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Offline MolonLabe

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Thought Experiment: Total Replacement
« on: March 26, 2014, 04:23:04 PM »

In the current BitSharesX design:

1] Trading occurs in a centralized market somewhere (although price discovery / trading activities are distributed, the NYSE / CME / etc. are centralized).
2] This trading[1] produces information, namely a market price.
3] This price[2] is used (for trades, settlement, margin calls) in BitSharesX.

BitSharesX seems to need [2] like a plant needs water.  Does it?

What would happen if BitSharesX trading volume / value-storage grew to exceed or replace that of the public gold market? What would BTS traders use to establish the price of gold? If individuals disagreed with the price and began trading a new price, how would BitSharesX learn about this? Say, for example, gold miners selling Gold at a low price to a distributor, who ships gold to US markets where it is sold at a higher price. NYSE prices for gold assume the option to pick up the gold at (for example) a New York Exchange approved vault, standardizing the grade and location. BitGold would be digital, though, so which location's price would be used in this case?

What if all traders "waited to see what other traders decide to do"? What other strange phenomena might we expect at 50%, 51%, 100% replacement?

Offline Troglodactyl

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Re: Thought Experiment: Total Replacement
« Reply #1 on: March 27, 2014, 01:14:56 AM »
How does BitSharesX need a price established by other exchanges any more than any other exchange needs a price established by other exchanges?  Prices on any exchange are established by traders announcing real offers until the offers start being accepted.  Comparison with other exchanges may be useful to slightly accelerate the initial price discovery, and because if prices on different exchanges start diverging it's a good sign that something is going wrong with at least one of them.  I don't see how other exchanges are a requirement at all though.

Offline MolonLabe

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Re: Thought Experiment: Total Replacement
« Reply #2 on: March 27, 2014, 02:58:56 PM »
How does BitSharesX need a price established by other exchanges any more than any other exchange needs a price established by other exchanges?

NYSE prices for gold assume the option to pick up the gold at (for example) a New York Exchange approved vault, standardizing the grade and location. BitGold would be digital, though, so which location's price would be used in this case?

Offline luckybit

Re: Thought Experiment: Total Replacement
« Reply #3 on: March 27, 2014, 11:10:57 PM »
How does BitSharesX need a price established by other exchanges any more than any other exchange needs a price established by other exchanges?

NYSE prices for gold assume the option to pick up the gold at (for example) a New York Exchange approved vault, standardizing the grade and location. BitGold would be digital, though, so which location's price would be used in this case?

Digital/virtual gold vs real gold. Because it's not real goal it's not the same legally but it has the same ability to store value. The only thing users care about is the ability to store value and use BitUSD as a unit of account.

If the value tracks to gold then you don't have to redeem BitGold for real gold. It would be nice but trying to do that might result in all sorts of regulations and legal consequences as now there would be contracts and securities involved.

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