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Offline luckybit

Is Bitshares X a serious game?
« on: August 31, 2014, 09:51:33 AM »

Here is an example of a virtual stock exchange https://secure.marketwatch.com/game/ .

But unlike that virtual stock exchange the Bitshares X stock exchange is a serious game with real money at stake.

Bitshares X can do the virtual stock exchange too but unlike the marketwatch game where if you do good trades and make millions of dollars you don't get to keep any of the money, with Bitshares and the birth of cryptocurrency you get to keep every penny.

The ultimate question the answer of which will decide if Bitshares X is a billion dollar industry or a potentially trillion dollar industry is whether or not we can find a way to turn virtual stocks into legal securities. In my opinion our community should make a serious effort to figure out ways to achieve that goal.

I think the way to achieve that is through integration with Wall Street, banks, and other mainstream financial institutions. They'll basically have to be willing to accept virtual "pegged" stocks as payment for the legal stocks. I think this is actually very possible because look at the success of BitPay?

The alternative if this isn't possible is people will make their millions on Bitshares X and be forced to cash out of it to move into the big leagues. People will be trading some pegged asset representing some new Silicon Valley company, then a big company like Facebook or Google will buy it and now the people trading the pegged BitAsset are going to want the real securities.

I think there is a limit to how much Bitshares X can scale before the greatest players seek diversification or to legally own assets. BitAssets only can go so far.

Am I the only one who sees this? If anything I hope Bitshares X can do something similar to market watch only if you win at the Bitshares X "serious game" you get to keep the money.

« Last Edit: August 31, 2014, 09:53:09 AM by luckybit »
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Offline bodenliu

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Re: Is Bitshares X a serious game?
« Reply #1 on: August 31, 2014, 10:03:59 AM »
Good point. we will see the serious game as soon as more firms accepting bitasset.

Hope 3i's international marketing push will do

Offline luckybit

Re: Is Bitshares X a serious game?
« Reply #2 on: August 31, 2014, 10:07:04 AM »
Good point. we will see the serious game as soon as more firms accepting bitasset.

Hope 3i's international marketing push will do

An entrepreneur from our community or in collaboration with Bitcoin ETF's like http://www.ibtimes.com/winklevoss-bitcoin-etf-will-likely-pass-federal-scrutiny-eventually-experts-say-1626106

It may be possible someday to exchange Bitcoins for stocks, but I'm not a lawyer and we don't even have a Bitcoin ETF yet so who knows.
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Offline quantumtangles

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Re: Is Bitshares X a serious game?
« Reply #3 on: August 31, 2014, 12:58:31 PM »
Warren Buffet thinks Bitcoin and altcoins generally an 'illusion'.

What he makes of Bitcoin derivatives (such as Bitshares x) I do not know, but I can guess.

The problem has been accurately identified by the originator of this thread. When will Bitshares x (derivatives) be directly linked with the primary securities or assets they purport to relate to?

This is more important that one might imagine because otherwise, Bitshares x may be said to amount to little more than betting on the price of primary assets (betting whether they will move up or down without actually holding a stake in the primary assets one is betting upon), like a 19th century ghetto bucket shop (poor people would bet on whether stocks listed on the real stock market would rise or fall - that is to say, it was a purer form of gambling).

The conceptual problem for old school investors (like Warren Buffet) may be summarised as follows:

In his view, Cryptocurrencies are similar to Ponzi schemes. The first people to invest do very nicely, but people further down the line must necessarily lose all their money. If that were not so, the schemes would become mathematical impossibilities (requiring more investors than there are human beings on the planet).

His second main objection is that nothing of value can spring into existence from nowhere.

Thirdly, he would argue that Bitcoin derivatives such as Bitshares x are a more extreme example of the same lunacy, as they are not even directly linked to the mirage of crytocurrencies in the first place, much less linked to gold or silver or oil or indeed anything else of value.

At the heart of the Buffet objections lie two questions
.
1. How can something of value materialise from the nothingness of mathematical abstraction (ex nihilo nihil fit...from nothing nothing comes... )?
2. How can Bitcoin derivatives such as bitshares x ever have underlying value if they are not directly linked to underlying assets with real world value?


Buffet is wrong in terms of his first objection. Fiat currencies and all of them essentially originate from nowhere.

After the first batch of notes are printed (not the most challenging of processes), quantitative easing brings more of the Fiat money supply into existence from that point on.

Governments today simply press a button on a computer keyboard to create more money. There is no underlying value.

Accordingly, there is no true distinction between cryptocurrencies and Fiat currencies in terms of provenance (that is, in terms of how they spring into existence).

The only real differences between them are that decentralised currencies cannot be controlled or expropriated by bankrupt governments (the Greek Government bank grab is perhaps the best example of a government simply announcing that they were taking bank customer' money, that it had been expropriated and there was no more to be said about it).

Cryptocurrencies are new, more volatile, more prone via exchanges and wallets to hacking (if proper precautions are not taken such as two factor authentication protection etc) but they are nonetheless orders of magnitude more efficient, more private, and so much safer in real terms (if you get your online security in order) than Fiat currencies.

Both spring into existence from nowhere, but crytocurrencies are in almost every sense better.

They arise from the perfection of mathematics (unlike Fiat currencies, which come into being because governments and opposition parties, all of which are ultimately sponsored and therefore controlled by competing business interests (whether they are Republicans or Democrats, Labour or Conservative) decide its time to print more money( normally because the money supply is running out, itself an inevitable consequence of interest and debt). Unattractive stuff that leads to bank bail outs (again, because political parties, whether they are in power or merely in opposition, are different from another only to the extent they represent different business interests - all else is a side show reflecting the inherent prejudices of their primary voting base- hence the bank bail outs were universally popular (with politicians).

Major Banks were in trouble. It did not really matter any more whether they had sponsored the Republicans or the Democrats or the Conservatives or Labour. Politicians from all parties for the most part acted in unison (to protect their sponsors).

If that is correct, bank bail outs were a political inevitability everywhere.

I will not exhaust myself explaining it further. The Buffet school are wrong if they challenge the idea that everything ultimately arises from nothing, most particularly money.

But the second objection of the Buffet school (concerning cryptocurrency derivatives) is entirely valid. Unless Bitshares x are linked directly or indirectly with underlying primary assets, cryptocurrency derivatives cannot work. I have every confidence that this can be acheived, in which event, DACs represent a disruptive new technology.

« Last Edit: August 31, 2014, 01:30:20 PM by quantumtangles »

Offline luckybit

Re: Is Bitshares X a serious game?
« Reply #4 on: August 31, 2014, 01:28:30 PM »
Bitshares X will have value in the billions even if we are just trading digital assets. Digital objects of value can exist and do exist. Digital assets have real world value and can be redeemed for digital objects of value.

What I mean to say is something like Bitshares Music, DNS, Storj, they will all have tokens which represent real value. So value is being exchanged even on the Bitshares we have now because virtual items are valuable to people. If you take a scarce weapon out of World of Warcraft and put it on the Bitshares chain it's going to have value and trade at a high price.

Buffet if he really believes that has a lack of understanding of virtual commodities, digital equity, virtual real estate, cryptocurrencies. He's not really the investor to talk to because he didn't make his fortune on technology stocks.

I think Bill Gates on the other hand would know about technology stocks to a certain extent. Ultimately the test of whether or not Bitcoin and similar technologies have value has been answered. Where the value comes from is also easy to answer, it all comes from the communities of people.

Bitcoin is backed by the people who are willing to accept it. You could barter with shells if we all agree to accept that. As far as treating it like a stock if it's in limited supply, and if it's acting like a stock, it's a probably more of a commodity or stock than currency.

Bitshares is harder to classify. Nothing like Bitshares has ever existed before and even now most people don't understand it's implications yet. If it can do what we think it can do then as long as it can simulate the buying power then it's got value just in it's utility to do that.

I refrain from using the word derivative. Bitshares polymorphic market pegged assets are not derivatives. If we don't want to confuse regulators we should stop calling BitAssets derivatives because there isn't any contracts involved, there aren't any securities involved, it's just an algorithm which simulates the buying power of the asset it's mapped to.

The moment you call it a derivative then you bring in traditional law into the picture which has no hope of understanding what this is. https://en.wikipedia.org/wiki/Derivative_(finance)

That is why I call it a market simulation. What we do with our pegging process is simulate BTC for example but it's not ever going to become BTC. I suppose for sake of understanding it we can think about it like we do derivatives but it's also a situation where 99% of the time no one ever redeems them. Also the potential market cap is in the trillions for derivatives which means Bitshares X can put Bitcoin to shame even if Bitcoin were a smash success.

Bitcoin will never be good at derivatives even though I'm sure some people will try to make it do that with Mastercoin it is unlikely that Bitcoin can scale without major changes.

Bitshares X BitAssets may someday be able to function as derivatives, it's possible but it's not what they are today so we have to be careful calling it that. 
« Last Edit: August 31, 2014, 01:40:17 PM by luckybit »
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Offline quantumtangles

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Re: Is Bitshares X a serious game?
« Reply #5 on: August 31, 2014, 01:35:57 PM »

Bitshares is harder to classify. Nothing like Bitshares has ever existed before and even now most people don't understand it's implications yet. If it can do what we think it can do then as long as it can simulate the buying power then it's got value just in it's utility to do that.

I refrain from using the word derivative. Bitshares polymorphic market pegged assets are not derivatives. If we don't want to confuse regulators we should stop calling BitAssets derivatives because there isn't any contracts involved, there aren't any securities involved, it's just an algorithm which simulates the buying power of the asset it's mapped to.

The moment you call it a derivative then you bring in traditional law into the picture which has no hope of understanding what this is. https://en.wikipedia.org/wiki/Derivative_(finance)

That is why I call it a market simulation. What we do with our pegging process is simulate BTC for example but it's not ever going to become BTC. I suppose for sake of understanding it we can think about it like we do derivatives but it's also a situation where 99% of the time no one ever redeems them. Also the potential market cap is in the trillions for derivatives which means Bitshares X can put Bitcoin to shame even if Bitcoin were a smash success.

Bitcoin will never be good at derivatives even though I'm sure some people will try to make it do that with Mastercoin it is unlikely that Bitcoin can scale without major changes.

Very informative and interesting. Plenty for me to think about here. Thank you.

Edit: I take your point about conceptual problems arising from referring to Bitcoin x as derivatives. Noted with thanks.
« Last Edit: August 31, 2014, 02:03:43 PM by quantumtangles »

Offline quantumtangles

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Re: Is Bitshares X a serious game?
« Reply #6 on: August 31, 2014, 02:18:13 PM »
I found this thread very helpful in terms of the relationship between Bitshares x and BitUSD.

http://invictus-innovations.com/bitshares-as-dac-bank/

The self regulating (balancing) mechanism is exquisite. I think Bitcoin, altcoins, DACs, Bitsharesx and BitUSD (in combination with one another) mark a huge leap in the evolution of money. Viewed as a whole, this is sheer genius.

« Last Edit: August 31, 2014, 02:23:32 PM by quantumtangles »

Offline Empirical1

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Re: Is Bitshares X a serious game?
« Reply #7 on: August 31, 2014, 02:21:58 PM »

At the heart of the Buffet objections lie two questions
.
1. How can something of value materialise from the nothingness of mathematical abstraction (ex nihilo nihil fit...from nothing nothing comes... )?
2. How can Bitcoin derivatives such as bitshares x ever have underlying value if they are not directly linked to underlying assets with real world value?


To me at it's simplest level the reason BitAssets have value is because they are backed by enough collateral of something else  that the market has given a value.

For an extreme example we could trade on the price of chickens using cows as collateral. We don't have to have any link to chickens in our cow market at all providing participants are happy a cow will be enough collateral to back the value of a chicken.



I think there is a limit to how much Bitshares X can scale before the greatest players seek diversification or to legally own assets. BitAssets only can go so far.


I agree, there is a limit (but it's very high) - something along the lines of 'when the market grows to a size in excess of what the majority would be able to acquire on the underlying market without substantially moving the price.'

The Comex for example has this problem. The scale of gold trading and particular shorting is far in excess of what can reasonably acquired in the physical market, so the participants would have trouble replicating their position if it had to backed not by dollars but physical gold as a result physical gold is underpriced. So the Comex could be described as a Ponzi imo. 

I guess something like this would be the end goal for the smaller markets...

http://bitshares.org/overstock-to-cryptostock/
« Last Edit: August 31, 2014, 02:27:22 PM by Empirical1 »

Offline luckybit

Re: Is Bitshares X a serious game?
« Reply #8 on: August 31, 2014, 02:32:38 PM »

At the heart of the Buffet objections lie two questions
.
1. How can something of value materialise from the nothingness of mathematical abstraction (ex nihilo nihil fit...from nothing nothing comes... )?
2. How can Bitcoin derivatives such as bitshares x ever have underlying value if they are not directly linked to underlying assets with real world value?


To me at it's simplest level the reason BitAssets have value is because they are backed by enough collateral of something else  that the market has given a value.

For an extreme example we could trade on the price of chickens using cows as collateral. We don't have to have any link to chickens in our cow market at all providing participants are happy a cow will be enough collateral to back the value of a chicken.



I think there is a limit to how much Bitshares X can scale before the greatest players seek diversification or to legally own assets. BitAssets only can go so far.


I agree, there is a limit (but it's very high) - something along the lines of 'when the market grows to a size in excess of what the majority would be able to acquire on the underlying market without substantially moving the price.'

The Comex for example has this problem. The scale of gold trading and particular shorting is far in excess of what can reasonably acquired in the physical market, so the participants would have trouble replicating their position if it had to backed not by dollars but physical gold as a result physical gold is underpriced. So the Comex could be described as a Ponzi imo. 

I guess something like this would be the end goal for the smaller markets...

http://bitshares.org/overstock-to-cryptostock/

I think most people will want to go from cryptostock to overstock, not  from overstock to cryptostock.

Legal securities don't belong on blockchains at this time, but we still want to be able to purchase and trade legal securities. Overstock wouldn't have to do anything at all for us to trade them on Bitshares because anyone can create a market asset titled Overstock and we can just trade that.

It's only difficult if we want legal securites too.
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Offline quantumtangles

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Re: Is Bitshares X a serious game?
« Reply #9 on: August 31, 2014, 02:40:00 PM »
I am beginning to understand it more clearly now.

Owning Bitshare x are like owning shares in a bank. If you own $1,000 dollars worth of Bitshare x, you are only allowed to borrow 50% of that in BitUSD.

If you speculate that BitUSD will fall in value relative to Bitshares x, it would make sense for you to borrow the $500 (taking a short position) using your Bitshare x as collateral, and if you end up being correct (if BitUSD falls in price relative to Bitshares x), then you can buy back the BitUSD at a lower price than you paid for it, making a profit in the process.

But it is the balancing mechanism as between bitshares x and BitUSD that is truly exceptional. You are allowed to borrow BitUSD (dollars) using your Bitshare x security as collateral (though you can never borrow more than 50% of the Bitshare x collateral's value).

The BTSX/BitUSD self balancing mechanism works because when someone tries to redeem a note but is unable to sell it on the open market, the value of BitUSD (relative to Bitshares x) will necessarily rise until the relevant event of default is triggered enabling the decentralized bank or DAC (here, the Bitsharesx DAC) to exercise their automated authority to call in the loan and buy back the BitUSD.

This is extremely clever. 
« Last Edit: August 31, 2014, 02:43:14 PM by quantumtangles »


Offline santaclause102

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Re: Is Bitshares X a serious game?
« Reply #11 on: August 31, 2014, 04:37:41 PM »
Here is an example of a virtual stock exchange https://secure.marketwatch.com/game/ .

But unlike that virtual stock exchange the Bitshares X stock exchange is a serious game with real money at stake.

Bitshares X can do the virtual stock exchange too but unlike the marketwatch game where if you do good trades and make millions of dollars you don't get to keep any of the money, with Bitshares and the birth of cryptocurrency you get to keep every penny.

The ultimate question the answer of which will decide if Bitshares X is a billion dollar industry or a potentially trillion dollar industry is whether or not we can find a way to turn virtual stocks into legal securities. In my opinion our community should make a serious effort to figure out ways to achieve that goal.

I think the way to achieve that is through integration with Wall Street, banks, and other mainstream financial institutions. They'll basically have to be willing to accept virtual "pegged" stocks as payment for the legal stocks. I think this is actually very possible because look at the success of BitPay?

The alternative if this isn't possible is people will make their millions on Bitshares X and be forced to cash out of it to move into the big leagues. People will be trading some pegged asset representing some new Silicon Valley company, then a big company like Facebook or Google will buy it and now the people trading the pegged BitAsset are going to want the real securities.

I think there is a limit to how much Bitshares X can scale before the greatest players seek diversification or to legally own assets. BitAssets only can go so far.

Am I the only one who sees this? If anything I hope Bitshares X can do something similar to market watch only if you win at the Bitshares X "serious game" you get to keep the money.
I would say that we have to clearly distinguish user issued assets = colored coins = IOUs tracked on a blockchain (possible in BitSharesX and BitSharesME) and market pegged assets = BitAssets. Those are two different worlds.

Custom issued assets are structurally no different from stocks today. Difference is only the way ownership is tracked and how they are traded - currently via legal contracts and bit colored coins via a blockchain. I could imagine that this would replace stock with it's legally enforced trading today IF the stock issuing company agrees to the network failure security risk and the shareholders take this into account when buying the the stock AND/OR the stock issuing company states that it will keep a record of the blockchain and make their version the mandatory one in case of a 51% attack or another type of network failure which they can PROOF.

Market pegged assets on the other side can never be legally (meaning: the state forces people to accept it as equal) equal to the stock (and IOUs for the stock) itself. That would be like (the state) forcing people to accept derivates on stock for real stock (except that derivates today are backed by central companies). Accepting it as equal could be on an individual basis (voluntarily). This might have to be legally allowed to. I don't see a principal reason for not allowing it. This (voluntarily making it equal) would be enough. Making it legally binding to treat stock (and IOU stock) and market pegged assets as equal would have less friction because it is more standardized but can NEVER be realized because a derivate and a stock is a totally different asset and it held for totally different reasons. The first for security / owning a company and the latter for speculation, ease of trading and transfer, hedging etc. 

Offline santaclause102

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Re: Is Bitshares X a serious game?
« Reply #12 on: August 31, 2014, 05:46:53 PM »
In his view, Cryptocurrencies are similar to Ponzi schemes. The first people to invest do very nicely, but people further down the line must necessarily lose all their money. If that were not so, the schemes would become mathematical impossibilities (requiring more investors than there are human beings on the planet).
It is no different than when an angel or a VC invests into a company early investors gain much, those who buy stock when the company is widely accepted with a almost guaranteed yearly profit but it not for speculation but to secure their wealth. If a crypto currency really created value and gains mass adaption it can stay like a company can stay and no one looses.

His second main objection is that nothing of value can spring into existence from nowhere.
It is not that the value came from nothing. Bitcoin (and BitSharex) require a software which need a lot of time to write it and a network of people to all run it.
At the beginning of the 20th century companies build physical products and sold them, then came a lot of services people use where the service is bound to to human labor and/ or physical resources (getting a massage, going to the gym). With the advent of the internet services were more and more delivered by networks. Facebook or youtube certainly are examples. And it is vastly established today that those can have a lot of value (see stock prices / market cap). Now the only difference between the network infrastructure facebook provides and the one Bitcoin (or BitShareX) provides is the field the service relates to (social vs. financial/payment network) and the fact that the database (incl. updating / accessing it) is kept on many servers with Bitcoin in contrast to being kept on one server respectively on the servers of facebook (the company).

Thirdly, he would argue that Bitcoin derivatives such as Bitshares x are a more extreme example of the same lunacy, as they are not even directly linked to the mirage of crytocurrencies in the first place, much less linked to gold or silver or oil or indeed anything else of value.
BitAssets are just a totally different asset. People buy it for other reasons than why people buy stock. See post above.

Buffet is wrong in terms of his first objection. Fiat currencies and all of them essentially originate from nowhere.
....
Governments today simply press a button on a computer keyboard to create more money. There is no underlying value.
Buffet is right (don't know if he said it that way explicitly) that there is something fundamental backing state issued fiat currencies: It is the state's monopoly on force and the state's monopoly on issuing a currency which it (the state) forces everyone to accept ("legal tender"). 

They arise from the perfection of mathematics...
I would disagree. A cryptocurrency's money supply CAN be determined by mathematics but the market might accept it or not. There will be someone (the delevoper or the coin holders if they can vote on the money supply) who decide(s) on the money supply. A developer can decide to hard code the money supply or the developer can allow the coinholders to vote on the money supply in the future. As there is either one person (developer) or a group of coin/shareholder to decide on the money supply and also decide on how the new money is used (with Bitcoin for example to secure the network; or a facuet or...) a cryptocurrency and its coinholders are more like a company with respect to how it is created and to what in the end determines the money supply.
So I would say cryptocurrencies are created by companies and enforced by a business model that is either unalterable encoded into the source code or dependent on the votes of the coinholders whereas fiat is created and enforced by states and their monoppoly of force.

Btw, I think this is a great conversation from which much can be learned.
« Last Edit: August 31, 2014, 05:56:20 PM by delulo »

 

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