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Offline starspirit

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Two questions relating to global settlement
« on: June 19, 2015, 01:44:28 AM »

1. How does global settlement on a Smartcoin get enforced? For example, how to you forcibly remove the long holding from a users' account? Or would each Smartcoin (or series of Smartcoin) have a unique identifier that would remove its ability to settle at any future date, thereby devaluing its market value?

2. Keys can get lost, accounts abandoned, or users forget or die. The problem is when we have counter-parties on the other side of their positions. Say for example, somebody owns a big % of bitUSD and disappears. The shorts could never fully exit their positions. The best they could do is try to offload their short position to others by bidding a high enough price on bitUSD in the market so another short self-creates a position to meet their bid. Is global settlement intended to deal with this situation, or are there less drastic solutions?

[Edit, actually make that 3 questions...]

3. What is the procedure for shorts agreeing to force a global settlement? Does this present any legal problem of control on the market?
« Last Edit: June 19, 2015, 02:19:22 AM by starspirit »

Offline arhag

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Re: Two questions relating to global settlement
« Reply #1 on: June 20, 2015, 03:32:47 AM »
1. How does global settlement on a Smartcoin get enforced? For example, how to you forcibly remove the long holding from a users' account? Or would each Smartcoin (or series of Smartcoin) have a unique identifier that would remove its ability to settle at any future date, thereby devaluing its market value?

https://github.com/cryptonomex/graphene/issues/41
https://github.com/cryptonomex/graphene/issues/33

My understanding of that is that you don't need to actively take any longs from anywhere. The blockchain just notes the relevant information at the time of the force settlement and freezes all operations that could affect settlement (meaning the asset is effectively dead). However, people can still trade the longs (which at that point represent fractional ownership in some pooled amount of the collateral asset) and can be used to redeem that fractional amount of the collateral at the owner's leisure.


2. Keys can get lost, accounts abandoned, or users forget or die. The problem is when we have counter-parties on the other side of their positions. Say for example, somebody owns a big % of bitUSD and disappears. The shorts could never fully exit their positions. The best they could do is try to offload their short position to others by bidding a high enough price on bitUSD in the market so another short self-creates a position to meet their bid. Is global settlement intended to deal with this situation, or are there less drastic solutions?

My guess is that the global settlement is the only way to deal with that situation currently. So it probably makes sense for the shorts who are desperate to get out but have no BitUSD sellers to buy from to just lower their collateral to the minimum amount allowed and then just wait until the price change causes them to be margin called. Their collateral will then sit as a BitUSD buy order at some limit price defined by the feed providers (since there won't be anyone selling BitUSD) until eventually the price changes enough to cause undercollateralization and thus force global settlement. Seems like a less than ideal process.

Offline starspirit

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Re: Two questions relating to global settlement
« Reply #2 on: June 20, 2015, 06:34:53 AM »
1. How does global settlement on a Smartcoin get enforced? For example, how to you forcibly remove the long holding from a users' account? Or would each Smartcoin (or series of Smartcoin) have a unique identifier that would remove its ability to settle at any future date, thereby devaluing its market value?

https://github.com/cryptonomex/graphene/issues/41
https://github.com/cryptonomex/graphene/issues/33

My understanding of that is that you don't need to actively take any longs from anywhere. The blockchain just notes the relevant information at the time of the force settlement and freezes all operations that could affect settlement (meaning the asset is effectively dead). However, people can still trade the longs (which at that point represent fractional ownership in some pooled amount of the collateral asset) and can be used to redeem that fractional amount of the collateral at the owner's leisure.

I wonder if the block-chain could just send the collateral out to all the long accounts (which I assume are always identifiable). If all token series had unique identifiers apart from their name (maybe they already do), then even if the token name gets re-used at some point the protocol will no longer allow any form of transaction or operation on the old tokens, apart from sending them to a burn address. It would be neat to just be able to completely wrap up the old market, and allow the market to be resurrected and re-used in future. Probably harder than it sounds though.

Offline Chronos

Re: Two questions relating to global settlement
« Reply #3 on: June 22, 2015, 03:00:14 AM »
2. Keys can get lost, accounts abandoned, or users forget or die. The problem is when we have counter-parties on the other side of their positions. Say for example, somebody owns a big % of bitUSD and disappears. The shorts could never fully exit their positions.
That's true, but we should also consider that the opposite can happen as well: shorts can take a short position, and then lose their wallet file. The short lives forever (under the Bitshares 2.0 rules), and the asset floats. Weird!  :)

Offline starspirit

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Re: Two questions relating to global settlement
« Reply #4 on: June 22, 2015, 03:36:11 AM »
2. Keys can get lost, accounts abandoned, or users forget or die. The problem is when we have counter-parties on the other side of their positions. Say for example, somebody owns a big % of bitUSD and disappears. The shorts could never fully exit their positions.
That's true, but we should also consider that the opposite can happen as well: shorts can take a short position, and then lose their wallet file. The short lives forever (under the Bitshares 2.0 rules), and the asset floats. Weird!  :)
The longs can force settlement if they like, as long as that option exists. If that option didn't exist, and margin calls were not an issue, then you could end up with the same issue on both sides.

 

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