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Offline MrJeans

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BitUSD as collateral
« on: March 03, 2014, 01:38:06 PM »

Instead of only allowing bisharesX shares to be used as collateral would there be value in allowing users to purchase bitAssets and use those as collateral to short other bitAssets?

If someone can purchase some bitUSD and then use that to short bitGOLD they would be able to leverage up on bitUSD and be able to short bitGOLD without having to worry too much about fluctuations in the value of bitsharesX shares.

The value of bitsharesX shares may fluctuate wildly (like bitcoin) in its early years making it difficult to trade. If users can use a more stable asset to take short positions this may encourage the behavior. The average FOREX or commodities trader should be able to switch their trading to bitsharesX without having to gain a huge understanding of bitsharesX shares and having to constantly monitor its value.

If we can use bitAssets as collaterol users can leverage up on any asset and short other assets while not having to worry about value fluctuations on bitsharesX shares (the price of which wont be pegged to anything in the way bitAssets are).

Or am I missing something completely?
« Last Edit: March 03, 2014, 01:40:31 PM by MrJeans »

Offline biophil

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Re: BitUSD as collateral
« Reply #1 on: March 03, 2014, 02:43:50 PM »
One thing that could cause trouble with this is that at any time, if you hold BitUSD, you're subject to having your BitUSD automatically replaced with XTS, because margin calls can happen at any time. If I'm shorting BitGLD using BitUSD as collateral, my BitUSD could be replaced with XTS with no warning. There's nothing inherently wrong with that - collateral is collateral. But it adds some complexity that might not be good.

I'm not saying it can't be done, just trying to talk through the issues.

Offline luckybit

Re: BitUSD as collateral
« Reply #2 on: March 03, 2014, 02:50:57 PM »
Instead of only allowing bisharesX shares to be used as collateral would there be value in allowing users to purchase bitAssets and use those as collateral to short other bitAssets?

If someone can purchase some bitUSD and then use that to short bitGOLD they would be able to leverage up on bitUSD and be able to short bitGOLD without having to worry too much about fluctuations in the value of bitsharesX shares.

The value of bitsharesX shares may fluctuate wildly (like bitcoin) in its early years making it difficult to trade. If users can use a more stable asset to take short positions this may encourage the behavior. The average FOREX or commodities trader should be able to switch their trading to bitsharesX without having to gain a huge understanding of bitsharesX shares and having to constantly monitor its value.

If we can use bitAssets as collaterol users can leverage up on any asset and short other assets while not having to worry about value fluctuations on bitsharesX shares (the price of which wont be pegged to anything in the way bitAssets are).

Or am I missing something completely?

This would be a great idea if it can be technically made possible.
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Offline theoretical

Re: BitUSD as collateral
« Reply #3 on: March 03, 2014, 06:08:50 PM »

If I'm shorting BitGLD using BitUSD as collateral, my BitUSD could be replaced with XTS with no warning.

I thought this could only happen with short BitUSD positions.  If you're using BitUSD as collateral for something else (let us say BitGLD), then you have a long BitUSD position.
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Offline MrJeans

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Re: BitUSD as collateral
« Reply #4 on: March 03, 2014, 07:58:48 PM »
One thing that could cause trouble with this is that at any time, if you hold BitUSD, you're subject to having your BitUSD automatically replaced with XTS, because margin calls can happen at any time.
I thought that a bitUSD position of say 1bitUSD would always hold its value as being 1bitUSD. And if the value of the collateral drops then the person with the short position would be forced to cover by buying back the bitUSD they lent. If the holders of bitUSD are not willing to sell the holders of short positions would need to wait until someone else purchases their position.
As I'm typing this I feel like I am missing some information.

But basically I was under the assumption that 1bitUSD will always be 1bitUSD if not sold. If bitUSD could suddenly turn into XTS doesn't this destroy the whole value proposition of bitAssets. I would want to be able to make some paper bitUSDs and put them under the mattress and know that the value should be stable.

Offline Markus

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Re: BitUSD as collateral
« Reply #5 on: March 04, 2014, 12:18:55 AM »
One thing that could cause trouble with this is that at any time, if you hold BitUSD, you're subject to having your BitUSD automatically replaced with XTS, because margin calls can happen at any time.
This is wrong. There are no margin calls for long positions.


I am strongly in favour of the proposal (to use any BitAsset as collateral). This is one of the major features missing in BTSX.
It would induce higher volatility of BTSX but it would also increase its value as the collateral-BitAsset would have to be created before by somebody using BTSX as collateral.

Offline toast

Re: BitUSD as collateral
« Reply #6 on: March 04, 2014, 01:37:37 AM »
Sounds like a great future for a future chain

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Offline bytemaster

Re: BitUSD as collateral
« Reply #7 on: March 04, 2014, 07:43:17 AM »
One thing that could cause trouble with this is that at any time, if you hold BitUSD, you're subject to having your BitUSD automatically replaced with XTS, because margin calls can happen at any time. If I'm shorting BitGLD using BitUSD as collateral, my BitUSD could be replaced with XTS with no warning. There's nothing inherently wrong with that - collateral is collateral. But it adds some complexity that might not be good.

I'm not saying it can't be done, just trying to talk through the issues.

Holding BitUSD is never subject to margin calls... only being Short BitUSD.   

I think that using BitUSD as collateral makes perfect sense for future systems.
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Offline mf-tzo

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Re: BitUSD as collateral
« Reply #8 on: March 06, 2014, 09:00:45 PM »
I don't get that...

If someone can take a short position in BitUSD/BitGold and use as collateral BitUSD where does Bitshares come in to play? Why would bitshares would have any value then?Nobody is going to use them... what I am missing here?

As far as I understand bitshares is the internal value of the clearing  house (Bitshares X) in exchanging IOUS between users.

It's value derives from the fact that people are willing to trade them since it is a way of honorring the IOUS.

More people are willing to place bets using bitshares about the future value of the different assets, means more people will want to buy bitshares from the exchanges and therefore bitshares price rise. if you can use other form of collateral than bitshares then the only reason someone would hold bitshares is for transaction fees? How does this work?

I am trying to understand all that but it is really confusing. If someone can present below with very simple examples the different options available for someone holding bitshares it would be very helpfull to better understand things.














 

Offline MrJeans

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Re: BitUSD as collateral
« Reply #9 on: March 06, 2014, 09:17:27 PM »
I don't get that...

If someone can take a short position in BitUSD/BitGold and use as collateral BitUSD where does Bitshares come in to play? Why would bitshares would have any value then?Nobody is going to use them... what I am missing here?

As far as I understand bitshares is the internal value of the clearing  house (Bitshares X) in exchanging IOUS between users.

It's value derives from the fact that people are willing to trade them since it is a way of honorring the IOUS.

More people are willing to place bets using bitshares about the future value of the different assets, means more people will want to buy bitshares from the exchanges and therefore bitshares price rise. if you can use other form of collateral than bitshares then the only reason someone would hold bitshares is for transaction fees? How does this work?

I am trying to understand all that but it is really confusing. If someone can present below with very simple examples the different options available for someone holding bitshares it would be very helpfull to better understand things.
This is just an idea.
To use bitUSD as collateral you would need to purchase bitUSD (which someone else would have lent into existence using bitshares) or use bitshares to lend bitUSD into existence. So bitshares will still be the source of value.

The idea here is that if you purchase bitUSD and use that as collateral, you collateral will be more stable and you wont have to monitor it as carefully. You pass on the collateral instability to someone else who can stomach the risk.

Offline mf-tzo

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Re: BitUSD as collateral
« Reply #10 on: March 06, 2014, 10:56:32 PM »
thank you for the reply. Well understood!


Offline speedy

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Re: BitUSD as collateral
« Reply #11 on: March 23, 2014, 03:48:43 AM »
Holding BitUSD is never subject to margin calls... only being Short BitUSD.   

I think that using BitUSD as collateral makes perfect sense for future systems.

Even if we couldnt do shorting BitUSD against BitGold immediately, it would still be great if we could at least directly swap BitUSD for BitGold using the buy & sell operations in the first BTS chain. IMO it seems like this would go a long way to reinforcing the value of the BitAssets and thereby helping the peg to function, because it would create arbitrage opportunities.

Being able to trade USD for gold without the huge fees that gold holding companies charge would be awesome.  :D

Offline bytemaster

Re: BitUSD as collateral
« Reply #12 on: March 23, 2014, 03:49:41 AM »
Holding BitUSD is never subject to margin calls... only being Short BitUSD.   

I think that using BitUSD as collateral makes perfect sense for future systems.

Even if we couldnt do shorting BitUSD against BitGold immediately, it would still be great if we could at least directly swap BitUSD for BitGold using the buy & sell operations in the first BTS chain. IMO it seems like this would go a long way to reinforcing the value of the BitAssets and thereby helping the peg to function, because it would create arbitrage opportunities.

Being able to trade USD for Gold without the huge fees that holding companies charge would be awesome.  :D

That is supported in the first chain.
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Offline speedy

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Re: BitUSD as collateral
« Reply #13 on: March 23, 2014, 03:54:40 AM »
That is supported in the first chain.

Wahoo - Bitshares X is going to be useful for so many people :)

Sorry if this has been addressed before, but if I swap some BitUSD for BitGold, but I dont have any BTS to pay the transaction fee, do I pay the transaction fee out of the assets instead? Or am I always required to have at least some BTS to swap the BitAssets directly?

Offline bytemaster

Re: BitUSD as collateral
« Reply #14 on: March 23, 2014, 03:56:24 AM »
That is supported in the first chain.

Wahoo - Bitshares X is going to be useful for so many people :)

Sorry if this has been addressed before, but if I swap some BitUSD for BitGold, but I dont have any BTS to pay the transaction fee, do I pay the transaction fee out of the assets instead? Or am I always required to have at least some BTS to swap the BitAssets directly?

With the renewed focus on incremental development of BTS X, I will support fees paid in any currency.  Lets do this right rather than hacking something.
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