Author Topic: Subsidizing Market Liquidity  (Read 19635 times)

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Offline CoinHoarder

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Re: Subsidizing Market Liquidity
« Reply #75 on: February 21, 2016, 07:25:27 am »
This is a tried and true (proven) way to create liquidity for market pegged cryptocurrencies (a la Nubits.) Dilution to subsidize (or provide) liquidity is the only certain way to achieve it. Tonyk's proposal is a gamble. It might work but it might not, as it is uncharted territory. Assuming you can work out all the kinks, and I am assuming that you can (a la Smartcoins), then I think this proposal is the best way forward as far as liquidity on the DEX is concerned.

IF Tonyk continues with his plan to fork Bitshares, then I propose that the original Bitshares chain implement this idea (or something similar). At that point the main chain is competing with Tonyk's chain, and I think it would be smart (for main chain Bitshares supporters) to implement a feature that nullifies one of the few potential benefits of Tonyk's fork.

All (or most) of the people that disagree with this proposal seem to support Tonyk's fork. I say you implement your idea BM, assuming you have the votes to support it, and let the rest of the community that disagrees with it go off and support Tonyk's fork. Then, the original Bitshares chain can go on to teach them a lesson in the strength of a network effects, and the main Bitshares chain's community would be more on the same wavelength (for other things too such as MAS). ;)
« Last Edit: February 21, 2016, 07:39:03 am by CoinHoarder »
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Offline jtme

Re: Subsidizing Market Liquidity
« Reply #76 on: February 21, 2016, 08:54:35 am »
found no reason to support this.
users trade because they need to trade, because the need to get something by selling something else.
so the key point is to creat the real demand.
to reward the trading activity will distorte the encouragement,and make the system more complex with no necessity.

Its not to reward market activity but to reward market makers.

https://en.wikipedia.org/wiki/Market_maker

Offline Erlich Bachman

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Re: Subsidizing Market Liquidity
« Reply #77 on: February 21, 2016, 11:40:11 am »
This is a tried and true (proven) way to create liquidity for market pegged cryptocurrencies (a la Nubits.) Dilution to subsidize (or provide) liquidity is the only certain way to achieve it.

ah i get it now.  I'm sick of getting my ass kicked by Nubits. Let's capitulate already so we can get this show on the road


* to be qualify for reward, the price should be within say 3% of feed price

Thoughts?

 +5% I agree. This liquidity measure would cost a lot of money everyday, so it has to bring in outside new money everyday.

Therefore the question is what spread will entice new outside users to use BitUSD? Anything outside that range isn't useful anyway.

Also the potential to game the system should be significantly reduced by this as well.





You own the network, but who pays for development?

Offline tbone

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Re: Subsidizing Market Liquidity
« Reply #78 on: February 21, 2016, 11:42:59 am »
All (or most) of the people that disagree with this proposal seem to support Tonyk's fork. I say you implement your idea BM, assuming you have the votes to support it, and let the rest of the community that disagrees with it go off and support Tonyk's fork. Then, the original Bitshares chain can go on to teach them a lesson in the strength of a network effects, and the main Bitshares chain's community would be more on the same wavelength (for other things too such as MAS). ;)

^This.  BTS is currently and historically one of the world's top cryptocurrencies by market cap and by volume traded.  Indeed, many people are aware of BTS and it is in demand.  With the proper incentives, a growing number of those people will trade BTS on the DEX instead of on centralized exchanges. 

As that happens, and along with other measures taken, the liquidity of BitUSD (and BitAssets in general) will grow, the peg will tighten, more people will hold and use it, even more people will trade on the DEX, and so on through the virtuous cycle.  At some point the dominant market for BTS will be on the DEX, which will be great for the peg.  Keep in mind, it is NOT necessary for trading of BTS to be ONLY on the DEX.  It would simply be very helpful if the DEX was the dominant marketplace for BTS.  And again, other measures will also help the peg.

So now let's think about tony's idea to create a new chain.  How many false assumptions must tony make in order to convince himself and a small handful of others that this is actually a good idea?  First, he assumes that it is necessary for the shares to trade exclusively on the DEX.  Wrong.  He assumes it is necessary to FORCE people to trade the shares on the DEX, rather than INCENTIVIZING them to do so.  Wrong.  He assumes that getting the shares to trade on the DEX will automatically create the perfect peg.  Wrong.  And finally, he assumes that more than 5 people are going to have the faintest desire to trade unknown shares of an unknown DAC on an unknown DEX.  Wrong, wrong, and wrong. 

I knew from the start that tony's idea to create doaShares (and his reasoning to do so) lacked logic.  But thank you [member=16778]CoinHoarder[/member] for sparking me to think more more specifically about why his idea is so idiotic misguided and may even be a pure attempt to sabotage Bitshares by dividing attention and resources.

Offline tbone

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Re: Subsidizing Market Liquidity
« Reply #79 on: February 21, 2016, 11:56:30 am »
found no reason to support this.
users trade because they need to trade, because the need to get something by selling something else.
so the key point is to creat the real demand.
to reward the trading activity will distorte the encouragement,and make the system more complex with no necessity.

Its not to reward market activity but to reward market makers.

https://en.wikipedia.org/wiki/Market_maker

^This.  And rewarding market makers is not a new concept.  Nasdaq does it and I assure you ([member=23]bitcrab[/member]) they are not alone in doing so.  There is good reason for it, and we should be doing it too.

http://www.nasdaqtrader.com/Trader.aspx?id=MQP

"The Market Quality Program (MQP) is a groundbreaking proprietary market structure and incentive program developed to help enhance liquidity in the Exchange Traded Fund (ETF) marketplace. It is an optional listing program that provides ETF issuers the opportunity to incentivize Market Makers to improve the quality of the market and increase the liquidity in their products. Market makers will benefit from the program’s quarterly rebate payments in exchange for a commitment to enhance the quality of the markets in registered ETFs."
« Last Edit: March 06, 2016, 01:47:23 pm by tbone »

Offline tbone

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Re: Subsidizing Market Liquidity
« Reply #80 on: February 21, 2016, 12:20:35 pm »
More from Nasdaq's Market Quality Program FAQ:

Q: Why is Nasdaq creating the MQP?
A: Nasdaq believes the Market Quality Program will help increase liquidity and enhance the quality of the markets being made in the Exchange Traded Fund marketplace by decreasing the quoted spread and increasing the shares quoted at the NBBO. Additionally, Nasdaq believes that the MQP will increase competition and broaden the pool of liquidity providing firms engaged in market making in ETFs.

Offline tbone

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Re: Subsidizing Market Liquidity
« Reply #81 on: February 21, 2016, 12:52:43 pm »
Here's the most interesting thing of all from Nasdaq.  They reward liquidity providers based on average time and average size at NBBO.  NBBO (national best bid & offer) sounds a lot like our price feed (see below).  Not to mention, they are rewarding for how long an order is on the book i.e. the longer it's on the book, the greater the reward.  If you think about it, that's how they avoid self trading.  Because why would a liquidity provider match their own order if they are getting paid to have it on the books?  And by the way, if we're paying for liquidity right at the feed, doesn't that help tighten the peg?  Hmmm. 



Q: How do Market Makers get compensated?
A: Trade and Quote Payments will be distributed pro-rata to qualified Market Makers. Trade Payment distribution will be based upon liquidity-adding executions. Quote Payment distribution will be based equally upon average time at NBBO and average size at NBBO. Trade and Quote Payments will only be made if a Market Maker(s) meets the qualifications above. Trade and Quote Payments will be calculated monthly and distributed quarterly.



What is a 'National Best Bid and Offer - NBBO'
The best (lowest) available ask price and the best (highest) available bid price to investors when they buy and sell securities. National Best Bid and Offer is the bid and ask price the average person will see. The Securities and Exchange Commission’s Regulation NMS requires that brokers must guarantee customers this price.

Offline monsterer

Re: Subsidizing Market Liquidity
« Reply #82 on: February 21, 2016, 01:07:18 pm »
Why can't the taker just pay the maker directly some portion of the fees? That pretty much prevents the system being gamble, while incentivising liquidity.
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Offline abit

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Re: Subsidizing Market Liquidity
« Reply #83 on: February 21, 2016, 01:35:46 pm »
Why can't the taker just pay the maker directly some portion of the fees? That pretty much prevents the system being gamble, while incentivising liquidity.
BM ever said in a post that "taker pay maker" will actually add an invisible but existed spread to the market, if the payment is high, everybody will try to be the maker, result in high and tight bid/ask walls but little volume. What is said in this thread is to encourage maker but not punish taker, so better liquidity.
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Offline valtr

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Re: Subsidizing Market Liquidity
« Reply #84 on: February 21, 2016, 01:42:21 pm »
There are for sure many ways how to gain new users, but than I was interested in altcoins as newcomer, I just looked in coinmarketcap.
Protoshares was the only interesting project with enough volume and capitalization. Ripple did not gain my attention and other was a me too coins only.
Low volume coins I did not explored.
I say that only because I can not understand the logic behind fork and spread. IMO that can not bring anything good fot all of us.

Offline monsterer

Re: Subsidizing Market Liquidity
« Reply #85 on: February 21, 2016, 01:42:34 pm »
BM ever said in a post that "taker pay maker" will actually add an invisible but existed spread to the market, if the payment is high, everybody will try to be the maker, result in high and tight bid/ask walls but little volume. What is said in this thread is to encourage maker but not punish taker, so better liquidity.

Only true if you increase the trade fee, I'm saying just divert part of the existing fee.
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Offline abit

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Re: Subsidizing Market Liquidity
« Reply #86 on: February 21, 2016, 02:16:56 pm »
BM ever said in a post that "taker pay maker" will actually add an invisible but existed spread to the market, if the payment is high, everybody will try to be the maker, result in high and tight bid/ask walls but little volume. What is said in this thread is to encourage maker but not punish taker, so better liquidity.

Only true if you increase the trade fee, I'm saying just divert part of the existing fee.
I'm saying zero fee + other encouragement.
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Offline CoinHoarder

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Re: Subsidizing Market Liquidity
« Reply #87 on: February 21, 2016, 02:49:43 pm »
Solid posts [member=39182]tbone[/member]

BM ever said in a post that "taker pay maker" will actually add an invisible but existed spread to the market, if the payment is high, everybody will try to be the maker, result in high and tight bid/ask walls but little volume. What is said in this thread is to encourage maker but not punish taker, so better liquidity.

Only true if you increase the trade fee, I'm saying just divert part of the existing fee.

I think the issue is that maker/taker won't consist of a sufficient amount of incentive to substantially increase liquidity.
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Offline abit

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Re: Subsidizing Market Liquidity
« Reply #88 on: February 21, 2016, 03:54:52 pm »
I wonder why only matched orders would be rewarded? Are we going to encourage self trading? The orders who placed there for a long time but not yet have chance to be filled didn't provide liquidity?
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Offline cylonmaker2053

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Re: Subsidizing Market Liquidity
« Reply #89 on: February 21, 2016, 04:42:09 pm »
Some good ideas in this thread. Mimicking NASDAQ is a great idea for a first cut solution, might as well leverage what seems to work for a dominant exchange.