Author Topic: What does the life of a bitAsset look like?  (Read 6485 times)

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Offline tonyk

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Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline NewMine

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Offline tonyk

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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 toast

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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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clout

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But who wants to hold on to bitUSD if it can be destroyed at anytime?

Offline toast

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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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Offline Agent86

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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 »

clout

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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?