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Offline pgbit

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Initial convergence of asset value to real value
« on: July 02, 2014, 09:40:47 PM »

When an asset is first released, for example an asset that is planned to mirror the real time price of a commodity, how will this be affected initially in different trading conditions, for example if trading volumes are low? I might expect (or personally, I mean, have a wild guess) that the asset will more likely than not be undervalued. But I am not sure how the Bitshares X chains are initialized.

Offline toast

Re: Initial convergence of asset value to real value
« Reply #1 on: July 02, 2014, 09:46:37 PM »
Assets are only created once shorts and longs cross. So at the very start there is no asset and the market just says "everyone agrees it's above here or below here". Once an asset is on the market and you think it's undervalued you should buy and hold it.

Why would low volume cause it to be undervalued? Even if people who trade in low volume are biased towards going short asset relative to BTS they would still go long the asset if it is undervalued relative to real-world because they're only shorting expecting BTS to actually work and hence the rest of the market to peg the asset as well
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Offline bytemaster

Re: Initial convergence of asset value to real value
« Reply #2 on: July 03, 2014, 12:14:00 AM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
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Offline xeroc

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Re: Initial convergence of asset value to real value
« Reply #3 on: July 03, 2014, 06:53:05 AM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
Learn sth. new every day [/end of quote]
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Offline pgbit

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Re: Initial convergence of asset value to real value
« Reply #4 on: July 07, 2014, 08:06:17 AM »
Thanks everyone for all the explanations.

Offline cass

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Re: Initial convergence of asset value to real value
« Reply #5 on: July 07, 2014, 01:59:11 PM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
Learn sth. new every day [/end of quote]

 +5% yup me also :) - and you'll recognice your acquired knowledge when you talk to people outside the inner discussion cirlce ... noticed this a few days before when talked to my friends...holy moly ... it sounded really nerdy ^^ (was a bit scared about)
« Last Edit: July 07, 2014, 02:03:03 PM by cass »
█║▌║║█  - - -  The quieter you become, the more you are able to hear  - - -  █║▌║║█

Offline Simeon II

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Re: Initial convergence of asset value to real value
« Reply #6 on: July 07, 2014, 02:03:44 PM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
Learn sth. new every day [/end of quote]

 +5% yup me also :) - and you'll recognice your acquired knowledge when you talk to people outside the inner discussion cirlce ... noticed this a few days before when talked to my friends...holy moly ... it sounded really nerdy ^^

This thing in particular is known since about 2/28... skipping the XT phase on the other hand was hidden secret until 2 days ago.

Offline cass

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Re: Initial convergence of asset value to real value
« Reply #7 on: July 07, 2014, 02:07:24 PM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
Learn sth. new every day [/end of quote]

 +5% yup me also :) - and you'll recognice your acquired knowledge when you talk to people outside the inner discussion cirlce ... noticed this a few days before when talked to my friends...holy moly ... it sounded really nerdy ^^
skipping the XT phase on the other hand was hidden secret until 2 days ago.

sounds like this is a problem for you, isn't it?
█║▌║║█  - - -  The quieter you become, the more you are able to hear  - - -  █║▌║║█

Offline xeroc

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Re: Initial convergence of asset value to real value
« Reply #8 on: July 07, 2014, 02:07:32 PM »
This thing in particular is known since about 2/28... skipping the XT phase on the other hand was hidden secret until 2 days ago.
calling it 'skippin' is wrong .. it still is the protoDAC .. only difference is that there will not be a snapshot for X but an upgrade ... for investors nothing changes .. for users .. nothing changes .. only thing changed is the name
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Offline AsymmetricInformation

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Re: Initial convergence of asset value to real value
« Reply #9 on: July 07, 2014, 02:14:27 PM »
This question has been debated endlessly.

From my reading of this debate (which spans many websites), the discussion did not approach anything like a unanimous conclusion, so I don't know what you expect to gain by bringing it up again.

The only way to know is to turn it on. From there, any number of things could go wrong, or none of them could.

Offline Simeon II

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Re: Initial convergence of asset value to real value
« Reply #10 on: July 07, 2014, 02:32:58 PM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
Learn sth. new every day [/end of quote]

 +5% yup me also :) - and you'll recognice your acquired knowledge when you talk to people outside the inner discussion cirlce ... noticed this a few days before when talked to my friends...holy moly ... it sounded really nerdy ^^
skipping the XT phase on the other hand was hidden secret until 2 days ago.

sounds like this is a problem for you, isn't it?

No it does not, that's why I bring it up.

Offline bytemaster

Re: Initial convergence of asset value to real value
« Reply #11 on: July 07, 2014, 02:35:16 PM »
The market requires a minimum market depth before any trades occur to prevent the SIDS attack (Sudden Investment Death Syndom) where low volume allows the attacker to control the initial price.   A lot of effort has gone into the design of the initial starting condition which will require a minimum market depth on both sides of the market before trades begin.
Learn sth. new every day [/end of quote]

 +5% yup me also :) - and you'll recognice your acquired knowledge when you talk to people outside the inner discussion cirlce ... noticed this a few days before when talked to my friends...holy moly ... it sounded really nerdy ^^
skipping the XT phase on the other hand was hidden secret until 2 days ago.

sounds like this is a problem for you, isn't it?

No it does not, that's why I bring it up.

We don't have hidden secrets... we reveal things as we figure them out, often before we probably should.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Simeon II

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Re: Initial convergence of asset value to real value
« Reply #12 on: July 07, 2014, 02:40:57 PM »

We don't have hidden secrets... we reveal things as we figure them out, often before we probably should.

Agreed!  Saying 'we have not decided' is far better on insisting for 2 mo. that you will do something stupid and all of sudden 2 days before the trading starts, come to your senses and do the right thing.

Offline pgbit

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Re: Initial convergence of asset value to real value
« Reply #13 on: July 08, 2014, 11:31:11 AM »
In my first post, I did mean to refer to user created assets - perhaps in other trading DACs - not the main BTS-X chains which for me would  immediately have a higher level of trust.

For example, when user created assets are allowed, a global banana company might (possibly) decide to create BANANAS as a chain, and although they might intend for their pricing to match the global banana price in kg quite precisely, others may initially have trouble taking the asset seriously.

In that situation, as a unqualified trading noob, I would guess that digital bananas might be 'offloaded' or traded at a lower price, forcing the asset to trade at a lower price than the real value of bananas, as confidence grows in the process this might then be expected to more closely approximate the real price. Is this flawed logic?

Anyway, I was imagining that the convergence of asset values will surely depend, perhaps *initially* foremost, on Trust. Once systems are established and DACs are trusted, this issue I would expect to diminish rapidly.

This is a potential problem for new players in the market, as surely they might be disadvantaged by a market leader effect once others are established; I wondered how this effect might be minimized. But then this leads on to how to win over Trust quickly.

I know these issues may have been raised before, sorry if I have missed posts covering this lot already.

EDIT: this is a useful link - http://wiki.bitshares.org/index.php/Market_Peg
« Last Edit: July 08, 2014, 11:36:21 AM by pgbit »

Offline AsymmetricInformation

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Re: Initial convergence of asset value to real value
« Reply #14 on: July 08, 2014, 01:47:32 PM »
For example, when user created assets are allowed, a global banana company might (possibly) decide to create BANANAS as a chain, and although they might intend for their pricing to match the global banana price in kg quite precisely, others may initially have trouble taking the asset seriously.
Indeed, this would be nearly as problematic as you or I writing "Banana" on a piece of paper and trying to sell it to someone who wants a banana, wouldn't it?

In that situation, as a unqualified trading noob, I would guess that digital bananas might be 'offloaded' or traded at a lower price, forcing the asset to trade at a lower price than the real value of bananas, as confidence grows in the process this might then be expected to more closely approximate the real price. Is this flawed logic?
You've assumed that people will respond to uncertainty by assuming the worst. At least one Nobel Paper agrees with you: http://en.wikipedia.org/wiki/The_Market_for_Lemons

Anyway, I was imagining that the convergence of asset values will surely depend, perhaps *initially* foremost, on Trust. Once systems are established and DACs are trusted, this issue I would expect to diminish rapidly.
Trusting the issuer of the assets, I think (not "systems and DACs"). Even if the DAC works perfectly, users may issue worthless assets, and/or traders may have no way of assessing the value of those assets.

EDIT: this is a useful link - http://wiki.bitshares.org/index.php/Market_Peg
I'm curious as to what you found useful about it. The link says:
[1] "...all traders in the blockchain expect BitUSD to peg to the dollar...",
[2] "...which leads them to trade in ways that reaffirm that expectation".
Therefore [3] "...the value of bitAssets will be equal to about the value of their real world counterparts".

But you've called the validity of 1 into question. That link just assumes 1, so either the link tricked your brain into forgetting about its concern, or it somehow inspired your brain into an amazing realization.
« Last Edit: July 08, 2014, 01:49:42 PM by AsymmetricInformation »

 

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