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clout

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What does the life of a bitAsset look like?
« on: May 06, 2014, 04:59:26 AM »

I revisited the Introduction to Bitshares video on youtube today, and I realized that I hadn't fully understood how these bitAssets are created and destroyed. I understand that the bitUSD is created when you have a long and short position that can agree to the price of the bitUSD/bts. So now we have a bitUSD which is collateralized by the short position, but what happens when the person shorting covers his/her position? It would make sense to me that the short position repurchases the bitUSD on the open market thereby switching his/her obligation to collateralizing the bitUSD he originally created. In this instance the second seller of the bitUSD is not creating new bitUSD, but instead rebacking old bitUSD. Assuming the margin calls are conducted in the same way where the bitUSD is still purchased on the open market I don't see how any bitUSD is ever destroyed. Can someone please explain to me if and how bitUSD is destroyed?

Offline Agent86

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Re: What does the life of a bitAsset look like?
« Reply #1 on: May 06, 2014, 07:52:05 AM »
when someone who already has bitUSD sells it to someone who is short bitUSD, it is destroyed.
« Last Edit: May 06, 2014, 11:35:28 AM by Agent86 »

Offline toast

Re: What does the life of a bitAsset look like?
« Reply #2 on: May 06, 2014, 11:05:20 AM »
BitUSD is destroyed when a short covers to reclaim collateral. Normal buy/sell don't create or destroy, just shorting and covering

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clout

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Re: What does the life of a bitAsset look like?
« Reply #3 on: May 08, 2014, 05:16:48 AM »
But who wants to hold on to bitUSD if it can be destroyed at anytime?

Offline toast

Re: What does the life of a bitAsset look like?
« Reply #4 on: May 08, 2014, 06:07:09 AM »
It can't, what suggested that? The short destroys his own usd to reclaim collateral. The opposite of the create process

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Offline tonyk

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Re: What does the life of a bitAsset look like?
« Reply #5 on: May 08, 2014, 04:52:24 PM »
But who wants to hold on to bitUSD if it can be destroyed at anytime?
The short position holder must first repurchase them bitUSD from the long bitUSD holder/s before destroying them.So, it is not exactly ‘destroying them at any time’.
 Hope this helps…
« Last Edit: May 08, 2014, 08:59:00 PM by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline NewMine

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Re: What does the life of a bitAsset look like?
« Reply #6 on: May 08, 2014, 11:29:42 PM »
How s bitUSD created?

Offline tonyk

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Re: What does the life of a bitAsset look like?
« Reply #7 on: May 08, 2014, 11:47:42 PM »
How s bitUSD created?
By someone going short bitUSD
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline biophil

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Re: What does the life of a bitAsset look like?
« Reply #8 on: May 15, 2014, 07:43:15 AM »
How s bitUSD created?
By someone going short bitUSD

Maybe that's technically correct, but it's a confusing way to say it.

BitUSD is created when someone borrows it from the bitshares network. Once you've borrowed it, you're free to sell it on the open market. You're not short bitUSD until you've sold the bitAssets that you've borrowed.

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Offline bytemaster

Re: What does the life of a bitAsset look like?
« Reply #9 on: May 15, 2014, 08:02:10 AM »
How s bitUSD created?
By someone going short bitUSD

Maybe that's technically correct, but it's a confusing way to say it.

BitUSD is created when someone borrows it from the bitshares network. Once you've borrowed it, you're free to sell it on the open market. You're not short bitUSD until you've sold the bitAssets that you've borrowed.

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Correct, except that this is a single operation, "borrow and sell".   You cannot borrow without selling.
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Offline muse-umum

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Re: What does the life of a bitAsset look like?
« Reply #10 on: May 15, 2014, 11:00:02 AM »
How s bitUSD created?
By someone going short bitUSD

Maybe that's technically correct, but it's a confusing way to say it.

BitUSD is created when someone borrows it from the bitshares network. Once you've borrowed it, you're free to sell it on the open market. You're not short bitUSD until you've sold the bitAssets that you've borrowed.

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Correct, except that this is a single operation, "borrow and sell".   You cannot borrow without selling.

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Offline tonyk

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Re: What does the life of a bitAsset look like?
« Reply #11 on: May 15, 2014, 12:27:19 PM »
How s bitUSD created?
By someone going short bitUSD

Maybe that's technically correct, but it's a confusing way to say it.

BitUSD is created when someone borrows it from the bitshares network. Once you've borrowed it, you're free to sell it on the open market. You're not short bitUSD until you've sold the bitAssets that you've borrowed.

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Correct, except that this is a single operation, "borrow and sell".   You cannot borrow without selling.

Can you someone, please, explain how you borrow something that does not exists????
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline toast

Re: What does the life of a bitAsset look like?
« Reply #12 on: May 15, 2014, 12:48:42 PM »
When your short order is matched with a buy order the network atomically prints and lends "you" the bitusd and then trades it to the long usd position

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Offline tonyk

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Re: What does the life of a bitAsset look like?
« Reply #13 on: May 15, 2014, 12:59:46 PM »
When your short order is matched with a buy order the network atomically prints and lends "you" the bitusd and then trades it to the long usd position

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Can somebody point my stupid sole to the exact line/s of code that make the 'network' do this magic ...
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline santaclause102

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Re: What does the life of a bitAsset look like?
« Reply #14 on: May 15, 2014, 01:07:07 PM »
As I understand it, it is at any time possible to change between on the one side non-liquid XTS you give up into non-liquidity and on the other side BitUSD you didn't have before. The system can always give you BitUSD when you give up XTS in liquid form. You can revert this at any time at current market rates.

 

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