BitAsset 2.0 Requirements & Implied Design

[sumantso]

I think getting merchants to accept BitUSD is doing it the hard way.

Debit cards will emerge that you can load with BitUSD and spend as ordinary USD.
Merchants won't know the difference.  They get USD and don't care about fiat counter party risk.

So BitUSD will always convert to at least a dollar when it hits your card and any surplus after the card's fees just sits on the card as a small bonus.  You only load the card with what you are going to use in the near future which is a negligible amount of counter party risk.  The rest stays safe in your BitUSD "savings account" until you need to move it to your debit card's "checking account".

Ordinary users will like that they sometimes get a small bonus when loading their card.  It will seem like yield.  Biased to be always a positive number.

Such a system would work everywhere on Day 1.

and who is paying for your 'yield'?

The biased to be positive is going to mess it all up. I wouldn't be surprised if we see a new version after this as it struggles with no liquidity.

[karnal]

If bitUSD is at a premium, there is no way merchants can sustainably sell products at face value (i.e. for equal quantity of bitUSD or USD), and get the benefit of selling bitUSD at a premium. Consumers would quickly learn to convert their premium bitUSD to USD before their purchase and use that instead.

The behaviour the market would adopt would be to therefore price goods at a discount when bitUSD is being used instead of USD. This is no net benefit to consumers or merchants. But it makes life more difficult for both because the premium is likely to fluctuate considerably.

I agree there are benefits to owning and using crypto-USD rather than real USD. However my current view is that I would prefer parity, and to reflect the difference in attractiveness in a lower rate of return on the bitUSD compared to a real USD. In practice this would be reflected in lower acceptable yields in the yield/deposit/bond market, or some other form of relative cost leakage over time.

Yes I agree.  I think that will happen.

[Stan]

I think getting merchants to accept BitUSD is doing it the hard way.

Debit cards will emerge that you can load with BitUSD and spend as ordinary USD.
Merchants won't know the difference.  They get USD and don't care about fiat counter party risk.

So BitUSD will always convert to at least a dollar when it hits your card and any surplus after the card's fees just sits on the card as a small bonus.  You only load the card with what you are going to use in the near future which is a negligible amount of counter party risk.  The rest stays safe in your BitUSD "savings account" until you need to move it to your debit card's "checking account".

Ordinary users will like that they sometimes get a small bonus when loading their card.  It will seem like yield.  Biased to be always a positive number.

Such a system would work everywhere on Day 1.

[merivercap]

If bitUSD is at a premium, there is no way merchants can sustainably sell products at face value (i.e. for equal quantity of bitUSD or USD), and get the benefit of selling bitUSD at a premium. Consumers would quickly learn to convert their premium bitUSD to USD before their purchase and use that instead.

The behaviour the market would adopt would be to therefore price goods at a discount when bitUSD is being used instead of USD. This is no net benefit to consumers or merchants. But it makes life more difficult for both because the premium is likely to fluctuate considerably.

I agree there are benefits to owning and using crypto-USD rather than real USD. However my current view is that I would prefer parity, and to reflect the difference in attractiveness in a lower rate of return on the bitUSD compared to a real USD. In practice this would be reflected in lower acceptable yields in the yield/deposit/bond market, or some other form of relative cost leakage over time.

Yes I agree.  I think that will happen. 

[starspirit]

If bitUSD is at a premium, there is no way merchants can sustainably sell products at face value (i.e. for equal quantity of bitUSD or USD), and get the benefit of selling bitUSD at a premium. Consumers would quickly learn to convert their premium bitUSD to USD before their purchase and use that instead.

The behaviour the market would adopt would be to therefore price goods at a discount when bitUSD is being used instead of USD. This is no net benefit to consumers or merchants. But it makes life more difficult for both because the premium is likely to fluctuate considerably.

I agree there are benefits to owning and using crypto-USD rather than real USD. However my current view is that I would prefer parity, and to reflect the difference in attractiveness in a lower rate of return on the bitUSD compared to a real USD. In practice this would be reflected in lower acceptable yields in the yield/deposit/bond market, or some other form of relative cost leakage over time.

[canucklehead]

Apparently, Policing for profit is a new side job. http://www.scrippsmedia.com/newschannel5/news/newschannel-5-investigates/policing-for-profit/265578441.html

A Monterey police officer wanted to know if he was carrying any large amounts of cash.

"I said, 'Around $20,000,'" he recalled. "Then, at the point, he said, 'Do you mind if I search your vehicle?' I said, 'No, I don't mind.' I certainly didn't feel I was doing anything wrong. It was my money."

[sumantso]

Any particular reason, or just an opinion?

Why would I want to buy BitUSD with more than a USD just to buy something in USD terms?

[sittingduck]

Those with bitusd will use it even with a slight premium because they get the benefits of holding and using crypto. 


Sent from my iPhone using Tapatalk

[Permie]

The new changes aren't going to be rolled out right away after the announcement so I hope during the community discussions the product can be finalized before release.

[sumantso]

The plan seems to be to make merchants comfortable in accepting BitUSD as it will be 1 USD at worst, and a nice profit otherwise. It conveniently forgets that those paying in BitUSD would rather not use it, and we will see a BitAsset 3.0 being rolled out by BM in a few months.

The current BitAssets is fine, just need a few tweaks and simplification and more importantly liquidity. Keeping BitUSD within +/- 1% or less of 1 USD was the goal, don't get why the sudden lopsided plan.

[xiahui135]

I do not think large companies will mainly be attracted by the yield, but solutions for the problem they are facing. Think about the rules, what are they designed for?

We would better with little rules, we can add if needed.

Here is a voice from business.

http://www.coindesk.com/seagate-ripple-investment-shows-were-serious-about-blockchain-tech/

A desire to become an "active participant" in the blockchain technology space is what drove $13bn data storage company Seagate to invest in Ripple Labs, according to its senior vice president Dave Morton.
...
He said:
"Our supply chain is very broad. There's over 286 components that go into each of our drives, we pull over 51 elements out of Mother Earth and obviously we manufacture in a lot of foreign locations where there's a lot of exchange risk."
The difficulty of managing this development process is what makes the "Internet of Value" made possible by Ripple Labs appealing, he added.
...

"We have 3 million components a day in flight, so you can just imagine the power that this can possibly have down the road from a supply chain perspective, whether that be cash flow or economics," he said, adding:
"We process over hundreds of thousands of invoices a quarter, you get into the process of how this improves the supply chain, it's pretty remarkable."

"You can do commodities,dollars, yen, euros versus it being just bitcoin. We want to take more of a holistic approach," he said, adding that he remains a fan of bitcoin.

In this light, Morton said Seagate remains primarily interested in seeing whether blockchain technologies can help solve real problems for its business, whether that solution comes from a provider like Ripple Labs or an alternative.

"We're serious about some of these use cases being thought about and resolved. We think there are some technology and business gains to be had."

[karnal]

The only reason not to buy BitUSD at more than 1.00 is the name.... call it a USD correlated asset and it works fine.

But that was the big premise! 1 BitUSD = 1 USD +- 1%

I think most people will care about:

Is it worth 1 USD (will it preserve its value)?
and
Will it give me some interest?

[Helikopterben]

Forced settlement will ALMOST NEVER HAPPEN because market participants will have financial incentive to trade at prices that make it very unlikely.

If this is indeed what actually happens when implemented, then that would be the best case scenario and likely work long term.  Perhaps forced settlement could be turned off by default and hidden behind an 'advanced' tab to discourage users from exercising this option.

Keep a potential manipulation tool in the background so new traders have no idea what's coming?  Why have it in the first place?

At the end of the day, anyone can create their own version of the client with these parameters changed If they believe that is what users want.  They are not consensus rules.

[starspirit]

We know that increasing the daily settlement limit will increase the premium, and decreasing it will decrease the premium. 

On the idea of using the settlement fee as a lever to manage the bitUSD:USD premium, I can't see why the market would price this in. If the market is at a premium, then the settlement mechanism is not needed. By the time the settlement mechanism is needed and used, the price must be at a discount where there is no longer a settlement fee. So there is no need for any settlement fee to ever be paid, nor any buyer to price in the risk of a higher fee, no matter how high the premium. So how would this affect supply or demand?

So lets just assume the market settles on $1.30  as the price for creating BitUSD with forced settlement at the feed which is $1.00.   Who cares so long as the premium is relatively stable?    The only thing that can move the premium is market forces based upon volume and market direction.   

I would care as a consumer because I would be better off just using real USD to make my purchase rather than using bitUSD which costs so much more to obtain. Now if merchants were willing to fully price in the higher value of a bitUSD into their product price, rather than just using face value, then that would adequately compensate. But then that forces merchants and consumers to keep constant track of the premium and adjust expectations accordingly, as well as accepting higher downside risk, and I don't know how we'd get everyone comfortable that the premium will be stable. Besides, it doesn't really appear true to label from a consumer/merchant angle.

I'm not underestimating the problem of dealing with premiums (or pegging in general), but I am still optimistic there is an improved solution...

[xiahui135]

I think this is fascinating how everyone approaches this from different points of view (and models) since this is really a multifaceted problem. There is demand side and supply side economics to think about here. Most are thinking of the demand side (how to set up a system that people want to use). I don't want to derail that, but here's my latest on the supply side thoughts. In theory, a simple system which properly manages supply will provide all the necessary features for a healthy and attractive investment.

Summary
Ideal system:
1) The system rewards market players for destroying BTA when there is an oversupply
2) The system rewards market players for creating BTA when there is an under supply

BTA2.0 Implementation of above:
Case (1) is handled by forced calls at 99% of the price feed.
Case (2) is unhandled, but the assumption is market players will do it with no explicit incentive because 1 BTA is supposed to equal the underlying asset.

New thoughts
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself, that is you need a mechanism by which there is market incentive to push towards the feed.
To do that how about the following:
A variable fee is charged on new shorts which is valued at X% of the difference between the feed and the short. This is a progressive "tax" paid by the parties (longs or shorts) pushing away from the feed and paid to the party that is pushing towards to feed. This fee is either in BTS or BTA depending on oversupply or undersupply and goes to a yield account paid out to all BTA shorts or for longs just like the current yield. It is market driven and leaves us with simple rules that are easy to explain.

The the market says that shorts need to be rewarded, there will be an auction for the size of the reward. The current market would be paying a yield to BTS shorters at one rate and longs at another. BOTH longs and shorts get a yield, and it is based on the fees that were collected when the asset was created.

Proposed, KISS, rules:
1) If a BTA is created (shorted) when there is an under supply, then the buyer would pay a fee in BTS based on how much the price was from the peg. That fee goes to a yield account. All shorts will be paid a fraction of that yield whenever they cover, and the yield is proportional to the fraction of the total BTA supply they are covering and how long they held the collateral (like the current system).
2) If a BTA is created when there is an over supply, the shorter pays a fee in BTA to a yield account which is paid out to longs similar to the current system.

Example:
Feed is 1 BTS per 1 Asset. I want to short at 1.10 BTS per 1 BTA, which means there is an under supply. Someone buys 1 BTA from me for 1.10 BTS. I put 1.10 in collateral so there is 2.20 in collateral, I owe 1 BTA, and the long is long 1 BTA. The buyer also pays a fee of some percentage of the 0.10 BTS they are from the peg, paid in BTS, to the short yield. Whenever any short covers, they are paid a yield proportional to the length of their short (capped at one year) and the percentage of their short. The is the contapositive of the current system.

If I want to short at .90 BTS per 1 BTA, that means there is an over supply of BTS. Someone buys 1 BTA from me for 0.9. I put 0.9 in collateral so there is now 1.90 BTS in collateral, I owe 1 BTA, and the long is long 1 BTA. I also pay a fee based on some percentage of the 0.1 BTS I am away from the peg, in BTA, to the long yield. It is paid out just like the long yield is paid out now. This is very similar to the current system.

Thoughts?

The idea that it is as simple as this:

The forced settlement price has a fee equal to the average delta between the trading price and the price feed.    As shorts "back away" from the feed, the forced settlement backs away in the opposite direction.   As shorts get closer to the fee the forced settlement creeps up.  This allows the market to control the feed and keeps things centered on the price feed.

But the feed comes from the centered exchange.
Check the nxt assets, there is no price feed, but the assets just price normally in and out the decentralized exchange.
We just need market make to peg.