Ethereum introducing the Dai, a cryptobond backing the eDollars stability

[btswildpig]

So it has been threatened three times that the devs will leave? I only remember the time when DNS/Vote/AGS merge. When did the other two happen? Thanks pig!

Consistently taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem is hardly "threatening to leave."   

 

This is off a reply to btswildpigs who as he just stated WAS a long-time bitshares holder.  He is NO more given his close inside information from the chinese team.  I'm not sure what to make of Stan's statement, but its certainly not a confidence building at all.

There is no confidence issue , just fact issue .
2.0 projects (including BTS and Ethereum) are highly premature comparing to Bitcoin .
2.0 projects may provide investors with great reward comparing to Bitcoin . If bitcoin can rise 3X in a bull market , maybe 2.0 projects can rise 30X .
But also , 2.0 projects have not yet suffered the pain and uncertainty issue as Bitcoin in its early stage , we tend to forget that . And once things are not going to the way as we wished , we tend to think : "OMG , there is risk investing in 2.0 projects OMG , they can leave ?  OMG , this 2.0 projects may not exist after 1 year ?  "  But that's just the way of how the  world works . Unfinished projects are highly likely stay unfinished due to all sorts of reasons .

Having 100% confidence in a premature project was never right in the first place . Risk management and expectation is important .
So now I hold them all . I have Bitcoin , if bitcoin goes up 3x , I would have stable profit . If BTS goes to zero , Bitcoin can still hold my value . If BTS goes up to 30X , I would still have great reward . 

But with that said , I would hope there is at least a "feature and update freeze" plan for BTS in the future someday  , otherwise there will be no capital as huge as what is in bitcoin jump in to this field . I would hope the devs can sip nice drinks in some island and BTS is still running just like Bitcoin . I would hope that I can stay off from the forum for even a year and comes back and my funds in my BTS wallet are still safe and available. If that's too much to ask ,  why would anyone with millions of dollars would put money in it ?

Remember , it took Bitcoin 4 years to reach a major size . Why 4 years ? Because big capitals were observing it to see if it's worth putting money into in the long run  .

Of course , I maybe 100% wrong , as all humans are . Maybe BTS will be better if the devs keep working on it and tweak it forever and never stops .-----But the risk with that is high too , because once you start something new , there is a chance of not finishing it and leaving a mess .

It's an experiment . We should adjust our expectations accordingly , and be ready for the potential amazing reward or sad heart breaks .

To be clear , I was a long term holder who only holds BTS  with 100% of my money . Now I hold more coins with BTS together because I recently read a book that involves some technical trading skills , and it tells me not to 100% hold a single investment object . So I adjusted my position base on a reward/risk model . I may add some stock/fiat currency from different country in the combination too .

[Stan]

So it has been threatened three times that the devs will leave? I only remember the time when DNS/Vote/AGS merge. When did the other two happen? Thanks pig!

Consistently taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem is hardly "threatening to leave."   

 

Yeayeayea you have your explanation ppl have their own read.

So can you tell me WHEN did "taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem" happen?


Sent from my iPhone using Tapatalk

Nov 2013:  The ability to mine for a share in future blockchains to fund development with PTS.
Jan 2014:  The ability to mine by donating to developers instead of burning resources with AGS.
Nov 2014:  The ability for developers to get hired by the blockchain in the form of issued BTS.
Jun 2015:  The ability for developers to get sweat equity in the form of issued CNX.

Each of these were innovations designed to keep professional developers on the job implementing the world's most powerful and ever growing feature set.

[Rune]

I'd love to hear what starspirit thinks about the eDollar pegging mechanism, because it's interest rate based, just as his proposal for a peg on bitshares was:

http://forum.makerdao.com/t/how-the-edollar-peg-works/64

paging @starspirit

If I understand it correctly, Rune's proposal appears to use an interest rate to modify supply, while on the long side there is no symmetric mechanism to modify demand. Somebody let me know if this is a wrong interpretation, as I only read Rune's main post.

My personal preference is for a payment system between longs and shorts that modifies both the supply and demand curve. This would lead to greater stability in both total issuance and the interest charged to shorts. For instance, suppose external interest rates rose significantly (e.g. after a Fed hike), and the relative demand for bitUSD fell as a result. Suppose demand at the peg price falls from $10m to $5m. The immediate impact would be a discount as half the current owners try to sell. By charging shorts higher interest as per proposed eDollar, the supply can be contracted to $5m (note this would have happened anyway with settlements, but at least this encourages shorts to act voluntarily). But if instead longs received the interest, a smaller interest rate increase would be required, as this will help lift demand at the same time as reduce supply, meeting somewhere in the middle. [As an aside, somebody might be able to point out to whom Rune intends for the interest to be paid, as I was not clear on this].

Such a transfer scheme is not so easy to implement now in 2.0, because there will no longer be a direct yield mechanism. However, it is possible to do indirectly, which I've been looking at for some time, and it may even be simpler in the end. So for example, suppose we create deposit tokens, where each token represents a notional number of USD that varies over time with regular interest accruals. Longs and shorts maintain a constant exposure to deposit units, but this represents a varying exposure to USD, that is captured in the net asset value of the token. By setting the interest rate with respect to discount or premium to parity (similar to Rune's approach), a mechanism is introduced that tends toward restoring parity over time. For people to be able to spend actual bitUSD in transactions then, one of two approaches are possible. One is to allow conversion of deposit tokens on a 1:1 basis with non-interest paying bitUSD tokens. Parity on the bitUSD is ensured by the 1:1 conversion with deposit tokens. A second approach, which does not require freely held bitUSD, is to allow a mechanism where transactions denominated in bitUSD are always sent and received from deposit reserves, and settled in the appropriate number of deposit tokens. While I expect all this is feasible with Smartcoins, I have to wait and see what practical difficulties there will be with tying together the processes for interest rate formation, feed production, and NAV calculation. I need to speak to the developers more about these things as we get closer to 2.0, but unfortunately am just a bit short of time at the moment.

There are some additional aspects that need to be ironed out though. One problem that Rune identifies is that market shocks can create quite large deviations to parity before the interest rate adjustments have sufficient effect. As a result, he introduces a penalty/reward on settlements. I prefer an approach where the algorithm for adjusting interest rates takes account of the distance from parity, not just the direction. Larger distances can lead to larger rate adjustments, with smaller adjustments as parity is approached. With the algorithm being public and transparent, there ought to be plenty of market-makers willing to step in before such distances get too large, in the knowledge that the rate algorithm will be moving quite responsively to restore parity. In fact, with such an approach, there may not even be a need for settlements at all, adding another great simplification to the structure.

Another problem is the zero-bound on interest rates. Under both Rune's approach and my approach there is likely to an insufficient supply (and persistent premium) if there is insufficient incentive for shorts to participate even at 0% interest. In theory though, it is possible to have negative rates (shorts earn interest from longs), but as a practical issue there is a big question mark around this.

There's more I could add on this wonderful topic, but another time perhaps...

Nice post, it raises some interesting points I will take into consideration.

Regarding the interest on issuance debt, this interest is paid out passively as yield to holders of dai. However dai holders only receive 90% of the interest that dai issuers pay, with the remaining 10% going to Maker in order to pay for undercollateralization insurance. Should a black swan event happen Maker will autonomously buy up all bad collateralized debt positions using the funds it has accumulated in the Maker vault (the account where the insurance payments go to).

In case there aren't enough funds in the Maker vault to cover all the bad debt, makercoin is inflated and sold off to cover the bad debt, at the rate of 1% inflation per week until the system is once again fully collateralized. But when no bad debt exists in the system, every week 1% of all the funds in the Maker vault are instead used to buy up makercoin and permanently burn them, continuously reducing total makercoin supply over time and thus transferring income to the investors of Maker as long as everything is working as it should. Among other things this insurance mechanism incentivises makercoin holders to be active voters and actively ensure that collateral requirements and debt ceilings are set safely for every approved collateral type, since makercoin holders, not dai holders, have to foot the bill if something goes wrong (except in the extreme case where Maker is wiped out, i.e. makercoin price goes to 0. Then the only option is to perform a controlled permanent devalution of the dai).

[rajarush]

So it has been threatened three times that the devs will leave? I only remember the time when DNS/Vote/AGS merge. When did the other two happen? Thanks pig!

Consistently taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem is hardly "threatening to leave."   

 

Yeayeayea you have your explanation ppl have their own read.

So can you tell me WHEN did "taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem" happen?


Sent from my iPhone using Tapatalk

[topcandle]

So it has been threatened three times that the devs will leave? I only remember the time when DNS/Vote/AGS merge. When did the other two happen? Thanks pig!

Consistently taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem is hardly "threatening to leave."   

 

This is off a reply to btswildpigs who as he just stated WAS a long-time bitshares holder.  He is NO more given his close inside information from the chinese team.  I'm not sure what to make of Stan's statement, but its certainly not a confidence building at all. 

[Stan]

So it has been threatened three times that the devs will leave? I only remember the time when DNS/Vote/AGS merge. When did the other two happen? Thanks pig!

Consistently taking positive actions to ensure that developers and their families are able to afford to work full time in the ecosystem is hardly "threatening to leave."   

 

[starspirit]

If I understand it correctly, Rune's proposal appears to use an interest rate to modify supply, while on the long side there is no symmetric mechanism to modify demand. Somebody let me know if this is a wrong interpretation, as I only read Rune's main post.

When I originally read rune's doc that I linked, I was sure it incorporated negative interest rates, but re-reading it now I see that it doesn't mention them.

Thanks monsterer, but what I was actually referring to in this statement was that the interest rate seems to be applied to just issuers (shorts) and not to holders (longs). (It was only later in my post I referred to the positive/negative rate issue.)

[monsterer]

If I understand it correctly, Rune's proposal appears to use an interest rate to modify supply, while on the long side there is no symmetric mechanism to modify demand. Somebody let me know if this is a wrong interpretation, as I only read Rune's main post.

When I originally read rune's doc that I linked, I was sure it incorporated negative interest rates, but re-reading it now I see that it doesn't mention them.

[jsidhu]

I bet I'll have a turing complete coin out before ethereum and it will be a better implementation built on top of Bitcoin one that will be easily portable to bitshares and allow,the ability to cross chain transfer coins trustlessly.. Ofcourse I'm tslking about ciyam. It would be interesting to get Ian Knowles here and explain how ciyams implementation is better than ethereums for a technical perspective.

[rajarush]

@Rune, Just out of curiosity, why have you moved your efforts to Ethereum?

He gets bored quickly and has big ideas. If Ethereum takes an eternity, we may see him back here again.

Pretty much. Also Ethereum is so easy to develop on that even I can do it, which is wonderful for someone who has never tried coding or developing apps ever before.

Regarding ethereum ever coming out, if anyone here has money stuck in the presale, i can confirm that its finally coming very soon, probably like a week. There is evidence that more than 20 exchanges are looking into integrating it, but I dont necessarily believe in the long term value of ether since fees can be paid in any currency on ethereum, including dai, so ether has no inherent value beyond the numismatic (which could still turn out to be significant).

I still hold bts btw, and im waiting for 2.0 hoping itll be good so i still visit this forum often.

The main problem I see with ethereum now in having taken more time to learn about it over the past week, is that unless there is something integrated to protect development code, people will quickly learn that there is no point in developing on ethereum (outside of the fact that it is easy and you just love coding) because few will pay the smart contract fees when they can fork the project and run it for free and then the developer totally loses out. I'm not sure how many developers will be able to find a "centralized niche" worthy of paying the smart contract fees on top of the ether gas....such is the new decentralized world we are creating.

Decentralization also means the survival of the project can be sustained without a centralized party , which we're clearly lack of right now .
In fact , almost all of the unfinished 2.0 projects , BitShares , Eth , are not really decentralized enough if we want to use bitcoin as an example .
A project can not really be called decentralized if the survival of the projects lies in couple of people , and if those people go look for jobs the projects would be dead in the water , which is what we've been told many times .I started to convert part of my BTS holding to Bitcoin after threats like this happened the third time , which is a magical number in my mind .   I think it is fears like this makes major investment in crypto also goes back to Bitcoin for long term holding , and invest in alt-coins as a venture investment .

(I remembered some people imagined 2.0 projects would take over bitcoin by the end of 2015 in the past year , but clearly , it's not going to happen . )

I would throw the word "decentralized" around maybe one year later , but not now .

It's nothing new though , in the stock market , there are always magical stocks like BTS ,Eth which has great potential , but the biggest market cap lies in those stocks with zero imagination just because people know -----   It's steady and big ....

So it has been threatened three times that the devs will leave? I only remember the time when DNS/Vote/AGS merge. When did the other two happen? Thanks pig!

[starspirit]

I'd love to hear what starspirit thinks about the eDollar pegging mechanism, because it's interest rate based, just as his proposal for a peg on bitshares was:

http://forum.makerdao.com/t/how-the-edollar-peg-works/64

paging @starspirit

If I understand it correctly, Rune's proposal appears to use an interest rate to modify supply, while on the long side there is no symmetric mechanism to modify demand. Somebody let me know if this is a wrong interpretation, as I only read Rune's main post.

My personal preference is for a payment system between longs and shorts that modifies both the supply and demand curve. This would lead to greater stability in both total issuance and the interest charged to shorts. For instance, suppose external interest rates rose significantly (e.g. after a Fed hike), and the relative demand for bitUSD fell as a result. Suppose demand at the peg price falls from $10m to $5m. The immediate impact would be a discount as half the current owners try to sell. By charging shorts higher interest as per proposed eDollar, the supply can be contracted to $5m (note this would have happened anyway with settlements, but at least this encourages shorts to act voluntarily). But if instead longs received the interest, a smaller interest rate increase would be required, as this will help lift demand at the same time as reduce supply, meeting somewhere in the middle. [As an aside, somebody might be able to point out to whom Rune intends for the interest to be paid, as I was not clear on this].

Such a transfer scheme is not so easy to implement now in 2.0, because there will no longer be a direct yield mechanism. However, it is possible to do indirectly, which I've been looking at for some time, and it may even be simpler in the end. So for example, suppose we create deposit tokens, where each token represents a notional number of USD that varies over time with regular interest accruals. Longs and shorts maintain a constant exposure to deposit units, but this represents a varying exposure to USD, that is captured in the net asset value of the token. By setting the interest rate with respect to discount or premium to parity (similar to Rune's approach), a mechanism is introduced that tends toward restoring parity over time. For people to be able to spend actual bitUSD in transactions then, one of two approaches are possible. One is to allow conversion of deposit tokens on a 1:1 basis with non-interest paying bitUSD tokens. Parity on the bitUSD is ensured by the 1:1 conversion with deposit tokens. A second approach, which does not require freely held bitUSD, is to allow a mechanism where transactions denominated in bitUSD are always sent and received from deposit reserves, and settled in the appropriate number of deposit tokens. While I expect all this is feasible with Smartcoins, I have to wait and see what practical difficulties there will be with tying together the processes for interest rate formation, feed production, and NAV calculation. I need to speak to the developers more about these things as we get closer to 2.0, but unfortunately am just a bit short of time at the moment.

There are some additional aspects that need to be ironed out though. One problem that Rune identifies is that market shocks can create quite large deviations to parity before the interest rate adjustments have sufficient effect. As a result, he introduces a penalty/reward on settlements. I prefer an approach where the algorithm for adjusting interest rates takes account of the distance from parity, not just the direction. Larger distances can lead to larger rate adjustments, with smaller adjustments as parity is approached. With the algorithm being public and transparent, there ought to be plenty of market-makers willing to step in before such distances get too large, in the knowledge that the rate algorithm will be moving quite responsively to restore parity. In fact, with such an approach, there may not even be a need for settlements at all, adding another great simplification to the structure.

Another problem is the zero-bound on interest rates. Under both Rune's approach and my approach there is likely to an insufficient supply (and persistent premium) if there is insufficient incentive for shorts to participate even at 0% interest. In theory though, it is possible to have negative rates (shorts earn interest from longs), but as a practical issue there is a big question mark around this.

There's more I could add on this wonderful topic, but another time perhaps...

[cass]

I'm helping rune with this. In ethereum it is just easier to develop dynamic, self-modifying systems that still follow clear, pre-defined rules. BTS chose the "specialization" route, so we should push that advantage. If Maker adds a killer feature, BTS can create a more efficient version of it.

Maker is defined by its own consensus and so could migrate onto BTS or another graphene chain

solidity is just super fun and we have an opportunity to push our competitive advantage from our sweet system framework, which will let us do stuff like add all the smart assets on ether into Maker for backing dai without disrupting the network

thx for clarification

[VoR0220]

IMO the only 2.0 crypto chains to be watching right now are Bitshares and Ethereum. One is overly complex but madly efficient and the other one is solving a previously thought unsolveable problem (that being the problem of ASIC resistance) while being incredibly fun to develop on top of. For the size of the team it has been working with, Bitshares has done INCREDIBLY. I'd say that they've worked way harder than the Ethereum team because the Ethereum team had the marketing to get more people to develop for them (developers love the idea of a turing complete blockchain...who knew?)

[xeroc]

Why it sounds like he's extolling the benefits of Dai and Ether.  BTS is a afterthought. 

@toast 's point was that BTS is simple not flexible but efficient .. for ethereum, devs have been focusing on Turing complete scripting while the main development goal of BitShares (in particular for BTS2) was to develop a highly efficient blockchain ..

I totally support Ethereum and the ideas behind it! It'd like to see a Turing complete blockchain .. it's just an amazing idea .. and if a day had 48h I would definitely look into Ethereum ..

Cheers 2 @Toast and @Rune for sticking with BitShares in their spare time!!!

[topcandle]

I'm helping rune with this. In ethereum it is just easier to develop dynamic, self-modifying systems that still follow clear, pre-defined rules. BTS chose the "specialization" route, so we should push that advantage. If Maker adds a killer feature, BTS can create a more efficient version of it.

Maker is defined by its own consensus and so could migrate onto BTS or another graphene chain

solidity is just super fun and we have an opportunity to push our competitive advantage from our sweet system framework, which will let us do stuff like add all the smart assets on ether into Maker for backing dai without disrupting the network

Agreed on all of this. 

Why it sounds like he's extolling the benefits of Dai and Ether.  BTS is a afterthought.