Can management of the supply be automated within the network to avoid future error or potential manipulation? I have no technical expertise here, just wondering as a user.

Earlier I said that market makers do not help the market to move toward the peg. They are merely providers of liquidity around the market's equilibrium price, and only narrow the spread around that price wherever that is. They can only help to maintain the peg if that is indeed where the market wants to be. Nobody in this thread has noted or rebutted this comment. Is this important or not?

liondani, a quick look at my post history would show I'm on the side of a free market incentives. The OP for this thread proposed a complicated rule system that I was opposed to, and along the way I thought of a what I think is a better alternative given a rule-based approach.

If there are no rules or other mechanisms in place, and price is free to float anywhere, I cannot see any reason why the consensus should necessarily settle on a price around the peg. It could settle anywhere and constantly shift. It would then behave like any independent crypto. At the moment, being within 10% seems like an excellent result IMO.

In the end, I think there needs to be some sort of mechanism to ensure this consensus settles and becomes stable around the peg. I do not think any of the rules introduced to date achieve this, because they assume ex-ante that there is some sort of magic attraction around the peg price (a lot of which seems to rely on the principle of keep saying it till everyone believes it), and a little bump here or there will remove the current gap. Instead I think there needs to be a mechanism in place that financially affects the results to all parties of trading around that peg price specifically, not just any price the market consensus might instead settle upon. That I suspect is where the self-perpetuation idea mentioned in the white-paper might break down - it is a "holding yourself up by the bootstraps" concept that only works if the market has already permanently settled on the peg price as being the one and only right price.

To give the peg price such financial tangibility, some possibilities are: (i) a floating (interest) incentive paid from shorts to longs (or visa versa), (ii) a floating (interest) incentive paid from BitUSD borrowers to BitUSD lenders in a separate lending market where BitUSD could be deposited for lending, (iii) market exchangers who are willing to make BitUSD 1:1 fungible with USD, subject to an incentive. There may be others you might think of. But even in these cases, we need to be careful assuming things about what the market consensus (if there is even such a thing) might be.

I think such a mechanism would see confidence in the peg rise considerably, especially in outside circles, and then we see potentially massive interest and growth.

Quote from: oco101 on September 17, 2014, 02:16:57 pm

Quote from: starspirit on September 17, 2014, 12:48:48 pm

The BTSX collateral is there to protect the rights of all parties to be paid according to price movements in the bitAssets. So the rights to proper payment are backed.

However it does not back the actual value of the BitAssets in the same way that say the value of a share or loan is backed by the saleable assets of a business, or that a house loan is backed by the ability of a bank to liquidate the recuperate the value of the loan, or the way in which gold-backed currencies used to be redeemable for gold. If the market decided to value BitAssets at 10% of today's value, instead of at the peg price, the BTSX collateral does not alter that, it only ensures everyone is paid accordingly. So perhaps we need to be careful with what we mean by 'backed'?

Strictly speaking you right.  But this will happen only if the peg is not working in witch event the whole experiment is a failure. . So let rephrase it, if  the peg is not working your bitAssets could be in danger else your bitAssets are backed by real money.
 . To me the backing of BitshareX is the business behind,  and my short explanation for newbie is : BitSharesX is a virtual bank that lets users buy, sell and trade virtual assets that have the  valued of real world assets. In the process of creating those virtual assets people make money trading similar way like Forex. To me the difference is: What's backing a share in Western Union  or Google ? And for the crypto crowd my killer question is what is backing Bitcoin ?

Yeah, that question is great: "what is backing bitcoin?" To another crowd, you can ask "what is backing gold?" Though gold has the benefit that it's been highly valued for millennia...

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You are all correct of course that other currencies in the modern age have dubious if any backing also, and value is subjective. I just think it can be a misleading claim to say for example BitUSD is backed without a proper explanation of what is meant by that.

An objection I heard the other day is that BitAssets are not backed by anything.

With regard to the opinion (expressed by delulo above, but that I've heard elsewhere) that its OK because BitAssets are really prediction markets, not assets, I am confused. Doesn't a prediction market require a pre-determined point in time at which the result is verified, such that people's bets are estimates of the probability of the outcome? What outcome are BitAssets predicting? If there is no end-point, there is no guarantee of any outcome at all. I'm not sure how this overcomes the concern.

Quote from: starspirit on September 03, 2014, 05:43:23 am

I just had a subsequent idea that levers off your principle of a floating R, but better satisfies my concerns that R always acts to sustain rather than distort the peg. What if you had a simpler set of rules, that if BitUSD is below the peg price, R could be steadily increased once every hour say, and if above, R could be steadily reduced every hour. The rate of increase or reduction at the end of each hour could further depend on how far the price is from the peg price, the further it is requiring more aggressive change. The increments would step down again as the gap tightened.

It should also not be required to have any limits on R, as if they are hit, it will only mean the peg will break again. We should be prepared for R to get very high if that is what is required to balance the supply and demand, given the view is that the peg is more important.

This would still require price feed.

The question whether R limits should be lifted is open to discussion. They are there for preventing short-term market manipulation.

Yes a price feed would be required, which ideally we would do without. But without some sort of reference to a feed price, any rules for adjusting R could just as likely be distorting the peg as aiding it. The only alternative schemes to this would involve having a way for the market to agree on the level of R that equates supply and demand. This is being explored in some other threads.

I don't think an unrestricted R could lead to market manipulation. Market manipulation can occur where few trades set a price for the entire market. In this case, R could not be outside where the market wants it because to drive it to that level would mean either buying large amounts way above the feed price or selling way below it, and the rest of the market will be glad to take the other side of the trade. The manipulator would make losses. Bit I could be missing something. Can you provide a scenario would a manipulator might be able to screw the rest of the market?
 

In particular I'd like to see the progress of daily volumes for each Bit Asset. In my mind that is a key indicator of 'usage' increasing over time.