Author [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] Topic: Understanding BitAsset Limitations  (Read 969 times)

0 Members and 1 Guest are viewing this topic.

Offline bytemaster

Understanding BitAsset Limitations
« on: May 21, 2015, 06:32:12 PM »

A peg is meaningless if you do not consider volume:

You can have $1.00 pegged to 1 BitUSD  *or*  You can have $100,000 pegged to 100,000 BitUSD but you cannot do both at the same time.

My argument is that we should prefer to peg $100,000 to 100,000 BitUSD rather than pegging $1.00 to 1 BitUSD because large merchants and people that wish to trade in large quantities of BitUSD need to know that they can accept it at face value. 

Think of it as the difference in premium between 1 oz units of gold and and a gold bar with 400 oz of gold.   

So long as the discussion is clouded with illusions that you can peg ALL volumes at the same price we will continue to talk in circles.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bytemaster

Re: Understanding BitAsset Limitations
« Reply #1 on: May 21, 2015, 06:38:32 PM »
Once we recognize that the price must MOVE as a result of volume we must ask how much should it move and should it ever be able to move below $1.00 at any volume?

A BitAsset with a force settlement limit of 1% per day will have a lower premium than one that allows 100% per day.
A BitAsset with a force settlement fee of 10% will sometimes trade below $1.00 but be less likely to trade at $1.10.

Two markets can have the same price feed but vastly different order books depending upon whether there is a Buy Wall or a Sell Wall and which side has the long low, volume tail reaching toward the feed. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline topcandle

Re: Understanding BitAsset Limitations
« Reply #2 on: May 21, 2015, 06:56:22 PM »

A BitAsset with a force settlement limit of 1% per day will have a lower premium than one that allows 100% per day.


Not sure if I see eye to eye on that. I see limiting to 1% creates a liquidity bottleneck that translates as a higher premium.  Therefore a 100% per day should have no premium, since all the liquidity is there at the price feed.
« Last Edit: May 21, 2015, 06:58:48 PM by topcandle »
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline bytemaster

Re: Understanding BitAsset Limitations
« Reply #3 on: May 21, 2015, 07:16:38 PM »

A BitAsset with a force settlement limit of 1% per day will have a lower premium than one that allows 100% per day.


Not sure if I see eye to eye on that. I see limiting to 1% creates a liquidity bottleneck that translates as a higher premium.  Therefore a 100% per day should have no premium, since all the liquidity is there at the price feed.

Premium demanded by the shorts to CREATE the BitUSD in the first place.   
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Ander

  • Hero Member
  • *****
  • Posts: 3507
    • View Profile
  • BTS: Ander
Re: Understanding BitAsset Limitations
« Reply #4 on: May 21, 2015, 07:53:48 PM »

A BitAsset with a force settlement limit of 1% per day will have a lower premium than one that allows 100% per day.


Not sure if I see eye to eye on that. I see limiting to 1% creates a liquidity bottleneck that translates as a higher premium.  Therefore a 100% per day should have no premium, since all the liquidity is there at the price feed.

Premium demanded by the shorts to CREATE the BitUSD in the first place.

I think the system needs to be designed to try to keep the price as close to $1 as possible.  We dont want to expect that bitUSD is usually 1.05 or 1.10.  Ideally we want it to be about $1.00 to $1.01 almost all the time. 

Forced settlement at $0.99 keeps the price from falling below $0.99.  I think only allowing 1% of supply to do this isnt enough, it doesnt release enough pressure if the price is getting far below $1.00.  5% of supply being convertable is better imo.  That can equalize the situation pretty quickly.

If the price gets much above $1.00 its a profit opportunity, so profit seeking keeps it in line.  As long as the rules dont punish shorts too much, they will be willing to take this profit.  (Recently rules punished them too much, which is why we had $1.10 bitUSD).  With fair rules it shouldnt rise this much.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline topcandle

Re: Understanding BitAsset Limitations
« Reply #5 on: May 21, 2015, 08:05:01 PM »

A BitAsset with a force settlement limit of 1% per day will have a lower premium than one that allows 100% per day.


Not sure if I see eye to eye on that. I see limiting to 1% creates a liquidity bottleneck that translates as a higher premium.  Therefore a 100% per day should have no premium, since all the liquidity is there at the price feed.

Premium demanded by the shorts to CREATE the BitUSD in the first place.

Good clarification.  Makes sense.  To your point I see this situation sorta playing out.  Large net wealth holders will be 1st to stuff their short positions early on.  They are inherently bullishly on BTS since they are holding bitshares.  They are most collateralize to prevent a force settlement.  These traders will likely short at the peg price, (they don't care able premium per say, they care about the # of shorts they can get in).  But once these types of shorters dry up, a second more speculative shorter will enter. 

This second type could be a medium or lower sized bts holders, who could be just Bullish, but are in it to play intermediate volatilities, as they will likely play long positions as well.  They will likely charge a premium, since they cant never collateralize as much as the large position holders.  Being at the bottom rung of the collateralize positions, they are going to charge a premium to safeguard against forced settlement. 

And to BM's statement, having a 1% settlement limit will protect these short-term speculative shorters, and thus reduce the amount of premium charged. 
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads


Offline Ander

  • Hero Member
  • *****
  • Posts: 3507
    • View Profile
  • BTS: Ander
Re: Understanding BitAsset Limitations
« Reply #7 on: May 21, 2015, 09:12:05 PM »
More new rules?

Hopefully simpler and better rules, replacing the old rules that didnt work well.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads


Offline bytemaster

Re: Understanding BitAsset Limitations
« Reply #9 on: May 21, 2015, 09:43:13 PM »
Who said anything about "new rules".   This thread is only about understanding reality independent of any rules.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bytemaster

Re: Understanding BitAsset Limitations
« Reply #10 on: May 21, 2015, 09:55:24 PM »
Quote
I think the system needs to be designed to try to keep the price as close to $1 as possible.  We dont want to expect that bitUSD is usually 1.05 or 1.10.  Ideally we want it to be about $1.00 to $1.01 almost all the time. 

You missed the point entirely.    Never again mention a price without specifying a quantity.     You need to peg a high enough volume of BitUSD to $1.00 for it to be a meaningful number.     

If the lowest short is $1.10 and there is a $10 buy order at $1.09 and then a $10000 buy order at $1.00  the "price" is $1.09.

In reality there is a $0.10 spread and everything in-between is meaningless noise.

Feed producers need to consider what the order book would look like if someone dumped BTS worth 10% of the BitUSD on it over 24 hours.   This tells BitUSD holders that if they own 10% of the BitUSD supply that everything they own can be priced at $1.00.

If I have 100,000 BitUSD right now.... and I sold it for $105,000 worth of BTS and then I sold the $105,000 BTS for USD (or BTC equivalent) I would probably get $50,000.    Now the fact remains that those who hold BitUSD are not selling even though most of the shorts currently have a "instant force settlement" at the price feed.    This is GOOD for BTS because it is supporting the BTS price.   

Bottom line, when you look at the BitUSD price, the quantity available over $1.00 is VERY SMALL and thus meaningless.   That means that right now BitUSD is "perfectly pegged" and the premium for creating new BitUSD is VERY HIGH.   This is a good and healthy position and indicates what it will look like with force settlement enabled.    Everything else just depends upon trading volume and market making.   
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline ag

  • Full Member
  • ***
  • Posts: 132
    • View Profile
Re: Understanding BitAsset Limitations
« Reply #11 on: May 21, 2015, 10:30:06 PM »
I'm not up to speed on current bitAsset implementation. I'd just add - the value of bitUSD is "one dollars worth of BTS". When demand exceeds supply (which hopefully will be temporary in the new implementation) bitUSD will trade at a premium, when it is the opposite, bitUSD will trade at a discount.

I don't see the importance of a "peg" concept.

 What's important, is there is a functioning primary market... which obviously we don't have. but I heard talk of  a bond market and that's my inclination too.

Offline carpet ride

  • Hero Member
  • *****
  • Posts: 544
    • View Profile
Re: Understanding BitAsset Limitations
« Reply #12 on: May 22, 2015, 12:34:48 AM »

Who said anything about "new rules".   This thread is only about understanding reality independent of any rules.

The force is strong with this one.


Sent from my iPhone using Tapatalk
All opinions are my own. Anything said on this forum does not constitute an intent to create a legal obligation between myself and anyone else.
Check out my blog: http://CertainAssets.com
Buy the ticket, take the ride.

Offline eagleeye

  • Hero Member
  • *****
  • Posts: 931
    • View Profile
Re: Understanding BitAsset Limitations
« Reply #13 on: May 22, 2015, 12:37:03 AM »
Dan, I feel the question should be - In the platform how easy is it to do something or know something?

Polonium just released lending and I'm a lender.  There is more supply than demand but if you set low enough youn can make 14% a year.  My point is not about the price but about how easy it is on Poloniex to initiate a price (do a command) on there platform.

They lack though on specifying the rules.

Maybe even the question should be rephrased should we incorporate a lending mechanism that Poloniex has done into the platform, for say bitshares.

The lending works where it puts up lenders and margin wanders together.

It would add another layer to the mix.

Buyers and sellers will come together if there is a market, all that needs to be understood is how price and volume discovery works for NYSE or NASDAQ then copy it.

We need a coordinated effort when releasing.
« Last Edit: May 22, 2015, 12:42:44 AM by eagleeye »

Offline starspirit

  • Hero Member
  • *****
  • Posts: 948
  • Financial markets pro over 20 years
    • View Profile
  • BTS: starspirit
Re: Understanding BitAsset Limitations
« Reply #14 on: May 22, 2015, 01:06:20 AM »

Bottom line, when you look at the BitUSD price, the quantity available over $1.00 is VERY SMALL and thus meaningless.   That means that right now BitUSD is "perfectly pegged" and the premium for creating new BitUSD is VERY HIGH.   This is a good and healthy position and indicates what it will look like with force settlement enabled.    Everything else just depends upon trading volume and market making.   


I'm not satisfied. I would want a bitAsset that can be traded on any day against the real asset with a tight spread. If I'm just a moderate sized buyer, I want to be able to buy a bitUSD today or any other day for not much more than $1. And have the knowledge that I can sell it again on any future day for not much less. Sure big volume transactions need to pay a higher spread, but there should be arbitragers tripping over themselves to meet this at any meaningful deviation from fair value. I won't stop working toward a better solution until this is what we have, or its shown to be impossible.


 

Google+