Author Topic: One way or another the PEG will be established...  (Read 13872 times)

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Offline alt

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Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   
how about use the  minimum price with average and median from feed?
this can avoid delegate set a very higher feed price
and we don't need to wait 101 feed, maybe 51 is enough

Offline tonyk

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... continueed
Let me quote you from where you were right:

Agent86, I know you are very passionate and bright guy who has convinced me of things in the past (like the approval voting) but I think you are entirely wrong in your assessment.

If we limit shorts then you are resorting to price fixing.  The peg is supposed to have some variance based upon supply and demand and I think you are judging the system entirely too soon.  Right now the demand for BitUSD is low and the demand for leverage is high and overall risk is high.  We will see what happens and monitor the correlation in price movement.

In your limit scenario I can see some benefits... you reduce selling pressure below the price feed.  This would give USD sellers a priority over shorts which in turn would help make USD more liquid.   But right now USD is liquid at a price that is correlated to USD.  But this introduces a requirement for a price feed and the purpose of this experiment is to attempt something without a price feed.

I think you are being alarmist.

If the network is the USD Buyer of Last Resort and buys it at a price of 10% below the price feed and sells it at 1% below the price feed... it would end up "printing XTS" to buy the USD and burning it when it sells the USD.   High demand to short USD would result in the network buying it up with inflation and then selling it back at a profit resulting in long-term deflation.    In this case 100% of the "inflation" would be locked in collateral of the short position.   
« Last Edit: August 29, 2014, 02:21:06 am by TheOnion »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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I just want to make it clear that we will use price feeds if necessary to establish the peg.

I have always been aware of that, and believed strongly that we must go to plan B, only if necessary.

BitUSD will eventually get to USD parity because otherwise this network will be worthless.

On the other hand, the network will be worth as much as it is worth. Making unnecessary restrictions will make it worth as much as if those restriction were necessary.

The network will end up with USD on its balance sheet proportional to the "surplus short demand" and the XTS created to buy this USD is actually locked away in the collateral of the shorts.   Thus we can safely say that printing XTS to perform this market making algorithm will not create additional XTS in circulation. 

One of the main points is that actually the new BTSX are NOT locked as collateral.

The main difference between this proposed system and the market can be summarized as follows:
When short are offering cheap dollars they provide collateral for those new bitUSDs. The market will punish them if this is unwise decision. If you think those are unwise choices on their part go ahead and buy cheap bitUSD (vote with your money, not with your power to take whatever decision will solve your perceived problem).

In you system you fix the price of the bitUSD to no less than 0.95 USD. You prevent the shorts from making informed economic decisions. The only actors left with this choice are the USD sellers. They think/believe bitUSD is worth less than 0.95 USD -I am selling. And you hope the way to solve this is to buy from those sellers, print more money (BTSX) diluting the backing of the bitUSD in existence? … and hoping that this will make reasonably acting market participant  think that their dollars are worth more ... Good Luck...


In short one bitUSD will be worth one USD when its utility is one USD. We might eventually need to make the system less valuable to provide the bitUSD peg, with measures similar to the one proposed but let's not destroy something potentially great by jumping to too quick conclusions.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline chono

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Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   

+5%especially the second rule is excellent,has enough flexibility and gives everyone the rights to choose.this may build the perfect system.




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Offline luckybit

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The primary tool we have at our disposal is to implement a market maker algorithm into the blockchain based upon the median feeds of the delegates.

It would automatically buy BitUSD at .95 and sell BitUSD at 1.05 and then we would limit shorts to 1.05. 

The impact this would have on the network:
1) When demand to sell BitUSD is high the network is buying at .95 with new BTSX
2) Shorts would be unable to sell at .95... so they would have to first buy at 1.05
3) This establishes a 10% initial fee for any shorts and gives longs a priority in selling.
4) As the price fluctuates between those who want into or out of BitUSD the network makes money.

The network will end up with USD on its balance sheet proportional to the "surplus short demand" and the XTS created to buy this USD is actually locked away in the collateral of the shorts.   Thus we can safely say that printing XTS to perform this market making algorithm will not create additional XTS in circulation. 

We can quibble about the spread.

This process would function much like it does today except it would make the "shareholders" more money from the built in arbitrage bot.  The built in "bot" doesn't need to predict which way the price will ultimately go... only that it will eventually change directions.   

What is the risk from running this BOT on the network?  Little that I can see right now.


1) An attacker could print USD at will provided they were willing to buy at 1.05... but they would only be able to sell back at .95 unless there was real demand.
2) An attacker would be unable to print arbitrary XTS because they would have to buy BitUSD high and then tie up the XTS in the collateral and their USD would only have guaranteed demand at .95 so when they "cover" they would get back less than they started with.

The primary down side is the requirement of a price feed.  I think if you start the BOT off with wide market maker functionality, that eventually other players will enter the market and provide tighter market maker functionality at which point in time the "feed" almost never factors into the equation.   

If this is what it takes to bootstrap the peg I am willing to do it.   Thoughts?

I'm all for this 100%. Please make it so that the bot can be easily extended/updated via a scripting language, repurposed, etc in the Bitshares toolkit. I can see a lot of areas where we'll want automation or bot like functionality but this is clearly the place we need it right now.

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Offline gulu

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Also, this short term solution would potentially print more BTSX, if the price of BTSX does increase as the shorts wishes.
BTC: 1FRsgcQELHKFY2VMFosBnyBaNxZgS4wj7x
PTS: Pf9yDYUknXShepu6YjwSEpMvm1ewNQLNgE
BTSX: gulu

Offline gulu

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This would be a short-term solution. Not a neat one though. I made a proposal for a long-term solution. Your thoughts are appreciated.
https://bitsharestalk.org/index.php?topic=7865.0
BTC: 1FRsgcQELHKFY2VMFosBnyBaNxZgS4wj7x
PTS: Pf9yDYUknXShepu6YjwSEpMvm1ewNQLNgE
BTSX: gulu

Offline robrigo

Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   

This looks acceptable to me in order to prevent rampant manipulation because of the thin orderdepth yet. How would you call the new "bitUSD-short pegged" and "bitUSD-market unlimited"? Also, in which version will this be included, I suppose the delegates and users will have to download a new version, for example 0.5.0 first, right?

I think BM was referring to bitBTC or bitCNY as the second asset, not 2 separate versions of bitUSD.

Offline okidoki

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Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   

This looks acceptable to me in order to prevent rampant manipulation because of the thin orderdepth yet. How would you call the new "bitUSD-short pegged" and "bitUSD-market unlimited"? Also, in which version will this be included, I suppose the delegates and users will have to download a new version, for example 0.5.0 first, right?
« Last Edit: August 28, 2014, 10:29:15 pm by okidoki »

Offline okidoki

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From libertarianism to democracy to oligarchy to tyranny, even faster than I expected.

:(  that is an interesting point of view... and I see your parallels.

I am for the feed and against the network owned arb bot. Its a free market and this would be a bad step. The whole, is it ok to do bad things for the greater good kind of thing, their has to be another way. Why not just use the feed and let the market decide the value of bitUSD
+5% no arb bot needed.
USE THE FEED TO LIMIT VALID SHORTS TO ONLY ABOVE THE FEED.  No 95-105% range and no arb bot is needed.
Sometimes I don't know how you guys come up with this stuff and start wasting time on it before thinking it through.  Sorry for being annoyed.

Exactly! No price controls, no arb bot with newly created shares. bitUSD is part of a prediction market and therefor surely only has to track the price more or less of the underlying asset. If the USD doubles compared to bitShares, than I am fine if I get more or less double the bitSHares... this can be done at 5 bitUSD per USD or 1 bitUSD per USD... as long as the percentage evolution stays the same it works for me...

Offline bytemaster

Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   

what happens if you publish a feed but don't update it?
All feeds expire after 24 hours
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 Agent86

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You can still short below the peg, it just costs a premium. You can match your own short and sell undervalued. I think all this is doing is forcing shorts to say "oh, I am effectively paying a 10% fee? I didn't want that!". I think BitUSD will still be undervalued.
You can't match your own short.  This is not allowed by the system.  The system matches every buy order with the lowest price sell order.

You can match your own short... you just have to buy up the order book first :)

FYI... I appreciate your feedback and challenges.  They help strengthen everyone here.
thanks

Offline Agent86

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Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   
+5%  If I'm understanding this right than this is good. 

I don't think we necessarily need to be in a rush to open up a new bitasset.

Offline GaltReport

Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   

what happens if you publish a feed but don't update it?

Offline bytemaster

You can still short below the peg, it just costs a premium. You can match your own short and sell undervalued. I think all this is doing is forcing shorts to say "oh, I am effectively paying a 10% fee? I didn't want that!". I think BitUSD will still be undervalued.
You can't match your own short.  This is not allowed by the system.  The system matches every buy order with the lowest price sell order.

You can match your own short... you just have to buy up the order book first :)

FYI... I appreciate your feedback and challenges.  They help strengthen everyone here.
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.