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Main => General Discussion => Topic started by: bytemaster on May 04, 2015, 01:18:37 pm

Title: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 04, 2015, 01:18:37 pm
In this post I introduced some economic analysis: https://bitsharestalk.org/index.php/topic,16127.0.html

It has been nicely summed up by Thom.

  • Buying 1 BitUSD should always be the most cost effective means to purchase BTS
  • USD : BitUSD market price + BitUSD : BTS market price should be factored into the BTS : USD price feed
  • It is far better for price feeds to error in the favor of BitUSD holders than in the favor of shorts
  • Cashing out of BTS should be done more efficiently (for USD through other channels) than using BitUSD
  • Creating BitUSD will *should* always cost more than $1.00
  • BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.


Two which the main critiques were:

1. An assumption that BitAssets 2.0 depends upon USD/BitUSD gateways  (false assumption)
2. I didn't say *how* to achieve all of the *shoulds*
3. I need to be laser focused and this whole discussion is a distraction and BitAssets 1.0 is "just fine".

Now I would like to respond:

BTA 2.0 approach does not depend upon USD/BitUSD gateways, it merely indicates that if there was a market between BitUSD and IOU USD that it should trade at 1.00 or greater at all times assuming the IOU was from a reliable source.    If we assume that there is an IOU USD issuer on the blockchain, that means that traders have two ways to get into BTS:  Buy BitUSD and Sell for BTS and Buy BTS directly with their USD.   Both markets would occur on the blockchain.    Given the existence of both markets and our target of making sure that BitUSD is always worth *AT LEAST* $1.00 then buying BitUSD for $1.00 should always be a win (or at least equal) if your goal is to buy BTS. 

Lets assume that the on chain IOU USD vs BTS market was very liquid and its 1hr moving average was used as the price feed.  What incentive would someone with USD have to buy BitUSD first?   

1.  They must pay IOU USD Trading Fees Either Way
2.  They must pay BitUSD trading fees *if* they go through BitUSD
3.  Going through BitUSD allows them to "buy" without slippage if they buy in large quantities
4.  They are free from counter party risk while trading.

Based upon these points the following things would result in me just buying BTS directly with USD rather than buying BitUSD first.
1.  High trading fees for BitUSD would make two hops more expensive
2.  A lag/time delay
3.  I can get more BTS via IOU USD than via BitUSD

Based upon this analysis I would do the following:

1. 0% fee for forced liquidation
2. As short as possible, I think instant forced settlement at the feed is the way to go.
3. Allow all BitUSD to be force liquidated at the feed at any time.
4. very low trading fees for BitUSD assets

What these rules would imply for the BitUSD shorts:
1. Don't sell below the feed.
2. Don't sell within the error range of the feed
3. Maintain high collateral at all times to minimize risk of being called.
4. There is an implicit "no shorting below the feed" rule.
5. Shorts may have to sell above the feed, but they also have to cover above the feed thus the position is USD neutral
6. In addition to USD price change risk, shorts also face premium change risk that could go for or against them. 

What these rules would imply for BitUSD longs:
1. To buy the first BitUSD requires you to pay to cover the shorts risks... a premium equal to the feed error / other factors
2. You can likely sell your BitUSD for a similar premium thus you are still protected from volatility and the "premium" doesn't matter to traders/hedgers.   
3. You can easily sell your BitUSD for USD at 1:1 to someone looking to buy BTS (they profit by the premium on internal market).
4. You would almost never request forced settlement because you would end up forfeiting the premium. 

What these rules would imply for the Price Feed:
1. The less error it has the lower the premium on the internal market.
2. Shorts carry 99% of the price-feed risk, shorts can be forced to cover at the feed.
3. Longs carry ~0% of the price feed risk, if the feed is manipulated too low they can just refuse to sell.

What the outside world would see:
1. BitUSD always trades for more than $1.00 worth of BTS.
2. BitUSD : IOU USD market is the most liquid / lowest spread
3. BitUSD has the lowest trading fees agains BTS
4. If I accept BitUSD as payment I know I can sell it for $1.00 (or more) worth of value.

In a bull market BitUSD is still not sold below the feed due to instant forced settlement
In a bear market the premium for creating new BitUSD goes up.

In conclusion I would like to submit that from a traders perspective BitUSD constantly trading a couple percent above USD against BTS is just as good as trading near 0% because the RELATIVE price movements are all the same.    From the perspective of merchants and everyone else you want them to know that 1 BitUSD to USD is the floor and ALWAYS a safe price to exchange at.   
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: zerosum on May 04, 2015, 02:03:58 pm
Are you saying you agree that - 1.immidiate ,  2.no testriction to the amount of sttlement, 3. At 100% the feed price would be better?
I think i like it more, even with the risks involving the feed error.


In a bull market the shorts will have the ability to short below the peg virtually illiminated. Any attempt to short(or regular sell bitUsd) will result in immediate reguest for settlement. That i am ready to call an actual floor at$1.00/bitUSD.
Plus, in bull market The shorts will have no other tool to compete,but provide more collateral!- nice side effect.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: joele on May 04, 2015, 02:19:42 pm
+5% Crystal clear
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Musewhale on May 04, 2015, 02:52:42 pm
 +5% +5% +5%
great, good idea, i like it, just do it.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 04, 2015, 03:30:13 pm
Sorry - saw this after I posted:
https://bitsharestalk.org/index.php/topic,16127.msg206725.html#msg206725

Is there an arbitrage opportunity for shorts? I only see implicit ones, which makes me concerned that there may be uncorrectable hyper-deflation if there is a run on bitUSD. What is the explicit market pressure returning shorts back to the feed?

If there is ever an under-supply of bitUSD, no one will execute forced calls - and the price will be running up fast that people will be scared of shorting since they will get burned and nothing is pushing it back to the feed. (this is the opposite of black swan, everyone is over-collateralized)

There needs to be an arbitrage opportunity for creation just as there is one for destruction of BTA. The spread of this arbitrage will be a function of liquidity and the cost of executing the arbitrage.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Thom on May 04, 2015, 03:52:58 pm
I think you've made a very good case how these changes to BitAssets are an improvement over the existing version, but you haven't addressed if it is necessary or worth the time to implement (3rd critique). You also haven't mentioned the cost to implement it, in terms of development resources required, impact on current deliverables or opportunity costs (the value of what isn't done or slips due to the effort of implementing this proposal).

Every day delayed in getting to 1.0, assuming it will have the impact you believe it will, is a day a competitor may find an advantage over us, by releasing a competing software product or my sheer marketing might that everyone listens to that persuades investors to invest somewhere other than the BitShares ecosystem. The case for that persuasion is much easier to make in the absence of a quality UX.

The changes you propose for BitAssets, although an improvement, aren't likely to have much if any impact on the BitShares marketcap or adoption. It's gonna take substantive, visible changes in the software, and for the last 6 months they have not materialized.

At this point I just want to see functional stability (it's hard to write a book with all these changes!), and a slow leak / hint of the hard core changes we're all waiting to see deployed. I recognize you & the dev team are in a tough spot and you're walking a fine line on the right level of disclosure. I'm merely vocalizing what many here are waiting for, and expressing my concern about being "laser focused" on the hard core changes that WILL impact adoption and marketcap.

I'm not going anywhere, I'll be one of those that go down with this ship if need be, because I'm totally on board with our mission, the fight for financial freedom BitShares represents, damn the torpedoes and icebergs get the hell out of our way.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Chronos on May 04, 2015, 03:54:36 pm
BM, you mentioned in a hangout a couple weeks back that you thought feeds only needed to be accurate "within 5% to 10%" of market price, because their primary role was detecting a black swan scenario.

What is your new objective for accuracy, and how confident can the network feel that such a feed will be  reliably available?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: zerosum on May 04, 2015, 03:57:50 pm
Sorry - saw this after I posted:
https://bitsharestalk.org/index.php/topic,16127.msg206725.html#msg206725

Is there an arbitrage opportunity for shorts? I only see implicit ones, which makes me concerned that there may be uncorrectable hyper-deflation if there is a run on bitUSD. What is the explicit market pressure returning shorts back to the feed?

If there is ever an under-supply of bitUSD, no one will execute forced calls - and the price will be running up fast that people will be scared of shorting since they will get burned and nothing is pushing it back to the feed. (this is the opposite of black swan, everyone is over-collateralized)

There needs to be an arbitrage opportunity for creation just as there is one for destruction of BTA. The spread of this arbitrage will be a function of liquidity and the cost of executing the arbitrage.

I gave it a little bit of thought after responding to you in the other thread - the answer is arbitrage opportunity do exist => short bitUSD on the BTS exchange and go long real USD...it should make you about 10% sooner or later. BTW in this regard 100% collateral as apposed to the current 200% helps a lot!
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: zerosum on May 04, 2015, 04:01:13 pm
I think you've made a very good case how these changes to BitAssets are an improvement over the existing version, but you haven't addressed if it is necessary or worth the time to implement (3rd critique). You also haven't mentioned the cost to implement it, in terms of development resources required, impact on current deliverables or opportunity costs (the value of what isn't done or slips due to the effort of implementing this proposal).

Every day delayed in getting to 1.0, assuming it will have the impact you believe it will, is a day a competitor may find an advantage over us, by releasing a competing software product or my sheer marketing might that everyone listens to that persuades investors to invest somewhere other than the BitShares ecosystem. The case for that persuasion is much easier to make in the absence of a quality UX.

The changes you propose for BitAssets, although an improvement, aren't likely to have much if any impact on the BitShares marketcap or adoption. It's gonna take substantive, visible changes in the software, and for the last 6 months they have not materialized.

At this point I just want to see functional stability (it's hard to write a book with all these changes!), and a slow leak / hint of the hard core changes we're all waiting to see deployed. I recognize you & the dev team are in a tough spot and you're walking a fine line on the right level of disclosure. I'm merely vocalizing what many here are waiting for, and expressing my concern about being "laser focused" on the hard core changes that WILL impact adoption and marketcap.

I'm not going anywhere, I'll be one of those that go down with this ship if need be, because I'm totally on board with our mission, the fight for financial freedom BitShares represents, damn the torpedoes and icebergs get the hell out of our way.
Many +5%   +5% on the un-scratched part.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 04, 2015, 04:37:33 pm
I'm not going anywhere, I'll be one of those that go down with this ship if need be, because I'm totally on board with our mission, the fight for financial freedom BitShares represents, damn the torpedoes and icebergs get the hell out of our way.
That's a commitment .. and I am joining!
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: liondani on May 04, 2015, 04:47:01 pm
I'm not going anywhere, I'll be one of those that go down with this ship if need be, because I'm totally on board with our mission, the fight for financial freedom BitShares represents, damn the torpedoes and icebergs get the hell out of our way.
That's a commitment .. and I am joining!
Even if I behave like a troll lately...don't be afraid  I will stay ALL IN too ... I love you to much to leave you alone on this ... after all it is so addictive I can't help it now :D

Sent from my ALCATEL ONE TOUCH 997D

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: abit on May 04, 2015, 05:11:15 pm
tl;dr
HOW to guarantee that each bitUSD could be changed back to one-USD-worth of BTS in a black swan event, especially when there is a daily % set?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 04, 2015, 05:12:20 pm
BM, you mentioned in a hangout a couple weeks back that you thought feeds only needed to be accurate "within 5% to 10%" of market price, because their primary role was detecting a black swan scenario.

What is your new objective for accuracy, and how confident can the network feel that such a feed will be  reliably available?

Under this system the feed accuracy becomes very important in reducing the spread above the feed.   In other words, shorts will factor the feed error into their pricing.  In other words BitUSD is pegged to the feed and shorts will price it accordingly.   The more error in the feed, the higher the risk to shorts.   Fortunately, I believe the feed can be made trust worth and accurate enough that feed error will be in the noise.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 04, 2015, 05:12:46 pm
tl;dr
HOW to guarantee that each bitUSD could be changed back to one-USD-worth of BTS in a black swan event, especially when there is a daily % set?

Black swan has BitUSD converted to BTS... no more guarantee.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 04, 2015, 05:18:43 pm
Another point for Merchants:

1) Offer to accept BitUSD at face value and you get to keep the premium (a couple of percent).   Hence, rather than Credit Cards which the merchant pays 3% with BitUSD they can earn up to 3%.   
2) Offer a 3% discount for paying in BitUSD and thus generate more business. 

Either way, merchants now have incentive to accept BitUSD at face value *AND* to promote it as the preferred means of payment.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: BTSdac on May 04, 2015, 05:21:54 pm
too many words  , it is difficult to understand
HI BM
 if the feed price bitusd:bts=1, the bts holder want to settle ,   how many BTS they can got  per bitusd    0.99BTS or 1.01 BTS ?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 04, 2015, 05:53:57 pm
I gave it a little bit of thought after responding to you in the other thread - the answer is arbitrage opportunity do exist => short bitUSD on the BTS exchange and go long real USD...it should make you about 10% sooner or later. BTW in this regard 100% collateral as apposed to the current 200% helps a lot!

I don't think that helps since we already know USD and bitUSD are decoupled. This was tried before feeds were introduced, the peg failed because sooner or later never happened (and would never happen). The only winning move is not to short out of fear of market ovetcaptilization leading to decoupling from USD.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: zerosum on May 04, 2015, 07:16:18 pm
I gave it a little bit of thought after responding to you in the other thread - the answer is arbitrage opportunity do exist => short bitUSD on the BTS exchange and go long real USD...it should make you about 10% sooner or later. BTW in this regard 100% collateral as apposed to the current 200% helps a lot!

I don't think that helps since we already know USD and bitUSD are decoupled. This was tried before feeds were introduced, the peg failed because sooner or later never happened (and would never happen). The only winning move is not to short out of fear of market ovetcaptilization leading to decoupling from USD.

I think the difference here (in contrast to the 'driving the price of bitUSD to 0' in the yearly design) is that in order for this never ending price increase of bitUSD (in X*peg price) to happen, we should have - People paying more and more  for something that is not working (has lost its main characteristic - tracking the USD). And people still paying more and more for this not-working product?!  At the end, all those bitAsset buyers are guaranteed is settling at the feed (i.e. increasingly less than what they paid). This makse this endlessly increasing overpayment quite illogical. And prevents sooner or later of becoming never.

Interesting issue btw. I do enjoy thinking about it.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: cube on May 04, 2015, 07:37:34 pm
The changes you propose for BitAssets, although an improvement, aren't likely to have much if any impact on the BitShares marketcap or adoption.

I beg to differ on this. If BitAssets (core product) has the right incentive for the traders, the shorters, the bitUSD holders and the merchants to use it, it would create a big pull for adoption. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Empirical1.2 on May 04, 2015, 07:59:18 pm
The changes you propose for BitAssets, although an improvement, aren't likely to have much if any impact on the BitShares marketcap or adoption.

http://www.zerohedge.com/news/2015-04-25/war-cash-migrates-switzerland
http://www.zerohedge.com/news/2015-04-30/war-cash-transparently-totalitarian
http://www.zerohedge.com/news/2015-04-23/largest-bank-america-joins-war-cash
http://www.zerohedge.com/news/2015-05-04/war-cash-australia-leads-new-age-economic-totalitarianism


Whoever gets BitAssets right, (private, liquid, decentralized) wins big.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Ander on May 04, 2015, 08:18:28 pm
Another point for Merchants:

1) Offer to accept BitUSD at face value and you get to keep the premium (a couple of percent).   Hence, rather than Credit Cards which the merchant pays 3% with BitUSD they can earn up to 3%.   
2) Offer a 3% discount for paying in BitUSD and thus generate more business. 

Either way, merchants now have incentive to accept BitUSD at face value *AND* to promote it as the preferred means of payment.

A bitUSD generally being worth at least $1.00, and often a bit more, is a nice system for encouraging merchant adoption. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jsidhu on May 04, 2015, 08:41:02 pm
 +5%
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Buck Fankers on May 04, 2015, 08:42:03 pm
1. An assumption that BitAssets 2.0 depends upon USD/BitUSD gateways  (false assumption)
...
From the perspective of merchants and everyone else you want them to know that 1 BitUSD to USD is the floor and ALWAYS a safe price to exchange at.

Sorry but I don't think you fully understand the "perspective of merchants" or I don't fully understand what the hell you're saying above when it comes to why a merchant would want to accept bitUSD. I can tell a merchant 1 bitUSD = 1 USD all day long, but what good does it do that merchant if they can't get out of bitUSD and into USD quickly (within 24 hours) and easily (without transferring funds to an exchange that is unregulated)? Why should that merchant leave the comfort of a merchant bank who (for 3% or less) handles all of the financials for the merchant and conveniently deposits the funds into their account the next morning?  How will BitShares possibly compete, much less get a foothold with U.S. merchants when there is no regulated gateway (even though you say it's not required, you've offered no solution for the merchants that I can see) to convert to USD? I can even throw in, "hey you're making 3% more!" and it would do no good. 3% more of what? The merchant can't easily convert bitUSD, no one else accepts it, what good is this 3% I've earned if I can't easily convert it to USD?

Dan, I'm down with your plan and all but I can't look at this with rose colored glasses thinking, "one day everyone will just realize how great this is and things will change!". You and I both know that's not going to happen.


The only way this makes sense is if you already have a deal lined up with someone like CoinBase and you simply can't say at this time.  Otherwise, as you've explained it in this thread and the original, the idea of merchants accepting bitUSD is a pipe dream IMHO. There's simply no way I could possibly convince a merchant to accept bitUSD with the terms you've outlined in both post, regardless of 1:1.03. And since you're much smarter than I will ever be, I'm going to watch you shoot down my entire post piece by piece and gently explain to me how this will work, so that I can easily explain it to merchants, because what you are reading right now is the "perspective of merchants".  "How am I going to get my money Dan?"



Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: carpet ride on May 04, 2015, 09:01:40 pm
Will 2.0 face the same liquidity challenges as 1.0?


Sent from my iPhone using Tapatalk
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: aaaxn on May 04, 2015, 09:14:20 pm
Remember this thread? https://bitsharestalk.org/index.php/topic,12724.msg167490.html#msg167490

Bitshares are slowly moving in right direction. I could provide you few months ago with design even better than bitasset 2.0. You might have avoided loosing over $20 mil in market cap.
BTW: With current proposal bts is still overpriced imo.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Ander on May 04, 2015, 09:37:04 pm
1. An assumption that BitAssets 2.0 depends upon USD/BitUSD gateways  (false assumption)
...
From the perspective of merchants and everyone else you want them to know that 1 BitUSD to USD is the floor and ALWAYS a safe price to exchange at.

Sorry but I don't think you fully understand the "perspective of merchants" or I don't fully understand what the hell you're saying above when it comes to why a merchant would want to accept bitUSD. I can tell a merchant 1 bitUSD = 1 USD all day long, but what good does it do that merchant if they can't get out of bitUSD and into USD quickly (within 24 hours) and easily (without transferring funds to an exchange that is unregulated)? Why should that merchant leave the comfort of a merchant bank who (for 3% or less) handles all of the financials for the merchant and conveniently deposits the funds into their account the next morning?  How will BitShares possibly compete, much less get a foothold with U.S. merchants when there is no regulated gateway (even though you say it's not required, you've offered no solution for the merchants that I can see) to convert to USD? I can even throw in, "hey you're making 3% more!" and it would do no good. 3% more of what? The merchant can't easily convert bitUSD, no one else accepts it, what good is this 3% I've earned if I can't easily convert it to USD?

Dan, I'm down with your plan and all but I can't look at this with rose colored glasses thinking, "one day everyone will just realize how great this is and things will change!". You and I both know that's not going to happen.

  • How will the merchant get their USD within 24 hours without a regulated exchange converting bitUSD to USD?
  • How much of a hassle will this be for the merchant? They have enough to do without having to handle these conversions themselves.

The only way this makes sense is if you already have a deal lined up with someone like CoinBase and you simply can't say at this time.  Otherwise, as you've explained it in this thread and the original, the idea of merchants accepting bitUSD is a pipe dream IMHO. There's simply no way I could possibly convince a merchant to accept bitUSD with the terms you've outlined in both post, regardless of 1:1.03. And since you're much smarter than I will ever be, I'm going to watch you shoot down my entire post piece by piece and gently explain to me how this will work, so that I can easily explain it to merchants, because what you are reading right now is the "perspective of merchants".  "How am I going to get my money Dan?"

I agree that the regulated exchange (aka, the Gateway between fiat and bitassets) is a key part of the plan.  Without it we cannot have merchant adoption. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Ander on May 04, 2015, 09:38:10 pm
Remember this thread? https://bitsharestalk.org/index.php/topic,12724.msg167490.html#msg167490

Bitshares are slowly moving in right direction. I could provide you few months ago with design even better than bitasset 2.0. You might have avoided loosing over $20 mil in market cap.
BTW: With current proposal bts is still overpriced imo.

What are your suggestions for improving them further?  What more is needed?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Agent86 on May 04, 2015, 10:55:35 pm
Remember this thread? https://bitsharestalk.org/index.php/topic,12724.msg167490.html#msg167490

Bitshares are slowly moving in right direction. I could provide you few months ago with design even better than bitasset 2.0. You might have avoided loosing over $20 mil in market cap.
BTW: With current proposal bts is still overpriced imo.
aaaxn,
Dan has tended to take a pretty hard line against the value of an idea/design in the past.  I disagree with this view and I think it is totally reasonable to compensate you for a unique/unobvious and useful idea that's implemented.  I'm far from convinced that you had / have thought of anything really interesting as there are lots of ideas tossed around and that's why people react with skepticism but I would 110% support you to be well compensated for a good idea that's implemented.  I think if we claim to promote innovation and reward community contribution it should be backed by precedent, and results should be rewarded.  I'm not in a position to personally offer a bounty but I would support you being compensated via delegates who often contribute to things that bring value.  Let us know if you'd like to share.

Ideas have NO MARKET VALUE without ability to execute. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 04, 2015, 11:01:21 pm
I think the difference here (in contrast to the 'driving the price of bitUSD to 0' in the yearly design) is that in order for this never ending price increase of bitUSD (in X*peg price) to happen, we should have - People paying more and more  for something that is not working (has lost its main characteristic - tracking the USD). And people still paying more and more for this not-working product?!  At the end, all those bitAsset buyers are guaranteed is settling at the feed (i.e. increasingly less than what they paid). This makse this endlessly increasing overpayment quite illogical. And prevents sooner or later of becoming never.

Interesting issue btw. I do enjoy thinking about it.

Thank for thinking about this too, I appreciate the conversation!

My concern isn't that people are still paying more for a non-working product, it's that the system breaks down if everyone expects trends to continue. With no pressure to restore the price back to the feed, it is just as likely to drift from the feed as it is towards - so you can make as much money speculating on drifting away from the median. When does that drifting stop? Since there is no arbitrage, there is no reason for it to stop and there is no reason for it to continue. Once it drifts away you know have your new value with equal chance going towards the median or away. It's the "random walk" of wall street, just with no reason for it to go one way or the other.

Using programming terminology, undersupply of bitUSD is "undefined behavior" while oversupply is handled gracefully with forced calls at 99%.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 04, 2015, 11:08:50 pm
I agree with most of the theory in the other new 2.0 thread, but I'm still hesitant about the design, especially the forced settlement.
It may be good to look at the perspectives of various parties and stress test various scenarios.

Parties:
1) Consumers/Merchants - design is good for them, but couldn't they sell bitUSD for USD directly without having to force settle? The price feed floor should guide the general bitUSD:USD trade above $1 even without any force settling.

2) Traders/Speculators/Investors - are shorts going to have to manage collateral too much?  Are they too vulnerable?  In an extreme bear market, there may be massive forced settlement and a short squeeze?  Will there be a lack of bitUSD creation?

3) Large trade manipulators - can large manipulators influence the market pricing enough to disrupt the possibly broader internal market.  If we have low average volume days in the external markets of let's say $50k, but let's say $10 million worth of bitUSD outstanding.   Can someone accumulate massive bitUSD positions and then bear raid BTS to knock out a large majority of shorts.  (Whale would accumulate large BTS & bitUSD positions.. let's say $200k BTS and $1million bitUSD.  Sell BTS on a low liquidity bear raid (along with FUD on the forums and on media like regular stocks are manipulated).  Short squeeze long BTS holders and force settle $1 million worth of bitUSD. 

Scenarios:
1) Extreme bull markets & bubbles - this market is about leverage for bitUSD creators.  Leverage cuts both ways... and a growth company usually has big swings up and down based on market psychology, greed etc...
 
2) Extreme bear markets - will there be enough shorts to create bitUSD?

Anyways I have to sit down and think deeper about the various scenarios more, but throwing this out there to get thoughts and see if I might be misunderstanding some of these issues.  Thanks! 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Ander on May 04, 2015, 11:16:55 pm

Using programming terminology, undersupply of bitUSD is "undefined behavior" while oversupply is handled gracefully with forced calls at 99%.

If there is undersupply of bitUSD, resulting in high bitUSD prices, could this be solved by someone buying up BTS on exchanges, and then shorting bitUSD to themself?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: abit on May 05, 2015, 12:12:34 am
tl;dr
HOW to guarantee that each bitUSD could be changed back to one-USD-worth of BTS in a black swan event, especially when there is a daily % set?

Black swan has BitUSD converted to BTS... no more guarantee.
If there is no such guarantee, it means BitUSD is NOT fully backed. When a black swan come, the last one who holds BitUSD will be unable to convert to BTS, because there would be no cover order exists on the market. On other words, in this case one BitUSD doesn't worth one USD. It doesn't make sense to set a hard-coded price floor.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 05, 2015, 12:59:47 am
If there is undersupply of bitUSD, resulting in high bitUSD prices, could this be solved by someone buying up BTS on exchanges, and then shorting bitUSD to themself?
I was thinking something like that, but in the end that doesn't do anything. Although there is three legged arbitrage, that arbitrage doesn't ensure that USD=bitUSD. There still is no profit or explicit reason for shorts will converge on the feed. Absent a reason, it is undefined behavior.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Globally Distributed on May 05, 2015, 01:23:40 am
I wouldn't be surprised if you have the secret sauce.  If nothing else, record the secret sauce with a timestamp to prove you knew it all along once someone else comes up with it.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: muse-umum on May 05, 2015, 04:22:54 am
In this post I introduced some economic analysis: https://bitsharestalk.org/index.php/topic,16127.0.html

It has been nicely summed up by Thom.

  • Buying 1 BitUSD should always be the most cost effective means to purchase BTS
  • USD : BitUSD market price + BitUSD : BTS market price should be factored into the BTS : USD price feed
  • It is far better for price feeds to error in the favor of BitUSD holders than in the favor of shorts
  • Cashing out of BTS should be done more efficiently (for USD through other channels) than using BitUSD
  • Creating BitUSD will *should* always cost more than $1.00
  • BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.


Two which the main critiques were:

1. An assumption that BitAssets 2.0 depends upon USD/BitUSD gateways  (false assumption)
2. I didn't say *how* to achieve all of the *shoulds*
3. I need to be laser focused and this whole discussion is a distraction and BitAssets 1.0 is "just fine".

Now I would like to respond:

BTA 2.0 approach does not depend upon USD/BitUSD gateways, it merely indicates that if there was a market between BitUSD and IOU USD that it should trade at 1.00 or greater at all times assuming the IOU was from a reliable source.    If we assume that there is an IOU USD issuer on the blockchain, that means that traders have two ways to get into BTS:  Buy BitUSD and Sell for BTS and Buy BTS directly with their USD.   Both markets would occur on the blockchain.    Given the existence of both markets and our target of making sure that BitUSD is always worth *AT LEAST* $1.00 then buying BitUSD for $1.00 should always be a win (or at least equal) if your goal is to buy BTS. 

Lets assume that the on chain IOU USD vs BTS market was very liquid and its 1hr moving average was used as the price feed.  What incentive would someone with USD have to buy BitUSD first?   

1.  They must pay IOU USD Trading Fees Either Way
2.  They must pay BitUSD trading fees *if* they go through BitUSD
3.  Going through BitUSD allows them to "buy" without slippage if they buy in large quantities
4.  They are free from counter party risk while trading.

Based upon these points the following things would result in me just buying BTS directly with USD rather than buying BitUSD first.
1.  High trading fees for BitUSD would make two hops more expensive
2.  A lag/time delay
3.  I can get more BTS via IOU USD than via BitUSD

Based upon this analysis I would do the following:

1. 0% fee for forced liquidation
2. As short as possible, I think instant forced settlement at the feed is the way to go.
3. Allow all BitUSD to be force liquidated at the feed at any time.
4. very low trading fees for BitUSD assets

What these rules would imply for the BitUSD shorts:
1. Don't sell below the feed.
2. Don't sell within the error range of the feed
3. Maintain high collateral at all times to minimize risk of being called.
4. There is an implicit "no shorting below the feed" rule.
5. Shorts may have to sell above the feed, but they also have to cover above the feed thus the position is USD neutral
6. In addition to USD price change risk, shorts also face premium change risk that could go for or against them. 

What these rules would imply for BitUSD longs:
1. To buy the first BitUSD requires you to pay to cover the shorts risks... a premium equal to the feed error / other factors
2. You can likely sell your BitUSD for a similar premium thus you are still protected from volatility and the "premium" doesn't matter to traders/hedgers.   
3. You can easily sell your BitUSD for USD at 1:1 to someone looking to buy BTS (they profit by the premium on internal market).
4. You would almost never request forced settlement because you would end up forfeiting the premium. 

What these rules would imply for the Price Feed:
1. The less error it has the lower the premium on the internal market.
2. Shorts carry 99% of the price-feed risk, shorts can be forced to cover at the feed.
3. Longs carry ~0% of the price feed risk, if the feed is manipulated too low they can just refuse to sell.

What the outside world would see:
1. BitUSD always trades for more than $1.00 worth of BTS.
2. BitUSD : IOU USD market is the most liquid / lowest spread
3. BitUSD has the lowest trading fees agains BTS
4. If I accept BitUSD as payment I know I can sell it for $1.00 (or more) worth of value.

In a bull market BitUSD is still not sold below the feed due to instant forced settlement
In a bear market the premium for creating new BitUSD goes up.

In conclusion I would like to submit that from a traders perspective BitUSD constantly trading a couple percent above USD against BTS is just as good as trading near 0% because the RELATIVE price movements are all the same.    From the perspective of merchants and everyone else you want them to know that 1 BitUSD to USD is the floor and ALWAYS a safe price to exchange at.

Stop thinking about anything else before you deliver a wallet which any HUMANBEING is able to operate. Will you?
钱包都没法正常使用的前提下就别去谈什么鸡巴规则。
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: cube on May 05, 2015, 04:23:04 am

  • How will the merchant get their USD within 24 hours without a regulated exchange converting bitUSD to USD?
  • How much of a hassle will this be for the merchant? They have enough to do without having to handle these conversions themselves.


Valid points raised and should be addressed.  I think Gateways/Exchanges (with its regulated licenses) would come when they can make a decent profit from a stable, reliable, liquid and secured bitasset.  In other words, it has to be worth while for people to build those gateways. 

To achieve that, bitasset 2.0 needs to perform well under ALL kind of scenarios (as raised by merivercap) - positive, negative and exception.  The negative scenario -  undersupply of bitUSD being 'undefined behavior' (as raised by maqifrnswa) needs to be addressed adequately.  So is the exception scenario - blackswan event as raised by abit.  bitasset 2.0 has to  undergo vigorous scenario testing before seeing the world.

Merchants and savers need to know that bitUSD can be converted safely to USD at ALL times.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 05, 2015, 06:04:11 am

Using programming terminology, undersupply of bitUSD is "undefined behavior" while oversupply is handled gracefully with forced calls at 99%.

If there is undersupply of bitUSD, resulting in high bitUSD prices, could this be solved by someone buying up BTS on exchanges, and then shorting bitUSD to themself?

My assumption was you could short to yourself.  It seems to me the way to balance the market.. You either buy BitUSD directly or buy BTS and create BitUSD if it's the cheaper option and you have  collateral.  Self-shorting is an important option but if we combine it with forced settlement I can imagine a manipulator accumulate $2 mil in BTS over time.. Exchange $1.5 mil BTS for BitUSD or short to self over time...then use 500k BTS to wait for low volume and sell BTS heavily at once and force liquidation on depressed BTS feed prices...is this a possibility?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 05, 2015, 06:51:41 am
My assumption was you could short to yourself.  It seems to me the way to balance the market.. You either buy BitUSD directly or buy BTS and create BitUSD if it's the cheaper option and you have  collateral.  Self-shorting is an important option but if we combine it with forced settlement I can imagine a manipulator accumulate $2 mil in BTS over time.. Exchange $1.5 mil BTS for BitUSD or short to self over time...then use 500k BTS to wait for low volume and sell BTS heavily at once and force liquidation on depressed BTS feed prices...is this a possibility?
AFAIK that's what the 24h notice is good for .. so that the price feed can recover ..
Also note that anything you do in the DEX is public! .. so you should be able to identify market manipulation .. in contrast to centralized exchanges..
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: pc on May 05, 2015, 11:16:28 am
My assumption was you could short to yourself.  It seems to me the way to balance the market.. You either buy BitUSD directly or buy BTS and create BitUSD if it's the cheaper option and you have  collateral.  Self-shorting is an important option but if we combine it with forced settlement I can imagine a manipulator accumulate $2 mil in BTS over time.. Exchange $1.5 mil BTS for BitUSD or short to self over time...then use 500k BTS to wait for low volume and sell BTS heavily at once and force liquidation on depressed BTS feed prices...is this a possibility?
AFAIK that's what the 24h notice is good for .. so that the price feed can recover ..
Also note that anything you do in the DEX is public! .. so you should be able to identify market manipulation .. in contrast to centralized exchanges..
The 24h notice doesn't help against the attack. The attacker only has to delay his BTS dumping until just before the settlement.

Also, detecting market manipulation doesn't help if the attack is executed quickly and anonymously.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 05, 2015, 02:40:51 pm

Using programming terminology, undersupply of bitUSD is "undefined behavior" while oversupply is handled gracefully with forced calls at 99%.

If there is undersupply of bitUSD, resulting in high bitUSD prices, could this be solved by someone buying up BTS on exchanges, and then shorting bitUSD to themself?

My assumption was you could short to yourself.  It seems to me the way to balance the market.. You either buy BitUSD directly or buy BTS and create BitUSD if it's the cheaper option and you have  collateral.  Self-shorting is an important option but if we combine it with forced settlement I can imagine a manipulator accumulate $2 mil in BTS over time.. Exchange $1.5 mil BTS for BitUSD or short to self over time...then use 500k BTS to wait for low volume and sell BTS heavily at once and force liquidation on depressed BTS feed prices...is this a possibility?

You can short to yourself and buy BTS on an exchange, but all that does is place a bet that you think the BTA:BTS price will return to the feed. There is no arbitrage and thus you are not helping the market become efficient. One can just as easily bet that it will move away from the feed. Why would one strategy be preferred over the other?

The more I think about this, the more real and serious I believe this to be. Like BM said, merchants will say "3% off if you use bitUSD" to take advantage of the bitUSD:USD spread. Then the market will move as people are willing to pay a premium for bitUSD, then merchants will say "4% off if you use bitUSD." People are now willing to pay an even higher premium. And why should I short today if people are willing to pay an even higher premium tomorrow? At some point, a bitUSD isn't at all pegged to USD and becomes a rapidly deflating token. There is no end to this loop since there is no feedback pushing it back.

The system, from a supply-side economic and game theory approach:
1) MUST have a profit/arbitrage opportunity to destroy bitUSD when demand is below the feed. (BTA3.0 does this)
2) MUST have a profit/arbitrage opportunity to create bitUSD when demand exceeds the feed. (BTA3.0 does not do this)

I don't know how to do (2), just that it is needed theoretically. The converse of forced calls is forced short-sells (or at least forced sells). How do you force someone to sell? Longs should be protected, so that means you need to force sell those that are already short. Do you force the most collateralized to sell more? That doesn't make sense either
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 05, 2015, 03:20:16 pm
A very important question:

Can the shorts use the collateral to cover their orders?

the longs can directly buy BTS, but the shorts can not use their collateral even the collateral is enough.

THIS IS WHAT I FOUND ON NXT FORUM:

"
Within 9 days my position was down near 10%. I decided I would take the loss and exit the trade.

Well, in attempting to close the trade, I kept getting error messages saying I didn't have enough bitUSD to buy back what I shorted.

I thought maybe this was a bug with one of the updated versions. I went to the forums and posted my problem.

To my surprise I was told I was stuck unless I went and bought more BTS and then bought more bitUSD to cover my existing short even though I had enough BTS locked in collateral to buy near 2 times the amount of BTS I had shorted.
"
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: abit on May 05, 2015, 05:05:19 pm
A very important question:

Can the shorts use the collateral to cover their orders?

the longs can directly buy BTS, but the shorts can not use their collateral even the collateral is enough.

THIS IS WHAT I FOUND ON NXT FORUM:

"
Within 9 days my position was down near 10%. I decided I would take the loss and exit the trade.

Well, in attempting to close the trade, I kept getting error messages saying I didn't have enough bitUSD to buy back what I shorted.

I thought maybe this was a bug with one of the updated versions. I went to the forums and posted my problem.

To my surprise I was told I was stuck unless I went and bought more BTS and then bought more bitUSD to cover my existing short even though I had enough BTS locked in collateral to buy near 2 times the amount of BTS I had shorted.
"
See this link: https://bitsharestalk.org/index.php/topic,13782.0/all.html
and this issue: https://github.com/BitShares/bitshares/issues/1499
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 05, 2015, 08:00:56 pm
My assumption was you could short to yourself.  It seems to me the way to balance the market.. You either buy BitUSD directly or buy BTS and create BitUSD if it's the cheaper option and you have  collateral.  Self-shorting is an important option but if we combine it with forced settlement I can imagine a manipulator accumulate $2 mil in BTS over time.. Exchange $1.5 mil BTS for BitUSD or short to self over time...then use 500k BTS to wait for low volume and sell BTS heavily at once and force liquidation on depressed BTS feed prices...is this a possibility?
AFAIK that's what the 24h notice is good for .. so that the price feed can recover ..
Also note that anything you do in the DEX is public! .. so you should be able to identify market manipulation .. in contrast to centralized exchanges..
The 24h notice doesn't help against the attack. The attacker only has to delay his BTS dumping until just before the settlement.

Also, detecting market manipulation doesn't help if the attack is executed quickly and anonymously.

I agree.  I would think short term price movements can be manipulated to take advantage of this strategy even if there were a 24h notice.

I think rather than forced settlement, just use a maintenance margin. You can also eliminate the initial collateral requirement.   If we eliminate the 100% initial margin, and just say anything below 50% maintenance margin will be settled at the bid at the end of the day, I think things may work out well.  Hence anyone with above 50% maintenance margin will be safe from any kind of forced settlement.. and can re-collateralize at any time.

A very important question:

Can the shorts use the collateral to cover their orders?

the longs can directly buy BTS, but the shorts can not use their collateral even the collateral is enough.

THIS IS WHAT I FOUND ON NXT FORUM:

"
Within 9 days my position was down near 10%. I decided I would take the loss and exit the trade.

Well, in attempting to close the trade, I kept getting error messages saying I didn't have enough bitUSD to buy back what I shorted.

I thought maybe this was a bug with one of the updated versions. I went to the forums and posted my problem.

To my surprise I was told I was stuck unless I went and bought more BTS and then bought more bitUSD to cover my existing short even though I had enough BTS locked in collateral to buy near 2 times the amount of BTS I had shorted.
"
See this link: https://bitsharestalk.org/index.php/topic,13782.0/all.html
and this issue: https://github.com/BitShares/bitshares/issues/1499

I think this was because of the 30-day time-frame of the CFD so you need high enough collateral on settlement date?  This current 2.0 proposal should improve this situation. 

I think brokerage firms use an initial and maintenance margin for operational efficiency and to minimize immediate transactions when one party is on the losing end. (Any other reasons?)   We on the other hand can just use a higher maintenance margin (50%) and no initial margin, but force settle anything below 50% margin.  Hence there will already be some 'forced' liquidity for anyone below the 50% threshold, but anyone above 50% maintenance would be safe and can always re-collateralize.  For high-risk speculators, they could be happy with only 51% BTS collateral, but may be forced out of part of their positions it their position goes below 50% such that they will be back at 50% the next day.  If their positions go down again the next day, they would keep losing their collateral to re-balance at the 50% threshold.  For most people, they can maintain higher amounts of collateral and know they couldn't be forced to settle.   

Hence forced settlement manipulation strategies are largely eliminated, you get some liquidity from those short positions that fall below 50%.  (Note: I'm using 50% because it seems like a safe 1 day black swan threshold.  The potential worst one-day drawdown.  I think Bitcoin had a few 35% down days?    If we want to be more conservative we can use 60%, 75%, or even 100% maintenance margin, but the lower margin requirements create higher liquidity.  I like 50%.)

Any thoughts?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jsidhu on May 05, 2015, 08:50:47 pm
My assumption was you could short to yourself.  It seems to me the way to balance the market.. You either buy BitUSD directly or buy BTS and create BitUSD if it's the cheaper option and you have  collateral.  Self-shorting is an important option but if we combine it with forced settlement I can imagine a manipulator accumulate $2 mil in BTS over time.. Exchange $1.5 mil BTS for BitUSD or short to self over time...then use 500k BTS to wait for low volume and sell BTS heavily at once and force liquidation on depressed BTS feed prices...is this a possibility?
AFAIK that's what the 24h notice is good for .. so that the price feed can recover ..
Also note that anything you do in the DEX is public! .. so you should be able to iydentify market manipulation .. in contrast to centralized exchanges..
The 24h notice doesn't help against the attack. The attacker only has to delay his BTS dumping until just before the settlement.

Also, detecting market manipulation doesn't help if the attack is executed quickly and anonymously.

I agree.  I would think short term price movements can be manipulated to take advantage of this strategy even if there were a 24h notice.

I think rather than forced settlement, just use a maintenance margin. You can also eliminate the initial collateral requirement.   If we eliminate the 100% initial margin, and just say anything below 50% maintenance margin will be settled at the bid at the end of the day, I think things may work out well.  Hence anyone with above 50% maintenance margin will be safe from any kind of forced settlement.. and can re-collateralize at any time.

A very important question:

Can the shorts use the collateral to cover their orders?

the longs can directly buy BTS, but the shorts can not use their collateral even the collateral is enough.

THIS IS WHAT I FOUND ON NXT FORUM:

"
Within 9 days my position was down near 10%. I decided I would take the loss and exit the trade.

Well, in attempting to close the trade, I kept getting error messages saying I didn't have enough bitUSD to buy back what I shorted.

I thought maybe this was a bug with one of the updated versions. I went to the forums and posted my problem.

To my surprise I was told I was stuck unless I went and bought more BTS and then bought more bitUSD to cover my existing short even though I had enough BTS locked in collateral to buy near 2 times the amount of BTS I had shorted.
"
See this link: https://bitsharestalk.org/index.php/topic,13782.0/all.html
and this issue: https://github.com/BitShares/bitshares/issues/1499

I think this was because of the 30-day time-frame of the CFD so you need high enough collateral on settlement date?  This current 2.0 proposal should improve this situation. 

I think brokerage firms use an initial and maintenance margin for operational efficiency and to minimize immediate transactions when one party is on the losing end. (Any other reasons?)   We on the other hand can just use a higher maintenance margin (50%) and no initial margin, but force settle anything below 50% margin.  Hence there will already be some 'forced' liquidity for anyone below the 50% threshold, but anyone above 50% maintenance would be safe and can always re-collateralize.  For high-risk speculators, they could be happy with only 51% BTS collateral, but may be forced out of part of their positions it their position goes below 50% such that they will be back at 50% the next day.  If their positions go down again the next day, they would keep losing their collateral to re-balance at the 50% threshold.  For most people, they can maintain higher amounts of collateral and know they couldn't be forced to settle.   

Hence forced settlement manipulation strategies are largely eliminated, you get some liquidity from those short positions that fall below 50%.  (Note: I'm using 50% because it seems like a safe 1 day black swan threshold.  The potential worst one-day drawdown.  I think Bitcoin had a few 35% down days?    If we want to be more conservative we can use 60%, 75%, or even 100% maintenance margin, but the lower margin requirements create higher liquidity.  I like 50%.)

Any thoughts?
Agreed fully. From brokers ive used to trade forex and cfds there is no initial margin when you place a trade the maintenance margin moniters margin levels and forces a market order at a level in your contract.. configurable on serverside mt4 software but each broker has its own and depends on leverage used. It worked as intended. The time eurchf flew down and below many accounts margin levels it didnt work.. brokers went out of business because they coulsnt cover customwr losses. How would we deal with the blck swan? 100% margin to be safe.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 06, 2015, 12:56:52 am

Agreed fully. From brokers ive used to trade forex and cfds there is no initial margin when you place a trade the maintenance margin moniters margin levels and forces a market order at a level in your contract.. configurable on serverside mt4 software but each broker has its own and depends on leverage used. It worked as intended. The time eurchf flew down and below many accounts margin levels it didnt work.. brokers went out of business because they coulsnt cover customwr losses. How would we deal with the blck swan? 100% margin to be safe.

Wow.  Nice insight!    BTW what was the leverage & maintenance margin in the forex?  Isn't forex leverage like 100:1 or 200:1 sometimes?  Forex is not a volatile market so a 1% move is huge and can see why some brokers went down. 

Hmmm.. I think I actually meant 100% like you did ... a regular maintenance margin of 50% means you have 2:1.  In that case you can have half as much collateral as your exposure. I was actually looking at having the value of your position = your collateral so I guess that is 100% and no leverage. (I think when I said 50% threshold I meant having your collateral be 50% of your total .. ie. collateral + position which was a confused way of looking at it.)... anyways that would look good.  100% collateral.

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: luckybit on May 06, 2015, 05:40:05 am
Another point for Merchants:

1) Offer to accept BitUSD at face value and you get to keep the premium (a couple of percent).   Hence, rather than Credit Cards which the merchant pays 3% with BitUSD they can earn up to 3%.   
2) Offer a 3% discount for paying in BitUSD and thus generate more business. 

Either way, merchants now have incentive to accept BitUSD at face value *AND* to promote it as the preferred means of payment.

Is there a way to get merchants to actually sell BitUSD? Shop at Overstock and get cash back in BitUSD?

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jsidhu on May 06, 2015, 07:33:10 am

Agreed fully. From brokers ive used to trade forex and cfds there is no initial margin when you place a trade the maintenance margin moniters margin levels and forces a market order at a level in your contract.. configurable on serverside mt4 software but each broker has its own and depends on leverage used. It worked as intended. The time eurchf flew down and below many accounts margin levels it didnt work.. brokers went out of business because they coulsnt cover customwr losses. How would we deal with the blck swan? 100% margin to be safe.

Wow.  Nice insight!    BTW what was the leverage & maintenance margin in the forex?  Isn't forex leverage like 100:1 or 200:1 sometimes?  Forex is not a volatile market so a 1% move is huge and can see why some brokers went down. 

Hmmm.. I think I actually meant 100% like you did ... a regular maintenance margin of 50% means you have 2:1.  In that case you can have half as much collateral as your exposure. I was actually looking at having the value of your position = your collateral so I guess that is 100% and no leverage. (I think when I said 50% threshold I meant having your collateral be 50% of your total .. ie. collateral + position which was a confused way of looking at it.)... anyways that would look good.  100% collateral.
Banks use 10:1 max retailers use 100:1 or more but are usually losing their accounts. Margin requirement is usually recipricol of leverage ie 50:1 is 2% margin requirement. Typically margin call happens when equity falls below 50% of the balance. We can offer leverage but if the move is fast enough it can wipe more than 100% in that case maybe we can cap the max winning for the person who took the other side of that trade.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 06, 2015, 09:00:32 am

Agreed fully. From brokers ive used to trade forex and cfds there is no initial margin when you place a trade the maintenance margin moniters margin levels and forces a market order at a level in your contract.. configurable on serverside mt4 software but each broker has its own and depends on leverage used. It worked as intended. The time eurchf flew down and below many accounts margin levels it didnt work.. brokers went out of business because they coulsnt cover customwr losses. How would we deal with the blck swan? 100% margin to be safe.

Wow.  Nice insight!    BTW what was the leverage & maintenance margin in the forex?  Isn't forex leverage like 100:1 or 200:1 sometimes?  Forex is not a volatile market so a 1% move is huge and can see why some brokers went down. 

Hmmm.. I think I actually meant 100% like you did ... a regular maintenance margin of 50% means you have 2:1.  In that case you can have half as much collateral as your exposure. I was actually looking at having the value of your position = your collateral so I guess that is 100% and no leverage. (I think when I said 50% threshold I meant having your collateral be 50% of your total .. ie. collateral + position which was a confused way of looking at it.)... anyways that would look good.  100% collateral.
Banks use 10:1 max retailers use 100:1 or more but are usually losing their accounts. Margin requirement is usually recipricol of leverage ie 50:1 is 2% margin requirement. Typically margin call happens when equity falls below 50% of the balance. We can offer leverage but if the move is fast enough it can wipe more than 100% in that case maybe we can cap the max winning for the person who took the other side of that trade.

Thanks for the info.

Yes as much as I like the idea of leverage to get liquidity, I think it's better to have the main blockchain unlevered because longs & shorts are guaranteed to be covered no matter what happens to prices.  New BTS exchange companies can build on top of the Bitshares blockchain with a lot more leverage, use caps as you mentioned and have settlement over shorter time periods (hrs/minutes) and add a lot more features if they wanted. 

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 06, 2015, 06:32:59 pm
You can short to yourself and buy BTS on an exchange, but all that does is place a bet that you think the BTA:BTS price will return to the feed. There is no arbitrage and thus you are not helping the market become efficient. One can just as easily bet that it will move away from the feed. Why would one strategy be preferred over the other?

Answering my own question, if BTS are expected to be more valuable tomorrow than they are today (measured in real USD), I will want to leverage as much bitUSD as possible to get them. That force continues until I hit the feed and people can start calling me. That is the restoring force that was missing, and will fix this model. bitUSD:realUSD spread is now defined and is a function of the rate of growth of BTS, volatility, and exchange risk.

It's a catch-22: BTS needs the feed to be enforced to be profitable, but in order for the feed to be enforced BTS must be profitable. I think that's fine, if more BTS are destroyed in fees than are given to block producers/developers, then it is "profitable"
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jsidhu on May 06, 2015, 09:54:42 pm

Agreed fully. From brokers ive used to trade forex and cfds there is no initial margin when you place a trade the maintenance margin moniters margin levels and forces a market order at a level in your contract.. configurable on serverside mt4 software but each broker has its own and depends on leverage used. It worked as intended. The time eurchf flew down and below many accounts margin levels it didnt work.. brokers went out of business because they coulsnt cover customwr losses. How would we deal with the blck swan? 100% margin to be safe.

Wow.  Nice insight!    BTW what was the leverage & maintenance margin in the forex?  Isn't forex leverage like 100:1 or 200:1 sometimes?  Forex is not a volatile market so a 1% move is huge and can see why some brokers went down. 

Hmmm.. I think I actually meant 100% like you did ... a regular maintenance margin of 50% means you have 2:1.  In that case you can have half as much collateral as your exposure. I was actually looking at having the value of your position = your collateral so I guess that is 100% and no leverage. (I think when I said 50% threshold I meant having your collateral be 50% of your total .. ie. collateral + position which was a confused way of looking at it.)... anyways that would look good.  100% collateral.
Banks use 10:1 max retailers use 100:1 or more but are usually losing their accounts. Margin requirement is usually recipricol of leverage ie 50:1 is 2% margin requirement. Typically margin call happens when equity falls below 50% of the balance. We can offer leverage but if the move is fast enough it can wipe more than 100% in that case maybe we can cap the max winning for the person who took the other side of that trade.

Thanks for the info.

Yes as much as I like the idea of leverage to get liquidity, I think it's better to have the main blockchain unlevered because longs & shorts are guaranteed to be covered no matter what happens to prices.  New BTS exchange companies can build on top of the Bitshares blockchain with a lot more leverage, use caps as you mentioned and have settlement over shorter time periods (hrs/minutes) and add a lot more features if they wanted.
+5%
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 09, 2015, 07:36:07 am
You can short to yourself and buy BTS on an exchange, but all that does is place a bet that you think the BTA:BTS price will return to the feed. There is no arbitrage and thus you are not helping the market become efficient. One can just as easily bet that it will move away from the feed. Why would one strategy be preferred over the other?

Answering my own question, if BTS are expected to be more valuable tomorrow than they are today (measured in real USD), I will want to leverage as much bitUSD as possible to get them. That force continues until I hit the feed and people can start calling me. That is the restoring force that was missing, and will fix this model. bitUSD:realUSD spread is now defined and is a function of the rate of growth of BTS, volatility, and exchange risk.

It's a catch-22: BTS needs the feed to be enforced to be profitable, but in order for the feed to be enforced BTS must be profitable. I think that's fine, if more BTS are destroyed in fees than are given to block producers/developers, then it is "profitable"

Yes there will be BTS bulls who want to leverage themselves and hence create bitUSD.  However in a stock market, assuming information symmetry, the current price is supposed to reflect all future considerations.  Hence in general the chances that any stock or BTS will go up or down is considered to be 50/50 when considering volatility risk.  (Random walk & efficient market theory..Note: I'm not a big fan of efficient market theory, but it provides some guidance)  The desire to create bitUSD may not be that strong in a neutral market and most may opt to just buy more BTS instead.

In bull markets, I can see demand to create bitUSD increase significantly due to market psychology.  In bear markets, the available bitUSD will shrink significantly for the same reason.  You can see what happened with the current system: http://coinmarketcap.com/assets/bitusd/

In Nov '14 the bitUSD float started at $1 million...went down below $500k in Feb '15, and in April '15 it went below $200k, and now it's around $150k with bitUSD selling at a premium.   A bear market exacerbates bitUSD creation.  Also increased consumer/merchant adoption of bitUSD will generally compound the downward pressure.  Sure in the long run, BTS should go up with more transaction fees and adoption, but in the short run the added pressure to buy bitUSD may keep downward pressure on BTS prices. Just a theory.  I think that may be what was happening with bitCNY.  There was good adoption and a premium for bitCNY, but less & less availability especially with fewer incentives to create bitCNY. 

In a neutral market with expectations of volatility, I think the forced settlement feature makes it disadvantageous to create bitUSD.  It creates an imbalance in the CFD contract.  The owners of bitUSD can call for an unlimited amount of BTS at the price feed without affecting the market pricing.  I even think there could be manipulation as I mentioned earlier.  It seems bitUSD shorts are at the beckon call of the longs and can be squeezed out at any time.  Over time I think the bitUSD shorts will learn the advantages bitUSD longs have (just like the current design) and be reluctant to short.  While the system may seem to work well in bull markets, in neutral or bear markets the flaws may show up. 

My preference would be to just settle all short bitUSD positions at the bid that fall below 100% collateral.  Hence there would be a natural flow of settlement rather than calculated, abrupt, potentially massive forced settlement maneuvers from bitUSD longs. 

(Note: I may even prefer a daily settle of the entire bitUSD float at the price feed rather than an option of unlimited forced settlement at the price feed at anytime, but I would have to think about it more and it would probably be too much of a burden on the market engine anyways.)

BTW for those BTS bulls this past year, what has been your experience with creating bitUSD?   Do you care about forced settlement?

Thoughts in general?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: lastagile on May 09, 2015, 02:57:41 pm
I don't think this will work. It will be a game totally controled by whales. They will manipulate the market with no risk. Any one with enough fiat money can attack the system. I do not know why u go through such a proposal


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Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sittingduck on May 09, 2015, 04:18:25 pm
The risk of manipulation will be priced into premium charged by shorts.    Price feeds can be averaged to prevent rapid changes. 


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Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 09, 2015, 04:44:27 pm
Yes there will be BTS bulls who want to leverage themselves and hence create bitUSD.  However in a stock market, assuming information symmetry, the current price is supposed to reflect all future considerations.  Hence in general the chances that any stock or BTS will go up or down is considered to be 50/50 when considering volatility risk.  (Random walk & efficient market theory..Note: I'm not a big fan of efficient market theory, but it provides some guidance)  The desire to create bitUSD may not be that strong in a neutral market and most may opt to just buy more BTS instead.

In bull markets, I can see demand to create bitUSD increase significantly due to market psychology.  In bear markets, the available bitUSD will shrink significantly for the same reason.  You can see what happened with the current system: http://coinmarketcap.com/assets/bitusd/

In Nov '14 the bitUSD float started at $1 million...went down below $500k in Feb '15, and in April '15 it went below $200k, and now it's around $150k with bitUSD selling at a premium.   A bear market exacerbates bitUSD creation.  Also increased consumer/merchant adoption of bitUSD will generally compound the downward pressure.  Sure in the long run, BTS should go up with more transaction fees and adoption, but in the short run the added pressure to buy bitUSD may keep downward pressure on BTS prices. Just a theory.  I think that may be what was happening with bitCNY.  There was good adoption and a premium for bitCNY, but less & less availability especially with fewer incentives to create bitCNY. 

In a neutral market with expectations of volatility, I think the forced settlement feature makes it disadvantageous to create bitUSD.  It creates an imbalance in the CFD contract.  The owners of bitUSD can call for an unlimited amount of BTS at the price feed without affecting the market pricing.  I even think there could be manipulation as I mentioned earlier.  It seems bitUSD shorts are at the beckon call of the longs and can be squeezed out at any time.  Over time I think the bitUSD shorts will learn the advantages bitUSD longs have (just like the current design) and be reluctant to short.  While the system may seem to work well in bull markets, in neutral or bear markets the flaws may show up. 

My preference would be to just settle all short bitUSD positions at the bid that fall below 100% collateral.  Hence there would be a natural flow of settlement rather than calculated, abrupt, potentially massive forced settlement maneuvers from bitUSD longs. 

(Note: I may even prefer a daily settle of the entire bitUSD float at the price feed rather than an option of unlimited forced settlement at the price feed at anytime, but I would have to think about it more and it would probably be too much of a burden on the market engine anyways.)

BTW for those BTS bulls this past year, what has been your experience with creating bitUSD?   Do you care about forced settlement?

Thoughts in general?

I agree with a lot of what your saying:
My concern ... [is] that the system breaks down if everyone expects trends to continue. With no pressure to restore the price back to the feed, it is just as likely to drift from the feed as it is towards - so you can make as much money speculating on drifting away from the median. When does that drifting stop? Since there is no arbitrage, there is no reason for it to stop and there is no reason for it to continue. Once it drifts away you know have your new value with equal chance going towards the median or away. It's the "random walk" of wall street, just with no reason for it to go one way or the other.

Using programming terminology, undersupply of bitUSD is "undefined behavior" while oversupply is handled gracefully with forced calls at 99%.

Futures markets use daily clearing of accounts, like you suggest. That is something that would force creation/destruction of bitUSD so supply=demand. I'll need to think about it some more, I'm sure BM and the devs are thinking too - it's an interesting problem. I do like thinking of it as a supply control problem.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: brainbug on May 10, 2015, 05:51:39 pm
Is it possible (in principle) to include something similar to Factom (http://factom.org) in Bitshares?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 11, 2015, 08:29:51 pm
Is it possible (in principle) to include something similar to Factom (http://factom.org) in Bitshares?

Yes
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 12, 2015, 02:04:04 am
You can short to yourself and buy BTS on an exchange, but all that does is place a bet that you think the BTA:BTS price will return to the feed. There is no arbitrage and thus you are not helping the market become efficient. One can just as easily bet that it will move away from the feed. Why would one strategy be preferred over the other?

Answering my own question, if BTS are expected to be more valuable tomorrow than they are today (measured in real USD), I will want to leverage as much bitUSD as possible to get them. That force continues until I hit the feed and people can start calling me. That is the restoring force that was missing, and will fix this model. bitUSD:realUSD spread is now defined and is a function of the rate of growth of BTS, volatility, and exchange risk.

It's a catch-22: BTS needs the feed to be enforced to be profitable, but in order for the feed to be enforced BTS must be profitable. I think that's fine, if more BTS are destroyed in fees than are given to block producers/developers, then it is "profitable"

Yes there will be BTS bulls who want to leverage themselves and hence create bitUSD.  However in a stock market, assuming information symmetry, the current price is supposed to reflect all future considerations.  Hence in general the chances that any stock or BTS will go up or down is considered to be 50/50 when considering volatility risk.  (Random walk & efficient market theory..Note: I'm not a big fan of efficient market theory, but it provides some guidance)  The desire to create bitUSD may not be that strong in a neutral market and most may opt to just buy more BTS instead.

In bull markets, I can see demand to create bitUSD increase significantly due to market psychology.  In bear markets, the available bitUSD will shrink significantly for the same reason.  You can see what happened with the current system: http://coinmarketcap.com/assets/bitusd/

In Nov '14 the bitUSD float started at $1 million...went down below $500k in Feb '15, and in April '15 it went below $200k, and now it's around $150k with bitUSD selling at a premium.   A bear market exacerbates bitUSD creation.  Also increased consumer/merchant adoption of bitUSD will generally compound the downward pressure.  Sure in the long run, BTS should go up with more transaction fees and adoption, but in the short run the added pressure to buy bitUSD may keep downward pressure on BTS prices. Just a theory.  I think that may be what was happening with bitCNY.  There was good adoption and a premium for bitCNY, but less & less availability especially with fewer incentives to create bitCNY. 

In a neutral market with expectations of volatility, I think the forced settlement feature makes it disadvantageous to create bitUSD.  It creates an imbalance in the CFD contract.  The owners of bitUSD can call for an unlimited amount of BTS at the price feed without affecting the market pricing.  I even think there could be manipulation as I mentioned earlier.  It seems bitUSD shorts are at the beckon call of the longs and can be squeezed out at any time.  Over time I think the bitUSD shorts will learn the advantages bitUSD longs have (just like the current design) and be reluctant to short.  While the system may seem to work well in bull markets, in neutral or bear markets the flaws may show up. 

My preference would be to just settle all short bitUSD positions at the bid that fall below 100% collateral.  Hence there would be a natural flow of settlement rather than calculated, abrupt, potentially massive forced settlement maneuvers from bitUSD longs. 

(Note: I may even prefer a daily settle of the entire bitUSD float at the price feed rather than an option of unlimited forced settlement at the price feed at anytime, but I would have to think about it more and it would probably be too much of a burden on the market engine anyways.)

BTW for those BTS bulls this past year, what has been your experience with creating bitUSD?   Do you care about forced settlement?

Thoughts in general?

merivercap & others, since BM first suggested it, I have been open to the view that removing the yield from bitAssets might be feasible. But the more I consider the issues you raise, the more I am leaning back to the view that the ideal would be to have a two-way payment mechanism (positive or negative "yield") between longs and shorts, that would allow any supply-demand imbalances in any market conditions to always be reconcilable at the peg price. As you are aware, I've already presented methods that may enable this, such as https://bitsharestalk.org/index.php/topic,15880.0.html and  https://bitsharestalk.org/index.php/topic,16029.msg205338.html#msg205338. These have not been widely reviewed at this stage.

In theory, if the external interest rate available on a currency is higher than the internal rate, the arbitrager (with existing BTS inventory) can earn profit by shorting bit-Currency, selling BTS outside and investing the real currency proceeds into an interest-bearing deposit. In a mature market, this should ensure that interest rates, within the constraint of arbitrage costs, are aligned with external rates, whether positive or negative. In that way, the potential for negative rates on the bit-Currency should not make the bit-Currency relatively unattractive to the real currency. Arbitrage would need to be encouraged in a more immature market though to not hinder its growth.

The biggest problem that certain members such as yourself have had with my yield-based system is the settlement at the price feed, which has been considered unnecessary by many in the longer term, and prone to price feed distortions. I maintain that a price feed is essential, but I do acknowledge the practical issues in managing it. Its worth noting though that this latest bitAsset 2.0 iteration also now features instantaneous forced settlement at the price feed, which is much closer to my own suggestions. The main difference is that, if price feed manipulation does occur, in this system it is always longs benefiting from shorts, whereas in my whitepaper, that distortion could run either way.

In thinking about the manipulation and other price feed issues, I've come up with some further suggestions that I will need to make in another post.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 12, 2015, 01:16:00 pm
I think this discussion would be helped dramatically if we all stopped to consider the "meaning" of a peg when you have two assets.   The first thing you must consider is how "stable" and "well defined" the value is of the things you are trying to peg.    In the case of a crypto-currency, the current market price represents an instantaneous measurement of the value of BTS that has error bars of +/- 15% or more.    Each day we gather more measurements and with enough measurements and time we will be lucky if the error bars drop to +/- 5%.   

In other words the perceived value isn't crisp in the minds of the market.  It is in constant flux and "no one knows" what it should be.   So there needs to be enough flexibility in pricing to allow at least a 10% range.  If you attempt to maintain a peg closer than that it would bankrupt the system.   

The suggestions to use interest rates to regulate the peg and keep it "perfect" only make sense if the interest is at all meaningful or interesting to traders when the hourly volatility exceeds the annual interest. 

The existence of a bond market will allow people to short without fear of being force settled and also give people a way to earn a yield on both BTS and BitUSD.   

Attempting to create a "one market rule to fit every traders needs" is the problem.   

For starters, BitUSD could disable forced settlement except for 1 day per month.   On that "one day" market manipulators will try to push it both ways... "For every whale, there is an equal and opposite whale".  The ying/yang of market manipulators if you will.   

So with Privatized BitAssets we have the tools to try various markets at the same time and see which ones traders prefer.   
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 12, 2015, 08:49:24 pm
BM I agree with your thoughts on the meaning of a  'peg'.

re: BitUSD.  I think the forced settlement is too much in favor of bitUSD holders because there are no limits and you can have massive settlement without moving prices.  With the unlimited force-settle design a lot of people will not create bitUSD even if they're BTS bulls.   They will just accumulate bitUSD and on occasion mass settle at good BTS prices.

My preference would be just to force settle anything below 100% collateral, but if not what about place limits to forced settlement based on collateral (ie. anyone with 150% or 200% collateral won't be required to settle)  At least those bitUSD creators will have less unpredictability if they keep their collateral above a certain level. 

I look forward to hearing more about Privatized BitAssets.  With Privatized BitAssets, can you:
1) place limits on force-settlement (or remove it all together?)
2) adjust collateral requirements?
3) automate collateral adjustments based on an algorithm (ie. 100% when ratio of BTS market cap to avg annual transaction fees is 5 or below... 120% when ratio is 10... up until 200% when ratio is 25)  This is just to a dampen effects of extreme bull & bear markets. 
4) make rule changes in the future? (The fewer rules the better, but just curious if there is flexibility to make tweaks later on.)

Thx!
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 13, 2015, 12:48:27 am
BM I agree with your thoughts on the meaning of a  'peg'.

re: BitUSD.  I think the forced settlement is too much in favor of bitUSD holders because there are no limits and you can have massive settlement without moving prices.  With the unlimited force-settle design a lot of people will not create bitUSD even if they're BTS bulls.   They will just accumulate bitUSD and on occasion mass settle at good BTS prices.

My preference would be just to force settle anything below 100% collateral, but if not what about place limits to forced settlement based on collateral (ie. anyone with 150% or 200% collateral won't be required to settle)  At least those bitUSD creators will have less unpredictability if they keep their collateral above a certain level. 

I look forward to hearing more about Privatized BitAssets.  With Privatized BitAssets, can you:
1) place limits on force-settlement (or remove it all together?)
2) adjust collateral requirements?
3) automate collateral adjustments based on an algorithm (ie. 100% when ratio of BTS market cap to avg annual transaction fees is 5 or below... 120% when ratio is 10... up until 200% when ratio is 25)  This is just to a dampen effects of extreme bull & bear markets. 
4) make rule changes in the future? (The fewer rules the better, but just curious if there is flexibility to make tweaks later on.)

Thx!
I support your idea. The two side of market should be equal. (Even a little advantage for shorter. )
We should garantee the shorters' interest, as long as the bts price hold, the BTA will be well backed. And the value of BTA is garanteed from a market make action called peg.
Any way, The simple rule, the better.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 13, 2015, 02:26:45 am
[Edit: Shortened]

Thanks BM for providing your views around yield.

Without yield, BTA 2.0 is effectively like non-interest bit-cash. While I do aesthetically like the idea of replicating traditional markets with full cash/deposit/bond options, I wonder about how stable both the peg and the cash supply will be without a mechanism to regulate supply and demand.

Firstly, I’m still struggling to see how we deal with high yielding currencies. If users are forced to lock it away in the bond market for yield, it won’t be used for transactions.

Secondly, although most of the time I think price would range between the 100% settlement price and some level of premium at which consumers stop buying, I can foresee some situations where it may become clear to the consensus that a bitUSD is worth meaningfully more or less than a real USD, as a result of risk or yield factors on either side. This could lead to rapid and severe contractions or expansions of bitUSD demand/supply as everyone either wants in or wants out. 

Examples include:

- if the external yield on the real currency rises considerably
- if coverage in the collateral pool becomes marginal and there is a meaningful risk of insolvency
- a regulatory issue around bitAssets
- counter-party risk in the real USD banking system
- a severe bear market in BTS

With a yield mechanism, supply and demand would still shift but more moderately. Of course, one might not like the swings in yield that such situations might cause anyway, that’s why this is a matter of preference, and open to debate.

The flexibility of yield also allows maximum tightness of the peg, which I think the market would see favourably. By suggesting this, I'm not claiming the price feed is a correct valuation of BTS, so I don't think the fuzziness of that underlying valuation matters. I’m only assuming that it is the best estimate of the instantaneous transaction price available, ignoring spreads. That is, if arbitragers or settlers wish to convert between bitUSD and USD using BTS, this is the price that gives them confidence of getting what they expect.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 13, 2015, 03:57:01 am
On other points:

So there needs to be enough flexibility in pricing to allow at least a 10% range.  If you attempt to maintain a peg closer than that it would bankrupt the system.     
I didn't get this?

The suggestions to use interest rates to regulate the peg and keep it "perfect" only make sense if the interest is at all meaningful or interesting to traders when the hourly volatility exceeds the annual interest. 
By construction it is at all times meaningful enough for supply and demand to equilibrate at the feed price.

Attempting to create a "one market rule to fit every traders needs" is the problem.   
I agree. I actually suspect the currency market might be better without traders, and supported by issuers with an income motive. Traders can operate in bond and other asset markets. But I think you're saying we can just have a bond market for yield, with no at-call interest market. I suspect we still need a deposit market too (or interest-bearing currency), otherwise users will just use real currency in interest bearing deposits rather than bit-cash for transactions.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: toast on May 13, 2015, 05:28:36 am
Quote
There is a market for liquidity that we have yet to tap into.  Do you want a piece of it or not?  This proposal is all about taping into this LIQUIDITY market.  Because up until now we have decided not to participate.  Your competitors are participating, so I suggest that we do as they are doing.
Quote
I actually suspect the currency market might be better without traders, and supported by issuers with an income motive.

Yes.. Good thing nubits didn't get sufficient momentum to steal this before having to deal with economic realities. Someone is going to eat your lunch and have easy instant crypto usd, cny, and gold.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 13, 2015, 06:07:15 am
I think the forced settlement is too much in favor of bitUSD holders.
I support your idea. The two side of market should be equal. (Even a little advantage for shorter. )
We should garantee the shorters' interest

Dude, what are you talking about?! ...
...

I disagree. 

1) There is already and will be tremendous demand for bitUSD from millions of people who don't even know what BTS is.  With bitUSD you can have the benefits of Bitcoin and send money instantly anywhere around the world without using a bank or worrying about volatility.  That's the main reason people will hold bitUSD.  To use it.  It's more useful than BTS for payments.

2) Secondly traders want bitUSD to have a stable asset and park money in so they can trade in and out of crypto

3) The market is not functioning primarily because of the bear market, but probably because of the design of forced 30-day settlement.  We went from about $1 million in bitUSD supply to about $150k currently.  No one wants to short.  Most shorters have probably quit.  Without shorting there is no bitUSD supply, and much less reason for Bitshares to even exist.  Unfortunately I think with the new design we will have the same result.  There may be a boost in bitUSD supply when prices turn around, but eventually with volatility and downturns in pricing the shorts are going to be squeezed out.  We do not have a problem of bitUSD demand.  We have a problem of bitUSD supply.

4) There is risk to investing in securities of any company.  Hence people hold cash or bonds instead of stock to minimize risk especially when they're risk-averse, when they have more immediate cash flow needs or when they're older.  The price of stability and lower risk is forgoing the opportunity for higher gains with more risk.  The current price of any security includes all future potential and considerations.  Otherwise no one should hold any cash or bonds at all and own 100% Apple or Google or BTS or any penny-stock because they have more potential.   

5) Balance is the key.  Not favoring one side or the other.  Modern CFD contracts are balanced.  Parties agree on settlement days and price feeds.  The current system is unbalanced in favor of bitUSD longs.

Cheers.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 13, 2015, 12:50:21 pm
[Edit: Shortened]

Thanks BM for providing your views around yield.

Firstly, I’m still struggling to see how we deal with high yielding currencies. If users are forced to lock it away in the bond market for yield, it won’t be used for transactions.
...

I would summarize it like this:  does cash pay interest?   do checking accounts ever pay meaningful interest?    There are many people here claiming that the "longs should pay the shorts" well, that is happening naturally by the longs *not charging interest* to the shorts.    This will increase supply of BitUSD and reduce the premium above the feed.   Any interest payments will only add to the risk profile the shorts face and create larger premiums above the feed.   No one ever pays meaningful interest for "on demand instant liquidity investments". 

To get high interest bonds usually requires locking up your funds for a period of time in some kind of bond.   It normally entails some kind of risk. 

If the blockchain mirrors the real world then BitUSD can ben lent at interest for fixed terms in the bond market to shorts who want the guarantee of not being called or who want extra leverage.   There will be a huge market to borrow BitUSD against other, more-stable, collateral.  IE: Borrow BitUSD using BitGold as collateral.   Here is a market that has minimal BTS exposure and will likely have large demand.   

So those who need liquidity can stay in BitUSD, those who want yield can offer their BitUSD to the bond market.    The existence of the Bond market creates arbitrage opportunities where you can buy BitUSD and then lend it at X% interest.  This is just like banking / cash where you have the option to get yield, but not everyone takes it.   



Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Helikopterben on May 13, 2015, 03:00:00 pm
No one wants to short.  Without shorting there is no bitUSD supply.  Unfortunately I think with the new design we will have the same result.

Balance is the key.  Not favoring one side or the other.  Modern CFD contracts are balanced.  Parties agree on settlement days and price feeds.  The current system is unbalanced in favor of bitUSD longs.
+5%


This is the problem that needs to be solved one way or the other.  Lots of demand and very little supply:

(http://i.imgur.com/pEuhQFm.png)

I believe the problem is a bit more complex than this.  Markets largely move based on human emotion and can trend in one direction or the other for long periods of time.  During a bts bear market, which we are having now, there is more demand to be long USD and less demand to be short USD, and we are seeing this right now.  During a bull market, like what was seen last summer, there is more demand to short USD and less demand to buy USD.  I believe this is where rules favoring longs were erroneously put into place.  Once the market turned from bull to bear, then demand to buy USD increased and demand to short USD decreased.  Consequently, USD buyers could not find sellers.  During the bull market, short sellers could not find USD buyers. 

IMO, too much emphasis is put on a 'stable' cryptocurrency.  All assets, including fiat currencies, are not stable by their very nature.  They fluctuate in value relative to other assets, but some assets such as bitcoin fluctuate much more violently than other assets such as the USD.  However, this can change over time.  In fact, there may become a time where assets such as bts or bitcoin fluctuate less violently than the USD, if faith is lost in the USD. 

Guaranteeing liquidity at the expense of the shorts will not fix the problem.  Shorts simply will not short if they are unfairly disadvantaged and you cannot have a 'stable' cryptocurrency if no one is willing to short it into existence.  Perhaps a floating market order at the price feed could be used for longs who want to redeem USD as close as possible to USD.  In other words, if there are no sellers at the price feed, then the order will track the price feed until someone places a sell order exactly at the price feed, and then the order will be matched.  In a highly liquid market, this should only take seconds, even for a whale, but even in a very illiquid market the order should be filled within a few hours.  The same can be done for shorts.  Liquidity will come from traders and market makers, who will not require instant redemption of USD.

I know many solutions have been proposed including the use of interest rates.  Also, interest rates that float between positive and negative have been proposed and this could potentially be the solution.  However, I am a bit skeptical because many legacy markets, especially futures markets which bitshares seems to be more like, don't use interest rates for most assets.  Also, I don't think time constraints such as forced covering should be used because that would prevent the function of currency for these assets.  The market should be as free as possible with the only requirement being that orders have to be executed within X% of the price feed.  Orders can be placed outside of that X%, but they won't be activated until the price feed comes within that X%.  If buyers want to buy, they buy.  If sellers want to sell, they sell.  If short sellers want to short, they short.  If not, then no trades take place.  To 'nearly' guarantee liquidity for asset holders, a floating market order at the feed price can be used.  In this scenario, I believe the risk of systemic failure would be greater than the risk of no liquidity.  Eventually liquidity will enter the system as users become more comfortable and believe it will work, but this will take time.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 13, 2015, 03:26:25 pm
During a bts bear market, which we are having now, there is more demand to be long USD and less demand to be short USD, and we are seeing this right now.
But this wouldn't be the case if shorts could issue bitUSD well above the market feed, would it?
And this is what BitAssets 2.0 will allow - if I understand it correctly.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: profitofthegods on May 13, 2015, 03:35:48 pm
Just to put in my two cents worth - focusing on getting more traders would be as good a solution as making changes to the way the system works.

Current traders, which is a fairly small group I would think, have become risk averse due to getting burned on a falling price and are therefore acting irrationality. Getting more traders and therefore a greater diversity of past history and perspectives may be a better solution than trying to tailor the system to cater for the current type of irrationality, because if there is one thing we can be confident of its that people will find a new way to act irrationally in the future.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: lastagile on May 13, 2015, 03:38:07 pm
[Edit: Shortened]

Thanks BM for providing your views around yield.

Firstly, I’m still struggling to see how we deal with high yielding currencies. If users are forced to lock it away in the bond market for yield, it won’t be used for transactions.
...

I would summarize it like this:  does cash pay interest?   do checking accounts ever pay meaningful interest?    There are many people here claiming that the "longs should pay the shorts" well, that is happening naturally by the longs *not charging interest* to the shorts.    This will increase supply of BitUSD and reduce the premium above the feed.   Any interest payments will only add to the risk profile the shorts face and create larger premiums above the feed.   No one ever pays meaningful interest for "on demand instant liquidity investments". 

To get high interest bonds usually requires locking up your funds for a period of time in some kind of bond.   It normally entails some kind of risk. 

If the blockchain mirrors the real world then BitUSD can ben lent at interest for fixed terms in the bond market to shorts who want the guarantee of not being called or who want extra leverage.   There will be a huge market to borrow BitUSD against other, more-stable, collateral.  IE: Borrow BitUSD using BitGold as collateral.   Here is a market that has minimal BTS exposure and will likely have large demand.   

So those who need liquidity can stay in BitUSD, those who want yield can offer their BitUSD to the bond market.    The existence of the Bond market creates arbitrage opportunities where you can buy BitUSD and then lend it at X% interest.  This is just like banking / cash where you have the option to get yield, but not everyone takes it.   

longs should pay the shorts. If it is not the case, this project will fail. This my opinion, we will see it.
Most important thing for BTS is the peg. Premium means not pegged.
No one want short makes BTS die!
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Helikopterben on May 13, 2015, 03:38:30 pm
During a bts bear market, which we are having now, there is more demand to be long USD and less demand to be short USD, and we are seeing this right now.
But this wouldn't be the case if shorts could issue bitUSD well above the market feed, would it?
And this is what BitAssets 2.0 will allow - if I understand it correctly.

Shorts can issue bitUSD above the feed now.  In fact the first short sell order is nearly 20% above the feed, meaning no one is willing to short unless they get a 20% discount.  There are buyers willing to pay a 10% premium right now but no one is willing to sell or short to them.  Most likely this imbalance is caused by the 30 day short covering rule. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: profitofthegods on May 13, 2015, 03:53:59 pm


Shorts can issue bitUSD above the feed now.  In fact the first short sell order is nearly 20% above the feed, meaning no one is willing to short unless they get a 20% discount.  There are buyers willing to pay a 10% premium right now but no one is willing to sell or short to them.  Most likely this imbalance is caused by the 30 day short covering rule.

Actually I do agree with this as the 30 day thing makes people buy to cover their shorts when they actually may just want to stay short.So if you are constantly shorting, you have to also be constantly buying, whereas buyers aren't forced to sell or short so they can just keep buying.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 13, 2015, 04:02:15 pm
During a bts bear market, which we are having now, there is more demand to be long USD and less demand to be short USD, and we are seeing this right now.
But this wouldn't be the case if shorts could issue bitUSD well above the market feed, would it?
And this is what BitAssets 2.0 will allow - if I understand it correctly.

Shorts can issue bitUSD above the feed now.  In fact the first short sell order is nearly 20% above the feed, meaning no one is willing to short unless they get a 20% discount.  There are buyers willing to pay a 10% premium right now but no one is willing to sell or short to them.  Most likely this imbalance is caused by the 30 day short covering rule.
But maybe longs would be willing to accept the 20% discount that shorts are now demanding if they were guaranteed liquidity, i.e. if they can be sure they will always be able to sell their bitUSD back to the issuer.
This is my understanding of BitAssets 2.0:
- longs are willing to pay a bit more but demand liquidity in return
- shorts are willing offer liquidity but demand a premium in return
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: zerosum on May 13, 2015, 04:31:34 pm
- shorts are willing offer liquidity but demand a premium in return

This is the biggest (imo) possible flow in bitAssets 2.0
Shorts are not getting any real premium if they sell at a premium to open the position but will have to buy at a premium to close the position!


The relieve the shorts get is in:
-less collateral (200%->100%)
-no need to cover every 30 days - good but of little to no practical value. In other words I firmly believe that the 30 day cover rule in bitAsset 1.0 is not a big deal if everything else is OK (as opposed to skewed in the longs' favour).

- they can also sell below the peg (as opposed to v1.0 were they cannot do so) but this is pretty useless  99% of the time as longs can request settlement at 100%??? 99%.

The benefit for the longs in v2.0:
-More direct way to get 100% of their 'value' by a setlment request, instead of having to wait up to 30 days [tools to wait these 30 days and get your $1.00 value does not exist as of now, but lets say they do exist in a reasonable time (aka 5-7 years :)  ).

To sum it up 2.0 is better system but do not expect miracles... also the main benefit of it for the shorts (reduced collateral) is easily achievable in 1.0 but changing a single variable or two in the code....
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 13, 2015, 04:53:37 pm
This is the biggest (imo) possible flow in bitAssets 2.0
Shorts are not getting any real premium if they sell at a premium to open the position but will have to buy at a premium to close the position!

So it all comes down whether BM's assumptions turn out to be holding:
  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD
It looks like we will never know unless we try it in action.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 13, 2015, 05:04:46 pm
This is the biggest (imo) possible flow in bitAssets 2.0
Shorts are not getting any real premium if they sell at a premium to open the position but will have to buy at a premium to close the position!
Also, it will be perceived as a premium if they sell at a price which is higher than the price they expect to be when they close the position.
So it boils down to the difference between the current premium and the premium expected in the future.
It's a very subtle distinction but I believe it might all we need to make it work.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: zerosum on May 13, 2015, 05:14:45 pm
This is the biggest (imo) possible flow in bitAssets 2.0
Shorts are not getting any real premium if they sell at a premium to open the position but will have to buy at a premium to close the position!

So it all comes down whether BM's assumptions turn out to be holding:
  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD
It looks like we will never know unless we try it in action.

1. The  flow in the bolded point 2 comes from the fact that it assumes the demand comes from the price itself. What I mean is:
If the demand increase due to say a country (or group of people if you prefer) A discovering bitUSD is great. It is true that if bitUSD is available for sell at 1.05 more of it will be bought than if the price is 1.15, but in total more bitUSD will be bought at either price as opposed to case where country A ended up not discovering the produc bitUSD.

2. As described in my previous post the assertion in 3. is true only if you can sell (short in this case) at premium and later buy without such premium. And as maqifrnswa described it - the premium can very well move in a random Brownian motion for a very wide range of premiums if no mechanism exist to push the price back closer to the feed.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 13, 2015, 05:33:45 pm

This is the problem that needs to be solved one way or the other.  Lots of demand and very little supply:

(http://i.imgur.com/pEuhQFm.png)
Informative graphic.  It's mainly bear market psychology, but the BitAsset design should be resilient and robust in any market conditions. 

BTW 'stable' cryptocurrency is important for immediate mainstream adoption.  We can easily transition to bitGold, bitBTC if fiat fails.

Guaranteeing liquidity at the expense of the shorts will not fix the problem....Liquidity will come from traders and market makers, who will not require instant redemption of USD.

Agree.

The market should be as free as possible with the only requirement being that orders have to be executed within X% of the price feed.  Orders can be placed outside of that X%, but they won't be activated until the price feed comes within that X%.  If buyers want to buy, they buy.  If sellers want to sell, they sell.  If short sellers want to short, they short.  If not, then no trades take place.  To 'nearly' guarantee liquidity for asset holders, a floating market order at the feed price can be used.  In this scenario, I believe the risk of systemic failure would be greater than the risk of no liquidity.  Eventually liquidity will enter the system as users become more comfortable and believe it will work, but this will take time.

I agree.

Also we need long term shorts to maintain bitUSD/bitAsset supply.  If not bitUSD users will have unpredictable supply to run their businesses.  Imagine if a company bought $1 million in bitUSD to run a business and start a bitUSD ecosystem last November. Today the company would only have about $150k worth of supply.  That's terrible for business.   We need bitUSD shorters that will short to infinity. 

Imagine for a moment that people can short as much as the collateral they have.  No leverage.  So if everyone shorted bitUSD today, $10 million of bitUSD  will be created and $10 million worth of BTS will back the collateral.  There is no leverage and there is 100% backing.  If BTS falls in price and market cap goes to $9 million, $1 million worth of shorts will disappear and $9 million worth of bitUSD will remain.  Wealth is just transferred from one party to another.  If less than 75% of bitUSD holders are long term users, there would be much less unpredictability with bitUSD supply.  Otherwise we will go from having $1 million bitUSD supply to $10 million like a yo-yo based on market conditions.

The bitAsset 2.0 system would work much better if we remove the proposed unlimited forced-settlement and just settle any positions below 100% collateral.  It's simple, more predictable, balanced and free-flowing.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Helikopterben on May 13, 2015, 05:56:31 pm
- longs are willing to pay a bit more but demand liquidity in return

Yes but longs are not going to pay 20% more because worst case - they may have to settle at a 20% loss when they redeem their dollars.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Helikopterben on May 13, 2015, 06:12:12 pm
BTW 'stable' cryptocurrency is important for immediate mainstream adoption.

I suppose this is where we disagree.  A fully functional market engine is most important for mainstream adoption.  A stable cryptocurrency is a byproduct.  As liquidity enters the system of a fully functional market, liquidity for bitAsset longs will become a non-issue.


Quote
We need bitUSD shorters that will short to infinity. 

Yes but you cannot force short sellers to short.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 13, 2015, 06:12:56 pm
This is the biggest (imo) possible flow in bitAssets 2.0
Shorts are not getting any real premium if they sell at a premium to open the position but will have to buy at a premium to close the position!

So it all comes down whether BM's assumptions turn out to be holding:
  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD
It looks like we will never know unless we try it in action.

1. The  flow in the bolded point 2 comes from the fact that it assumes the demand comes from the price itself. What I mean is:
If the demand increase due to say a country (or group of people if you prefer) A discovering bitUSD is great. It is true that if bitUSD is available for sell at 1.05 more of it will be bought than if the price is 1.15, but in total more bitUSD will be bought at either price as opposed to case where country A ended up not discovering the produc bitUSD.

2. As described in my previous post the assertion in 3. is true only if you can sell (short in this case) at premium and later buy without such premium. And as maqifrnswa described it - the premium can very well move in a random Brownian motion for a very wide range of premiums if no mechanism exist to push the price back closer to the feed.

What about this mechanism - it's not very nice but it might do the job required:
The higher the price of bitUSD (in terns of real $) the more insecure the bitUSD longs will feel about the future of the BitShares system backing up their bitUSD and they will start thinking like this: "I've earned enough, I'd better not push my luck any further and and I'd better get rid of my bitUSD while the whole system still works".
If you bought your bitUSD at $1.1 and now the price was bitUSD = $2.0, will you push your luck much further? I would not as I'd be worried that I might end up having nothing instead of $2 which I can have now.

So maybe that's the mechanism we are looking for: the price of bitUSD will be pushed down because the existence of bitUSD depends on the well-being of the underlying BitShares and if the price goes too high more and more people will feel insecure about holding bitUSD.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 13, 2015, 09:34:06 pm
This is the biggest (imo) possible flow in bitAssets 2.0
Shorts are not getting any real premium if they sell at a premium to open the position but will have to buy at a premium to close the position!

So it all comes down whether BM's assumptions turn out to be holding:
  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD
It looks like we will never know unless we try it in action.

1. The  flow in the bolded point 2 comes from the fact that it assumes the demand comes from the price itself. What I mean is:
If the demand increase due to say a country (or group of people if you prefer) A discovering bitUSD is great. It is true that if bitUSD is available for sell at 1.05 more of it will be bought than if the price is 1.15, but in total more bitUSD will be bought at either price as opposed to case where country A ended up not discovering the produc bitUSD.

2. As described in my previous post the assertion in 3. is true only if you can sell (short in this case) at premium and later buy without such premium. And as maqifrnswa described it - the premium can very well move in a random Brownian motion for a very wide range of premiums if no mechanism exist to push the price back closer to the feed.

What about this mechanism - it's not very nice but it might do the job required:
The higher the price of bitUSD (in terns of real $) the more insecure the bitUSD longs will feel about the future of the BitShares system backing up their bitUSD and they will start thinking like this: "I've earned enough, I'd better not push my luck any further and and I'd better get rid of my bitUSD while the whole system still works".
If you bought your bitUSD at $1.1 and now the price was bitUSD = $2.0, will you push your luck much further? I would not as I'd be worried that I might end up having nothing instead of $2 which I can have now.

So maybe that's the mechanism we are looking for: the price of bitUSD will be pushed down because the existence of bitUSD depends on the well-being of the underlying BitShares and if the price goes too high more and more people will feel insecure about holding bitUSD.

The higher the BitUSD to USD price the greater the potential losses.   IF the price is $1.01 per BitUSD then you can buy it with a risk of 1% loss.   If you buy it at $1.10 it is a 10% risk of loss.   

For the sake of argument... assume the feed producers adjusted the "force settlement price" to constantly move the volume weighted average trade price of BitUSD to $1.00?     In this case the feed producers are pro-actively managing the peg and adjusting for changes in supply/demand of shorts vs longs.     This means that at some points in time "force settlement" may be 10% below parity... but trading is still occurring around $1.00.

If you can understand how manipulating the force-settlement price to maintain the peg is similar to manipulating an artificial interest rate then you can see how not manipulating the forced settlement price would behave like keeping interest rates fixed.     When interest rates are fixed, prices move to compensate.   Likewise, if the force-settlement fee is fixed at 0% then prices will move... if you dynamically adjust the fee then the price will stay flat. 

Once you understand that you will see that fixing the fee at 0% means prices will float ABOVE $1.00 per BitUSD and be entirely set by the market.    Dynamically adjusting the fee would be market intervention and keep trading at $1.00 so long as everyone trusts the fee manipulation to be carried out in a trustable manner.   












Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 13, 2015, 09:42:02 pm
BTW 'stable' cryptocurrency is important for immediate mainstream adoption.

I suppose this is where we disagree.  A fully functional market engine is most important for mainstream adoption.  A stable cryptocurrency is a byproduct.  As liquidity enters the system of a fully functional market, liquidity for bitAsset longs will become a non-issue.


Quote
We need bitUSD shorters that will short to infinity. 

Yes but you cannot force short sellers to short.

1)  When I mean 'stable' I just meant generally pegged, but I'm using the word loosely so we may not really differ in opinion.  I don't really care that bitUSD fluctuates between $0.90 and $1.10 and I don't think bitUSD holders will care either, although adding the floor in the current design so prices fluctuate between $1.00 and $1.20 seems fine.

I think most mainstream bitUSD holders will end up exchanging with FRN's back and forth without even considering what they can get on a crypto exchange.  If it's valued around $1 in most places no one's going to sweat the difference and that's going to drive the peg.

2) Did not hear anyone saying anything about forcing people to short and I wouldn't agree with anyone that did.  If we just remove the forced-settlement feature it will do a lot to keep the market in balance.  People will naturally short if there is more balance.  I personally wouldn't short in the current design, but who knows what others will do. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 13, 2015, 10:06:21 pm
Just to put in my two cents worth - focusing on getting more traders would be as good a solution as making changes to the way the system works.

Current traders, which is a fairly small group I would think, have become risk averse due to getting burned on a falling price and are therefore acting irrationality. Getting more traders and therefore a greater diversity of past history and perspectives may be a better solution than trying to tailor the system to cater for the current type of irrationality, because if there is one thing we can be confident of its that people will find a new way to act irrationally in the future.

I would agree that it may help to get more perspectives from traders. 

Not sure I would call them irrational.  Nothing is guaranteed.  Value is subjective.  Sure market psychology influences prices significantly, but someone's view of the fundamentals of Bitshares can change too.  It can also be the current design that discourages shorts.  If you think it's irrational behavior maybe you should just invest more heavily and HODL .. perhaps mortgage your house on  BTS.  :P   It's good to be aware of the rules of the game because what you may think is irrational behavior now may very well become rational the more you look into it. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 14, 2015, 12:14:26 am
I would summarize it like this:  does cash pay interest?   do checking accounts ever pay meaningful interest? 
...[deleted]...
To get high interest bonds usually requires locking up your funds for a period of time in some kind of bond.   It normally entails some kind of risk. 
BM, you may be right that a yield is not required - I'm just trying to think through the bigger context.

US and European citizens might be deceived by today's low rates. Where inflation is high deposit accounts normally do require interest, as banks compete to offer competitive rates. If inflation expectations rose considerably in the pegged currencies, and there were no compensation, external at-call deposits would offer interest, and put bitUSD at quite a disadvantage, severely contracting its demand. I could be satisfied if BitAsset 2.0 were like cash, and an interest-bearing at-call deposit account made available in addition.

On the other hand, while global interest rates are so low, and crypto in a bear market, we need to also be able to deal with the possibility of an occasionally negative yield (income to shorts) to balance supply and demand. A cash option gives longs a way to avoid negative yield, and would basically lead to shorts wanting to close the market to escape their shorts. I don't like the idea of negative rates, but we do need to reflect the competitive environment externally.

In this case, it may not be sufficient to rely on shorts being incentivised by selling at a premium, if there is no way they can be sure of unwinding at a lower premium to reap the benefit.

I'm still open to the arguments either way, as long as all the ramifications are clear.

I know many solutions have been proposed including the use of interest rates.  Also, interest rates that float between positive and negative have been proposed and this could potentially be the solution.  However, I am a bit skeptical because many legacy markets, especially futures markets which bitshares seems to be more like, don't use interest rates for most assets. 
These external markets do reflect interest rates as follows. In CFD markets, users' accounts are credited or debited according to the funding rates available to the CFD provider and dividends on the underlying assets of their positions (less a spread). In futures and options markets, where there is a fixed expiry for settlement of both longs and shorts, the difference between the futures price and the spot (or "cash") price reflects the market's funding rates and dividend expectations till expiry. (I think a bitUSD is more like a CFD than a future.)

...The market should be as free as possible with the only requirement being that orders have to be executed within X% of the price feed.  Orders can be placed outside of that X%, but they won't be activated until the price feed comes within that X%.  If buyers want to buy, they buy.  If sellers want to sell, they sell.  If short sellers want to short, they short.  If not, then no trades take place.  To 'nearly' guarantee liquidity for asset holders, a floating market order at the feed price can be used.  In this scenario, I believe the risk of systemic failure would be greater than the risk of no liquidity.  Eventually liquidity will enter the system as users become more comfortable and believe it will work, but this will take time.
There is nothing to stop somebody else setting up a free bitUSD:BTS market without these constraints. When the free market price is outside the constraints of the constrained market, all the liquidity will migrate to the unconstrained market and trade at the free market price. Any other bitUSD markets would follow suit.

The bitAsset 2.0 system would work much better if we remove the proposed unlimited forced-settlement and just settle any positions below 100% collateral.  It's simple, more predictable, balanced and free-flowing.
If demand contracted relative to supply (a market overhang), and the market cannot force settlement, then price must fall below the peg. What is the limit to how far below the peg the market might go? We could argue that other longs may be incentivised to buy at a discount, but the problem is that they don't know whether they will be able to sell at a lower discount, or if the discount just stays indefinitely or expands further. This is analogous to the situation experienced on the short side today. You have said you don't mind deviation around the peg, but we don't know how far this could go.

However, as forced settlement can be subject to BTS market manipulation without appropriate rules in place, I think it is worthwhile toying with alternatives as well.  For example, we could let the bitUSD:USD market trade freely, and when the price of bitUSD:USD falls below parity, force closure of a block of shorts (with enough notice of timing put to the market to alert shorts, arbitragers, bargain hunter etc). The block of shorts selected and closed would then be forced to buy bitUSD on market. The block size could be determined with reference to the level of discount, volume, or depth in the bitUSD:USD market, and it may take several such blocks to get back to parity, but its guaranteed to happen eventually through the forced supply reduction. The selection criteria for short closures could be based on yield or collateral. This concept may have holes in it too, just an early half-formed thought.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 14, 2015, 07:31:05 am
The higher the BitUSD to USD price the greater the potential losses.   IF the price is $1.01 per BitUSD then you can buy it with a risk of 1% loss.   If you buy it at $1.10 it is a 10% risk of loss.   
For me that's the most convincing argument so far.
The further bitUSD moves from parity the more risky it becomes in the eyes of bitUSD longs (as it is more detached from its safety net of $1.0) and this should push its price down.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jakub on May 14, 2015, 11:40:17 am
I would summarize it like this: does cash pay interest?  do checking accounts ever pay meaningful interest? There are many people here claiming that the "longs should pay the shorts" well, that is happening naturally by the longs *not charging interest* to the shorts. This will increase supply of BitUSD and reduce the premium above the feed.Any interest payments will only add to the risk profile the shorts face and create larger premiums above the feed. No one ever pays meaningful interest for "on demand instant liquidity investments". 

To get high interest bonds usually requires locking up your funds for a period of time in some kind of bond. It normally entails some kind of risk. 

If the blockchain mirrors the real world then BitUSD can ben lent at interest for fixed terms in the bond market to shorts who want the guarantee of not being called or who want extra leverage. There will be a huge market to borrow BitUSD against other, more-stable, collateral.  IE: Borrow BitUSD using BitGold as collateral. Here is a market that has minimal BTS exposure and will likely have large demand.   

So those who need liquidity can stay in BitUSD, those who want yield can offer their BitUSD to the bond market. The existence of the Bond market creates arbitrage opportunities where you can buy BitUSD and then lend it at X% interest.  This is just like banking / cash where you have the option to get yield, but not everyone takes it.   

This reminds me of Agent86 saying something very similar back in August 2014.

BitUSD is not supposed to have an associated interest rate.  It's just supposed to track the dollar.  People will buy a bitUSD that reliably tracks the dollar for the purpose of facilitating trade, not for getting interest.
...
Interest bearing bonds require a separate market and implementation from the core BitUSD market.  A BTSX holder can sell a collateralized promise to pay a certain amount of bitUSD at a certain date in the future.  There can then be a "bond market" for these promissory notes.  The present day value of these future promises to pay BitUSD will determine short term and long term interest rates.

I could not understand it then but now I do.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: brainbug on May 14, 2015, 03:13:33 pm
From an email contact with www.mapofcoins.com/technologies : What shall be replied to the following request?

"Could you name me the core features of BitShares technology that you want me to highlight. And could you tell me why this technology has to be in this list."
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Shentist on May 14, 2015, 03:21:14 pm
From an email contact with www.mapofcoins.com/technologies : What shall be replied to the following request?

"Could you name me the core features of BitShares technology that you want me to highlight. And could you tell me why this technology has to be in this list."

First decentralized exchange with market pegged assets
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 15, 2015, 01:45:34 am
I am against the force settlement design.
Our purpose should be to establish a  platform, on which two sides of player can match each other.
We just need simple rules.Remove the settlement design seem can do that.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 15, 2015, 02:33:18 am
To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 15, 2015, 03:08:55 am
merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 15, 2015, 03:56:20 am
merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html

I read through what I could, but I might need a summary version.  :P

If the idea is that the market can be fixed externally, that sounds good.  We don't currently have any bitUSD:USD markets to reference.  However we do have a bitCNY:CNY market: https://www.transwiser.com/

I'm not clear on the exact mechanisms of the website, but it would be interesting to know.  The peg seems reasonably tight.

Rather than unlimited forced-settlement, I think daily settlement at the price feed for undercollateralized positions should bring enough volume to tie pricing to an external price feed as you want.   We want to have long term shorters to maintain enough supply for bitUSD holders.  Shorters need predictability.

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 15, 2015, 04:39:40 am
merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html

I read through what I could, but I might need a summary version.  :P

If the idea is that the market can be fixed externally, that sounds good.  We don't currently have any bitUSD:USD markets to reference.  However we do have a bitCNY:CNY market: https://www.transwiser.com/

I'm not clear on the exact mechanisms of the website, but it would be interesting to know.  The peg seems reasonably tight.

Rather than unlimited forced-settlement, I think daily settlement at the price feed for undercollateralized positions should bring enough volume to tie pricing to an external price feed as you want.   We want to have long term shorters to maintain enough supply for bitUSD holders.  Shorters need predictability.



Summary version:
- On any day when the external bitUSD:USD market falls below 1:1, this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over parity

It does not require a bitUSD:USD market necessarily, but if not, it does require at least one external market where both bitUSD and USD trade against a liquid asset like BTC, so that a bitUSD:USD exchange ratio can be inferred (edit: actually any bitUSD market will suffice as long as there is a path to USD).

I think your idea to not force-settle under any price scenario, and just cover under-collateralized positions (which only depends on BTS), would allow the external bitUSD:USD external rate to swing further from the peg, as there is no mechanism to force it back toward parity.

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 15, 2015, 05:58:03 am
Following my last post, I want to consider the limit case where the only bitUSD market is the internal one, as is the case currently. Then BTS is the only path to USD, and the method resolves as follows:

- On any day when the bitUSD:BTS market falls below the price feed, the inferred value of a bitUSD is less than a USD, and this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over the feed price

So in the limit case, the difference to BTA 2.0 is that:
- supply reduction is automatically enforced rather than triggered by settlement requests from individual longs
- the cover price for shorts is a market price, rather than the feed price, with all participants given 24 hour notice to ensure full information and fair pricing

The advantage of this approach might be that a long can no longer manipulate the BTS price to their benefit, because they compete for the BTS made available through the short covers, including with new shorts. Even if somebody owned 100% of the bitUSD, they can only force out blocks of BTS gradually around the price feed, because whenever it goes over that price the short covers stop.

Shorts are protected from unfair pricing by the 24 hour market notice period and by taking account of market conditions in setting block sizes. Block sizes would err on the lower side, and may require several periods to remove the market discount.

As bitUSD found wider external acceptance, the shortest path to USD would be external markets, and preferably bitUSD:USD markets, and its the discounts in those markets that would trigger the short covers. This would demonstrate a commitment to underpin parity in the broader market.

Still just an early idea though.

[Edit: In fact, the short cover procedure is a lot like the way short expiries work, when they are subject to paying no more than the feed price (100%). The main benefit here is that rather than having forced expiries which are often unnecessary when bitUSD is trading at or above parity, we are only forcing covers when there is a discount, and covering from the shorts that are the least keen to hold their position.]
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 15, 2015, 06:41:16 am

Summary version:
- On any day when the external bitUSD:USD market falls below 1:1, this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over parity

It does not require a bitUSD:USD market necessarily, but if not, it does require at least one external market where both bitUSD and USD trade against a liquid asset like BTC, so that a bitUSD:USD exchange ratio can be inferred (actually any bitUSD market will suffice as long as there is a path to USD).

I think your idea to not force-settle under any price scenario, and just cover under-collateralized positions (which only depends on BTS), would allow the external bitUSD:USD external rate to swing further from the peg, as there is no mechanism to force it back toward parity.

Thanks for the summary.

 It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 

I think many of the designs in the past have been over-complicated.  Participants in a  free market will eventually work around any of the complications, but it's better to achieve the same result with a much simpler design.  A simple design reduces the chances of manipulation and  lowers the barriers to entry for market participants and will increase liquidity.

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: helloworld on May 15, 2015, 08:47:49 am
Make a simple rules ,discard suplus part.
It is only way to resolve issues.
Don't fear liquidity not enough. don't fear BTS's price volatility,Please let BTS adjust by itself。
Most people like me just fear the complex rules, so not like trade in BTS.
Make rules simple , Will bring more people trade in it.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 15, 2015, 09:14:23 am
It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 
Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 15, 2015, 01:02:21 pm
To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.

This is a fair point. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 15, 2015, 01:37:26 pm
merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html

I read through what I could, but I might need a summary version.  :P

If the idea is that the market can be fixed externally, that sounds good.  We don't currently have any bitUSD:USD markets to reference.  However we do have a bitCNY:CNY market: https://www.transwiser.com/

I'm not clear on the exact mechanisms of the website, but it would be interesting to know.  The peg seems reasonably tight.

Rather than unlimited forced-settlement, I think daily settlement at the price feed for undercollateralized positions should bring enough volume to tie pricing to an external price feed as you want.   We want to have long term shorters to maintain enough supply for bitUSD holders.  Shorters need predictability.



Summary version:
- On any day when the external bitUSD:USD market falls below 1:1, this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over parity

It does not require a bitUSD:USD market necessarily, but if not, it does require at least one external market where both bitUSD and USD trade against a liquid asset like BTC, so that a bitUSD:USD exchange ratio can be inferred (edit: actually any bitUSD market will suffice as long as there is a path to USD).

I think your idea to not force-settle under any price scenario, and just cover under-collateralized positions (which only depends on BTS), would allow the external bitUSD:USD external rate to swing further from the peg, as there is no mechanism to force it back toward parity.
I am against the settlement is that the bitusd can settle for bts any time.
I agree with the system force-settle when the bts collateral is not enough. In this situation, once the collateral is under some level, say 120%, the market should force the short to cover.
The martket rules should be simple and fair to two side. This make the market work.

As to pegging of bitusd, it should be realised by market make. As the bitasset is well backed, pegging can be done via market make.
You idea sounds you want to use the collateral to do market make work to support the bitusd price. But when bitusd is higher than usd, people will not willing short more bitusd. I think this should be.considered.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 15, 2015, 01:44:09 pm
Yield is only OK, once we have guaranteed liquidity (walk before you run).

Of course both is better.

As long as we are offering the most competitive (stable-coin) product.

Guaranteed liquidity plus variable yield would be an absolutely incredible offering (if SuperDan could pull it off)
Most of the interest should flow to bts holder and the delegate.
As they support and serve for the bitasset holder.
And some interest should be saved as money to save the market. This can make the peg more tight.
There should no interest for bitasset holder, because they just hold the cash. If they want interest, they should rent the money to the bank or bond market.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: profitofthegods on May 15, 2015, 09:21:37 pm
Yield is only OK, once we have guaranteed liquidity (walk before you run).

Of course both is better.

As long as we are offering the most competitive (stable-coin) product.

Guaranteed liquidity plus variable yield would be an absolutely incredible offering (if SuperDan could pull it off)
Most of the interest should flow to bts holder and the delegate.
As they support and serve for the bitasset holder.
And some interest should be saved as money to save the market. This can make the peg more tight.
There should no interest for bitasset holder, because they just hold the cash. If they want interest, they should rent the money to the bank or bond market.

As long as investors are made aware of how it works, greater demand for BitAssets should drive up the value of BTS, because a higher value of BTS will be required to short the assets into existence. Demand for BitAssets should therefore be encouraged, and BTS holders should expect to profit from the increasing value rather than needing additional dividends.

Current problems with the peg are at least partially due to insufficient new investors. That is something that can be remedied.

I think eventually BitAssets with yield will be a big draw for Bitshares, perhaps the biggest.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 16, 2015, 05:51:23 am
It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 
Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

Lol.  You can use google translate, but you can see the exchange rates w/o translation. Free market?  A gateway is an exchange.  People buy or sell voluntarily... Not sure what you mean exactly...
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 17, 2015, 01:07:03 am
It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 
Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

Lol.  You can use google translate, but you can see the exchange rates w/o translation. Free market?  A gateway is an exchange.  People buy or sell voluntarily... Not sure what you mean exactly...

I'm making some educated guesses here about how gateways operate. In free markets relative supply and demand can be measured by a floating price. Gateways on the other hand may adopt a fixed price for promotional purposes, or out of faith that the free market will hover around parity. So you wouldn't immediately see lopsided market demand in their price, only in their inventory. Ultimately they have to adjust to meet the market price, but for quite a long time they could hold their fixed prices somewhere different until it is clear that their inventories can't sustain it any longer. [I don't know how transwise manage things internally, but there is some insight here... https://bitsharestalk.org/index.php/topic,15759.msg202527.html#msg202527]

I suspect the best comfort we could offer gateways and other market makers is a commitment to having the mechanisms in place to restore parity when prices drift. That way they can be assured of being able to offset their inventory in the market when required and being able to maintain their prices around that. But it would be useful to get the view from gateways themselves.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 17, 2015, 09:24:58 am
It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 
Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

Lol.  You can use google translate, but you can see the exchange rates w/o translation. Free market?  A gateway is an exchange.  People buy or sell voluntarily... Not sure what you mean exactly...

I'm making some educated guesses here about how gateways operate. In free markets relative supply and demand can be measured by a floating price. Gateways on the other hand may adopt a fixed price for promotional purposes, or out of faith that the free market will hover around parity. So you wouldn't immediately see lopsided market demand in their price, only in their inventory. Ultimately they have to adjust to meet the market price, but for quite a long time they could hold their fixed prices somewhere different until it is clear that their inventories can't sustain it any longer. [I don't know how transwise manage things internally, but there is some insight here... https://bitsharestalk.org/index.php/topic,15759.msg202527.html#msg202527]

I suspect the best comfort we could offer gateways and other market makers is a commitment to having the mechanisms in place to restore parity when prices drift. That way they can be assured of being able to offset their inventory in the market when required and being able to maintain their prices around that. But it would be useful to get the view from gateways themselves.

Thanks for the link.  I think it's good to analyze the business of this gateway.  The main problem it seems Transwiser mentions in his comment was a lack of access to bitCNY supply and a desire to have a preference for self-shorting so it can buy its own bitCNY before others so they can fill the demand.  It's more about the lack of supply of bitCNY caused either by the bear market in BTS or the design that is unfavorable for shorts or both.  In any case the system seems to be running fine, but I can see how lack of supply can effect the business. 

I don't believe the gateway issues has anything to do with the peg.  (You might be trying to solve an impossibility if you start with assumption that bitUSD & BTS are both volatile and that you are somehow trying to peg them together.)  The better way is to assume bitUSD is stable and that way you can track BTS volatility and price moves. 

Gateway businesses enforce the 1:1 peg and charge a fee, either to buy bitCNY or sell bitCNY.  In this case Transwiser charges for buying bitCNY.  So everyone can sell bitCNY and get CNY 1:1.  In a ecosystem of consumers/merchants the bitCNY to CNY can get transferred back and forth between each other 1:1 without ever having going to a cryptoexchange.  If the demand for bitCNY increases, the gateway just has to buy or create more bitCNY to match the demand.  If the gateway creates bitCNY by self-shorting, it doesn't really care if BTS goes up or down because bitCNY will maintain value...It's on both sides of the CFD contract.  All the gateway needs is the BTS collateral to short.  The gateway just wants to fill general bitCNY demand.  It can continually create supply by self-shorting as much bitCNY demand there is and not worry.

The bigger problem is there is just a lack of bitCNY creation.  Worse yet, the proposed design of unlimited forced-settlement won't allow the gateway to maintain their self-shorts and maintain the supply of bitCNY necessary to promote general use.   I would be interested in helping set up a similar bitUSD/bitGold ecosystem as Transwiser and create supply by self-shorting if it weren't for the forced settlement rules. 

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 17, 2015, 04:36:49 pm
Make a simple rules ,discard suplus part.
It is only way to resolve issues.
Don't fear liquidity not enough. don't fear BTS's price volatility,Please let BTS adjust by itself。
Most people like me just fear the complex rules, so not like trade in BTS.
Make rules simple , Will bring more people trade in it.
Yes, this should be basic rules!
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 17, 2015, 04:51:39 pm
Make a simple rules ,discard suplus part.
It is only way to resolve issues.
Don't fear liquidity not enough. don't fear BTS's price volatility,Please let BTS adjust by itself。
Most people like me just fear the complex rules, so not like trade in BTS.
Make rules simple , Will bring more people trade in it.
Yes, this should be basic rules!

 +5%
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: brainbug on May 20, 2015, 12:00:11 pm
Side question: What was the date of the initial Bitshares launch?

Btw, http://wiki.bitshares.org/ is OFFLINE.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 20, 2015, 12:17:36 pm
Side question: What was the date of the initial Bitshares launch?

Btw, http://wiki.bitshares.org/ is OFFLINE.
IIRC 15. or 17. of July
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 20, 2015, 12:40:33 pm
This is too complicated. Just keep delegates for block producing (like original), and then have a set of employees visible on a page in GUI with their projects listed where you can allot the coins (like a game).
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: mindphlux on May 20, 2015, 01:07:39 pm
To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.

This is a fair point.

Do also keep in mind that bitAssets are advertised pretty much everywhere  to give the average joe investor/merchant a yield. Even the forum-own "5%" meme refers to the yield on bitAssets, if I remember correctly.

I have bought in a few investors who deposited into bitUSD instead of their savings bank account just because of the advertised yield. I'm pretty sure they'd leave the BitShares space if that yield would no longer exist. A "bond market" where one can earn interest is not the same, it is too complicated for someone without a financial background to grasp, all the passive investors care about is a simple yield on bitUSD.

My two bitshares.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 20, 2015, 01:29:46 pm
To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.

This is a fair point.

Do also keep in mind that bitAssets are advertised pretty much everywhere  to give the average joe investor/merchant a yield. Even the forum-own "5%" meme refers to the yield on bitAssets, if I remember correctly.

I have bought in a few investors who deposited into bitUSD instead of their savings bank account just because of the advertised yield. I'm pretty sure they'd leave the BitShares space if that yield would no longer exist. A "bond market" where one can earn interest is not the same, it is too complicated for someone without a financial background to grasp, all the passive investors care about is a simple yield on bitUSD.

My two bitshares.

We need businesses which need BTA.
People who use BTA to save their money for 5 % yield, can easily find other way to get that amount yield.

What kind of people we want attract? the people just hold BTA and not use it, or the people use it and spread it everywhere?
The businesses on bitshares are much precious than people doing saving. I do not know whether you think so too.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: pc on May 20, 2015, 01:36:53 pm
Side question: What was the date of the initial Bitshares launch?

Btw, http://wiki.bitshares.org/ is OFFLINE.

Code: [Select]
>>> blockchain_get_block 1
{
  "previous": "0000000000000000000000000000000000000000",
  "block_num": 1,
  "timestamp": "2014-07-19T03:18:50",
...
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: mindphlux on May 20, 2015, 01:48:47 pm

We need businesses which need BTA.
People who use BTA to save their money for 5 % yield, can easily find other way to get that amount yield.

What kind of people we want attract? the people just hold BTA and not use it, or the people use it and spread it everywhere?
The businesses on bitshares are much precious than people doing saving. I do not know whether you think so too.

Why limit the amount of exposure you can get for bitshares? If you want to change how the current financial system works, you also need to account for the savers who are quite passive. No serious investment besides maybe stocks gives >= 5% p.a, at least not in Europa and the US. Those people investing into Money market deposit accounts are pretty security minded, and would not invest into a stockmarket as it might be considered too dangerous. Bitshares may be eventually be seen as a "low risk" investment because of the automated yield.

Bitshares already has changed too many things to begin with, and now one of the most original features over other crypto currencies will be removed? Do not limit the amount of exposure we might get with this, bytemaster. At least the BitShares 101 video series must be redone then, pretty much all material mentions this in a prominent form.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 20, 2015, 03:31:54 pm

We need businesses which need BTA.
People who use BTA to save their money for 5 % yield, can easily find other way to get that amount yield.

What kind of people we want attract? the people just hold BTA and not use it, or the people use it and spread it everywhere?
The businesses on bitshares are much precious than people doing saving. I do not know whether you think so too.

Why limit the amount of exposure you can get for bitshares? If you want to change how the current financial system works, you also need to account for the savers who are quite passive. No serious investment besides maybe stocks gives >= 5% p.a, at least not in Europa and the US. Those people investing into Money market deposit accounts are pretty security minded, and would not invest into a stockmarket as it might be considered too dangerous. Bitshares may be eventually be seen as a "low risk" investment because of the automated yield.

Bitshares already has changed too many things to begin with, and now one of the most original features over other crypto currencies will be removed? Do not limit the amount of exposure we might get with this, bytemaster. At least the BitShares 101 video series must be redone then, pretty much all material mentions this in a prominent form.
we need the savers, and need the buninesses more.
The old yield system just transfer blood from bts to BTA, and the market can not continue. This will drive both the savers and businesses away eventually.
If we have enough businesses built on Bitshares, it will be quite simple for BTA holder to get 5% yield if they lend the BTA. But it will not work inversely.
(In fact I am getting 30% more yield per year form the business in NXT system via investing to several market make fund. I hope there will be some businesses built on Bitshares)
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: karnal on May 20, 2015, 09:12:40 pm
ventually BitAssets with yield will be a big draw for Bitshares, perhaps the biggest.

It is definitely what initially attracted me to BitShares. A mechanism that allows for storage of wealth in a currency/asset that I am sure(r) will be more stable than $speculatingcoin ? And it pays interest, even?

It still sounds too good to be true. But what do you know, so far it has actually worked..
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: karnal on May 20, 2015, 09:17:08 pm
they'd leave the BitShares space if that yield would no longer exist. A "bond market" where one can earn interest is not the same, it is too complicated for someone without a financial background to grasp, all the passive investors care about is a simple yield on bitUSD.

Fully agree. BitAssets providing interest is one of the most appealing features.

Also I'm with the others who say - KISS. All these rule changes, mad complex rules.. I would be surprised if someone who is not a core dev could properly explain in a simple way all the little rules and their interactions.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 20, 2015, 10:25:41 pm
I believe an at-call yield, or possibly something very similar alongside cash  (e.g. deposit accounts or 1 day bills), is strongly desired to attract and retain currency users, especially if external or competitive interest rates are higher. However expectations of any fixed yield like 5% is not really sustainable. Markets will dictate what yield, if any, is possible, as arbitragers operate between the bit-Currency market and the real currency market.


Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 21, 2015, 05:57:10 am
I believe an at-call yield, or possibly something very similar alongside cash  (e.g. deposit accounts or 1 day bills), is strongly desired to attract and retain currency users, especially if external or competitive interest rates are higher. However expectations of any fixed yield like 5% is not really sustainable. Markets will dictate what yield, if any, is possible, as arbitragers operate between the bit-Currency market and the real currency market.
Though it is difficult to explain to people why bitGold has a yield ..
It does sound fishy IMHO
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 21, 2015, 06:51:27 am
I believe an at-call yield, or possibly something very similar alongside cash  (e.g. deposit accounts or 1 day bills), is strongly desired to attract and retain currency users, especially if external or competitive interest rates are higher. However expectations of any fixed yield like 5% is not really sustainable. Markets will dictate what yield, if any, is possible, as arbitragers operate between the bit-Currency market and the real currency market.
Though it is difficult to explain to people why bitGold has a yield ..
It does sound fishy IMHO
I'm referring specifically to currencies when I talk about yield. But for any asset type, external yields will be a key driver of what is accepted by the market for the bit-version, primarily because of arbitrage if differences get too large. Yield would be particularly important for shares and indexes that earn dividends. However, if somebody owns real gold externally, they don't earn a yield - it actually costs them money for storage and insurance, although some big players can also earn fees from gold lending. So if bitGold earned zero yield, it would already be more attractive than real gold, and its possible a small negative yield would even be acceptable by the market. My guess is that traditional CFDs on gold and silver would have a net funding cost on long accounts for this very reason, and a bit-version would be no different in principle.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 21, 2015, 03:31:14 pm
I think this is fascinating how everyone approaches this from different points of view (and models) since this is really a multifaceted problem. There is demand side and supply side economics to think about here. Most are thinking of the demand side (how to set up a system that people want to use). I don't want to derail that, but here's my latest on the supply side thoughts. In theory, a simple system which properly manages supply will provide all the necessary features for a healthy and attractive investment.

Summary
Ideal system:
1) The system rewards market players for destroying BTA when there is an oversupply
2) The system rewards market players for creating BTA when there is an under supply

BTA2.0 Implementation of above:
Case (1) is handled by forced calls at 99% of the price feed.
Case (2) is unhandled, but the assumption is market players will do it with no explicit incentive because 1 BTA is supposed to equal the underlying asset.

New thoughts
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself, that is you need a mechanism by which there is market incentive to push towards the feed.
To do that how about the following:
A variable fee is charged on new shorts which is valued at X% of the difference between the feed and the short. This is a progressive "tax" paid by the parties (longs or shorts) pushing away from the feed and paid to the party that is pushing towards to feed. This fee is either in BTS or BTA depending on oversupply or undersupply and goes to a yield account paid out to all BTA shorts or for longs just like the current yield. It is market driven and leaves us with simple rules that are easy to explain.

The the market says that shorts need to be rewarded, there will be an auction for the size of the reward. The current market would be paying a yield to BTS shorters at one rate and longs at another. BOTH longs and shorts get a yield, and it is based on the fees that were collected when the asset was created.

Proposed, KISS, rules:
1) If a BTA is created (shorted) when there is an under supply, then the buyer would pay a fee in BTS based on how much the price was from the peg. That fee goes to a yield account. All shorts will be paid a fraction of that yield whenever they cover, and the yield is proportional to the fraction of the total BTA supply they are covering and how long they held the collateral (like the current system).
2) If a BTA is created when there is an over supply, the shorter pays a fee in BTA to a yield account which is paid out to longs similar to the current system.

Example:
Feed is 1 BTS per 1 Asset. I want to short at 1.10 BTS per 1 BTA, which means there is an under supply. Someone buys 1 BTA from me for 1.10 BTS. I put 1.10 in collateral so there is 2.20 in collateral, I owe 1 BTA, and the long is long 1 BTA. The buyer also pays a fee of some percentage of the 0.10 BTS they are from the peg, paid in BTS, to the short yield. Whenever any short covers, they are paid a yield proportional to the length of their short (capped at one year) and the percentage of their short. The is the contapositive of the current system.

If I want to short at .90 BTS per 1 BTA, that means there is an over supply of BTS. Someone buys 1 BTA from me for 0.9. I put 0.9 in collateral so there is now 1.90 BTS in collateral, I owe 1 BTA, and the long is long 1 BTA. I also pay a fee based on some percentage of the 0.1 BTS I am away from the peg, in BTA, to the long yield. It is paid out just like the long yield is paid out now. This is very similar to the current system.

Thoughts?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 21, 2015, 06:05:35 pm
I think this is fascinating how everyone approaches this from different points of view (and models) since this is really a multifaceted problem. There is demand side and supply side economics to think about here. Most are thinking of the demand side (how to set up a system that people want to use). I don't want to derail that, but here's my latest on the supply side thoughts. In theory, a simple system which properly manages supply will provide all the necessary features for a healthy and attractive investment.

Summary
Ideal system:
1) The system rewards market players for destroying BTA when there is an oversupply
2) The system rewards market players for creating BTA when there is an under supply

BTA2.0 Implementation of above:
Case (1) is handled by forced calls at 99% of the price feed.
Case (2) is unhandled, but the assumption is market players will do it with no explicit incentive because 1 BTA is supposed to equal the underlying asset.

New thoughts
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself, that is you need a mechanism by which there is market incentive to push towards the feed.
To do that how about the following:
A variable fee is charged on new shorts which is valued at X% of the difference between the feed and the short. This is a progressive "tax" paid by the parties (longs or shorts) pushing away from the feed and paid to the party that is pushing towards to feed. This fee is either in BTS or BTA depending on oversupply or undersupply and goes to a yield account paid out to all BTA shorts or for longs just like the current yield. It is market driven and leaves us with simple rules that are easy to explain.

The the market says that shorts need to be rewarded, there will be an auction for the size of the reward. The current market would be paying a yield to BTS shorters at one rate and longs at another. BOTH longs and shorts get a yield, and it is based on the fees that were collected when the asset was created.

Proposed, KISS, rules:
1) If a BTA is created (shorted) when there is an under supply, then the buyer would pay a fee in BTS based on how much the price was from the peg. That fee goes to a yield account. All shorts will be paid a fraction of that yield whenever they cover, and the yield is proportional to the fraction of the total BTA supply they are covering and how long they held the collateral (like the current system).
2) If a BTA is created when there is an over supply, the shorter pays a fee in BTA to a yield account which is paid out to longs similar to the current system.

Example:
Feed is 1 BTS per 1 Asset. I want to short at 1.10 BTS per 1 BTA, which means there is an under supply. Someone buys 1 BTA from me for 1.10 BTS. I put 1.10 in collateral so there is 2.20 in collateral, I owe 1 BTA, and the long is long 1 BTA. The buyer also pays a fee of some percentage of the 0.10 BTS they are from the peg, paid in BTS, to the short yield. Whenever any short covers, they are paid a yield proportional to the length of their short (capped at one year) and the percentage of their short. The is the contapositive of the current system.

If I want to short at .90 BTS per 1 BTA, that means there is an over supply of BTS. Someone buys 1 BTA from me for 0.9. I put 0.9 in collateral so there is now 1.90 BTS in collateral, I owe 1 BTA, and the long is long 1 BTA. I also pay a fee based on some percentage of the 0.1 BTS I am away from the peg, in BTA, to the long yield. It is paid out just like the long yield is paid out now. This is very similar to the current system.

Thoughts?

The idea that it is as simple as this:

The forced settlement price has a fee equal to the average delta between the trading price and the price feed.    As shorts "back away" from the feed, the forced settlement backs away in the opposite direction.   As shorts get closer to the fee the forced settlement creeps up.  This allows the market to control the feed and keeps things centered on the price feed.


Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 22, 2015, 03:10:41 am
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself...,
I don't understand what you mean by this.


Proposed, KISS, rules:
1) If a BTA is created (shorted) when there is an under supply, then the buyer would pay a fee in BTS based on how much the price was from the peg. That fee goes to a yield account. All shorts will be paid a fraction of that yield whenever they cover, and the yield is proportional to the fraction of the total BTA supply they are covering and how long they held the collateral (like the current system).
2) If a BTA is created when there is an over supply, the shorter pays a fee in BTA to a yield account which is paid out to longs similar to the current system.


maqifrnswa, a market can shift its value appraisal at any time even in the absence of volume. Imagine there is a change in the market's view on the value of a bitUSD compared to a USD. This could be driven by a change in interest rates on real USD, regulation risk around bitUSD, or any other point of comparison - it does not matter for our illustration.

Under a yield approach, in principle there is always some level of yield at which longs and shorts would balance out their average evaluation at $1 again. If the movement to premiums drove down yields, and the movement to discounts drove up yields, the appropriate yield can be reached where the market would reset at $1. Granted this is harder than it sounds, but that's the idea.

Under your approach a tax gets paid by one side, which opens up a spread in the market, reducing trading activity. Since there is nothing to force trades that incur the tax, there is also no easy way for the opposite side to price in any yield expectation. So the result is a disincentive on one party to stop negative action that might make the peg deviation worse, no incentive for them to positively act to make it better, and little incentive for the other party to act in a way to make it better either.


The idea that it is as simple as this:

The forced settlement price has a fee equal to the average delta between the trading price and the price feed.    As shorts "back away" from the feed, the forced settlement backs away in the opposite direction.   As shorts get closer to the fee the forced settlement creeps up.  This allows the market to control the feed and keeps things centered on the price feed.


Is there somewhere I can read more on this, because I don't really get it right now.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 22, 2015, 12:52:30 pm
It is really quite simple, the BitUSD:USD price needs to be factored into the price feed, the feed should adjust in what ever way is necessary to maintain the BitUSD:USD price and otherwise ignore the USD:BTS price.     The USD:BTS price is volatile and will have a high spread at any reasonable volume.   

There is no need for the BitUSD:USD price to have a large spread and the difference in price between $1 and $100,000 of volume on the BitUSD:USD market can be much less than the same difference on the USD:BTS market.   

Therefore, forced-settlement doesn't matter so long as it exists it serves as a backdrop of liquidity that sets the floor on BitUSD : BTS.    The feed producers should simply move this floor until the BitUSD:USD market is trading at $1.00.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: wuyanren on May 22, 2015, 12:59:15 pm
Bitusd is not required, this is difficult to achieve anchor
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: monsterer on May 22, 2015, 01:08:42 pm
The feed producers should simply move this floor until the BitUSD:USD market is trading at $1.00.

IMO you can't rely on this to work quickly enough; the price feed mechanism is too slow. To allow for price discovery, the feed price needs to adjust after every trade, and should probably adjust more quickly depending on the traded volume.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 22, 2015, 01:22:48 pm
The feed producers should simply move this floor until the BitUSD:USD market is trading at $1.00.

IMO you can't rely on this to work quickly enough; the price feed mechanism is too slow. To allow for price discovery, the feed price needs to adjust after every trade, and should probably adjust more quickly depending on the traded volume.

Hence my point regarding BitUSD that it should FLOAT above $1.00 and have the market set the premium.   

Attempting to maintain 1:1 perfect peg at all times requires MASIVE and continual manual intervention and will always be playing catch up.   The more you attempt to "close loop" the market the greater opportunity there is for people to profit from manipulation.

Having forced settlement always be at the price feed will simply cause it to trade at a offset and the market will set the premium with every trade.    Forced settlement will ALMOST NEVER HAPPEN because market participants will have financial incentive to trade at prices that make it very unlikely.   

From a traders perspective you only need to know 1 thing:   the price of BitUSD is 99.9% correlated to the price of USD.   

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: monsterer on May 22, 2015, 01:28:33 pm
Attempting to maintain 1:1 perfect peg at all times requires MASIVE and continual manual intervention and will always be playing catch up.   The more you attempt to "close loop" the market the greater opportunity there is for people to profit from manipulation.

I'm not sure if that is provable. It seems to me the blockchain itself should have an provably optimal response to trading action, and that response should be to include instantly adjusting the feed as a function of trading volume.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Helikopterben on May 22, 2015, 04:04:34 pm
Forced settlement will ALMOST NEVER HAPPEN because market participants will have financial incentive to trade at prices that make it very unlikely.

If this is indeed what actually happens when implemented, then that would be the best case scenario and likely work long term.  Perhaps forced settlement could be turned off by default and hidden behind an 'advanced' tab to discourage users from exercising this option.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 22, 2015, 05:44:17 pm
The idea that it is as simple as this:

The forced settlement price has a fee equal to the average delta between the trading price and the price feed.    As shorts "back away" from the feed, the forced settlement backs away in the opposite direction.   As shorts get closer to the fee the forced settlement creeps up.  This allows the market to control the feed and keeps things centered on the price feed.

That does help, it discourages the destruction of BTS when there is already an under supply. Also, as the price moves tighter to the feed, liquidity increases, which is another side of this which needs to be considered
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 22, 2015, 05:50:21 pm
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself...,
I don't understand what you mean by this.

This wasn't in reference to you, but to one of BM's eariler ideas that people will work to maintain the peg. Your system is fine, the yield is determined at the short sale and thus is fixed at a value determined at the sale.


maqifrnswa, a market can shift its value appraisal at any time even in the absence of volume. Imagine there is a change in the market's view on the value of a bitUSD compared to a USD. This could be driven by a change in interest rates on real USD, regulation risk around bitUSD, or any other point of comparison - it does not matter for our illustration.

Under a yield approach, in principle there is always some level of yield at which longs and shorts would balance out their average evaluation at $1 again. If the movement to premiums drove down yields, and the movement to discounts drove up yields, the appropriate yield can be reached where the market would reset at $1. Granted this is harder than it sounds, but that's the idea.

Under your approach a tax gets paid by one side, which opens up a spread in the market, reducing trading activity. Since there is nothing to force trades that incur the tax, there is also no easy way for the opposite side to price in any yield expectation. So the result is a disincentive on one party to stop negative action that might make the peg deviation worse, no incentive for them to positively act to make it better, and little incentive for the other party to act in a way to make it better either.

that makes sense - I think a positive or negative yield could work. Question: what does it mean to have BTA yield versus simply selling at a discount (e.g. zero coupon yield)?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 22, 2015, 08:41:00 pm
Forced settlement will ALMOST NEVER HAPPEN because market participants will have financial incentive to trade at prices that make it very unlikely.

If this is indeed what actually happens when implemented, then that would be the best case scenario and likely work long term.  Perhaps forced settlement could be turned off by default and hidden behind an 'advanced' tab to discourage users from exercising this option.

Keep a potential manipulation tool in the background so new traders have no idea what's coming?  Why have it in the first place?

How sure is the "ALMOST NEVER GOING TO HAPPEN'....? 

Let's say BitUSD would normally trade at 10% above the price feed...  BTS prices can go up or down by 5-10% quickly & frequently (ie.  prices are up about 20% in the last 24hrs.)... so should shorters of BidUSD ask for 15-20% above the feed to be safe?  If so psychologically, BitUSD buyers are going to think that's way too much of a premium and you're preventing the demand side of BitUSD because they would want it as close to 1:1 as possible.  The closer you get to 1:1 the bigger chance shorts are going to get force settled.  So demand side won't budge until it's much closer to 1:1 and supply side won't budge or be prone to getting massively forced out.  Wouldn't that just prevent people from making a trade?

Without thinking about 'pegs' or any other theory, what about the idea of giving BitUSD forced settlement powers.  Whenever you give one side of a trade the right to force-settle at any time that's an advantage.  When one side can force-settle without moving the price, that's even a bigger advantage.  I'm I missing something?

Can someone explain it to me like I'm five?  If people can't understand it, how is anyone going to explain it to the average trader/speculator/person and how are they going to get comfortable wanting to get started?  BTW I wouldn't count on traders/speculators to know the theories or the rules.. they'll just trade and speculate when the market is hot until they lose money and quit playing...

Lastly can we have these trading rules vetted by a variety of trusted & experienced market making professionals, traders, and exchange companies?

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 22, 2015, 09:15:52 pm
There is a DAILY LIMIT TO FORCED SETTLEMENT.   

If the price moved up 27% like it did in the last 24 hours then the first people to ask for forced settlement would consume the daily amount and force everyone else to wait. 

I maintain that there exists a PRICE for every contract arrangement and that the "value of the advantage" will be priced in by BOTH SIDES.   The person buying BitUSD doesn't care about the $1.00 peg, they care about ALL of the advantages associated with owning it.  If they are a trader/speculator then they will buy it up expecting to profit from shorts when there is heavy volatility.   Therefore, to the extent that a short asks a premium, a long has incentive to pay a premium.   

So lets just assume the market settles on $1.30  as the price for creating BitUSD with forced settlement at the feed which is $1.00.   Who cares so long as the premium is relatively stable?    The only thing that can move the premium is market forces based upon volume and market direction.   

If you focus ONLY ON TRADERS then BitUSD with forced settlement at the feed is a fine substitute for a USD. 

We know that increasing the daily settlement limit will increase the premium, and decreasing it will decrease the premium.   If you have no forced settlement at all then no price feed is necessary and the peg walks toward which ever side of the market is "more stubborn".   

As a short you balance collateralization vs forced settlement risk.   

I maintain that having BitUSD be worth $1.30 at all times is far better than it being worth $0.70 sometimes or even $0.85 to $1.15.   If you break the buck then merchants are no longer "safe" accepting it at parity.   I would rather a merchant offer a discount to someone paying with BitUSD that is worth $1.30 than charge someone extra with BitUSD worth $0.95.   

Conclusion:  forced settlement "on demand" that is limited to a reasonable percentage of the supply per day will mean that shorts will prioritize themselves by collateral to the extent they fear the forced settlement.    Keep in mind, that the entire book between $1.00 and $1.30 must be consumed before anyone even initiates a forced settlement. 

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 22, 2015, 10:21:40 pm
There is a DAILY LIMIT TO FORCED SETTLEMENT.   
  It wasn't specified in the design, it's arbitrary, and more complex regardless.  (I don't think it's necessary, but it isn't my call to make.)

If the price moved up 27% like it did in the last 24 hours then the first people to ask for forced settlement would consume the daily amount and force everyone else to wait. 
   Isn't that clunky?

I maintain that there exists a PRICE for every contract arrangement and that the "value of the advantage" will be priced in by BOTH SIDES.   The person buying BitUSD doesn't care about the $1.00 peg, they care about ALL of the advantages associated with owning it.  If they are a trader/speculator then they will buy it up expecting to profit from shorts when there is heavy volatility.   Therefore, to the extent that a short asks a premium, a long has incentive to pay a premium.   
  There is a very real psychological barrier in buying a BitUSD for anything more than a dollar just as there is selling for less.

So lets just assume the market settles on $1.30  as the price for creating BitUSD with forced settlement at the feed which is $1.00.   Who cares so long as the premium is relatively stable?    The only thing that can move the premium is market forces based upon volume and market direction.   
  Convince anyone to buy a BitUSD for $1.30... don't think it's going to be easy. 

If you focus ONLY ON TRADERS then BitUSD with forced settlement at the feed is a fine substitute for a USD.

We know that increasing the daily settlement limit will increase the premium, and decreasing it will decrease the premium.   If you have no forced settlement at all then no price feed is necessary and the peg walks toward which ever side of the market is "more stubborn".   

As a short you balance collateralization vs forced settlement risk.   
 
   If you have no user-generated forced settlement, when shorts are undercollateralized I assume they are forced at the feed or market or however you want. That allows a connection to the price feed or at least creates settlement.  Many speculative shorts will be at the margins of their collateral so there should be a natural flow of settlement... If BTS goes down 50% from a fully collateralized position (ie. in one day at daily settlement) the short loses everything. 

I maintain that having BitUSD be worth $1.30 at all times is far better than it being worth $0.70 sometimes or even $0.85 to $1.15.   If you break the buck then merchants are no longer "safe" accepting it at parity.   I would rather a merchant offer a discount to someone paying with BitUSD that is worth $1.30 than charge someone extra with BitUSD worth $0.95.   
 
  Not sure I would make the same argument nor do I want to speak on behalf of merchants.  I think it's just a matter of having $1.15 +/- .15 or $1.00 +/- .15... I think the focus should be narrowing spreads via liquidity so it's $1.00 +/- .02 or $1.15  +/- .02.  I prefer the former.  Also when the external markets are trying to trade BitUSD at $1.00 in the real world, aren't people going to end up selling it in the internal markets at $1.15 and isn't the real world market going to adjust to selling BitUSD for $1.15 on the streets? 

Conclusion:  forced settlement "on demand" that is limited to a reasonable percentage of the supply per day will mean that shorts will prioritize themselves by collateral to the extent they fear the forced settlement.    Keep in mind, that the entire book between $1.00 and $1.30 must be consumed before anyone even initiates a forced settlement.
  Isn't the orderbook extremely thin?  Isn't there a reason for that?  (Ok the new design isn't out yet so we don't know)  But you sure people are going to want to trade?  It takes two to tango and I'm not sure we're playing the right song right now...
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 22, 2015, 10:46:10 pm
The basic argument I am seeing is that with 0 forced settlement except margin calls means that some shorts playing on the edge of their margin will provide liquidity. 
The argument I am making is that with a small percent of forced settlement regardless of margin will improve confidence and be irrelevant to any short "on the edge".

Basically, "forced settlement" is a way of allowing some dynamic calculation of the collateralization level. 

Lets say that the minimum maintenance level of collateral was just 110% of the value of the loan.   The existence of forced settlement for a "small percent per day" will mean that the effective collateral requirements will be higher and that most shorts have no fear of being "margin called". 

Like I have said 1000 times, with Privatized BitAssets there are enough variables to achieve almost everything except interest.   No settlement, small settlement, all settlement. High maintenance collateral, low collateral, etc.  Fixed parameters, Variable Parameters, and an infinite number of ways of calculating yield. 

The only reason not to buy BitUSD at more than 1.00 is the name.... call it a USD correlated asset and it works fine.

I honestly have no idea what the market needs or will prefer, I just know we have the tools in place to find it.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 22, 2015, 11:04:14 pm
The basic argument I am seeing is that with 0 forced settlement except margin calls means that some shorts playing on the edge of their margin will provide liquidity. 
The argument I am making is that with a small percent of forced settlement regardless of margin will improve confidence and be irrelevant to any short "on the edge".

Basically, "forced settlement" is a way of allowing some dynamic calculation of the collateralization level. 

Lets say that the minimum maintenance level of collateral was just 110% of the value of the loan.   The existence of forced settlement for a "small percent per day" will mean that the effective collateral requirements will be higher and that most shorts have no fear of being "margin called". 

Like I have said 1000 times, with Privatized BitAssets there are enough variables to achieve almost everything except interest.   No settlement, small settlement, all settlement. High maintenance collateral, low collateral, etc.  Fixed parameters, Variable Parameters, and an infinite number of ways of calculating yield. 

The only reason not to buy BitUSD at more than 1.00 is the name.... call it a USD correlated asset and it works fine.

I honestly have no idea what the market needs or will prefer, I just know we have the tools in place to find it.

Ok if the forced settlement feature is kept at a minimum it may not be that bad.  As long as shorts can have certainty about what level of collateral they need so that their positions will be intact.

Wow.  I think the idea of Privatized BitAssets is fantastic, but I'll have to find out more of the details.. so you're saying we all get to play mad scientist and experiment? :P
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 23, 2015, 12:20:51 am
I think this is fascinating how everyone approaches this from different points of view (and models) since this is really a multifaceted problem. There is demand side and supply side economics to think about here. Most are thinking of the demand side (how to set up a system that people want to use). I don't want to derail that, but here's my latest on the supply side thoughts. In theory, a simple system which properly manages supply will provide all the necessary features for a healthy and attractive investment.

Summary
Ideal system:
1) The system rewards market players for destroying BTA when there is an oversupply
2) The system rewards market players for creating BTA when there is an under supply

BTA2.0 Implementation of above:
Case (1) is handled by forced calls at 99% of the price feed.
Case (2) is unhandled, but the assumption is market players will do it with no explicit incentive because 1 BTA is supposed to equal the underlying asset.

New thoughts
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself, that is you need a mechanism by which there is market incentive to push towards the feed.
To do that how about the following:
A variable fee is charged on new shorts which is valued at X% of the difference between the feed and the short. This is a progressive "tax" paid by the parties (longs or shorts) pushing away from the feed and paid to the party that is pushing towards to feed. This fee is either in BTS or BTA depending on oversupply or undersupply and goes to a yield account paid out to all BTA shorts or for longs just like the current yield. It is market driven and leaves us with simple rules that are easy to explain.

The the market says that shorts need to be rewarded, there will be an auction for the size of the reward. The current market would be paying a yield to BTS shorters at one rate and longs at another. BOTH longs and shorts get a yield, and it is based on the fees that were collected when the asset was created.

Proposed, KISS, rules:
1) If a BTA is created (shorted) when there is an under supply, then the buyer would pay a fee in BTS based on how much the price was from the peg. That fee goes to a yield account. All shorts will be paid a fraction of that yield whenever they cover, and the yield is proportional to the fraction of the total BTA supply they are covering and how long they held the collateral (like the current system).
2) If a BTA is created when there is an over supply, the shorter pays a fee in BTA to a yield account which is paid out to longs similar to the current system.

Example:
Feed is 1 BTS per 1 Asset. I want to short at 1.10 BTS per 1 BTA, which means there is an under supply. Someone buys 1 BTA from me for 1.10 BTS. I put 1.10 in collateral so there is 2.20 in collateral, I owe 1 BTA, and the long is long 1 BTA. The buyer also pays a fee of some percentage of the 0.10 BTS they are from the peg, paid in BTS, to the short yield. Whenever any short covers, they are paid a yield proportional to the length of their short (capped at one year) and the percentage of their short. The is the contapositive of the current system.

If I want to short at .90 BTS per 1 BTA, that means there is an over supply of BTS. Someone buys 1 BTA from me for 0.9. I put 0.9 in collateral so there is now 1.90 BTS in collateral, I owe 1 BTA, and the long is long 1 BTA. I also pay a fee based on some percentage of the 0.1 BTS I am away from the peg, in BTA, to the long yield. It is paid out just like the long yield is paid out now. This is very similar to the current system.

Thoughts?

The idea that it is as simple as this:

The forced settlement price has a fee equal to the average delta between the trading price and the price feed.    As shorts "back away" from the feed, the forced settlement backs away in the opposite direction.   As shorts get closer to the fee the forced settlement creeps up.  This allows the market to control the feed and keeps things centered on the price feed.
But the feed comes from the centered exchange.
Check the nxt assets, there is no price feed, but the assets just price normally in and out the decentralized exchange.
We just need market make to peg.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 23, 2015, 01:00:32 am
We know that increasing the daily settlement limit will increase the premium, and decreasing it will decrease the premium. 

On the idea of using the settlement fee as a lever to manage the bitUSD:USD premium, I can't see why the market would price this in. If the market is at a premium, then the settlement mechanism is not needed. By the time the settlement mechanism is needed and used, the price must be at a discount where there is no longer a settlement fee. So there is no need for any settlement fee to ever be paid, nor any buyer to price in the risk of a higher fee, no matter how high the premium. So how would this affect supply or demand?

So lets just assume the market settles on $1.30  as the price for creating BitUSD with forced settlement at the feed which is $1.00.   Who cares so long as the premium is relatively stable?    The only thing that can move the premium is market forces based upon volume and market direction.   

I would care as a consumer because I would be better off just using real USD to make my purchase rather than using bitUSD which costs so much more to obtain. Now if merchants were willing to fully price in the higher value of a bitUSD into their product price, rather than just using face value, then that would adequately compensate. But then that forces merchants and consumers to keep constant track of the premium and adjust expectations accordingly, as well as accepting higher downside risk, and I don't know how we'd get everyone comfortable that the premium will be stable. Besides, it doesn't really appear true to label from a consumer/merchant angle.

I'm not underestimating the problem of dealing with premiums (or pegging in general), but I am still optimistic there is an improved solution...
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Helikopterben on May 23, 2015, 01:00:02 pm
Forced settlement will ALMOST NEVER HAPPEN because market participants will have financial incentive to trade at prices that make it very unlikely.

If this is indeed what actually happens when implemented, then that would be the best case scenario and likely work long term.  Perhaps forced settlement could be turned off by default and hidden behind an 'advanced' tab to discourage users from exercising this option.

Keep a potential manipulation tool in the background so new traders have no idea what's coming?  Why have it in the first place?

At the end of the day, anyone can create their own version of the client with these parameters changed If they believe that is what users want.  They are not consensus rules.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: karnal on May 23, 2015, 07:23:18 pm
The only reason not to buy BitUSD at more than 1.00 is the name.... call it a USD correlated asset and it works fine.

But that was the big premise! 1 BitUSD = 1 USD +- 1%

I think most people will care about:

Is it worth 1 USD (will it preserve its value)?
and
Will it give me some interest?

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 24, 2015, 03:15:33 pm
I do not think large companies will mainly be attracted by the yield, but solutions for the problem they are facing. Think about the rules, what are they designed for?

We would better with little rules, we can add if needed.

Here is a voice from business.

http://www.coindesk.com/seagate-ripple-investment-shows-were-serious-about-blockchain-tech/ (http://www.coindesk.com/seagate-ripple-investment-shows-were-serious-about-blockchain-tech/)

Quote

A desire to become an "active participant" in the blockchain technology space is what drove $13bn data storage company Seagate to invest in Ripple Labs, according to its senior vice president Dave Morton.
...
He said:
"Our supply chain is very broad. There's over 286 components that go into each of our drives, we pull over 51 elements out of Mother Earth and obviously we manufacture in a lot of foreign locations where there's a lot of exchange risk."
The difficulty of managing this development process is what makes the "Internet of Value" made possible by Ripple Labs appealing, he added.
...

"We have 3 million components a day in flight, so you can just imagine the power that this can possibly have down the road from a supply chain perspective, whether that be cash flow or economics," he said, adding:
"We process over hundreds of thousands of invoices a quarter, you get into the process of how this improves the supply chain, it's pretty remarkable."

"You can do commodities,dollars, yen, euros versus it being just bitcoin. We want to take more of a holistic approach," he said, adding that he remains a fan of bitcoin.

In this light, Morton said Seagate remains primarily interested in seeing whether blockchain technologies can help solve real problems for its business, whether that solution comes from a provider like Ripple Labs or an alternative.

"We're serious about some of these use cases being thought about and resolved. We think there are some technology and business gains to be had."
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 24, 2015, 06:40:33 pm
The plan seems to be to make merchants comfortable in accepting BitUSD as it will be 1 USD at worst, and a nice profit otherwise. It conveniently forgets that those paying in BitUSD would rather not use it, and we will see a BitAsset 3.0 being rolled out by BM in a few months.

The current BitAssets is fine, just need a few tweaks and simplification and more importantly liquidity. Keeping BitUSD within +/- 1% or less of 1 USD was the goal, don't get why the sudden lopsided plan.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Permie on May 24, 2015, 07:01:38 pm
The new changes aren't going to be rolled out right away after the announcement so I hope during the community discussions the product can be finalized before release.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sittingduck on May 24, 2015, 07:39:40 pm
Those with bitusd will use it even with a slight premium because they get the benefits of holding and using crypto. 


Sent from my iPhone using Tapatalk
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 24, 2015, 07:41:39 pm
Any particular reason, or just an opinion?

Why would I want to buy BitUSD with more than a USD just to buy something in USD terms?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: canucklehead on May 24, 2015, 08:42:48 pm
Apparently, Policing for profit is a new side job. http://www.scrippsmedia.com/newschannel5/news/newschannel-5-investigates/policing-for-profit/265578441.html

A Monterey police officer wanted to know if he was carrying any large amounts of cash.

"I said, 'Around $20,000,'" he recalled. "Then, at the point, he said, 'Do you mind if I search your vehicle?' I said, 'No, I don't mind.' I certainly didn't feel I was doing anything wrong. It was my money."
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 24, 2015, 09:18:30 pm
If bitUSD is at a premium, there is no way merchants can sustainably sell products at face value (i.e. for equal quantity of bitUSD or USD), and get the benefit of selling bitUSD at a premium. Consumers would quickly learn to convert their premium bitUSD to USD before their purchase and use that instead.

The behaviour the market would adopt would be to therefore price goods at a discount when bitUSD is being used instead of USD. This is no net benefit to consumers or merchants. But it makes life more difficult for both because the premium is likely to fluctuate considerably.

I agree there are benefits to owning and using crypto-USD rather than real USD. However my current view is that I would prefer parity, and to reflect the difference in attractiveness in a lower rate of return on the bitUSD compared to a real USD. In practice this would be reflected in lower acceptable yields in the yield/deposit/bond market, or some other form of relative cost leakage over time.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 24, 2015, 10:09:38 pm
If bitUSD is at a premium, there is no way merchants can sustainably sell products at face value (i.e. for equal quantity of bitUSD or USD), and get the benefit of selling bitUSD at a premium. Consumers would quickly learn to convert their premium bitUSD to USD before their purchase and use that instead.

The behaviour the market would adopt would be to therefore price goods at a discount when bitUSD is being used instead of USD. This is no net benefit to consumers or merchants. But it makes life more difficult for both because the premium is likely to fluctuate considerably.

I agree there are benefits to owning and using crypto-USD rather than real USD. However my current view is that I would prefer parity, and to reflect the difference in attractiveness in a lower rate of return on the bitUSD compared to a real USD. In practice this would be reflected in lower acceptable yields in the yield/deposit/bond market, or some other form of relative cost leakage over time.

Yes I agree.  I think that will happen. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Stan on May 24, 2015, 10:53:01 pm
I think getting merchants to accept BitUSD is doing it the hard way.

Debit cards will emerge that you can load with BitUSD and spend as ordinary USD.
Merchants won't know the difference.  They get USD and don't care about fiat counter party risk.

So BitUSD will always convert to at least a dollar when it hits your card and any surplus after the card's fees just sits on the card as a small bonus.  You only load the card with what you are going to use in the near future which is a negligible amount of counter party risk.  The rest stays safe in your BitUSD "savings account" until you need to move it to your debit card's "checking account".

Ordinary users will like that they sometimes get a small bonus when loading their card.  It will seem like yield.  Biased to be always a positive number.

Such a system would work everywhere on Day 1.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: karnal on May 24, 2015, 10:53:30 pm
If bitUSD is at a premium, there is no way merchants can sustainably sell products at face value (i.e. for equal quantity of bitUSD or USD), and get the benefit of selling bitUSD at a premium. Consumers would quickly learn to convert their premium bitUSD to USD before their purchase and use that instead.

The behaviour the market would adopt would be to therefore price goods at a discount when bitUSD is being used instead of USD. This is no net benefit to consumers or merchants. But it makes life more difficult for both because the premium is likely to fluctuate considerably.

I agree there are benefits to owning and using crypto-USD rather than real USD. However my current view is that I would prefer parity, and to reflect the difference in attractiveness in a lower rate of return on the bitUSD compared to a real USD. In practice this would be reflected in lower acceptable yields in the yield/deposit/bond market, or some other form of relative cost leakage over time.

Yes I agree.  I think that will happen.

+5%
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 24, 2015, 11:48:10 pm
I think getting merchants to accept BitUSD is doing it the hard way.

Debit cards will emerge that you can load with BitUSD and spend as ordinary USD.
Merchants won't know the difference.  They get USD and don't care about fiat counter party risk.

So BitUSD will always convert to at least a dollar when it hits your card and any surplus after the card's fees just sits on the card as a small bonus.  You only load the card with what you are going to use in the near future which is a negligible amount of counter party risk.  The rest stays safe in your BitUSD "savings account" until you need to move it to your debit card's "checking account".

Ordinary users will like that they sometimes get a small bonus when loading their card.  It will seem like yield.  Biased to be always a positive number.

Such a system would work everywhere on Day 1.

and who is paying for your 'yield'?

The biased to be positive is going to mess it all up. I wouldn't be surprised if we see a new version after this as it struggles with no liquidity.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 24, 2015, 11:57:47 pm
I think getting merchants to accept BitUSD is doing it the hard way.

Debit cards will emerge that you can load with BitUSD and spend as ordinary USD.
Merchants won't know the difference.  They get USD and don't care about fiat counter party risk.

So BitUSD will always convert to at least a dollar when it hits your card and any surplus after the card's fees just sits on the card as a small bonus.  You only load the card with what you are going to use in the near future which is a negligible amount of counter party risk.  The rest stays safe in your BitUSD "savings account" until you need to move it to your debit card's "checking account".

Ordinary users will like that they sometimes get a small bonus when loading their card.  It will seem like yield.  Biased to be always a positive number.

Such a system would work everywhere on Day 1.
Except that the ordinary users would need to pay a premium to get the bitUSD in the first place. By this reasoning that will seem like a loss. Biased to always be a negative number. Completely negating the "yield".

I like the sound of the debit card payment concept. However for this discussion, it does not make a bitUSD premium a benefit to anybody. Might as well buy euro above parity to the USD (which it is, and perhaps we could call it premium-USD), then when you load your multi-currency card and get USD, the resulting quantity is guaranteed to be a bigger number. I don't think anybody would believe that is a yield though.

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 25, 2015, 01:15:33 am
If 1 bitusd equals at least 1 usd, then the longs will not sell bitusd at 1 usd.
People pay more than 1 in usd to get 1 bitusd.
This just make bitusd unpeged.

I also think the current rules is OK when modified. We just need to cancel the shorts' time limit, force bad collateraled shorts to cover at market price, and the collateral can be used to cover.
It conveniently forgets that those paying in BitUSD would rather not use it.

Any particular reason, or just an opinion?

If I had a USD, then I would want to use it before QE12 kicks in.  Why would I not want to use USD or BitUSD.  It tracks the depreciating USD:

(http://www.rockcapital.co.za/wp-content/uploads/2013/09/US-dollar-Value-3-value-of-the-dollar.jpg)

You might want to hold your USD and keep going down with the ship, but I don't think that most people will want to hold depreciating assets (unless we give them yield).

The current BitAssets is fine, just need a few tweaks and simplification and more importantly liquidity. Keeping BitUSD within +/- 1% or less of 1 USD was the goal, don't get why the sudden lopsided plan.

We could not hold either side to within 1%, but we can hold one side tight, so we get the lopsided plan (it's the 5th law of Thermo: you can't have your cake and eat it too).  We choose the minimum side, therefore, BitUSD can always be sold at par.  You can buy BitUSD from many different places.  If you can find a deal, then good for you.  If you don't want to short BitUSD right now, then someone else will.

Looking to buy BitUSD?  Well look no further:

But I still have BitUSD for sale.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 25, 2015, 05:11:36 am
If  1 bitusd is make at least 1 usd, then people will not hold bitusd.
Because they have to pay more usd to get bitusd, and then spend them like usd. People loose some money in this process.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 25, 2015, 12:03:34 pm
If  1 bitusd is make at least 1 usd, then people will not hold bitusd.
Because they have to pay more usd to get bitusd, and then spend them like usd. People loose some money in this process.

And people pay the spread to buy BTC and then again when they spend BTC.    People pay 3% higher prices when they pay with Credit Card USD.   

NO ONE buys BitUSD just to SPEND BitUSD.   

When I was talking with companies about integrating BitUSD they always told me they need a way to "hide their fee" because no customer wants to see a 3% fee tacked on to their order.   If BitUSD was pegged to a value that was $1 +/- 3% then merchants would charge extra or have no incentive to take it and payment processors would charge a 6% fee  (3% for the spread and 3% for their fee).   

*OR* you can have BitUSD selling for $1.06 and merchants / payment processors taking it at face value of $1.00.    If you stay within the BitUSD economy then the premium is a wash.   

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xiahui135 on May 25, 2015, 03:11:30 pm
If  1 bitusd is make at least 1 usd, then people will not hold bitusd.
Because they have to pay more usd to get bitusd, and then spend them like usd. People loose some money in this process.

And people pay the spread to buy BTC and then again when they spend BTC.    People pay 3% higher prices when they pay with Credit Card USD.   

NO ONE buys BitUSD just to SPEND BitUSD.   

When I was talking with companies about integrating BitUSD they always told me they need a way to "hide their fee" because no customer wants to see a 3% fee tacked on to their order.   If BitUSD was pegged to a value that was $1 +/- 3% then merchants would charge extra or have no incentive to take it and payment processors would charge a 6% fee  (3% for the spread and 3% for their fee).   

*OR* you can have BitUSD selling for $1.06 and merchants / payment processors taking it at face value of $1.00.    If you stay within the BitUSD economy then the premium is a wash.
OK..I see.
I never see this situation. In China, we do not pay extra fee when we use credit card, but even get extra dicount sometimes.
The merchant side will pay the fee to bank.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 25, 2015, 03:17:17 pm
If  1 bitusd is make at least 1 usd, then people will not hold bitusd.
Because they have to pay more usd to get bitusd, and then spend them like usd. People loose some money in this process.

And people pay the spread to buy BTC and then again when they spend BTC.    People pay 3% higher prices when they pay with Credit Card USD.   

NO ONE buys BitUSD just to SPEND BitUSD.   

When I was talking with companies about integrating BitUSD they always told me they need a way to "hide their fee" because no customer wants to see a 3% fee tacked on to their order.   If BitUSD was pegged to a value that was $1 +/- 3% then merchants would charge extra or have no incentive to take it and payment processors would charge a 6% fee  (3% for the spread and 3% for their fee).   

*OR* you can have BitUSD selling for $1.06 and merchants / payment processors taking it at face value of $1.00.    If you stay within the BitUSD economy then the premium is a wash.
OK..I see.
I never see this situation. In China, we do not pay extra fee when we use credit card, but even get extra dicount sometimes.
The merchant side will pay the fee to bank.

We don't see the fee either, it just shows up in higher prices.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 25, 2015, 06:42:09 pm
If  1 bitusd is make at least 1 usd, then people will not hold bitusd.
Because they have to pay more usd to get bitusd, and then spend them like usd. People loose some money in this process.

And people pay the spread to buy BTC and then again when they spend BTC.    People pay 3% higher prices when they pay with Credit Card USD.   

The Bitcoin merchant problem is that no one spends in Bitcoin.  There are 60,000 merchants Bitpay has signed up and meager transaction volume... Most businesses don't pass along the credit card fees to the consumer.  They eat it and that's why Bitcoin is an easy sell to merchants because they want to save the 3% credit card fees.  That's why merchants readily sign up for Bitcoin despite all the headaches.   

Merchants already auto-convert to cash with highly volatile Bitcoin prices and they can do it more easily with BitUSD.  You also want merchants to keep BitUSD, pay their expenses & employees in BitUSD and start a cycle.. with the proposed design they will probably rather sell BitUSD and pay expenses and employees in USD...

NO ONE buys BitUSD just to SPEND BitUSD.   
I'd buy BitUSD to spend it... It has all the benefits of Bitcoin.  It's more convenient than cash.  There are no bank freezes, restrictions etc.  It's more convenient than spending Bitcoin, BTS or BitGold because it will have minimal volatility, but maybe I'll switch to Bitcoin/BitGold if fiat gets volatile.... 

If however, I can sell BitUSD at a premium, then I'd sell it for USD and spend that instead ... It kind of defeats the purpose.

When I was talking with companies about integrating BitUSD they always told me they need a way to "hide their fee" because no customer wants to see a 3% fee tacked on to their order.   If BitUSD was pegged to a value that was $1 +/- 3% then merchants would charge extra or have no incentive to take it and payment processors would charge a 6% fee  (3% for the spread and 3% for their fee).   

*OR* you can have BitUSD selling for $1.06 and merchants / payment processors taking it at face value of $1.00.    If you stay within the BitUSD economy then the premium is a wash.

Bitcoin merchants don't charge a 6% fee when using Bitcoin and it has higher volatility.   Merchants already get the 3% discount so it's unnecessary to give a 3% extra for volatility.. if it's $1 +/- 3% the average value will be $1 ... merchants don't want to make money off the transaction fee.. they will just want to direct consumers away from using credit cards..merchants won't have to change their pricing and will prefer BitUSD....  Again we have a consumer spending problem, not a merchant adoption problem. 

Sure if you stay within the BitUSD economy people won't sweat the difference, but a large premium will discourage people from easily exchanging cash for BitUSD.. people will opt to sell on the exchange rather than naturally trade for another on the street.. the system will probably function, but it won't be as smooth.

Anyways hopefully we get a few Privatized BitUSD with various designs to let the free market work its magic....eagerly awaiting the details.  Thanks.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 25, 2015, 09:43:17 pm
I don't pay any fee either. We usually have options of cash, CC, Net Banking. Sometimes specific CCs will even net us discounts, to the tune of 10%. Add to that the whole points getting accumulated thing.

But of course, I will blow it away for a chance to spend more. Even if I, for whatever reason, want to stay in Cryptos, there will be other USD options. It will be stupidity on my part to use BitUSD.

What BM is going ahead with might help getting more merchants, but there will be hardly any spenders. It will struggle with liquidity problems and I am already looking forward to BitAssets 3.0 in some 5-6 months with another set of promises and general sentiment 'we got an amazing product, why is everyone selling?'
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 25, 2015, 10:21:38 pm
I don't pay any fee either. We usually have options of cash, CC, Net Banking. Sometimes specific CCs will even net us discounts, to the tune of 10%. Add to that the whole points getting accumulated thing.

But of course, I will blow it away for a chance to spend more. Even if I, for whatever reason, want to stay in Cryptos, there will be other USD options. It will be stupidity on my part to use BitUSD.

What BM is going ahead with might help getting more merchants, but there will be hardly any spenders. It will struggle with liquidity problems and I am already looking forward to BitAssets 3.0 in some 5-6 months with another set of promises and general sentiment 'we got an amazing product, why is everyone selling?'

I understand and agree with your perspective on spenders.  If BitUSD was designed properly it can replace the traditional cash & banking ecosystem and can outcompete: Paypal, Dwolla, Square, Stripe, Google, Apple Pay etc in a $100B/yr industry... Crypto really can be the final frontier.

We just need balance, favoring neither merchants nor consumers... in the end we are all both buyers and sellers...buyers of goods & services as well as sellers of goods & services...  there's nothing more to an economy than that. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 25, 2015, 11:39:43 pm
Bytemaster,

You are proposing we need a bitUSD that trades at a premium so that merchants can keep prices matched for USD and bitUSD, while effectively hiding a 6% fee on the bitUSD from the consumer. I'm perplexed why we would harm the wider utility of bitAssets to pander to a specific group accepting currencies like bitUSD. The following would help my understanding:

1. Why do merchants need a 6% fee for accepting bitUSD? Is part of it to cover the variability in the bitUSD premium? Is part of it for the relative inconvenience of dealing in bitUSD? Would this problem diminish with familiarity in the long term?

2. How would you guarantee stability in the premium, that merchants would require to maintain matched prices? In theory it could range anywhere from 0% and up. I've challenged the idea of using a variable settlement fee. If not this, what other mechanism is there?

3. If consumers have a choice between using bitUSD or USD for their purchase, why wouldn't they always choose the USD that was cheaper to obtain and replace? So wouldn't this mean in practice that consumers and merchants keep using USD for external goods and services rather than bitUSD? So is this merchant demand rather futile in the end?

4. If we have a bitUSD that constantly trades at varying premiums, might this significantly diminish its value in other use cases of bitUSD? For example,
- if bitUSD were used for margin accounts in a derivative market, users would need to try to price in the volatility of the underlying asset, as well as movements in their margin collateral
- in bond markets, users would need to try to price in movements in yield as well as movements in the value of the par value of the bond
- in crypto markets, users looking to use bitUSD as a hedge would need to factor in a view on whether the premium might rise or fall
These are just some off-the-top-of-my-head examples of things we are looking to achieve in the near future. It seems to me that the utility of a variable-premium-USD is a lot less than the utility of a parity-USD.

5. Why wouldn't it be better to have a bitUSD trading at parity, that is fair to all parties, and let the free market work out the best way for merchants, consumers and other users to price goods and services around it? If there is mutual benefit to all parties, there is always a solution, isn't there?

6. Is the preference for a premium-USD now strongly being expressed to post-rationalise the lack of a current solution to establishing a parity-USD? On the other hand, I remain highly optimistic that it is possible to have a bitUSD centred on parity, and that is my strong preference at this stage.

7. Does the proposal extend to all bitAssets that are not currencies generally used for transactional purposes? For example, gold, oil, Dow Jones, or other possible bitAssets. In those cases don't we want something as close to parity as we can get, to maximise their utility as tracking instruments?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 26, 2015, 12:18:35 pm
Starspirit,
   I am not really concerned about merchants so much as payment processors.   Most merchants will not be setting up their own node on the network to accept payment directly, instead they will go through a 3rd party.    More importantly, most merchants will not *directly* accept crypto, instead they will accept USD through a service provider that hides all cryptos, including BitUSD from them.      In the case of most non-stable crypto's, the payment processors simply hide the fee in the "exchange rate". 

   So the person I am really catering to is the middle man.   

   Early adopters of crypto use it because of properties other than price.   Most "crypto-consumers" wouldn't mind paying a fee to buy something with crypto, after all they would be paying a fee to exit to fiat anyway.   

   Traders don't care about anything other than "free market pricing" and "stable rules".   For them a premium doesn't matter because it all comes out in the end.

   I reject the notion that we can establish a peg with 0 premium and 0 volatility in the premium and those seeking this perfection are seeking the impossible.   Supply and Demand are constantly changing along with market perception of the valuation of BitShares.   

  Lets take a "perfect" and "balanced" system of a simple prediction market that settles once per year at a "perfectly fair" price.    In this prediction market both sides have the exact same liquidity and expectation of profit.  Any deviations from the value of $1.00 is a profit opportunity for both parties.   

  Under such a system what is the "volatility" of the premium?   It is proportional to the holding cost until settlement combined with the demand for leverage on BTS.   I would expect a range around $1.00 that could be off by over 10% at times.    So even with guaranteed settlement at a fair price on a specific date in the future you do not get an asset that is always worth $1.00 with a stable premium.    The best we can do is get an asset that is approximately worth $1.00 and the volatility in the premium is beyond our control. 

  If the premium is persistently biased by a certain minimum amount then the market will end up adjusting prices to account for that bias.  This "constant bias" can be relatively stable and can be removed by adjusting the feed. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: topcandle on May 26, 2015, 01:13:22 pm
Starspirit,
   I am not really concerned about merchants so much as payment processors.   Most merchants will not be setting up their own node on the network to accept payment directly, instead they will go through a 3rd party.    More importantly, most merchants will not *directly* accept crypto, instead they will accept USD through a service provider that hides all cryptos, including BitUSD from them.      In the case of most non-stable crypto's, the payment processors simply hide the fee in the "exchange rate". 

   So the person I am really catering to is the middle man.   


Since these payment processors are first-in-line in accepting cypto and are targeted for regulation, are there no concerns over places like Bitpay requiring only whitelisted BitUsd in order to meet regulatory oblligations? 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 26, 2015, 01:27:06 pm
Starspirit,
   I am not really concerned about merchants so much as payment processors.   Most merchants will not be setting up their own node on the network to accept payment directly, instead they will go through a 3rd party.    More importantly, most merchants will not *directly* accept crypto, instead they will accept USD through a service provider that hides all cryptos, including BitUSD from them.      In the case of most non-stable crypto's, the payment processors simply hide the fee in the "exchange rate". 

   So the person I am really catering to is the middle man.   


Since these payment processors are first-in-line in accepting cypto and are targeted for regulation, are there no concerns over places like Bitpay requiring only whitelisted BitUsd in order to meet regulatory oblligations?

No, BitPay would only need to Know *their* customers and not all users of BitUSD.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 26, 2015, 01:33:08 pm
Starspirit,
   I am not really concerned about merchants so much as payment processors.   Most merchants will not be setting up their own node on the network to accept payment directly, instead they will go through a 3rd party.    More importantly, most merchants will not *directly* accept crypto, instead they will accept USD through a service provider that hides all cryptos, including BitUSD from them.      In the case of most non-stable crypto's, the payment processors simply hide the fee in the "exchange rate". 

   So the person I am really catering to is the middle man.   

   Early adopters of crypto use it because of properties other than price.   Most "crypto-consumers" wouldn't mind paying a fee to buy something with crypto, after all they would be paying a fee to exit to fiat anyway.   

   Traders don't care about anything other than "free market pricing" and "stable rules".   For them a premium doesn't matter because it all comes out in the end.

   I reject the notion that we can establish a peg with 0 premium and 0 volatility in the premium and those seeking this perfection are seeking the impossible.   Supply and Demand are constantly changing along with market perception of the valuation of BitShares.   

  Lets take a "perfect" and "balanced" system of a simple prediction market that settles once per year at a "perfectly fair" price.    In this prediction market both sides have the exact same liquidity and expectation of profit.  Any deviations from the value of $1.00 is a profit opportunity for both parties.   

  Under such a system what is the "volatility" of the premium?   It is proportional to the holding cost until settlement combined with the demand for leverage on BTS.   I would expect a range around $1.00 that could be off by over 10% at times.    So even with guaranteed settlement at a fair price on a specific date in the future you do not get an asset that is always worth $1.00 with a stable premium.    The best we can do is get an asset that is approximately worth $1.00 and the volatility in the premium is beyond our control. 

  If the premium is persistently biased by a certain minimum amount then the market will end up adjusting prices to account for that bias.  This "constant bias" can be relatively stable and can be removed by adjusting the feed.

It seems to me you're making it lopsided so as to encourage adoption and liquidity. I feel the opposite will happen, there will be even less users and liquidity will suffer and it will again fall into the vicious cycle.

In my humble opinion the current BitAssets is fine, it only needs a few rule changes and simplifications. More importantly, it needs adoption to improve liquidity.

See you in another half a year. I hope you're proven to be correct this time, as otherwise it is difficult to see BTS surviving another bear phase. For all those who are sure this is going to further mess things up, the run up in price in anticipation of the release of the '17000 line' BTS would be a good opportunity to exit.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: topcandle on May 26, 2015, 01:52:10 pm
No, BitPay would only need to Know *their* customers and not all users of BitUSD.


[/quote]

Yeah, but since whitelisted BitUSD will be most convertable, wouldn't there be a central tendency of whitelisted BitUSD becoming more widely accepted and more transact-able?  This would follow Gresham's Law, that bad money drives out the good money.  I guess I'll save this for the Friday meetup, but I see in the end no one would use non-whitelisted BitUSD because its not accepted in most normal places and the good nonwhitelisted BitUSD would be driven out of existence?  I guess its not so bad since there still exists the option of choice.   
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 26, 2015, 02:41:04 pm
Yeah, but since whitelisted BitUSD will be most convertable, wouldn't there be a central tendency of whitelisted BitUSD becoming more widely accepted and more transact-able?  This would follow Gresham's Law, that bad money drives out the good money.  I guess I'll save this for the Friday meetup, but I see in the end no one would use non-whitelisted BitUSD because its not accepted in most normal places and the good nonwhitelisted BitUSD would be driven out of existence?  I guess its not so bad since there still exists the option of choice.
AFAIK you can't whitelist bitusd.. you can only do so for UIA .. for instance bitPayUSD ..
it's pretty much the same as what ripple IOUs do .. except that BitShares has a decentralized, market-pegged asset that is NOT an IOU and people can trade bitPayUSD : bitUSD
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Pheonike on May 26, 2015, 06:30:10 pm

I think we are saying the average users are not going to be using bitusd for their transactions. They are going to use GatewayUSD because that is where they are most likely be converting from FiatUSD in the first place. Most users will not be coming in through BTS or BTC. Therefore it is more important for GatewayUSD to hold the peg to FiatUSD. So BitUSD is going to be traded mostly between Gateways who can use the premium to keep their GatewayUSD pegged FiatUSD.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 27, 2015, 12:57:39 am
On whether we should have have a bitUSD centred on parity or at a premium, assuming both are possible:

I do not understand all the subtleties of merchant, payment processor and other third party operations. However, it seems to me that everything that can be done with a bitUSD trading at a premium can also be accomplished with a bitUSD trading at parity, only with different labels on the currency flows. For example the equivalent financial result for all parties can be achieved by having a bitUSD centred on parity, with consumers paying the fee directly to the payment processor. However, maybe bytemaster is right, based on his advice, that the way in which fees are labelled or packaged in the marketplace makes a big difference to actual behaviour. I can't argue with the way other people think.

I do have a concern however that a bitUSD at a premium reduces its utility for a number of other application areas that I touched on in my previous post. A bitUSD trading around parity would serve these applications much better IMO. Regardless of the direction taken in the near term, I would like to continue pursing the method for a bitUSD based around parity, because I personally think it would give bitShares the best long term result.

On whether it is possible to have a bitUSD that trades close to parity:

   I reject the notion that we can establish a peg with 0 premium and 0 volatility in the premium and those seeking this perfection are seeking the impossible.   
This is knocking down a straw man, and perhaps you have misunderstood my goal. What I wish to see is bitUSD that centres around parity rather than a premium. Clearly there will be deviation either side of that with movement in supply and demand, at least to the point that arbitragers are incentivised to jump in and prevent larger deviations. This is the model I am working toward. There is no plan for 0 volatility.

Do you think this notion is impossible? I don't have enough evidence of that yet.

  Lets take a "perfect" and "balanced" system of a simple prediction market that settles once per year at a "perfectly fair" price.    In this prediction market both sides have the exact same liquidity and expectation of profit.  Any deviations from the value of $1.00 is a profit opportunity for both parties.   

  Under such a system what is the "volatility" of the premium?   It is proportional to the holding cost until settlement combined with the demand for leverage on BTS.   I would expect a range around $1.00 that could be off by over 10% at times.    So even with guaranteed settlement at a fair price on a specific date in the future you do not get an asset that is always worth $1.00 with a stable premium.    The best we can do is get an asset that is approximately worth $1.00 and the volatility in the premium is beyond our control. 

This is not the most useful comparison for bitUSD. What you describe here is a futures contract, that expires and settles at a fixed date in the future. The fair price for a futures contract is not equal to the spot value of the underlying asset, because of the cost of carry. That is, the difference between the funding cost related to the currency and that of the BTS in which it is settled. The market will price this in when it compares the cost of establishing a position with similar exposure in the external market. The fair value for the future will also fluctuate as the funding costs in these markets fluctuates. None of this means that the future is trading at wide variations from its fair value, its just that its fair value is not parity. In a different context, we would not argue for example that a discount bond is trading at large deviation from its fair value because it is trading at a large discount to its par value.

In these cases however, large deviations from the "fair value" are contained by the action of arbitragers, and that is really what is important.

A bitUSD is a tracking instrument, more like an exchange-traded fund (ETF), in that it does not expire. The fair value of an instrument like this is its underlying asset value. Instruments like ETFs do trade close to the spot value because of the action of arbitragers in those markets. Authorised Parties are granted the ability to exchange units in the fund for units in the underlying asset, making this arbitrage possible. I think a similar mechanism is possible for a bitUSD.

On whether it is possible to have a stable bitUSD premium:


  If the premium is persistently biased by a certain minimum amount then the market will end up adjusting prices to account for that bias.  This "constant bias" can be relatively stable and can be removed by adjusting the feed. 
Would you mind expanding on this mechanism as I still don't understand it? If the idea is to adjust the feed price downward (equivalent to a higher settlement fee) for larger bitUSD premiums, I've raised my concern about that in the link below. However, I could also be at risk of knocking down a straw man if I misunderstand your intended mechanism.
link: https://bitsharestalk.org/index.php/topic,16143.msg210901.html#msg210901
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: JonnyB on May 27, 2015, 01:20:22 am
BitUSD needs to have an absolute floor of parity with real USD so people will know for sure its at least as good as a real dollar.
Merchants should always price product at face value and pocket the rest.
People will be willing to pay a premium for this Super dollar as it has superior qualitys like.
- Full and exclusive access to your bitUSD
- Privacy (nobody knows how much you have)
- Easy fast global payment to anywhere in the world (paypal doesn't allow some countries)
- better interest paid on your savings (german bonds pay negative interest right now)

However saying all that I believe the collateral for bitUSD needs to be bitcoin instead of bitshares due to its market depth, liquidity, stability and acceptance as an asset class. This will be possible hopefully with sidechains. This will hurt the bitshares price alot but if it isn't implemented someone else will and that newly created bitcoin backed bitusd will surpersede bitUSD. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 27, 2015, 01:32:03 am
However saying all that I believe the collateral for bitUSD needs to be bitcoin instead of bitshares due to its market depth, liquidity, stability and acceptance as an asset class. This will be possible hopefully with sidechains. This will hurt the bitshares price alot but if it isn't implemented someone else will and that newly created bitcoin backed bitusd will surpersede bitUSD.
Welcome jonnybitcoin.
I agree, that's a big commercial opportunity when we have the tech in place. Some previous discussion raised here:
https://bitsharestalk.org/index.php/topic,15957.msg204725.html#msg204725
It could be a huge boon to the BTS price too.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 27, 2015, 01:35:59 am
BitUSD needs to have an absolute floor of parity with real USD so people will know for sure its at least as good as a real dollar.
Merchants should always price product at face value and pocket the rest.
People will be willing to pay a premium for this Super dollar as it has superior qualitys like.
- Full and exclusive access to your bitUSD
- Privacy (nobody knows how much you have)
- Easy fast global payment to anywhere in the world (paypal doesn't allow some countries)
- better interest paid on your savings (german bonds pay negative interest right now)

However saying all that I believe the collateral for bitUSD needs to be bitcoin instead of bitshares due to its market depth, liquidity, stability and acceptance as an asset class. This will be possible hopefully with sidechains. This will hurt the bitshares price alot but if it isn't implemented someone else will and that newly created bitcoin backed bitusd will surpersede bitUSD.

You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: lil_jay890 on May 27, 2015, 01:51:56 am
BitUSD needs to have an absolute floor of parity with real USD so people will know for sure its at least as good as a real dollar.
Merchants should always price product at face value and pocket the rest.
People will be willing to pay a premium for this Super dollar as it has superior qualitys like.
- Full and exclusive access to your bitUSD
- Privacy (nobody knows how much you have)
- Easy fast global payment to anywhere in the world (paypal doesn't allow some countries)
- better interest paid on your savings (german bonds pay negative interest right now)

However saying all that I believe the collateral for bitUSD needs to be bitcoin instead of bitshares due to its market depth, liquidity, stability and acceptance as an asset class. This will be possible hopefully with sidechains. This will hurt the bitshares price alot but if it isn't implemented someone else will and that newly created bitcoin backed bitusd will surpersede bitUSD.

You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.

The current bitUSD will still be around even after the new assets are released. The market will decide which one is best... Our currently pegged one or our new unpegged liquid one
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: sumantso on May 27, 2015, 12:22:12 pm
BitUSD needs to have an absolute floor of parity with real USD so people will know for sure its at least as good as a real dollar.
Merchants should always price product at face value and pocket the rest.
People will be willing to pay a premium for this Super dollar as it has superior qualitys like.
- Full and exclusive access to your bitUSD
- Privacy (nobody knows how much you have)
- Easy fast global payment to anywhere in the world (paypal doesn't allow some countries)
- better interest paid on your savings (german bonds pay negative interest right now)

However saying all that I believe the collateral for bitUSD needs to be bitcoin instead of bitshares due to its market depth, liquidity, stability and acceptance as an asset class. This will be possible hopefully with sidechains. This will hurt the bitshares price alot but if it isn't implemented someone else will and that newly created bitcoin backed bitusd will surpersede bitUSD.

You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.

The current bitUSD will still be around even after the new assets are released. The market will decide which one is best... Our currently pegged one or our new unpegged liquid one

The current BitAssets is flawed and needs some simplification and rule changes to work.

Wait till BTS gets forked and someone tweaks the current BitAssets while we remain with the expensive BitUSD 2.0
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 27, 2015, 01:05:55 pm
You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.

What many of you are missing is that it is not economically possible to have a tight peg in a thin market when one of the assets is a volatile crypto currency.

So these hypothetical "other" pegged crypto's with no premium all depend upon a market maker willing to take a financial loss.

We can lower the feed price such that the average trading price is $1.00 and that has always been my stance.  Adjusting the feed will adjust the average trade price and the premium is always relative to the feed. 

It all comes down to a choice on how you want the BitUSD holder to *pay* for their liquidity.   Do they pay up front when they buy it at a premium, or do they pay on the back end when they sell it at a discount? 

There is NO WAY AROUND IT.   Liquidity has a price proportional to market depth and volatility. 

After you factor out the liquidity price all that is left is "speculative demand".   In a bull market shorts "pay interest" by shorting below the cost of providing liquidity resulting in a narrower spread.  In a bear market longs must pay more for "price insurance".

Interest rates can be used to stabilize the supply / demand created by speculation but this stabilization is fleeting because anyone who buys for the interest rate is exposed to interest rate risks.  So whether it is interest rate risk or premium change risks it all works out to be the same thing to traders.   

 

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: hadrian on May 27, 2015, 10:33:50 pm
You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.


I just wanted to point out that it is in fact sumantso's statement you have quoted here bytemaster (a quote from sumantso pulled out of one of lil_jay890's posts).
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Pheonike on May 27, 2015, 11:23:55 pm
You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.


I just wanted to point out that it is in fact sumantso's statement you have quoted here bytemaster (a quote from sumantso pulled out of one of lil_jay890's posts).

The decision is between a centralized pegged usd with counterparty risk vs a decentralized pegged usd with free market risk.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 27, 2015, 11:34:42 pm
bytemaster,

What about this solution to please everyone?

1. Have bitUSD centred on parity (there is a liquidity spread around parity)

2. Create a couponUSD for merchant use that is convertible both ways by the block-chain at 1.06 bitUSD

If users want to use bitUSD with external merchants, they convert bitUSD to couponUSD at a 6% premium and spend it. The payment processor then converts the couponUSD back to bitUSD, sells bitUSD for USD near parity, pays the merchant and keeps the extra 6%+/-.

The advantages of this approach are:

i) We still have a parity centred bitUSD that has greater utility in a broad swathe of applications
ii) Payment processors facilitating trade with merchants are satisfied they get their cut
iii) The free market can determine what relative demand there is for both bitUSD and couponUSD
iv) It makes more sense to the market that bitUSD tracks a dollar, and there is a separate coupon program for dealing with merchants

The liquidity spread is no greater than the liquidity spread that would be experienced if we tried to create a bitUSD that trades around a 6% premium, because the same liquidity issues you raise exist whether we choose to centre trading around $1.00, $1.06 or any other level. So payment processors experience profit risk in the size of their cut that is also no greater than would be the case by using a bitUSD centred on $1.06.

[As an aside, for those arguing that a bitUSD should trade at a premium to $1 because it is a premium means of payment, it should be clear from the above that this is a bogus argument. A bitUSD retains all the same benefits whether it is centred around $1 or $1.06. In the approach above, the coupon instrument is not better than a bitUSD, it is simply an instrument to ensure payment facilitators get their cut.]
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 28, 2015, 12:36:59 am
You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.

What many of you are missing is that it is not economically possible to have a tight peg in a thin market when one of the assets is a volatile crypto currency.

So these hypothetical "other" pegged crypto's with no premium all depend upon a market maker willing to take a financial loss.

We can lower the feed price such that the average trading price is $1.00 and that has always been my stance.  Adjusting the feed will adjust the average trade price and the premium is always relative to the feed. 

It all comes down to a choice on how you want the BitUSD holder to *pay* for their liquidity.   Do they pay up front when they buy it at a premium, or do they pay on the back end when they sell it at a discount? 

There is NO WAY AROUND IT.   Liquidity has a price proportional to market depth and volatility. 

After you factor out the liquidity price all that is left is "speculative demand".   In a bull market shorts "pay interest" by shorting below the cost of providing liquidity resulting in a narrower spread.  In a bear market longs must pay more for "price insurance".

Interest rates can be used to stabilize the supply / demand created by speculation but this stabilization is fleeting because anyone who buys for the interest rate is exposed to interest rate risks.  So whether it is interest rate risk or premium change risks it all works out to be the same thing to traders.   

 

Liquidity constraints in the underlying crypto mean that spreads are always inevitable around the peg, deviating between discounts and premiums. However, there are two key ways to minimise those spreads within that constraint:

i) offering the ability for arbitrage, and
ii) providing incentive for market makers.

Arbitrage is the key to tight pegging. Exchange traded funds provide convertibility (subject to a transaction cost that can reflect liquidity) to their Authorised Parties to maintain close pegging to NAV. CFD providers provide tight spreads because they can arbitrage their book in the external market. I think offering a means of convertibility is essential to get a peg to operate effectively.

Market-makers or spread-traders, trading between bitUSD and USD, could be incentivised to step in where their cost is lower than that of the arbitragers (as they do not bear a spread cost on BTS). They are incentivised because they know there are arbitragers sitting in the wings limiting the variation against them, and possibly because there is a mechanism (e.g. yield) to return value toward parity.

Even with all this, there must always be deviation around the peg. In theory this could be materially reduced by backing a bitUSD alternative with BTC rather than BTS once the tools are in place to minimise counterparty risk.

On a separate point - I have raised concerns about the idea of using the feed price to dynamically adjust the average trading level. I would appreciate learning more about this.


Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 28, 2015, 12:46:18 am
What are your concerns about using feed to adjust premium over the peg?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 28, 2015, 01:01:13 am
What are your concerns about using feed to adjust premium over the peg?
I don't understand how you intend for it to work. My impression, please correct if its wrong, is that as the premium grows, you drop the price feed below its "fair" price (like a fee on settlements) and as the premium contracts, you lift it back toward the "fair" price (lower the "settlement fee"). Is that correct?

If it is, then I have a concern with it. For any static settlement fee, I agree the average trading price would equilibrate at a different level. The possible problem is that when it is dynamic the market may not price it in because it never comes into force, as here:

...I can't see why the market would price this in. If the market is at a premium, then the settlement mechanism is not needed. By the time the settlement mechanism is needed and used, the price must be at a discount where there is no longer a settlement fee. So there is no need for any settlement fee to ever be paid, nor any buyer to price in the risk of a higher fee, no matter how high the premium. So how would this affect supply or demand?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 28, 2015, 01:02:16 am
What are your concerns about using feed to adjust premium over the peg?

In ELI5 fashion (because this is intriguing but I'm not sure I understand how it is supposed to work)... so the covering bitUSD buy wall will move based on how far the last trade was from the feed. Is this just so those that want to sell/short bitUSD have an incentive to short up to the feed if they want liquidity? If I have bitUSD, why would I ever do a forced call at a large premium when I can just place my sell wall at the feed which will pull the buy wall up to me? Or is this the intention of the system, to not have people use the forced covers and thus eliminate the "fee" for maintaining liquidity?

EDIT: I posted the same time as starspirit, and have the same conclusion
"...I can't see why the market would price this in. If the market is at a premium, then the settlement mechanism is not needed. By the time the settlement mechanism is needed and used, the price must be at a discount where there is no longer a settlement fee. So there is no need for any settlement fee to ever be paid, nor any buyer to price in the risk of a higher fee, no matter how high the premium. So how would this affect supply or demand?"
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Ben Mason on May 28, 2015, 10:34:46 am
You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.

So these hypothetical "other" pegged crypto's with no premium all depend upon a market maker willing to take a financial loss.
 

You are right, in fact, it is already game over for BitShares.  You are trying to make a trustless "Stable-coin" when the rest of us here, who are against this proposal (due to the premium), would rather trust a group of people to provide liquidity for us (like how the highly liquid NuBits killed BitUSD the first time because the centralized team was trustworthy to provide liquidity and not steal your coins) so that the price does not fluctuate more than 1% either way.

The future is in centralized trusted third party liquidity providers like our Ethereum-BitUSD stable-coin that can be both bought and sold for $1.

So like Little Jay stated:  It is already game over for BitShares because nothing beats centralized stable solutions.  Behold Ethereum USD, the BitUSD killer:

https://www.youtube.com/watch?v=fVDSjR0N4ho#t=5m46s

"First it will be completely centralized, like me and three (anonymous for your protection) others will own all the shares in the market maker (liquidity provider business) in the beginning, and you can trust us to not run off with your money, and over time, we will eventually distribute the ownership shares all over the world.  Just trust us  ;) "

Sorry BitShares, nobody is interested in trustless platforms like yours and bitcoin's.  Case in point:  Ripple has only gained ground on bitcoin over the course of its short lifespan, and when Ethereum comes out with it's centralized Ether BitUSD, then you might as well pull the plug on your automatic computerized and trustless market maker solution.

Little Jay knows.  Heed his warnings and concede your trustless imperfect market maker for a trusted and perfectly pegged honorable human market maker, or like he says, it's "game over" for you (because we will not charge you a premium)(ever)(trust us)(we will take good care of you and your family for you)

lol....It does seem to come down to this over and over again.  So let's stick with our foundational principals every time and watch the competition make the same old mistakes and run into the same old walls.  Meanwhile, innovation and integrity will give our network effect resilience, scope, credibility and durability.  Earth, powered by Bitshares.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 28, 2015, 10:42:18 am
We can lower the feed price such that the average trading price is $1.00 and that has always been my stance.  Adjusting the feed will adjust the average trade price and the premium is always relative to the feed. 

This somehow sounds better, but I'm not sure I fully understand.

It all comes down to a choice on how you want the BitUSD holder to *pay* for their liquidity.   Do they pay up front when they buy it at a premium, or do they pay on the back end when they sell it at a discount? 

There is NO WAY AROUND IT.   Liquidity has a price proportional to market depth and volatility. 
I have to think about this more.  I'm not sure about the notion that the BitUSD holder has to 'pay'. 

In general I think if we had a balanced design we would have more trading, liquidity & BitUSD creation.   My concern is if the design gives BitUSD holders any extra liquidity (ie. user-generated settlements/large forced-settlements), there will be far less BitUSD creation and higher premiums. It would be great if we just had a consistent long-term float of BitUSD creation/shorts.   Wouldn't a balanced design allow for trades to occur at times above or below the price feed and wouldn't settlement at the price feed encourage trades towards it?

Again I have to think about things more because I may be misunderstanding some of the issues and might be stuck looking at this from a different perspective. 

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: lil_jay890 on May 28, 2015, 11:32:07 am
You do realize that most of the benefits will be the same for any other pegged crypto? If they don't charge a premium then it is game over. for us.

So these hypothetical "other" pegged crypto's with no premium all depend upon a market maker willing to take a financial loss.
 

You are right, in fact, it is already game over for BitShares.  You are trying to make a trustless "Stable-coin" when the rest of us here, who are against this proposal (due to the premium), would rather trust a group of people to provide liquidity for us (like how the highly liquid NuBits killed BitUSD the first time because the centralized team was trustworthy to provide liquidity and not steal your coins) so that the price does not fluctuate more than 1% either way.

The future is in centralized trusted third party liquidity providers like our Ethereum-BitUSD stable-coin that can be both bought and sold for $1.

So like Little Jay stated:  It is already game over for BitShares because nothing beats centralized stable solutions.  Behold Ethereum USD, the BitUSD killer:

https://www.youtube.com/watch?v=fVDSjR0N4ho#t=5m46s

"First it will be completely centralized, like me and three (anonymous for your protection) others will own all the shares in the market maker (liquidity provider business) in the beginning, and you can trust us to not run off with your money, and over time, we will eventually distribute the ownership shares all over the world.  Just trust us  ;) "

Sorry BitShares, nobody is interested in trustless platforms like yours and bitcoin's.  Case in point:  Ripple has only gained ground on bitcoin over the course of its short lifespan, and when Ethereum comes out with it's centralized Ether BitUSD, then you might as well pull the plug on your automatic computerized and trustless market maker solution.

Little Jay knows.  Heed his warnings and concede your trustless imperfect market maker for a trusted and perfectly pegged honorable human market maker, or like he says, it's "game over" for you (because we will not charge you a premium)(ever)(trust us)(we will take good care of you and your family for you)

It was actually sumantso that said that stuff... Bytemaster just made a mistake when he tried to edit a quoted post by me.

I said our current bitusd and new bitusd 2.0 will exist at the same time. The market will choose which one is best
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 28, 2015, 11:46:45 am
I said our current bitusd and new bitusd 2.0 will exist at the same time. The market will choose which one is best
If you were "the market" .. which one would be the best and survive?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 28, 2015, 11:48:33 am
You can simulate "current BitUSD" by having a 15-30 day delay on forced settlement.  With such a massive delay on forced settlement it will rarely be used and all players would have 15 days notice.   It would be very much like todays shorts which have 30 days notice until they are force settled at the price feed (assuming there are any takers).

Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: eagleeye on May 28, 2015, 08:24:47 pm
I don'tknow if this was brought up but if possible have the ability to denominate bitassets in bitUSD
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 28, 2015, 08:25:23 pm
You can simulate "current BitUSD" by having a 15-30 day delay on forced settlement.  With such a massive delay on forced settlement it will rarely be used and all players would have 15 days notice.   It would be very much like todays shorts which have 30 days notice until they are force settled at the price feed (assuming there are any takers).

Hey BM what is your synopsis of the current BitUSD trading?   

It seems we currently have a float of $155k BitUSD: http://coinmarketcap.com/assets/bitusd/#charts
I hope the float will increase significantly somehow with a new design and that supply will increase/decrease gradually without any abrupt creation or destruction of BitUSD.

Right now I only use a webwallet and it seems simplified so I assume I can't short or use any other advanced features?  There is a huge $77k buy-wall at the feed price (assume it's some kind of relative order?)   I see transactions occasionally happen both at the feed and I just did a 1 BitUSD transaction at the market as a test. So I assume shorts have to cover in 30-days so there is some automatic flow at the feed and the rest of the trade happens at the market?  Who is able to purchase at the feed price?   

Anyways it would be great to get feedback to get some ideas from you and others as to what is going on in the current system and some theories of why it operates that way.  Thanks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     


Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on May 28, 2015, 08:26:12 pm
I don'tknow if this was brought up but if possible have the ability to denominate bitassets in bitUSD
you should be able to trade in the bitGOLD:bitUSD market as you can do already ... issue is liquidity..
or do you want to short bitGOLD with bitUSD as collateral?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: eagleeye on May 28, 2015, 08:28:11 pm
I don'tknow if this was brought up but if possible have the ability to denominate bitassets in bitUSD
you should be able to trade in the bitGOLD:bitUSD market as you can do already ... issue is liquidity..
or do you want to short bitGOLD with bitUSD as collateral?

I want to buy bitSHANGHAI in bitUSD or bitYUAN
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: eagleeye on May 28, 2015, 08:29:22 pm
I don'tknow if this was brought up but if possible have the ability to denominate bitassets in bitUSD
you should be able to trade in the bitGOLD:bitUSD market as you can do already ... issue is liquidity..
or do you want to short bitGOLD with bitUSD as collateral?

Golds has been, not going up just finding a bottom or at a bottom.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: lil_jay890 on May 28, 2015, 08:46:52 pm
You can simulate "current BitUSD" by having a 15-30 day delay on forced settlement.  With such a massive delay on forced settlement it will rarely be used and all players would have 15 days notice.   It would be very much like todays shorts which have 30 days notice until they are force settled at the price feed (assuming there are any takers).

Hey BM what is your synopsis of the current BitUSD trading?   

It seems we currently have a float of $155k BitUSD: http://coinmarketcap.com/assets/bitusd/#charts
I hope the float will increase significantly somehow with a new design and that supply will increase/decrease gradually without any abrupt creation or destruction of BitUSD.

Right now I only use a webwallet and it seems simplified so I assume I can't short or use any other advanced features?  There is a huge $77k buy-wall at the feed price (assume it's some kind of relative order?)   I see transactions occasionally happen both at the feed and I just did a 1 BitUSD transaction at the market as a test. So I assume shorts have to cover in 30-days so there is some automatic flow at the feed and the rest of the trade happens at the market?  Who is able to purchase at the feed price?   

Anyways it would be great to get feedback to get some ideas from you and others as to what is going on in the current system and some theories of why it operates that way.  Thanks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

77K buy wall are expired shorts waiting to be filled. Meanwhile the current bitUSD holders are not willing to sell at the feed price, hence the buy wall.  There's a big premium to buy bitUSD right now.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jsidhu on May 29, 2015, 02:39:08 am
You can simulate "current BitUSD" by having a 15-30 day delay on forced settlement.  With such a massive delay on forced settlement it will rarely be used and all players would have 15 days notice.   It would be very much like todays shorts which have 30 days notice until they are force settled at the price feed (assuming there are any takers).

Hey BM what is your synopsis of the current BitUSD trading?   

It seems we currently have a float of $155k BitUSD: http://coinmarketcap.com/assets/bitusd/#charts
I hope the float will increase significantly somehow with a new design and that supply will increase/decrease gradually without any abrupt creation or destruction of BitUSD.

Right now I only use a webwallet and it seems simplified so I assume I can't short or use any other advanced features?  There is a huge $77k buy-wall at the feed price (assume it's some kind of relative order?)   I see transactions occasionally happen both at the feed and I just did a 1 BitUSD transaction at the market as a test. So I assume shorts have to cover in 30-days so there is some automatic flow at the feed and the rest of the trade happens at the market?  Who is able to purchase at the feed price?   

Anyways it would be great to get feedback to get some ideas from you and others as to what is going on in the current system and some theories of why it operates that way.  Thanks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

77K buy wall are expired shorts waiting to be filled. Meanwhile the current bitUSD holders are not willing to sell at the feed price, hence the buy wall.  There's a big premium to buy bitUSD right now.
People are starting to sell BitUSD for bts now.. Last few hours saw millions of bts bought at the price feed.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on May 29, 2015, 03:39:06 am
You can simulate "current BitUSD" by having a 15-30 day delay on forced settlement.  With such a massive delay on forced settlement it will rarely be used and all players would have 15 days notice.   It would be very much like todays shorts which have 30 days notice until they are force settled at the price feed (assuming there are any takers).

Hey BM what is your synopsis of the current BitUSD trading?   

It seems we currently have a float of $155k BitUSD: http://coinmarketcap.com/assets/bitusd/#charts
I hope the float will increase significantly somehow with a new design and that supply will increase/decrease gradually without any abrupt creation or destruction of BitUSD.

Right now I only use a webwallet and it seems simplified so I assume I can't short or use any other advanced features?  There is a huge $77k buy-wall at the feed price (assume it's some kind of relative order?)   I see transactions occasionally happen both at the feed and I just did a 1 BitUSD transaction at the market as a test. So I assume shorts have to cover in 30-days so there is some automatic flow at the feed and the rest of the trade happens at the market?  Who is able to purchase at the feed price?   

Anyways it would be great to get feedback to get some ideas from you and others as to what is going on in the current system and some theories of why it operates that way.  Thanks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

77K buy wall are expired shorts waiting to be filled. Meanwhile the current bitUSD holders are not willing to sell at the feed price, hence the buy wall.  There's a big premium to buy bitUSD right now.
People are starting to sell BitUSD for bts now.. Last few hours saw millions of bts bought at the price feed.

Yeah thanks for the input guys.  Interesting.

So what are the exact mechanics?  BitUSD holders request settlement, wait 30 days and then do they have the option of settling or do positions automatically settle?

I assume you can't request settling at the feed using the web wallet?

I see the wall being taken down right now.  Down to $65.5k.   Will that get the float down below $100k?  Or can part of the wall also represent long term BitUSD holders that just want to hold it for the very long term?

In a bull market I would expect there should be much more BitUSD creation.  I know we are moving to a new platform so people may not be creating any new BitUSD, but I do want to make sure the new BitUSD design encourages a large sustained BitUSD float instead of being created/destroyed abruptly.

Also normally if these large orders were covered at the market, the BTS price should move even more quickly.. I'd rather see more market settlement than feed settlement in general. 

Anyways it's interesting to just observe.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: jsidhu on May 29, 2015, 04:12:59 am
You can simulate "current BitUSD" by having a 15-30 day delay on forced settlement.  With such a massive delay on forced settlement it will rarely be used and all players would have 15 days notice.   It would be very much like todays shorts which have 30 days notice until they are force settled at the price feed (assuming there are any takers).

Hey BM what is your synopsis of the current BitUSD trading?   

It seems we currently have a float of $155k BitUSD: http://coinmarketcap.com/assets/bitusd/#charts
I hope the float will increase significantly somehow with a new design and that supply will increase/decrease gradually without any abrupt creation or destruction of BitUSD.

Right now I only use a webwallet and it seems simplified so I assume I can't short or use any other advanced features?  There is a huge $77k buy-wall at the feed price (assume it's some kind of relative order?)   I see transactions occasionally happen both at the feed and I just did a 1 BitUSD transaction at the market as a test. So I assume shorts have to cover in 30-days so there is some automatic flow at the feed and the rest of the trade happens at the market?  Who is able to purchase at the feed price?   

Anyways it would be great to get feedback to get some ideas from you and others as to what is going on in the current system and some theories of why it operates that way.  Thanks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

77K buy wall are expired shorts waiting to be filled. Meanwhile the current bitUSD holders are not willing to sell at the feed price, hence the buy wall.  There's a big premium to buy bitUSD right now.
People are starting to sell BitUSD for bts now.. Last few hours saw millions of bts bought at the price feed.

Yeah thanks for the input guys.  Interesting.

So what are the exact mechanics?  BitUSD holders request settlement, wait 30 days and then do they have the option of settling or do positions automatically settle?

I assume you can't request settling at the feed using the web wallet?

I see the wall being taken down right now.  Down to $65.5k.   Will that get the float down below $100k?  Or can part of the wall also represent long term BitUSD holders that just want to hold it for the very long term?

In a bull market I would expect there should be much more BitUSD creation.  I know we are moving to a new platform so people may not be creating any new BitUSD, but I do want to make sure the new BitUSD design encourages a large sustained BitUSD float instead of being created/destroyed abruptly.

Also normally if these large orders were covered at the market, the BTS price should move even more quickly.. I'd rather see more market settlement than feed settlement in general. 

Anyways it's interesting to just observe.
The floating wall is expired shorts waiting to be covered by blockchain so the short can get his collateral back aswell as the bts that was given to take the BitUSD that was created (shorted) which should be someone's profit from 30 days ago.

I'm seeing more BitUSD creation through shorting aswell as ppl selling BitUSD for bts into the floating wall. I think we just started. Some whales are buying all top alts and some may stand out more (ripple due to commonwealth bank news) and bts (if we release good news like exchange, new bitassets proposal etc).. Then we may see the next wave of investors.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 29, 2015, 11:53:36 pm
What are your concerns about using feed to adjust premium over the peg?
I don't understand how you intend for it to work. My impression, please correct if its wrong, is that as the premium grows, you drop the price feed below its "fair" price (like a fee on settlements) and as the premium contracts, you lift it back toward the "fair" price (lower the "settlement fee"). Is that correct?

If it is, then I have a concern with it. For any static settlement fee, I agree the average trading price would equilibrate at a different level. The possible problem is that when it is dynamic the market may not price it in because it never comes into force, as here:

...I can't see why the market would price this in. If the market is at a premium, then the settlement mechanism is not needed. By the time the settlement mechanism is needed and used, the price must be at a discount where there is no longer a settlement fee. So there is no need for any settlement fee to ever be paid, nor any buyer to price in the risk of a higher fee, no matter how high the premium. So how would this affect supply or demand?
Reminder to bytemaster- awaiting answer on this.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 29, 2015, 11:55:47 pm
bytemaster,

What about this solution to please everyone?

1. Have bitUSD centred on parity (there is a liquidity spread around parity)

2. Create a couponUSD for merchant use that is convertible both ways by the block-chain at 1.06 bitUSD

If users want to use bitUSD with external merchants, they convert bitUSD to couponUSD at a 6% premium and spend it. The payment processor then converts the couponUSD back to bitUSD, sells bitUSD for USD near parity, pays the merchant and keeps the extra 6%+/-.

The advantages of this approach are:

i) We still have a parity centred bitUSD that has greater utility in a broad swathe of applications
ii) Payment processors facilitating trade with merchants are satisfied they get their cut
iii) The free market can determine what relative demand there is for both bitUSD and couponUSD
iv) It makes more sense to the market that bitUSD tracks a dollar, and there is a separate coupon program for dealing with merchants

The liquidity spread is no greater than the liquidity spread that would be experienced if we tried to create a bitUSD that trades around a 6% premium, because the same liquidity issues you raise exist whether we choose to centre trading around $1.00, $1.06 or any other level. So payment processors experience profit risk in the size of their cut that is also no greater than would be the case by using a bitUSD centred on $1.06.

[As an aside, for those arguing that a bitUSD should trade at a premium to $1 because it is a premium means of payment, it should be clear from the above that this is a bogus argument. A bitUSD retains all the same benefits whether it is centred around $1 or $1.06. In the approach above, the coupon instrument is not better than a bitUSD, it is simply an instrument to ensure payment facilitators get their cut.]
bytemaster, any thoughts on this? Might this be a way to meet both needs without compromise?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on May 30, 2015, 01:22:58 am
bytemaster,

What about this solution to please everyone?

1. Have bitUSD centred on parity (there is a liquidity spread around parity)

2. Create a couponUSD for merchant use that is convertible both ways by the block-chain at 1.06 bitUSD

If users want to use bitUSD with external merchants, they convert bitUSD to couponUSD at a 6% premium and spend it. The payment processor then converts the couponUSD back to bitUSD, sells bitUSD for USD near parity, pays the merchant and keeps the extra 6%+/-.

The advantages of this approach are:

i) We still have a parity centred bitUSD that has greater utility in a broad swathe of applications
ii) Payment processors facilitating trade with merchants are satisfied they get their cut
iii) The free market can determine what relative demand there is for both bitUSD and couponUSD
iv) It makes more sense to the market that bitUSD tracks a dollar, and there is a separate coupon program for dealing with merchants

The liquidity spread is no greater than the liquidity spread that would be experienced if we tried to create a bitUSD that trades around a 6% premium, because the same liquidity issues you raise exist whether we choose to centre trading around $1.00, $1.06 or any other level. So payment processors experience profit risk in the size of their cut that is also no greater than would be the case by using a bitUSD centred on $1.06.

[As an aside, for those arguing that a bitUSD should trade at a premium to $1 because it is a premium means of payment, it should be clear from the above that this is a bogus argument. A bitUSD retains all the same benefits whether it is centred around $1 or $1.06. In the approach above, the coupon instrument is not better than a bitUSD, it is simply an instrument to ensure payment facilitators get their cut.]
bytemaster, any thoughts on this? Might this be a way to meet both needs without compromise?

I think it would get gamed, it is an extra step to pay a fee that would be easier for merchants to just add a 6% fee to their bill.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: karnal on May 30, 2015, 08:31:39 pm
77K buy wall are expired shorts waiting to be filled. Meanwhile the current bitUSD holders are not willing to sell at the feed price, hence the buy wall.  There's a big premium to buy bitUSD right now.

How to fix this?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: maqifrnswa on May 30, 2015, 09:22:31 pm
77K buy wall are expired shorts waiting to be filled. Meanwhile the current bitUSD holders are not willing to sell at the feed price, hence the buy wall.  There's a big premium to buy bitUSD right now.

How to fix this?

That's what the discussion is all about. Right now, it says that if you could sell 1 bitUSD for at least 1 dollar, there must be a premium charged by those creating a bitUSD. That's just the market, there is nothing to fix.

However, the question is that this system might not allow for any real liquidity, which is BM's concern. So rules can be changed to create liquidity (as long as you don't ever violate the fundamental rules of creating bitUSD when there is an oversupply or destroying bitUSD when there is an undersupply).
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on May 30, 2015, 09:50:12 pm
bytemaster,

What about this solution to please everyone?

1. Have bitUSD centred on parity (there is a liquidity spread around parity)

2. Create a couponUSD for merchant use that is convertible both ways by the block-chain at 1.06 bitUSD

If users want to use bitUSD with external merchants, they convert bitUSD to couponUSD at a 6% premium and spend it. The payment processor then converts the couponUSD back to bitUSD, sells bitUSD for USD near parity, pays the merchant and keeps the extra 6%+/-.

The advantages of this approach are:

i) We still have a parity centred bitUSD that has greater utility in a broad swathe of applications
ii) Payment processors facilitating trade with merchants are satisfied they get their cut
iii) The free market can determine what relative demand there is for both bitUSD and couponUSD
iv) It makes more sense to the market that bitUSD tracks a dollar, and there is a separate coupon program for dealing with merchants

The liquidity spread is no greater than the liquidity spread that would be experienced if we tried to create a bitUSD that trades around a 6% premium, because the same liquidity issues you raise exist whether we choose to centre trading around $1.00, $1.06 or any other level. So payment processors experience profit risk in the size of their cut that is also no greater than would be the case by using a bitUSD centred on $1.06.

[As an aside, for those arguing that a bitUSD should trade at a premium to $1 because it is a premium means of payment, it should be clear from the above that this is a bogus argument. A bitUSD retains all the same benefits whether it is centred around $1 or $1.06. In the approach above, the coupon instrument is not better than a bitUSD, it is simply an instrument to ensure payment facilitators get their cut.]
bytemaster, any thoughts on this? Might this be a way to meet both needs without compromise?

I think it would get gamed, it is an extra step to pay a fee that would be easier for merchants to just add a 6% fee to their bill.
Unsure exactly what you mean.
Isn't the extra step just an instantaneous block-chain conversion? If so this could even be done automatically on receipt by the merchant payment processor (i.e. coupon USD is one-time-use).
How would this get gamed? i.e. who potentially loses?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on June 04, 2015, 03:00:32 am
Hey Bytemaster,
I just listened to the May 15th Mumble Hangout and your comments about the premium vs fee.  I think it's an interesting trade-off between the two choices, but I wanted to step back a bit and think about why there is a premium in the first place.  I was wondering if the premium is possibly because of the option value the long BitUSD holder has vs the short BitUSD in the current design and will have in the proposed design.   The higher the forced settlement amount, the higher the option value the long BitUSD holder has.  With no user-generated forced settlement, the premium value may be small. 

Right now I would rather have  no user-generated forced-settlement and instead automatic forced-settlement of undercollateralized short BitUSD holders.  Hence shorts can more easily manage their positions to sustain a long-term BitUSD supply and BitUSD holders will be more confident there will be a predictable supply available to buy.

My question is what specific parameters can you adjust with Privatized BitAssets? 
It would be great to be able to:
-adjust user-generated forced-settlement to zero. 
-force-settle undercollateralized positions at the feed daily
-keep collateral at 100% as proposed.

I hope the above is all possible?

Also is there any way you can algorithmically change parameters (ie. collateral) based on market conditions? 

Lastly what is the cost to set up Privatized BitAssets?  Thanks!


Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on June 04, 2015, 10:36:33 pm
Hey Bytemaster,
I just listened to the May 15th Mumble Hangout and your comments about the premium vs fee.  I think it's an interesting trade-off between the two choices, but I wanted to step back a bit and think about why there is a premium in the first place.  I was wondering if the premium is possibly because of the option value the long BitUSD holder has vs the short BitUSD in the current design and will have in the proposed design.   The higher the forced settlement amount, the higher the option value the long BitUSD holder has.  With no user-generated forced settlement, the premium value may be small. 

Right now I would rather have  no user-generated forced-settlement and instead automatic forced-settlement of undercollateralized short BitUSD holders.  Hence shorts can more easily manage their positions to sustain a long-term BitUSD supply and BitUSD holders will be more confident there will be a predictable supply available to buy.

My question is what specific parameters can you adjust with Privatized BitAssets? 
It would be great to be able to:
-adjust user-generated forced-settlement to zero. 
-force-settle undercollateralized positions at the feed daily
-keep collateral at 100% as proposed.

I hope the above is all possible?

Also is there any way you can algorithmically change parameters (ie. collateral) based on market conditions? 

Lastly what is the cost to set up Privatized BitAssets?  Thanks!

"undercollateralized positions" are always force settled instantly by margin call (walking the book, no feed involved)

Private BitAssets can set:
maintenance collateral level  > 100%
collateral type
force settlement delay (or disable force settlement)
issuer initiated global settlement
fee imposed for forced settlement
pick any algorithm for establishing the settlement price as published by feed producers
maximum daily forced settlement amount 0 to 100% of supply





 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on June 04, 2015, 11:30:28 pm

"undercollateralized positions" are always force settled instantly by margin call (walking the book, no feed involved)

Private BitAssets can set:
maintenance collateral level  > 100%
collateral type
force settlement delay (or disable force settlement)
issuer initiated global settlement
fee imposed for forced settlement
pick any algorithm for establishing the settlement price as published by feed producers
maximum daily forced settlement amount 0 to 100% of supply

"undercollateralized positions" are always force settled instantly by margin call (walking the book, no feed involved)- Great.  End of each day or what time period is collateral checked?  Might be good to shorten the time period to one minute to allow more leverage in the future.  I think some forex platforms have 200:1 leverage because they can settle in a matter of seconds/minutes.  Good for liquidity & trading fees.  :P

maintenance collateral level  > 100% - Great.. btw what about <100% ?  Might eventually be useful for leverage in certain Privatized BitAssets alongside shorter time periods.

force settlement delay (or disable force settlement) - Great

issuer initiated global settlement - Is this for one time events or can the system be automated to force a daily settle?  Or even settling by the minute?   

fee imposed for forced settlement - Ok

pick any algorithm for establishing the settlement price as published by feed producers   - Ok

maximum daily forced settlement amount 0 to 100% of supply  - Ok
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: starspirit on June 05, 2015, 12:13:05 am
Hey Bytemaster,
I just listened to the May 15th Mumble Hangout and your comments about the premium vs fee.  I think it's an interesting trade-off between the two choices, but I wanted to step back a bit and think about why there is a premium in the first place.  I was wondering if the premium is possibly because of the option value the long BitUSD holder has vs the short BitUSD in the current design and will have in the proposed design.   The higher the forced settlement amount, the higher the option value the long BitUSD holder has.  With no user-generated forced settlement, the premium value may be small. 

Right now I would rather have  no user-generated forced-settlement and instead automatic forced-settlement of undercollateralized short BitUSD holders.  Hence shorts can more easily manage their positions to sustain a long-term BitUSD supply and BitUSD holders will be more confident there will be a predictable supply available to buy.

My question is what specific parameters can you adjust with Privatized BitAssets? 
It would be great to be able to:
-adjust user-generated forced-settlement to zero. 
-force-settle undercollateralized positions at the feed daily
-keep collateral at 100% as proposed.

I hope the above is all possible?

Also is there any way you can algorithmically change parameters (ie. collateral) based on market conditions? 

Lastly what is the cost to set up Privatized BitAssets?  Thanks!

"undercollateralized positions" are always force settled instantly by margin call (walking the book, no feed involved)

Private BitAssets can set:
maintenance collateral level  > 100%
collateral type
force settlement delay (or disable force settlement)
issuer initiated global settlement
fee imposed for forced settlement
pick any algorithm for establishing the settlement price as published by feed producers
maximum daily forced settlement amount 0 to 100% of supply
BM
- is a flexible yield mechanism off the cards for the moment?
- is there a way that private issuers can take a profit?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on June 05, 2015, 05:42:29 am

"undercollateralized positions" are always force settled instantly by margin call (walking the book, no feed involved)

Private BitAssets can set:
maintenance collateral level  > 100%
collateral type
force settlement delay (or disable force settlement)
issuer initiated global settlement
fee imposed for forced settlement
pick any algorithm for establishing the settlement price as published by feed producers
maximum daily forced settlement amount 0 to 100% of supply

"undercollateralized positions" are always force settled instantly by margin call (walking the book, no feed involved)- Great.  End of each day or what time period is collateral checked?  Might be good to shorten the time period to one minute to allow more leverage in the future.  I think some forex platforms have 200:1 leverage because they can settle in a matter of seconds/minutes.  Good for liquidity & trading fees.  :P

maintenance collateral level  > 100% - Great.. btw what about <100% ?  Might eventually be useful for leverage in certain Privatized BitAssets alongside shorter time periods.

force settlement delay (or disable force settlement) - Great

issuer initiated global settlement - Is this for one time events or can the system be automated to force a daily settle?  Or even settling by the minute?   

fee imposed for forced settlement - Ok

pick any algorithm for establishing the settlement price as published by feed producers   - Ok

maximum daily forced settlement amount 0 to 100% of supply  - Ok

BTW It may be nice to be able to have the option to get margin calls to automatically settle at the feed.  I'd like to experiment with that option because I would probably start by having no forced settlement at all so there would be no link to the external markets much like the very original design.  It may not be necessary, but that option would be nice. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on June 05, 2015, 12:25:13 pm
BM
- is a flexible yield mechanism off the cards for the moment?
- is there a way that private issuers can take a profit?

No yield except via bond markets
Private issuers can set (and keep) the market trading fees.
Title: Re: BitAsset 2.0 Requirements &amp; Implied Design
Post by: alt on December 02, 2015, 04:05:58 pm
1)  When I mean 'stable' I just meant generally pegged, but I'm using the word loosely so we may not really differ in opinion.  I don't really care that bitUSD fluctuates between $0.90 and $1.10 and I don't think bitUSD holders will care either, although adding the floor in the current design so prices fluctuate between $1.00 and $1.20 seems fine.
@Bytemаsteг
I remember from the beginning our target is peg at price 1.0 +/- 0.01
so everybody can be a market maker, sell at price more than 1.0, buy at price less than 1.0
and users can use bitUSD for payment just like 1.0 fiat USD

I want ask you if this is your new plan, peg at price from $1.0 to $1.2?
I want know how to use this bitUSD for payment, why I pay bitUSD to others when bitUSD's price always more than 1?
as a  gateway, what's the price to sell bitUSD, and what's the price to buy bitUSD?
Title: Re: BitAsset 2.0 Requirements &amp; Implied Design
Post by: bytemaster on December 02, 2015, 10:06:50 pm
1)  When I mean 'stable' I just meant generally pegged, but I'm using the word loosely so we may not really differ in opinion.  I don't really care that bitUSD fluctuates between $0.90 and $1.10 and I don't think bitUSD holders will care either, although adding the floor in the current design so prices fluctuate between $1.00 and $1.20 seems fine.
@Bytemаsteг
I remember from the beginning our target is peg at price 1.0 +/- 0.01
so everybody can be a market maker, sell at price more than 1.0, buy at price less than 1.0
and users can use bitUSD for payment just like 1.0 fiat USD

I want ask you if this is your new plan, peg at price from $1.0 to $1.2?
I want know how to use this bitUSD for payment, why I pay bitUSD to others when bitUSD's price always more than 1?
as a  gateway, what's the price to sell bitUSD, and what's the price to buy bitUSD?

It is always a good deal to buy BitUSD for $1.00
It is always a good idea to sell BitUSD for as much as possible.
As a gateway, I would have a buy wall at $1.00 and then sell whatever inventory I get on the market... this would be the safest bet, but will probably result in the Gateway not having much BitUSD.
As a merchant, you "buy" bitUSD with a dollar's worth of merchandise.

The market must discover the price premium, I obviously want it to be as close to $1.00 as possible, but I have no idea what kind of premium shorts will demand and it will change over time depending upon how many people are selling BitUSD, how many are shorting, and how many are buying.  Until the market discovers the equilibrium we will have to wait and see.  It would probably be helpful to have a graph of the premium relative to the feed over time.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on December 02, 2015, 10:45:40 pm
Yeah I may have said before that a range of 1 - 1.2 was fine, but I always preferred a range of .9 to 1.1.

The local trade will be 1:1 so everything should fluctuate around 1 not 1.1.   I would call the current design bitUSD Plus and treat it like a separate coin and if merchants and others like the premium then that's fine there might be liquidity.   I have my doubts with consumers and think it will hinder liqudity and a regular bitUSD that fluctuates around 1 is by far my preference.  Hence I would like to see two Smartcoins if possible and I would like to promote a regular bitUSD that fluctuates around 1, not above 1.   

Note: I think the other motivation behind the floor is that in previous designs there were great discounts and premiums without liquidity so this seems to be a recompensation to enforce some kind of peg.  I would rather see a weak peg using the margin calls at the price feed as training wheels, not a permanent forced settlement feature.  Thanks.
Title: Re: BitAsset 2.0 Requirements &amp; Implied Design
Post by: alt on December 02, 2015, 11:08:17 pm
if you have success design the bitUSD's price always more than 1.0
I'm happy to buy bitUSD at price 1.0 as much as posiblle
so all stupid person, please sell your bitUSD to me at price 1.0

1)  When I mean 'stable' I just meant generally pegged, but I'm using the word loosely so we may not really differ in opinion.  I don't really care that bitUSD fluctuates between $0.90 and $1.10 and I don't think bitUSD holders will care either, although adding the floor in the current design so prices fluctuate between $1.00 and $1.20 seems fine.
@Bytemаsteг
I remember from the beginning our target is peg at price 1.0 +/- 0.01
so everybody can be a market maker, sell at price more than 1.0, buy at price less than 1.0
and users can use bitUSD for payment just like 1.0 fiat USD

I want ask you if this is your new plan, peg at price from $1.0 to $1.2?
I want know how to use this bitUSD for payment, why I pay bitUSD to others when bitUSD's price always more than 1?
as a  gateway, what's the price to sell bitUSD, and what's the price to buy bitUSD?

It is always a good deal to buy BitUSD for $1.00
It is always a good idea to sell BitUSD for as much as possible.
As a gateway, I would have a buy wall at $1.00 and then sell whatever inventory I get on the market... this would be the safest bet, but will probably result in the Gateway not having much BitUSD.
As a merchant, you "buy" bitUSD with a dollar's worth of merchandise.

The market must discover the price premium, I obviously want it to be as close to $1.00 as possible, but I have no idea what kind of premium shorts will demand and it will change over time depending upon how many people are selling BitUSD, how many are shorting, and how many are buying.  Until the market discovers the equilibrium we will have to wait and see.  It would probably be helpful to have a graph of the premium relative to the feed over time.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: tbone on December 02, 2015, 11:35:13 pm
Yeah I may have said before that a range of 1 - 1.2 was fine, but I always preferred a range of .9 to 1.1.

The local trade will be 1:1 so everything should fluctuate around 1 not 1.1.   I would call the current design bitUSD Plus and treat it like a separate coin and if merchants and others like the premium then that's fine there might be liquidity.   I have my doubts with consumers and think it will hinder liqudity and a regular bitUSD that fluctuates around 1 is by far my preference.  Hence I would like to see two Smartcoins if possible and I would like to promote a regular bitUSD that fluctuates around 1, not above 1.   

Note: I think the other motivation behind the floor is that in previous designs there were great discounts and premiums without liquidity so this seems to be a recompensation to enforce some kind of peg.  I would rather see a weak peg using the margin calls at the price feed as training wheels, not a permanent forced settlement feature.  Thanks.

@merivercap: I've certainly appreciated having the chance to read all of your excellent input on this matter lately.  However,  I'm having trouble understanding why you think consumers would care so much whether BitUSD fluctuates around $1 or just at/above $1. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: yvv on December 02, 2015, 11:52:18 pm
Imo, a peg fluctuating above 1:1 is as good as a peg fluctuating around 1:1 if deviation from the peg is small. If a premium was less than a penny, nobody would care.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: roadscape on December 03, 2015, 12:05:52 am
The floor could be lower... for example, if the floor is set to $0.97, then the worst case scenario is that it's still competitive w/ PayPal. If the average premium is around 3%, it means USD will float right around $1.00.

So don't guarantee $1.00 .. instead, offer $1.00 on average, but guarantee that one can ALWAYS get 97% of face value.

It's the best of both worlds, no?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on December 03, 2015, 07:21:15 am
@merivercap: I've certainly appreciated having the chance to read all of your excellent input on this matter lately.  However,  I'm having trouble understanding why you think consumers would care so much whether BitUSD fluctuates around $1 or just at/above $1.

Thanks @tbone!   

Yeah every minor issue with most consumers can add significant friction.  I'm ok with not going after peer-to-peer transactions as a business because I know 4-20 cent fees are a significant enough psychological friction to prevent mass p2p transactions.  Hence we can go after merchants who can  cover the cost of transactions and the consumers won't see the small transaction fees. 

This leads me to the other friction for consumers of obtaining and using bitUSD.  Even a minor premium is psychological friction.  Every fee to get into bitUSD is friction.   We are already facing an uphill battle.   We don't need to give additional benefits to merchants.   They are willing to pay up to 1-2% more so giving them guarantees is not necessary. 

1.  Consumers naturally will think of 1 bitUSD as equivalent to 1 dollar.   Maybe around 20% of consumers might exchange it 1:1  despite a permanent premium out of laziness.  Many will start taking out their change purse and actually charge 1.05 or 1.10 or 1.15  for each bitUSD so people are going to be transacting with change.  That's extremely inconvenient.  I don't even want to do that.  We need most general exchanges to happen 1:1 or adoption will grind to a halt.  We're trying to create a new money and so even the tiniest issue will psychologically deter users.

2.  On top of the premium there will be fees to get in and out so the prices will be even higher especially in the beginning.  We're going to see bitUSD for 1.25 - 1.35.   (Note: BitQuick.co was selling bitUSD at 1.35 - 1.45 in Bitshares 1.0 near the tail end of the transition and during the bear market).  Those kind of premiums are non-starters for consumers.   So it's already hard for people that will pay 1-5% fees to get in, but a premium will make the market even more out of whack.  Adoption will grind further to a halt.

Minor friction in this space is a big deal and there's already too much friction already.  If we hope to have a shot at getting the mainstream or even early adopters to use this system as money we have to be careful at every little thing we do.   This premium is not a minor issue either. 

Imo, a peg fluctuating above 1:1 is as good as a peg fluctuating around 1:1 if deviation from the peg is small. If a premium was less than a penny, nobody would care.

Premiums in the beginning are going to be huge.  All the p2p exchanges are going to be selling bitUSD at 1.2+
Furthermore you will get far less liquidity if you don't know what the accepted value of bitUSD is.  The best way is to declare it to be 1:1 among consumers and traders.  That's it.  Simple.

Otherwise  if you only set a floor at 1 you will have an ever changing premium around 1.1, but the accepted value of bitUSD will be different for everyone .. some people will say 1.08 .. others will say 1.12..some will say they don't know.. and it will always fluctuate... So with the confusion in trading you'll get far less liquidity (and I'm not even including forced settlement in this conversation which will make liquidity even worse.)

So if I can guess what the outcome of two designs would be you will have one trading between .95 and 1.05 (spread of 10 cents) or another trading at 1.00 to 1.25 (spread of 25 cents) all things being equal and in non-bull markets.   

The floor could be lower... for example, if the floor is set to $0.97, then the worst case scenario is that it's still competitive w/ PayPal. If the average premium is around 3%, it means USD will float right around $1.00.

So don't guarantee $1.00 .. instead, offer $1.00 on average, but guarantee that one can ALWAYS get 97% of face value.

It's the best of both worlds, no?

That's a little better, but we don't need a guarantee in the first place.  Markets fluctuate so if you want to get out on average you should be able to get out at $1.00 anyways...some trades you'll get $1.05 and others you'll get .95 and yet others you'll get $1... your average exit will still average $1 without needing a guarantee. 



Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on December 03, 2015, 08:22:19 am
The floor could be lower... for example, if the floor is set to $0.97, then the worst case scenario is that it's still competitive w/ PayPal. If the average premium is around 3%, it means USD will float right around $1.00.

So don't guarantee $1.00 .. instead, offer $1.00 on average, but guarantee that one can ALWAYS get AT LEAST 97% of face value.

It's the best of both worlds, no?
^^ This!

And @Xeldal figured out that we (read: the committee) can do this by tuning the force_settlement_offset_percent parameter of a bitasset

Thought it would "change the deal" of bitassets ..
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: Xeldal on December 03, 2015, 03:03:31 pm
The floor could be lower... for example, if the floor is set to $0.97, then the worst case scenario is that it's still competitive w/ PayPal. If the average premium is around 3%, it means USD will float right around $1.00.

So don't guarantee $1.00 .. instead, offer $1.00 on average, but guarantee that one can ALWAYS get AT LEAST 97% of face value.

It's the best of both worlds, no?
^^ This!

And @Xeldal figured out that we (read: the committee) can do this by tuning the force_settlement_offset_percent parameter of a bitasset

Thought it would "change the deal" of bitassets ..

I'm not sure if that was me :), but I have brought up the general idea a few times.  Pulling from older quotes from this thread you find the same thing.

We can lower the feed price such that the average trading price is $1.00 and that has always been my stance.  Adjusting the feed will adjust the average trade price and the premium is always relative to the feed. 

It all comes down to a choice on how you want the BitUSD holder to *pay* for their liquidity.   Do they pay up front when they buy it at a premium, or do they pay on the back end when they sell it at a discount? 

There is NO WAY AROUND IT.   Liquidity has a price proportional to market depth and volatility. 

It is really quite simple, the BitUSD:USD price needs to be factored into the price feed, the feed should adjust in what ever way is necessary to maintain the BitUSD:USD price and otherwise ignore the USD:BTS price.     The USD:BTS price is volatile and will have a high spread at any reasonable volume.   

There is no need for the BitUSD:USD price to have a large spread and the difference in price between $1 and $100,000 of volume on the BitUSD:USD market can be much less than the same difference on the USD:BTS market.   

Therefore, forced-settlement doesn't matter so long as it exists it serves as a backdrop of liquidity that sets the floor on BitUSD : BTS.    The feed producers should simply move this floor until the BitUSD:USD market is trading at $1.00.

Like I have said 1000 times, with Privatized BitAssets there are enough variables to achieve almost everything except interest.   No settlement, small settlement, all settlement. High maintenance collateral, low collateral, etc.  Fixed parameters, Variable Parameters, and an infinite number of ways of calculating yield. 

The only reason not to buy BitUSD at more than 1.00 is the name.... call it a USD correlated asset and it works fine.

I honestly have no idea what the market needs or will prefer, I just know we have the tools in place to find it.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: roadscape on December 04, 2015, 07:43:32 pm
That's a little better, but we don't need a guarantee in the first place.  Markets fluctuate so if you want to get out on average you should be able to get out at $1.00 anyways...some trades you'll get $1.05 and others you'll get .95 and yet others you'll get $1... your average exit will still average $1 without needing a guarantee.

As USD is a "premium" product, such a guarantee sets us apart from the competition & we should take advantage of it, IMO.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on December 04, 2015, 10:24:37 pm
That's a little better, but we don't need a guarantee in the first place.  Markets fluctuate so if you want to get out on average you should be able to get out at $1.00 anyways...some trades you'll get $1.05 and others you'll get .95 and yet others you'll get $1... your average exit will still average $1 without needing a guarantee.

As USD is a "premium" product, such a guarantee sets us apart from the competition & we should take advantage of it, IMO.

I think it will confuse people and make things more inconvenient.   It will set us apart in a negative way and will most likely be a non-starter for consumers.  I personally don't believe in a bitUSD premium and as a company that depends on bitUSD it puts us in a dilemma.   I can't sell to people something I don't believe in.  Do we proceed hoping it will eventually change in the future or wait and advocate for an alternative.

There are those that want to experiment with the current design and I think that's fine.  However we should have an alternative version of bitUSD for those that strongly believe in an alternative design. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: bytemaster on December 05, 2015, 12:07:10 am
I am not apposed to a policy of adjusting the force settlement price such that the average of all trades in a given day occur at around $1.00.   This would have to be a very slowly adjusted parameter (long term moving average of the premium).   

It would produce a currency that has the guarantee that on average it can be sold for $1.00.   Perhaps this is an opportunity to create a new asset called BUX that implements this policy.  Changing the policy on USD without sufficient warning could be detrimental.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: tbone on December 05, 2015, 12:56:47 am
@merivercap: I've certainly appreciated having the chance to read all of your excellent input on this matter lately.  However,  I'm having trouble understanding why you think consumers would care so much whether BitUSD fluctuates around $1 or just at/above $1.

Thanks @tbone!   

Yeah every minor issue with most consumers can add significant friction.  I'm ok with not going after peer-to-peer transactions as a business because I know 4-20 cent fees are a significant enough psychological friction to prevent mass p2p transactions.  Hence we can go after merchants who can  cover the cost of transactions and the consumers won't see the small transaction fees. 

This leads me to the other friction for consumers of obtaining and using bitUSD.  Even a minor premium is psychological friction.  Every fee to get into bitUSD is friction.   We are already facing an uphill battle.   We don't need to give additional benefits to merchants.   They are willing to pay up to 1-2% more so giving them guarantees is not necessary. 

1.  Consumers naturally will think of 1 bitUSD as equivalent to 1 dollar.   Maybe around 20% of consumers might exchange it 1:1  despite a permanent premium out of laziness.  Many will start taking out their change purse and actually charge 1.05 or 1.10 or 1.15  for each bitUSD so people are going to be transacting with change.  That's extremely inconvenient.  I don't even want to do that.  We need most general exchanges to happen 1:1 or adoption will grind to a halt.  We're trying to create a new money and so even the tiniest issue will psychologically deter users.

2.  On top of the premium there will be fees to get in and out so the prices will be even higher especially in the beginning.  We're going to see bitUSD for 1.25 - 1.35.   (Note: BitQuick.co was selling bitUSD at 1.35 - 1.45 in Bitshares 1.0 near the tail end of the transition and during the bear market).  Those kind of premiums are non-starters for consumers.   So it's already hard for people that will pay 1-5% fees to get in, but a premium will make the market even more out of whack.  Adoption will grind further to a halt.

Minor friction in this space is a big deal and there's already too much friction already.  If we hope to have a shot at getting the mainstream or even early adopters to use this system as money we have to be careful at every little thing we do.   This premium is not a minor issue either. 

Imo, a peg fluctuating above 1:1 is as good as a peg fluctuating around 1:1 if deviation from the peg is small. If a premium was less than a penny, nobody would care.

Premiums in the beginning are going to be huge.  All the p2p exchanges are going to be selling bitUSD at 1.2+
Furthermore you will get far less liquidity if you don't know what the accepted value of bitUSD is.  The best way is to declare it to be 1:1 among consumers and traders.  That's it.  Simple.

Otherwise  if you only set a floor at 1 you will have an ever changing premium around 1.1, but the accepted value of bitUSD will be different for everyone .. some people will say 1.08 .. others will say 1.12..some will say they don't know.. and it will always fluctuate... So with the confusion in trading you'll get far less liquidity (and I'm not even including forced settlement in this conversation which will make liquidity even worse.)

So if I can guess what the outcome of two designs would be you will have one trading between .95 and 1.05 (spread of 10 cents) or another trading at 1.00 to 1.25 (spread of 25 cents) all things being equal and in non-bull markets.   

The floor could be lower... for example, if the floor is set to $0.97, then the worst case scenario is that it's still competitive w/ PayPal. If the average premium is around 3%, it means USD will float right around $1.00.

So don't guarantee $1.00 .. instead, offer $1.00 on average, but guarantee that one can ALWAYS get 97% of face value.

It's the best of both worlds, no?

So in your design, will the BitUSD buyer ALWAYS pay a little more than $1, and ALWAYS have to sell for a little less than a $1?  In other words, will the bids always be under $1 and the offers always above $1 by design?
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on December 05, 2015, 08:58:23 am
I am not apposed to a policy of adjusting the force settlement price such that the average of all trades in a given day occur at around $1.00.   This would have to be a very slowly adjusted parameter (long term moving average of the premium).   

It would produce a currency that has the guarantee that on average it can be sold for $1.00.   Perhaps this is an opportunity to create a new asset called BUX that implements this policy.  Changing the policy on USD without sufficient warning could be detrimental.

I think this would be much better and we can always give people plenty of warning...  The only kind of forced settlement I think is somewhat acceptable is if it's at 90% such that we don't have too steep a discount, but most trades would be generally free to swing at a premium or discount.

I still think it's better to experiment more strongly and have one with and without force settlement.  We will learn less with incremental changes.  It's like when you do an A/B test you might find a local maxima, but unless you test bigger changes you won't find larger maxima. 
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on December 06, 2015, 06:10:02 am

So in your design, will the BitUSD buyer ALWAYS pay a little more than $1, and ALWAYS have to sell for a little less than a $1?  In other words, will the bids always be under $1 and the offers always above $1 by design?

No there will be no ALWAYS.  Bids/asks and trades will just fluctuate around $1.  Sometimes it will be .90 and other times 1.1 .. Early on without liquidity we can have a range of .85 to 1.15.. as we get more liquidity spreads may tighten to keep the range between .9 to 1.1 and with even more liquidity between .95 and 1.05.     

Eventually the street price will dominate and people would probably trade 1 bitUSD for $1 locally or purchase bitUSD at $1.01 via ACH.  Local exchange and gateway purchases will dictate the pricing in the internal market such that the average prices for bitUSD might trade at a discount... maybe around .98/.99...
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: xeroc on December 06, 2015, 02:27:00 pm
I'll buy all bitUSD sold for less than $1 and settle them for $1.
Title: Re: BitAsset 2.0 Requirements & Implied Design
Post by: merivercap on December 06, 2015, 08:50:18 pm
I'll buy all bitUSD sold for less than $1 and settle them for $1.

Just for clarification I'm talking about a design without forced settlement. 

But without forced settlement people can buy bitUSD at a discount and then wait for bitUSD to go back to parity or even a premium.  People will hopefully do that to keep the market pegged so if it's a discount there will be more demand to buy and if it sells at a premium there will be more demand to sell.  People should trade towards parity.