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Offline Agent86

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I think making money off the spread by matching shorts that are below the feed with bids that are above it can reduce liquidity and hurt the peg.

I would much rather see shorts prioritized by amount of collateral.

How I would fine tune the market:
I would create a small delay from the time that new feeds are posted and the time they are active, maybe a few minutes.  That way traders can know the exact median feed price a little before it takes effect so all traders are on even ground.  Aggressive shorts can then enter their orders at the exact feed price and compete on who posts the most collateral to be first in line to be matched.  This allows traders to profit by shorting at $1 and quickly buying back at $.99 when they can.

If you match shorts that are below feed with higher bids you artificially increase transaction costs which hurts liquidity and only attract long term shorts who will be reluctant to cover (they can't turn around and cover at $.99 to make a profit because they may have only got $.95 or less worth of BTSX from their short).

Offline Empirical1.1

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I know you're on another level compared to me here, but looking at the order book wouldn't you agree we need to attract BitAsset buying demand?

Translating shorting demand into transaction fees which gets transferred to incentivising genuine BitAsset buying (via interest) helps correct the demand imbalance imo.

Offline Agent86

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I know you're on another level compared to me here, but looking at the order book wouldn't you agree we need to attract BitAsset buying demand?

Translating shorting demand into transaction fees which gets transferred to incentivising genuine BitAsset buying (via interest) helps correct the demand imbalance imo.
I think to create buying demand you want to motivate shorts to cover whenever bitUSD is offered below parity.  I think the current method works against that goal.

Offline Empirical1.1

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I know you're on another level compared to me here, but looking at the order book wouldn't you agree we need to attract BitAsset buying demand?

Translating shorting demand into transaction fees which gets transferred to incentivising genuine BitAsset buying (via interest) helps correct the demand imbalance imo.
I think to create buying demand you want to motivate shorts to cover whenever bitUSD is offered below parity.  I think the current method works against that goal.


If the odds that BTSX has a serious issue/failure in the next year are 2% then a BitAsset is only worth 0.98 to a long term BitAsset holder.

A genuine BitAsset holder also has to consider the utility of a BitAsset or the cost of conversion to acquire the real world counterpart (edit: or at least the fiat value equivalent) his BitAsset mirrors.

So even if your proposal resulted in a tighter range than the current few % now it wouldn't attract genuine buyers because a BiAsset isn't worth 1-1 in the medium term because of risk, conversion & utility costs which is why you have a dead buy side of the order book.

Interest will offset these factors and does make BitAssets 1-1 or better which attracts buyers at 1-1 Therefore making a bigger market than the current one and it creates the peg at 1-1 (because the interest applied in this way is self-regulating.)




« Last Edit: September 06, 2014, 03:04:11 PM by Empirical1.1 »

Offline Agent86

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If the odds that BTSX has a serious issue/failure in the next year are 2% then a BitAsset is only worth 0.98 to a long term BitAsset holder.

A genuine BitAsset holder also has to consider the utility of a BitAsset or the cost of conversion to acquire the real world counterpart his BitAsset mirrors.

So even if your proposal resulted in a tighter range than the current few % now it wouldn't attract genuine buyers because a BiAsset isn't worth 1-1 in the medium term because of risk, conversion & utility costs which is why you have a dead buy side of the order book.

Interest will offset these factors and does make BitAssets 1-1 or better which attracts buyers at 1-1 Therefore making a bigger market than the current one and it creates the peg at 1-1 (because the interest applied in this way is self-regulating.)

Empirical, you are making a PERSONAL value judgment here.  Just because a bitAsset isn't worth 1-1 to YOU doesn't mean it isn't worth 1-1 to somebody else.  There are still advantages to bitAssets and as long as it is worth at least 1-1 to somebody then we have demand.  The trick to the peg is we adjust supply to whatever the demand may be.  So if we make bitAssets more attractive and useful than we can sustain a larger supply/market cap for the bitAssets: It affects the total supply rather than changing the peg.  The mechanics of maintaining the peg are more dependent on the shorting/covering rules.

Offline Empirical1.1

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If the odds that BTSX has a serious issue/failure in the next year are 2% then a BitAsset is only worth 0.98 to a long term BitAsset holder.

A genuine BitAsset holder also has to consider the utility of a BitAsset or the cost of conversion to acquire the real world counterpart his BitAsset mirrors.

So even if your proposal resulted in a tighter range than the current few % now it wouldn't attract genuine buyers because a BiAsset isn't worth 1-1 in the medium term because of risk, conversion & utility costs which is why you have a dead buy side of the order book.

Interest will offset these factors and does make BitAssets 1-1 or better which attracts buyers at 1-1 Therefore making a bigger market than the current one and it creates the peg at 1-1 (because the interest applied in this way is self-regulating.)

Empirical, you are making a PERSONAL value judgment here.  Just because a bitAsset isn't worth 1-1 to YOU doesn't mean it isn't worth 1-1 to somebody else.  There are still advantages to bitAssets and as long as it is worth at least 1-1 to somebody then we have demand.  The trick to the peg is we adjust supply to whatever the demand may be.  So if we make bitAssets more attractive and useful than we can sustain a larger supply/market cap for the bitAssets: It affects the total supply rather than changing the peg.  The mechanics of maintaining the peg are more dependent on the shorting/covering rules.

I don't think it's a personal value judgement to say at the very least current demand for BitAssets is not matched with current demand from people looking to short and that people looking to short are willing to pay a premium to incentivise customers for their short.

While I can see your strategy matches supply with current demand as you say - and in that sense it works - it's just a very small market because current demand is so low.

You're also strangling & suffocating the market because the shorts are willing to pay to a premium to attract/incentivise buyers & in so doing create a much bigger market of buyers and sellers. It's like trying to stop a store from offering incentives to attract more customers, if the store is willing to do that let them. Don't let them sit with $2000 leather jackets on the shelves with no customers when they want to sell them for and can still make a profit on them @$1800. (The shorts are willing to pay a premium below the peg because they believe their short position will be profitable, let them do it in a way that attracts customers for their shorts.)

If Bank A is new and or it risky it generally needs to offer me more interest for my deposit than a safe established bank. If it didn't there would be low demand, looking at the green side of our order book that is BitAssets current predicament imo. The BTSX virtual vault is new and risky & needs rewards to attract deposits and luckily competition from shorts is capable of producing a pot of funds that can offer the incentive needed in a self regulating way where it's not going to over-stimulate BitAsset demand in excess of shorting demand.

I like it personally, though as long as there was some form of self regulating method for maximising the order book by taking fees from those on the other side willing to pay a premium at 1-1 I'm happy.


 

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