Negative Post about Bitshares

[xeroc]

Why did AdamBLevine leave the community?

He left for Dogeparty
http://www.dogeparty.io/#dp-team

.. not kidding

[bytemaster]

Because the philosophy of this community is slightly different than his. 

[sschechter]

Why did AdamBLevine leave the community?

I hope he didn't sell out of all his shares before the run-up.....

[Method-X]

Why did AdamBLevine leave the community?

[matt608]

I agree with the post from the blog that being humble and making not too bold claims comes across as more trustworthy!

In your analysis the following didn't make sense to me:

and in order to pay them back the shorts have to sell their collateral

The collateral (BTSX) is held by the system in order to be able to guarantee the long position that it can be paid out any time. Not selling of BTSX is necessary. No?

Ah ok, well if that's the case that is a bit better.  This will be a fascinating experiment.

[santaclause102]

I agree with the post from the blog that being humble and making not too bold claims comes across as more trustworthy!

In your analysis the following didn't make sense to me:

and in order to pay them back the shorts have to sell their collateral

The collateral (BTSX) is held by the system in order to be able to guarantee the long position that it can be paid out any time. Not selling of BTSX is necessary. No?

[matt608]

So, I'm learning about this about this and trying to get my head around it.

So he's saying that the loans the shorts take out are backed by BTSX.  So if the value of btsx goes down enough, it will trigger margin calls of the shorts and in order to pay them back the shorts have to sell their collateral, which is BTSX, which causes more downard pressure on the price, triggering more margin calls, causing more downward pressure resulting in a cascading of margin calls plunging the BTSX price and rendering the bitassets unbacked, resulting in the whole thing imploding and everyone losing a ton of money.

From my padawan learner mind, this appears so far like a valid criticism. and I haven't seen anything convincing to counter it.  100% of this 'bank's' collateral is in its own 'shares'.  I did some googling of 'loans collateralized by bank stock' and it seems in some states in might be forbidden and in others it may be allowed, but I'm not certain.  Now this is a decentralized system so I not going to go into what laws may hypothetically apply, but if this type of system is sometimes not allowed, it makes me wonder why?

I am not fudding and I might just misunderstand and there are probably some protection mechanisms I don't understand yet.  Maybe there is some other solution too though, like requiring other types of collateral such as BTC or LTC, to reduce the exposure to BTSX.

[yellowecho]

Increased exposure relative to WHAT?   Owning BitUSD you have less exposure,  Shorting BitUSD you have more exposure than just holding BTSX.  It is really a very simple trading of risks/rewards between consenting parties.

I'm referring to the scenario mentioned by the author.  He's basically trying to make the case that bitAssets won't hold market peg if BTSX has huge volatility to the downside because they'll be 'unbacked' by real world USD... or to put it another way, the value of all outstanding bitAssets will largely exceed the value of all BTSX during a black swan so it will implode on itself.

Scenario: If BTSX has a market cap of $100M and there are $50M worth of bitAssets issued and a black swan happens .. if the market cap of BTSX falls to $1M then those with bitAssets are screwed because their bitAssets would be greatly undercollateralized so if they wanted to cash out in USD they'd do so at huge loss.

But as I said, many of his conclusions are unsubstantiated for a number of reasons.

[bytemaster]

If there is not enough liquidity it is also possible for the network to "print" BTSX necessary to make great deals relative to a trusted feed.  IE: if BitUSD bids are over 10% above the feed, print BTSX to short BitUSD and if it is under the feed by 10%, cover the short.   Simply knowing there is unlimited sell pressure at 10%+ and a large cover at -10% could also enhance the system.  The benefit of this "system trading" is that the profits from shorting high and covering low go to the shareholders.

 

let's do it!

I think the market peg will be so effective that those trading rules would never be hit in the first place.

[liondani]

If there is not enough liquidity it is also possible for the network to "print" BTSX necessary to make great deals relative to a trusted feed.  IE: if BitUSD bids are over 10% above the feed, print BTSX to short BitUSD and if it is under the feed by 10%, cover the short.   Simply knowing there is unlimited sell pressure at 10%+ and a large cover at -10% could also enhance the system.  The benefit of this "system trading" is that the profits from shorting high and covering low go to the shareholders.

 

let's do it!

[bytemaster]

Totally agree he should be engaged with and educated, but I think your final comment might be more indicative of trouble than the good you seem to be implying from it.  Preston works professionally in the non-crypto comparable industry to what Bitshares X hopes to accomplish (derivatives).  Because of that, he has context with which to look at Bitshares X and say "Oh, it's the same from conventional tools in this way and different in these ways and this is what that means" which I'm willing to bet most of the "bloggers" do not.   

When you speak to these "bloggers" how many of them actually understand how Bitassets work, or even think they do vs. how many are just trusting that Dan knows what he's talking about and think it sounds really neat.

Do you understand how Bitassets work well enough to respond to this article?

I agree with your point and think its a valid one.  With that said, I've responded to each of the items from the article and believe the author is jumps to many conclusions out of ignorance of how the system functions leading to mostly unsubstantiated conclusions.  For instance, in most of his 'analogous' examples he treats trades as if they're traditional derivative contracts rather than being balance sheet neutral.  He's correct about increased exposure of the underlying (BTSX) but the exact same risks exist in real world markets so it's a moot point.. not to mention that he lacks adequate knowledge as to what extent the system is capable of covering in such extreme events.  If increased exposure to BTSX equity is his only real criticism (which seems to be the case) then I'm confident BTSX will do quite well moving forward.

Increased exposure relative to WHAT?   Owning BitUSD you have less exposure,  Shorting BitUSD you have more exposure than just holding BTSX.  It is really a very simple trading of risks/rewards between consenting parties.

*IF* the market peg doesn't hold well enough (insufficient liquidity, manipulation, etc) then we have a very simple fall back option:

1) The delegates publish a price feed
2) All trades must be within X% of the price feed

If there is not enough liquidity it is also possible for the network to "print" BTSX necessary to make great deals relative to a trusted feed.  IE: if BitUSD bids are over 10% above the feed, print BTSX to short BitUSD and if it is under the feed by 10%, cover the short.   Simply knowing there is unlimited sell pressure at 10%+ and a large cover at -10% could also enhance the system.  The benefit of this "system trading" is that the profits from shorting high and covering low go to the shareholders. 

Bottom line, we are going with the most market-based solution first and have fall backs to feed based solutions if they prove necessary. 

The feed-based solution is a non-brainer to understand and would work, it is simply a prediction market with 100 panel judge. 

[yellowecho]

Totally agree he should be engaged with and educated, but I think your final comment might be more indicative of trouble than the good you seem to be implying from it.  Preston works professionally in the non-crypto comparable industry to what Bitshares X hopes to accomplish (derivatives).  Because of that, he has context with which to look at Bitshares X and say "Oh, it's the same from conventional tools in this way and different in these ways and this is what that means" which I'm willing to bet most of the "bloggers" do not.   

When you speak to these "bloggers" how many of them actually understand how Bitassets work, or even think they do vs. how many are just trusting that Dan knows what he's talking about and think it sounds really neat.

Do you understand how Bitassets work well enough to respond to this article?

I agree with your point and think its a valid one.  With that said, I've responded to each of the items from the article and believe the author is jumps to many conclusions out of ignorance of how the system functions leading to mostly unsubstantiated conclusions.  For instance, in most of his 'analogous' examples he treats trades as if they're traditional derivative contracts rather than being balance sheet neutral.  He's correct about increased exposure of the underlying (BTSX) but the exact same risks exist in real world markets so it's a moot point.. not to mention that he lacks adequate knowledge as to what extent the system is capable of covering in such extreme events.  If increased exposure to BTSX equity is his only real criticism (which seems to be the case) then I'm confident BTSX will do quite well moving forward.

[Xeldal]

What's interesting is this guy doesn't allow comments on his blog post.  Guess he doesn't want to enter the arena of ideas and have his challenged.  But he does have a place to email him directly. I suggest we win him over, or attempt to rather than fight him.  His opinion is based on a lot of ignorance about BitShares, but it's good practice for all of us to win over our worst critics, or attempt to, even if we dont.  What's amazing to me is that with as many people as we meet and talk to at all the events we attend, rarely do we find anyone who has more than one or two objections...so bloggers like this are certainly in the minority..... B

Totally agree he should be engaged with and educated, but I think your final comment might be more indicative of trouble than the good you seem to be implying from it.  Preston works professionally in the non-crypto comparable industry to what Bitshares X hopes to accomplish (derivatives).  Because of that, he has context with which to look at Bitshares X and say "Oh, it's the same from conventional tools in this way and different in these ways and this is what that means" which I'm willing to bet most of the "bloggers" do not.   

When you speak to these "bloggers" how many of them actually understand how Bitassets work, or even think they do vs. how many are just trusting that Dan knows what he's talking about and think it sounds really neat.

Do you understand how Bitassets work well enough to respond to this article?

I agree that in general not finding criticism, doesn't mean you're doing it right.

Does Preston understand bitAssets well enough to write the article in the first place?

I was a professional in the same or similar field and will say that I would not trust half these people to pick up my garbage. (oddly the individual i eventually partnered with independently, was actually a trash man, but that's another story)  I would not want 98% of financial 'professionals' managing my finances, as I would not take economic advice from 98% of professional economists. How many journalists do you feel get it right because their profession is journalism?   Ones profession does not always equate thorough, correct understanding.  In fact its often people outside the 'industry' that break the mold.  A professional is often too entrenched in his world view to see the value in what doesn't fit.  I think we can agree here that what we're talking about, for many may require a new view of the world.

I don't mean to say Preston doesn't know what he's doing, or that he has nothing to offer to the conversation, but he clearly doesn't know what he's talking about with regard to bitAssets/BitShares, and so regardless of what he does professionally, his opinion about bitAssets, so far, carries little weight for me.

So, what I'm getting at is, someones profession can lend credence to their opinion, though, if what they say illustrates a clear lack of understanding or proper investigation of the topic, its garbage, just like any other.

[xeroc]

What's interesting is this guy doesn't allow comments on his blog post.  Guess he doesn't want to enter the arena of ideas and have his challenged.  But he does have a place to email him directly. I suggest we win him over, or attempt to rather than fight him.  His opinion is based on a lot of ignorance about BitShares, but it's good practice for all of us to win over our worst critics, or attempt to, even if we dont.  What's amazing to me is that with as many people as we meet and talk to at all the events we attend, rarely do we find anyone who has more than one or two objections...so bloggers like this are certainly in the minority..... B

Totally agree he should be engaged with and educated, but I think your final comment might be more indicative of trouble than the good you seem to be implying from it.  Preston works professionally in the non-crypto comparable industry to what Bitshares X hopes to accomplish (derivatives).  Because of that, he has context with which to look at Bitshares X and say "Oh, it's the same from conventional tools in this way and different in these ways and this is what that means" which I'm willing to bet most of the "bloggers" do not.   

When you speak to these "bloggers" how many of them actually understand how Bitassets work, or even think they do vs. how many are just trusting that Dan knows what he's talking about and think it sounds really neat.

Do you understand how Bitassets work well enough to respond to this article?

*agreed*

[AdamBLevine]

What's interesting is this guy doesn't allow comments on his blog post.  Guess he doesn't want to enter the arena of ideas and have his challenged.  But he does have a place to email him directly. I suggest we win him over, or attempt to rather than fight him.  His opinion is based on a lot of ignorance about BitShares, but it's good practice for all of us to win over our worst critics, or attempt to, even if we dont.  What's amazing to me is that with as many people as we meet and talk to at all the events we attend, rarely do we find anyone who has more than one or two objections...so bloggers like this are certainly in the minority..... B

Totally agree he should be engaged with and educated, but I think your final comment might be more indicative of trouble than the good you seem to be implying from it.  Preston works professionally in the non-crypto comparable industry to what Bitshares X hopes to accomplish (derivatives).  Because of that, he has context with which to look at Bitshares X and say "Oh, it's the same from conventional tools in this way and different in these ways and this is what that means" which I'm willing to bet most of the "bloggers" do not.   

When you speak to these "bloggers" how many of them actually understand how Bitassets work, or even think they do vs. how many are just trusting that Dan knows what he's talking about and think it sounds really neat.

Do you understand how Bitassets work well enough to respond to this article?