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Offline xeroc

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BitShares 2.0 Technologies
Price-Stable Cryptocurrencies



The freedom of cryptocurrency with the stability of the dollar
A BitAsset is a cryptocurrency whose value is pegged to that of another asset such as the US Dollar or Gold. BitAssets have over 100% of their value backed by the BitShares currency, BTS, and can be converted to BTS at any time at an exchange rate set by a trustworthy price feed. In all but the most extreme market conditions, BitAssets are assured to be worth at least their face value and perhaps more in some circumstances. Like any other cryptocurrency, BitAssets are fungible, divisible, and free from any restrictions.

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« Last Edit: June 08, 2015, 06:31:54 PM by xeroc ¯\_(ツ)_/¯ »
Give BitShares a try! Use the http://testnet.bitshares.eu provided by http://bitshares.eu

Offline starspirit

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On varying the settlement fee

I continue to have an unresolved issue with manipulating the forced settlement fee to control the market price relative to parity, or any desired premium. Settlement would only ever get used if the coin is at a discount, at which point the fee would be at its usual level (or perhaps some discounted level). Therefore increasing the fee because the coin is at a premium has no economic impact, and no difference to market pricing.

When the coin is at a discount, the market is incentivised to settle the token if the discount becomes larger than the fee. As price moves downward toward that point, there is never any incentive to settle, except perhaps on very large amounts that might have negatively impacted price to sell in the market. If the discount moves beyond that point, there is no reason to lower the fee further, because the discount itself incentivises the market to settle (unless you just want to speed things up).

ie. I would recommend for anyone using a forced settlement fee to just keep it fixed.

Offline starspirit

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On black swans

When does this liquidation event trigger? Is this as soon as the least collateralised short falls below 100% collateralisation?

What specifically is meant by "exchange rate" in the phrase "all SmartCoins are liquidated at the exchange rate of the least collateralized short position". Does that mean the price level at which the least collateralised short would be 100% collateralised, the market price, or some other level?

Also on liquidation, I assume you can't just replace the coin in somebody's wallet with BTS. So is it simply a case of sending them BTS and ensuring that particular class of coin is never redeemable for anything again? Would they be prevented from passing it off as a later version of the bitAsset operating under the same name?
« Last Edit: June 11, 2015, 06:05:50 AM by starspirit »

Offline merivercap

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Bytemaster,
It would be great to have an option to force-settle undercollateralized positions at the price feed instead of walking the book.  Is it a difficult task to code in that option? 

Based on my current hypothesis I want to create a Privatized BitAsset with no forced-settlement option to encourage greater BitUSD creation and liquidity.  However I may want to create a connection to an external price-feed, especially in the beginning.  Hence a force-settle for undercollateralized positions at the price feed would be useful.   

I think this feature may be useful for other people who create Privatized BitAssets.  Should this be a proposal or would this be an easy option to add before the fork?  Thanks!   
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Offline starspirit

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Bytemaster,
It would be great to have an option to force-settle undercollateralized positions at the price feed instead of walking the book.  Is it a difficult task to code in that option? 

Based on my current hypothesis I want to create a Privatized BitAsset with no forced-settlement option to encourage greater BitUSD creation and liquidity.  However I may want to create a connection to an external price-feed, especially in the beginning.  Hence a force-settle for undercollateralized positions at the price feed would be useful.   

I think this feature may be useful for other people who create Privatized BitAssets.  Should this be a proposal or would this be an easy option to add before the fork?  Thanks!
Curious who you would force-settle them against?

Offline merivercap

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Bytemaster,
It would be great to have an option to force-settle undercollateralized positions at the price feed instead of walking the book.  Is it a difficult task to code in that option? 

Based on my current hypothesis I want to create a Privatized BitAsset with no forced-settlement option to encourage greater BitUSD creation and liquidity.  However I may want to create a connection to an external price-feed, especially in the beginning.  Hence a force-settle for undercollateralized positions at the price feed would be useful.   

I think this feature may be useful for other people who create Privatized BitAssets.  Should this be a proposal or would this be an easy option to add before the fork?  Thanks!
Curious who you would force-settle them against?

Good point.  Just allow BitUSD holders to place orders at the price feed and then any remaining settlement just walk the book?
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Offline starspirit

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A question and concern regarding black swan settlement price

It may be I have misunderstood the approach. If I have, please correct my understanding.

My interpretation is that if the least collateralised short has say only enough collateral to cover 95% of their debt, whatever that amount is, then all the debts will be set to 95% of the current value, and any excess collateral of shorts returned based on that price. Is that a correct interpretation?

If it is correct, my concern is as follows.

Somebody needs to bear the burden of the amount of shortfall of the under-collateralised (<100% debt coverage) shorts. Its fine for the longs to bear this, but they should not have to bear any more than this amount. My issue with the proposed approach is that most of the other shorts may well still have enough collateral to cover their full debt, but they are getting a windfall gain because there were one or more shorts who triggered a black swan. This windfall gain of course, comes at the expense of the longs. It may even be the case that the under-collateralised short is very very small, but triggers a very large and unnecessary cross transfer between the longs and shorts.

I think a more equitable method is to settle all shorts at the feed price, and base the settlement price for shorts on the ratio of the remaining collateral to token supply.

Again, that's just based on my (possibly incorrect) interpretation of the proposed process.



Offline arhag

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Somebody needs to bear the burden of the amount of shortfall of the under-collateralised (<100% debt coverage) shorts. Its fine for the longs to bear this, but they should not have to bear any more than this amount. My issue with the proposed approach is that most of the other shorts may well still have enough collateral to cover their full debt, but they are getting a windfall gain because there were one or more shorts who triggered a black swan. This windfall gain of course, comes at the expense of the longs. It may even be the case that the under-collateralised short is very very small, but triggers a very large and unnecessary cross transfer between the longs and shorts.

Oh this is a good point. I would like clarification on this as well.

I am afraid that the code might be currently set up to settle all margin positions at the swan price defined as the ratio between the collateral and debt of the least collateralized margin position at the moment of black swan. But what it should do (as you already mentioned starspirit, but let me be a little more explicit in the description) is settle all margin positions with sufficient collateral at the feed price (taking the collateral paid for the settlement and putting it into the settlement pool, and the remaining collateral for each of these margin positions goes to their respective owners), and then for all other margin positions that do not have sufficient collateral it should just move all of their collateral into the settlement pool and consider their debt paid off. The ratio of the total debt owed of all margin positions when the black swan occurred to the total collateral added into the settlement pool is the new immutable settlement price that is then used for when longs redeem their fraction of the collateral from the settlement pool at their leisure.

Offline starspirit

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Somebody needs to bear the burden of the amount of shortfall of the under-collateralised (<100% debt coverage) shorts. Its fine for the longs to bear this, but they should not have to bear any more than this amount. My issue with the proposed approach is that most of the other shorts may well still have enough collateral to cover their full debt, but they are getting a windfall gain because there were one or more shorts who triggered a black swan. This windfall gain of course, comes at the expense of the longs. It may even be the case that the under-collateralised short is very very small, but triggers a very large and unnecessary cross transfer between the longs and shorts.

Oh this is a good point. I would like clarification on this as well.

I am afraid that the code might be currently set up to settle all margin positions at the swan price defined as the ratio between the collateral and debt of the least collateralized margin position at the moment of black swan. But what it should do (as you already mentioned starspirit, but let me be a little more explicit in the description) is settle all margin positions with sufficient collateral at the feed price (taking the collateral paid for the settlement and putting it into the settlement pool, and the remaining collateral for each of these margin positions goes to their respective owners), and then for all other margin positions that do not have sufficient collateral it should just move all of their collateral into the settlement pool and consider their debt paid off. The ratio of the total debt owed of all margin positions when the black swan occurred to the total collateral added into the settlement pool is the new immutable settlement price that is then used for when longs redeem their fraction of the collateral from the settlement pool at their leisure.

(bump) just checking the dev team have noted this (?)

I was also just wondering whether black swans always need to result in a liquidation event. There may be a way to let the token trade on in a fair manner, and still give the under-collaterisation time to resolve itself (i.e. if the collateral recovered in value). Maybe there might be some flexibility in how privatised Smartcoins choose to deal with black swans.

My understanding is the main reason for the liquidation event is so that all longs get equal treatment. In the absence of such an event, if margin calls or settlements continued to occur at the feed price, the longs first in the queue to sell would get favoured treatment over the slower-to-move longs, as can often happen in a bank run.

But what if under-collateralised or black-swan status does not result in liquidation, but a price limit on all margin calls and settlements set in the same way as the liquidation value would have been set (this could be a public NAV figure alongside the feed price)? In this way, nobody gets more than their fair share, and there is a prospect of collateral recovery, especially if the collateral were experiencing a transient flash crash. While its true that a number of the margin calls will not be filled at the lower price, this does not leave longs any more exposed to further downside in the collateral than they would have been had the liquidation event been initiated. In fact, it could well be less, because some of the shorts may still be over-collateralised, providing some additional buffer against further downside (in contrast, these would be immediately closed out in the liquidation event).

It may be that the market is still a zombie if under-collateralisation persisted, resulting in no new supply, or is forever tainted by the event even if a recovery occurs, in which case closure can still be initiated through a global settlement, but that can be decided separately and after the event.

Its just a quick thought - not sure yet if I've missed something else that might be an obstacle.

Offline bytemaster

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Offline bytemaster

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Offline MrJeans

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The following may function as a good solution to enable jurisdictional legitimate adoption of already in use price-stable Cryptocurrencies.

Lets say the Argentinian government allows me to create a USD money transmission service  :o
However they say I need to comply with strict KYC and AML laws.

In such a case I would need to issue a UIA in the form of a depository recite and still manage holding user's funds in a traditional bank account or I could issue a new smartcoin for USD and wait for the market to establish.

But would it not be better if I could use the current bit.USD market and still comply with KYC and AML.

1. To do this I would need a system where Bitshares users I register can only trade with other Bitshares users I have registered.

2. In order to trade users would also need to be white listed.

3. All other features of Bitshares would be disabled for these users aside from being able to trade bitUSD

4. They can fund their account using on-ramps which can be established by myself and other entrepreneurs.

 

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