Author Topic: BM Black Swan insurance fund proposal  (Read 5988 times)

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Offline tonyk

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OK
Empirical1 is in charge of buying 3-5 billion life and well being  insurance on Dan, with beneficiary the BTSX DAC?
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Riverhead

Speaking of insurance. At the moment a lot of the BitShares talent is co-located, which seems to have worked out great. However that's not very decentralised. While there's no insuring BM. Are there people not currently co-located that are incentivised and capable of delivering BitAssets in their current form to DACsunlimited for release on BTSX.

To be totally honest I have never, ever, understood any of alt's posts (my hope has always been that the people that matter, do).
Reading this I feel the same way totally lost, as what do you mean.
Can you please re-phrase.
I think he means BTSX's ability to see the light of day as a fully functional product wouldn't survive the, "Hit by a bus" test when applied to BM. As a project manager that is a key risk factor to a successful project.

Offline Empirical1

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Has this insurance fund proposal been implemented?

All BitUSD fees collected by network are saved and used in the event that a short runs out of collateral.   If the fees are not enough then the fund will go negative and will slowly pay it back over time.

 +5% Great.

Offline bytemaster

Has this insurance fund proposal been implemented?

All BitUSD fees collected by network are saved and used in the event that a short runs out of collateral.   If the fees are not enough then the fund will go negative and will slowly pay it back over time.

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 Empirical1

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Has this insurance fund proposal been implemented?

Offline speedy

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So are BitAssets still on course for starting in August? Just wondering.
any minute now .. I guess BM didn't want to release them right before the conference ... delegates are currently updating to the most recent version which has the hardfork to enable markets in them ..

 :D

Offline xeroc

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So are BitAssets still on course for starting in August? Just wondering.
any minute now .. I guess BM didn't want to release them right before the conference ... delegates are currently updating to the most recent version which has the hardfork to enable markets in them ..

Offline speedy

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So are BitAssets still on course for starting in August? Just wondering.

Offline tonyk

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Opening a short transaction as I know is as follows:
If I short bitUSD, I am collecting BTSX and putting up collateral BTSX. The person buying it is selling his/her BTSX to get the bitUSD.
TRUE

Closing the transaction from the short side:
He would use BTSX to buy back bitUSD.(hopefully less BTSX than he received to profit)
TRUE

Closing from the long bitUSD side:
He would sell the bitUSD and receive BTSX. (hopefully get more BTSX back than originally sent to profit)
TRUE

So here is where I don't follow. If the shorter can't cover, meaning he doesn't have the BTSX to buy the bitUSD back, then where will the seller of the bitUSD get the BTSX for giving up the bitUSD? 
The system is selling those bitUSDs, so think of it as if it does not care if it gets BTSX


If you are going to confiscate the bitUSD, you have to simultaneously create BTSX to pay for that bitUSD (since the shorter couldn't cover his portion of BTSX owed to the transaction).
No confiscation planed/implemented.
... well no confiscation at the time of that transaction at least. The plan is to trick customers to give them to us beforehand for free. :)
Joking aside, those USDs will have been already collected beforehand by the system  as fees.


So now you created more BTSX and you are keeping the "unbacked" bitUSD "alive". It would seem if that bitUSD was just sitting there waiting for castrophe that eventually the free market will tend to move to that point just because everyone knows the fail safe is in place. At some point the system will get purged because it's an option.
You are saying that because you have insurance you will find a way to put your house on fire? or I missed the logic somewhere?

If you are okay with the BTSX creation and hoarding of bitUSD, then I'll ask:
How will the platform determine who's bitUSD to buy back? Not all bitUSD will be on the table at once. So the new bitUSD insurance fund is going to act as an active market maker setting "untrue" bids on bitUSD. This is not a good idea. You are guaranteeing liquidity through default.
Previous answer(s) should have explained that you just misinterpreted something. If not ask the q again.


« Last Edit: August 18, 2014, 03:31:11 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Ggozzo

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Opening a short transaction as I know is as follows:
If I short bitUSD, I am collecting BTSX and putting up collateral BTSX. The person buying it is selling his/her BTSX to get the bitUSD.

Closing the transaction from the short side:
He would use BTSX to buy back bitUSD.(hopefully less BTSX than he received to profit)

Closing from the long bitUSD side:
He would sell the bitUSD and receive BTSX. (hopefully get more BTSX back than originally sent to profit)

So here is where I don't follow. If the shorter can't cover, meaning he doesn't have the BTSX to buy the bitUSD back, then where will the seller of the bitUSD get the BTSX for giving up the bitUSD? 

If you are going to confiscate the bitUSD, you have to simultaneously create BTSX to pay for that bitUSD (since the shorter couldn't cover his portion of BTSX owed to the transaction).

So now you created more BTSX and you are keeping the "unbacked" bitUSD "alive". It would seem if that bitUSD was just sitting there waiting for castrophe that eventually the free market will tend to move to that point just because everyone knows the fail safe is in place. At some point the system will get purged because it's an option.

If you are okay with the BTSX creation and hoarding of bitUSD, then I'll ask:
How will the platform determine who's bitUSD to buy back? Not all bitUSD will be on the table at once. So the new bitUSD insurance fund is going to act as an active market maker setting "untrue" bids on bitUSD. This is not a good idea. You are guaranteeing liquidity through default.
« Last Edit: August 18, 2014, 03:07:02 am by skyscraperfarms »

Offline Empirical1

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Speaking of insurance. At the moment a lot of the BitShares talent is co-located, which seems to have worked out great. However that's not very decentralised. While there's no insuring BM. Are there people not currently co-located that are incentivised and capable of delivering BitAssets in their current form to DACsunlimited for release on BTSX.

To be totally honest I have never, ever, understood any of alt's posts (my hoe has always been that the people that matter, do).
Reading this I feel the same way totally lost, as what do you mean.
Can you please re-phrase.

I think the BitShares development team should be more decentralised.

Offline tonyk

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Speaking of insurance. At the moment a lot of the BitShares talent is co-located, which seems to have worked out great. However that's not very decentralised. While there's no insuring BM. Are there people not currently co-located that are incentivised and capable of delivering BitAssets in their current form to DACsunlimited for release on BTSX.

To be totally honest I have never, ever, understood any of alt's posts (my hope has always been that the people that matter, do).
Reading this I feel the same way totally lost, as what do you mean.
Can you please re-phrase.
« Last Edit: August 18, 2014, 03:07:53 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Empirical1

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Speaking of insurance. At the moment a lot of the BitShares talent is co-located, which seems to have worked out great. However that's not very decentralised. While there's no insuring BM. Are there people not currently co-located that are incentivised and capable of delivering BitAssets in their current form to DACsunlimited for release on BTSX.

Offline yellowecho

Sounds like a very reasonable idea to me. 
696c6f766562726f776e696573

Offline Empirical1

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I do not see the need for bitUSD_2

I don't pretend to understand everything here properly. But it seems that if there was a successful attack on BitUSD1 that drained the reserve fund and created a large amount of unbacked currency that BitUSD1 may go quite far away from a peg that resembles the value of a USD.

If you identified and corrected the cause of the attack you could start BitUSD2, which would start from scratch and be fully backed and therefore trade closer to a USD peg.

-It should be highly unlikely to have not fully backed bitUSD; 
-The unbaked/not fully backed bitUSD is not the end of the world;
-The proposed system provides a way to 'eat them up'/remove them over time.

On a different issue:
'fully backed and therefore trade closer to a USD peg.
'
'fully backed' is not the reason the peg holds...fully backed means backed by 2x BTSX.
 being backed by even 1 BTSX  for 1 Unit of value in bitUSD should be more than enough. (and this only happens in fast and huge drop in BTSX).

On a third issue (Probably the most important):
BM have consistently referred to such bitUSD as unbacked - in reality the bitUSD in existence are not individually backed. So if you have 99 USD backed 100% and you add 1 backed 0 % you actually have 100 bitUSD backed 99%. You do not have some backed and some not. The reason for that is that from holders perspective you do not hold backed or unbacked bitUSD, you just hold one that have the same qualities as the rest of them.

 +5% Thanks for the detailed explanation, yes all of that is my understanding too.

I see you disagree and you're probably right. My concern is still that we missed something critical in testing that creates a back-door/some massive attack vector. This is the first time something like this is being 'turned on'

Calling it an experimental name for the first month and having the ability to start another BitUSD on the same blockchain is a way to insure BTSX against a major problem with BitUSD version 1. But as you say that is probably not needed...