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Offline bernard

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Thoughts on BitShares and BitUSD
« on: August 27, 2014, 12:14:38 PM »

Firstly, let me start by saying congrats on the BitSharesX going live.. i've been playing around with it and its working well.

I just wanted to share my thoughts on the platform, its positives and negatives..

I love the idea of a decentralized BitUSD, its the only way to get around the obstacles that centralized exchanges were facing dealing with fiat currencies and there associated regulations.

I also believe the market will keep the price of BitUSD where it should be (although the first major short squeeze will be fun to watch).

Now this is not really a problem, more of an observation, if we can create BitUSD out of thin air using BTSX as collateral and start trading it, how do we determine the price of USD/BTSX?  obviously we can check other centralized markets and use their prices.  And the good (and bad) thing with USD is there is so much of it out there, traded everywhere its nearly impossible to determine an accurate price so we just go with what the big boys tell us.

But what if we wanted to create an BitAsset based on an asset that did have limited supply and demand, and had illiquid markets.. the BitShares "virtual" version would never be able to take over as the leading marketplace or primary point for determining price because no one is actually swapping the real asset.

So my conclusion is USD/BTSX is probably the best market for BitShares because we just accept the price the big boys tell us.. but BitShares can never become the primary exchange for Bitcoin, potentially even Gold due to it not being able to determine its own real price.  It can only be a small percentage of the real markets that actually demand swapping/depositing of the real asset.
Saying that, even if BitShares fulfills only a small percentage of trading for a given asset, maybe that's enough to facilitate a virtual representation of said real asset enough that they can be transferred around on a blockchain p2p style with no restrictions or red tape :)

TLDR; Without supply and demand of actual assets there can be no independent price discovery.
« Last Edit: August 27, 2014, 12:19:08 PM by bernard »

jakub

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Re: Thoughts on BitShares and BitUSD
« Reply #1 on: August 27, 2014, 10:00:28 PM »
So my conclusion is USD/BTSX is probably the best market for BitShares because we just accept the price the big boys tell us.. but BitShares can never become the primary exchange for Bitcoin, potentially even Gold due to it not being able to determine its own real price.  It can only be a small percentage of the real markets that actually demand swapping/depositing of the real asset.

If the BTSX/BTC and BTSX/USD markets are liquid I don't see a reason why Bitshares X cannot one day be the biggest market for BTC/USD (in the form of bitBTC/bitUSD).
All that is required is that Bitshares X can value itself in terms of BTC and USD and this will be the case when the BTSX/BTC and BTSX/USD markets are liquid.
« Last Edit: August 27, 2014, 10:03:19 PM by jakub »

Offline speedy

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Re: Thoughts on BitShares and BitUSD
« Reply #2 on: August 27, 2014, 10:08:34 PM »
BitShares can never become the primary exchange for Bitcoin, potentially even Gold due to it not being able to determine its own real price.  It can only be a small percentage of the real markets that actually demand swapping/depositing of the real asset.

99% of gold trading is just paper gold anyway. No one demands the real asset. Its all fictional and just based on what everyone else is doing. At least BTSX disregards that illusion :)

Offline bernard

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Re: Thoughts on BitShares and BitUSD
« Reply #3 on: August 30, 2014, 01:58:25 AM »
If I have a bag of the best oranges the world has ever tasted and I create a BitOrange asset to trade shares of the bag of oranges whats the BTSX/BitOrange price going to be?  The price has to follow what people are actually paying to receive a physical orange and BitOrange will follow that.. if the volume of BitOrange is 50% or more of physical orange purchase volume then the price cant really be considered accurate because all that volume is not actually affecting the physical exchange price at all.

Yes I agree, the current gold market and most markets today are 90% speculation and not based on physical delivery.. thats unfortunate and probably a reason why the world is in a financial mess right now.

I highly doubt BitBTC will become the biggest BTC market.. if it did I wouldn't trust the price.. unless BitShares can integrate delivery of actual bitcoins into the software somehow.

Offline santaclause102

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Re: Thoughts on BitShares and BitUSD
« Reply #4 on: August 30, 2014, 08:07:27 AM »
The volume of a specific BitAsset market does not depend on the volume of the underlying asset but on the utility of trading the udnerlying and on the utility of holding a an asset that correlates with the price of the underlying.
The underlying (organges) and the BitOrange are two totally different services and are bought and traded for two totally different reasons.

Offline graffenwalder

Re: Thoughts on BitShares and BitUSD
« Reply #5 on: August 30, 2014, 08:22:01 AM »
I highly doubt BitBTC will become the biggest BTC market.. if it did I wouldn't trust the price.. unless BitShares can integrate delivery of actual bitcoins into the software somehow.

The only thing you would need is a gateway, like Ripple has with bitstamp.

 

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