Author [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] Topic: When will there be interest on BitAssets?  (Read 1113 times)

0 Members and 1 Guest are viewing this topic.

Offline Empirical1.1

  • Hero Member
  • *****
  • Posts: 886
    • View Profile
When will there be interest on BitAssets?
« on: September 03, 2014, 03:00:31 PM »

BTSX is a virtual vault for storing value via BitAssets

The virtual vault is currently risky, people need to be compensated for that risk.

How? Interest on their BitAssets

(BTSX holders don't need to be compensated for the risk because they get the reward from BTSX doing well)

We have an attempt from Shentist here https://bitsharestalk.org/index.php?topic=8047.msg107361#msg107361
Gulu here https://bitsharestalk.org/index.php?topic=7865.msg104117#msg104117

I am very excited about 4.11 because


2) Shorts can sell at up to 10% below the peg *if* there are offers to buy above the peg.  The difference is captured as fees, gives priority to shorts willing to pay the highest fee.

That difference captured as fees gives you the pot that can be distributed to all BitAsset holders as interest and in so doing create the market. (I presume because of TITAN this is not easy to do.)

My question is does anyone know what the current plans are with regards to introducing interest into the system?

To BM, if you have the time - Do you currently feel that interest may not be necessary/not easy to implement and want to give the system a chance without it or do you guys recognise that interest is required and you are thinking how best to approach it?

Thanks.

Edit: Assuming 2 identical systems except system A didn't redistribute the captured fees from (2) above as interest to BitAsset holders and system B did.

Would someone looking to store their value in BitAssets choose system A or system B?

BitAsset holders would choose system B so there would be no demand for BitAssets in System A, assuming they are otherwise identical, ergo that interest should go to BitAsset holders if possible imo.

(I also don't feel it will effect the peg as banks & exchanges such as bter all offer interest and the level of interest attracts capital. The interest we can afford to pay seems to be defined by (2).)
« Last Edit: September 03, 2014, 03:20:23 PM by Empirical1.1 »

Offline bytemaster

Re: When will there be interest on BitAssets?
« Reply #1 on: September 03, 2014, 06:32:51 PM »
Interest is extremely hard to implement in an explicit manner because accounts are heavily divided and payment periods are continuous. 

A BitAsset can be defined any way that is easily calculated.  The challenge is "what interest rate should we set"?   

If you set a "fixed interest rate" then it is possible for the interest to be "too high". 

Imagine a BitAsset that paid interest equal to 25% of the growth of BTSX but had a floor pegged to the dollar.  It can "lock in" the gains on a daily basis.     

So you buy $100,000 USD + 25% of BTSX growth...
BTSX doubles....   your USD investment is now worth $125,000 
BTSX halves... your USD investment is still worth $100,000

By sharing the "upside potential" with the USD holders you create huge demand.

Now once again this is price fixing ratio of profit sharing... so could have other side effects. 

Would you buy an asset that was "pegged" to daily BTSX upside growth with the shorts taking all of the downside risk?

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 liondani

Re: When will there be interest on BitAssets?
« Reply #2 on: September 03, 2014, 06:45:15 PM »
Is Empirical1.1 squatting Empirical name?   ???
  https://bitshares.OPENLEDGER.info/?r=GREECE  | You are in Control | BUY | SELL | SHORT | SWAP | LOAN | TRADE |  

Offline tonyk

  • Hero Member
  • *****
  • Posts: 3309
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #3 on: September 03, 2014, 07:25:37 PM »
Interest is extremely hard to implement in an explicit manner because accounts are heavily divided and payment periods are continuous. 

A BitAsset can be defined any way that is easily calculated.  The challenge is "what interest rate should we set"?   

If you set a "fixed interest rate" then it is possible for the interest to be "too high". 

Imagine a BitAsset that paid interest equal to 25% of the growth of BTSX but had a floor pegged to the dollar.  It can "lock in" the gains on a daily basis.     

So you buy $100,000 USD + 25% of BTSX growth...
BTSX doubles....   your USD investment is now worth $125,000 
BTSX halves... your USD investment is still worth $100,000

By sharing the "upside potential" with the USD holders you create huge demand.

Now once again this is price fixing ratio of profit sharing... so could have other side effects. 

Would you buy an asset that was "pegged" to daily BTSX upside growth with the shorts taking all of the downside risk?

My general though on the interest rate assets is that it seem easier if they have an expiration date.

Say each month only bonds expiring after 3,6 mo, 1, 5 and10 years from now can be newly issued.

Having a some fixed face interest rate (say 5% for the one year one) is not a problem - the bonds will be traded (an initially issued) with a discount/premium).

At the end of the said period for each bond it is converted into the underlying currency (bitUSD for example)
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Empirical1.1

  • Hero Member
  • *****
  • Posts: 886
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #4 on: September 03, 2014, 07:27:00 PM »
Imagine a BitAsset that paid interest equal to 25% of the growth of BTSX but had a floor pegged to the dollar.  It can "lock in" the gains on a daily basis.     

So you buy $100,000 USD + 25% of BTSX growth...
BTSX doubles....   your USD investment is now worth $125,000 
BTSX halves... your USD investment is still worth $100,000

By sharing the "upside potential" with the USD holders you create huge demand.

Would you buy an asset that was "pegged" to daily BTSX upside growth with the shorts taking all of the downside risk?

Thanks for the reply. WOW! Sounds amazing to me! I agree that this would create huge demand and yes I would buy it! I will be interested what others think.

A BitAsset can be defined any way that is easily calculated.  The challenge is "what interest rate should we set"?   

Yes this is a challenge that is too hard for me. What I do know is the optimal interest rate will trend lower over time as demand increases for BitAssets. I don't know how the system would/could deal with that transition?

Initial ideas...

Maybe a formula that looks at buying vs. shorting demand. If the average increases so that there are more buyers than shorters over X period the interest rate drops 2%.  So you buy the BitAsset at a certain interest rate paid daily but with the knowledge that interest rate is variable and will adjust occasionally to reflect supply and demand. Is something like that possible?
« Last Edit: September 03, 2014, 07:40:02 PM by Empirical1.1 »

Offline Empirical1

  • Hero Member
  • *****
  • Posts: 884
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #5 on: September 03, 2014, 09:06:17 PM »
Is Empirical1.1 squatting Empirical name?   ???

Empirical1.1 is my new account. It's silly but 888 is my lucky number so I'm ending this account on 888 posts for good luck :)

Quote
In Christian numerology, the number 888 represents Jesus, or sometimes more specifically Christ the Redeemer. This representation may be justified either through gematria, by counting the letter values of the Greek transliteration of Jesus' name,[11] or as an opposing value to 666, the number of the beast.[12]

In Chinese numerology, 888 has a different meaning, triple fortune, a strengthening of the meaning of the digit 8.[13] For this reason, addresses and phone numbers containing the digit sequence 888 are considered particularly lucky, and may command a premium because of it.[14]

http://en.wikipedia.org/wiki/888_(number)


Offline bytemaster

Re: When will there be interest on BitAssets?
« Reply #7 on: September 03, 2014, 10:21:59 PM »
We just need a way to establish the perfect interest rate by consensus.

The best way to achieve this is: "Daniel - THINK."

A prediction market.

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 santaclause102

  • Hero Member
  • *****
  • Posts: 2486
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #8 on: September 03, 2014, 10:38:12 PM »
We just need a way to establish the perfect interest rate by consensus.

The best way to achieve this is: "Daniel - THINK."

A prediction market.
Dont see why we need an interest rate for bitusd since it is already trading either at a discount or a premium (without the price feed). There is a prediction market already built into bitusd? This is not (only/mostly) a long term prediction market though which in turn could justify bitUSD interest rates. Such a prediction market might be hard to establish as it is very hard to predict the interest rate especially in those volatile times! With bitUSD short/long positions you just have to guess the direction (anytime in the future)...
« Last Edit: September 03, 2014, 10:40:32 PM by delulo »

Offline Empirical1.1

  • Hero Member
  • *****
  • Posts: 886
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #9 on: September 03, 2014, 10:53:27 PM »
We just need a way to establish the perfect interest rate by consensus.

The best way to achieve this is: "Daniel - THINK."

A prediction market.

 +5% +5%

We just need a way to establish the perfect interest rate by consensus.

The best way to achieve this is: "Daniel - THINK."

A prediction market.
Dont see why we need an interest rate for bitusd since it is already trading either at a discount or a premium (without the price feed). There is a prediction market already built into bitusd? This is not (only/mostly) a long term prediction market though which in turn could justify bitUSD interest rates. Such a prediction market might be hard to establish as it is very hard to predict the interest rate especially in those volatile times! With bitUSD short/long positions you just have to guess the direction (anytime in the future)...

My feeling is without the price feed in the short term there is too much shorting demand this drives the 'average' below the peg. So the peg doesn't form at 1-1. When you buy at 0.86 you're not actually getting the interest you think you are if the medium term 'average' is 0.9.

The price feed and limiting BitAsset creation at or above the peg helps it, but there is very little demand @ 1-1 from people wanting to hold value in BitAssets. The same way a new bank or exchange may have to pay you interest to attract your deposit the same for BTSX virtual vault.

There are a lot of people willing to pay a premium to short in the form of interest at 1-1.
The question is what rate of interest will maximise BitAsset creation. A separate prediction market should be able to answer that.

Also an actual interest rate is so much more marketable imo.
« Last Edit: September 03, 2014, 11:14:13 PM by Empirical1.1 »

Offline starspirit

  • Hero Member
  • *****
  • Posts: 948
  • Financial markets pro over 20 years
    • View Profile
  • BTS: starspirit
Re: When will there be interest on BitAssets?
« Reply #10 on: September 03, 2014, 11:08:46 PM »
On the face of it, this sounds interesting, though I don't quite understand it. Could somebody please explain in a simple way the mechanics of how a prediction market could be used to form a market-consensus around R in such a way as to effectively peg the price? 

Offline santaclause102

  • Hero Member
  • *****
  • Posts: 2486
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #11 on: September 03, 2014, 11:32:49 PM »
On the face of it, this sounds interesting, though I don't quite understand it. Could somebody please explain in a simple way the mechanics of how a prediction market could be used to form a market-consensus around R in such a way as to effectively peg the price?
you set up Bit_interest-rate-with-demand-supply-equilibrium-for-the-next-month-form-now and let people trade it like bitUSD is traded. I guess it can be calculated by the premium/discount bitUSD is traded. How would it be calculated/quantified if we have a price feed and not premium/discount. I dont know: Not looking at the price / not at actual trades but at supply/demand? Doubt the latter would work as anybody can put up orders with little danger that they are actually executed and calculating the interest it would not for an equilibrium supply is not possible, is it?
« Last Edit: September 03, 2014, 11:38:05 PM by delulo »

Offline Empirical1.1

  • Hero Member
  • *****
  • Posts: 886
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #12 on: September 03, 2014, 11:47:25 PM »
On the face of it, this sounds interesting, though I don't quite understand it. Could somebody please explain in a simple way the mechanics of how a prediction market could be used to form a market-consensus around R in such a way as to effectively peg the price?
you set up Bit_interest-rate-with-demand-supply-equilibrium-for-the-month-form-now and let people trade it like bitUSD is traded. I guess it can be calculated by the premium/discount bitUSD is traded. How would it be calculated/quantified if we have a price feed and not premium/discount. I dont know: Not looking at the price / not at actual trades but at supply/demand?

I would say the prediction market would be guaging average supply and demand.

We know by looking at the limited BitAsset long side & the big short demand that the optimal interest is >0% (current)

I guess the first prediction market would yield an 'educated guess' but get better and better quickly over time by viewing how the market responded to it's previous consensuses and even viewing the markets reaction to their next consensus in real time.
« Last Edit: September 03, 2014, 11:49:10 PM by Empirical1.1 »

Offline santaclause102

  • Hero Member
  • *****
  • Posts: 2486
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #13 on: September 03, 2014, 11:59:59 PM »
"guaging average supply and demand" What is guaging?  :o

Offline Empirical1.1

  • Hero Member
  • *****
  • Posts: 886
    • View Profile
Re: When will there be interest on BitAssets?
« Reply #14 on: September 04, 2014, 12:09:09 AM »
"guaging average supply and demand" What is guaging?  :o

'estimate or determine the amount' - Gauge (oops gauging not guaging)

Sorry I'm new to trading (well shorting) and am not familiar with prediction markets.

So for example I would gauge at the present time the interest rate should be at least 10% as I can already see shorts are willing to pay at least that. I would make the interest 10% then view the results/effects and raise it or lower it accordingly. My understanding is a prediction market would be doing that but much better than any one man or small group of people could.

Edit: And I guess it could take the form of sharing the upside potential of BTSX as described by BM above which I really like.
« Last Edit: September 04, 2014, 12:40:30 AM by Empirical1.1 »

 

Google+