Liquidity idea

[JonnyB]

Keep all UIAs.
What I'm saying is we need a master USD smartcoin for fiat.
Use the master as a base smartcoin to create all other fiat smartcoins from.

These other sub smartcoins would hold value in euros or yen etc but couldn't be traded only used to hold value.
They would need to be turned back to BitUSD if you want to do trading.

these sub smartcoins would work by transfering bitusd in to a special EUR wallet which uses a CFD behind the scenes to keep the the value correct by either adding or subtracting Bitusd.

I'm a bit slow with these things.

Lets say I have 1215 BitUSD & I put it into a special Gold wallet because I want to be long 1 ounce of Gold.

Gold then increases by 300% vs. USD.

Where does the additional $2400 come from to pay me my gains. Who loses on that trade?

The blockchain/reserve pool would have to cover these costs. 
But lets get some perspective. For every winning trade there will be a similar number of losing trades which would offset losses and may even make profit.
I think should only be for fiat currencies.
Another way of offsetting any losses would be to charge a 1% fee when users choose to lock their Bitusd to another fiat currency.
Another way to offset this proposed systems excessive long USD position might with prediction markets.

Why do no real world companies offer this exact service unless their exposure is hedged?...

Imo the closest we can come to offering this service is something like my 'Simple Smartcoin Account' approach.. https://bitsharestalk.org/index.php/topic,21507.0.html

The real world example that does exactly this would be IG index (the worlds largest spreadbetting company )

Andrew Bole, Risk director at IG index

As counterparty to thousands of spread trades every day, from small punts to large trading positions, IG Index has to manage a significant amount of market risk. But hedging every spread trade as it is placed is not practical.

There are two ways around this problem. First, in highly active markets, many of the spread bets cancel each other out. "If it's a very busy market, you will have a lot of two-way business, which is ideal. We are just acting as another market-maker," says Bole.

However, in less liquid markets, such as spread bets on single stocks, IG Index cannot rely on investors taking both sides of the market. Instead, it hedges its exposure using futures on the underlying stock.

Yeah I was referring to spread betting companies. From the same article you quoted...

However, in less liquid markets, such as spread bets on single stocks, IG Index cannot rely on investors taking both sides of the market. Instead, it hedges its exposure using futures on the underlying stock. This is simple in principle, but the introduction of foreign exchange risk increases the complexity - a UK client might trade an overseas equity index but would expect payment in sterling. "The key part is working out what the underlying equivalent is (within our exposure model), and then you can use the tools available within the normal financial markets," Bole explains.

Keeping an eye on IG's exposure, the risk committee uses an approach that would be familiar to any fund manager - employing limits on individual underlyings, sectors of the markets and countries, in what Bole calls a hierarchy of exposure.

"If all your clients were long, you could arguably be inside your limits, but you could have massive exposure to the UK stock market as a whole. So, in that case, you would hedge on futures on the index. Or, if you are concentrated in a banking sector, you can review that sector - so you're building up a much better portfolio picture," he says.

They have a very complex risk management model to hedge their exposure wherever it's not easily cancelled out and presumably very few of our markets would be liquid and evenly matched at the beginning.

I like the idea of simple Smartcoin accounts but I think we'd have to incentivize others to put up collateral and then let market participants decide if they're happy with it. If we allowed BTS to be the loser if we were over-exposed/not properly hedged then we put BTS at serious risk imo.

For fiat currencies I think it would be fine maybe not for more volatile assets though.
If we were only long dollar and short all other fiat I can't see it being very costly.

[cylonmaker2053]

I think if we combine @Empirical1.2 's yield harvesting proposal (link below) with either a liquidity pool or rewards for providing liquidity, we'll be well on our way.  @JonnyBitcoin, I haven't seen you comment on this idea at all and hope you'll take a closer look and serious consider supporting it.  @cylonmaker2053, what about you?  I'm hoping we can start to coalesce around a smart idea like this. And keep in mind it doesn't require major structural changes to BitAssets, perhaps just tweaking settlement. 

https://bitsharestalk.org/index.php/topic,21597.0.html

i just replied on that linked thread. i'm not a fan of dilution if it means what i think it does --expanding the planned BTS supply. Having a fixed supply that isn't up for vote is a big allure of crypto to me.

why not recycle fees from the asset markets into some sort of yield, either to people who borrow smartcoins into existence, or to liquidity providers?

We're just talking about using funds available for worker proposals.  You can read further discussion about this on that thread now. 
 
https://bitsharestalk.org/index.php/topic,21597.0.html

gotcha, thanks ...the term "dilution" makes me nervous, in general. appreciate the clarification.

[Empirical1.2]

Keep all UIAs.
What I'm saying is we need a master USD smartcoin for fiat.
Use the master as a base smartcoin to create all other fiat smartcoins from.

These other sub smartcoins would hold value in euros or yen etc but couldn't be traded only used to hold value.
They would need to be turned back to BitUSD if you want to do trading.

these sub smartcoins would work by transfering bitusd in to a special EUR wallet which uses a CFD behind the scenes to keep the the value correct by either adding or subtracting Bitusd.

I'm a bit slow with these things.

Lets say I have 1215 BitUSD & I put it into a special Gold wallet because I want to be long 1 ounce of Gold.

Gold then increases by 300% vs. USD.

Where does the additional $2400 come from to pay me my gains. Who loses on that trade?

The blockchain/reserve pool would have to cover these costs. 
But lets get some perspective. For every winning trade there will be a similar number of losing trades which would offset losses and may even make profit.
I think should only be for fiat currencies.
Another way of offsetting any losses would be to charge a 1% fee when users choose to lock their Bitusd to another fiat currency.
Another way to offset this proposed systems excessive long USD position might with prediction markets.

Why do no real world companies offer this exact service unless their exposure is hedged?...

Imo the closest we can come to offering this service is something like my 'Simple Smartcoin Account' approach.. https://bitsharestalk.org/index.php/topic,21507.0.html

The real world example that does exactly this would be IG index (the worlds largest spreadbetting company )

Andrew Bole, Risk director at IG index

As counterparty to thousands of spread trades every day, from small punts to large trading positions, IG Index has to manage a significant amount of market risk. But hedging every spread trade as it is placed is not practical.

There are two ways around this problem. First, in highly active markets, many of the spread bets cancel each other out. "If it's a very busy market, you will have a lot of two-way business, which is ideal. We are just acting as another market-maker," says Bole.

However, in less liquid markets, such as spread bets on single stocks, IG Index cannot rely on investors taking both sides of the market. Instead, it hedges its exposure using futures on the underlying stock.

Yeah I was referring to spread betting companies. From the same article you quoted...

However, in less liquid markets, such as spread bets on single stocks, IG Index cannot rely on investors taking both sides of the market. Instead, it hedges its exposure using futures on the underlying stock. This is simple in principle, but the introduction of foreign exchange risk increases the complexity - a UK client might trade an overseas equity index but would expect payment in sterling. "The key part is working out what the underlying equivalent is (within our exposure model), and then you can use the tools available within the normal financial markets," Bole explains.

Keeping an eye on IG's exposure, the risk committee uses an approach that would be familiar to any fund manager - employing limits on individual underlyings, sectors of the markets and countries, in what Bole calls a hierarchy of exposure.

"If all your clients were long, you could arguably be inside your limits, but you could have massive exposure to the UK stock market as a whole. So, in that case, you would hedge on futures on the index. Or, if you are concentrated in a banking sector, you can review that sector - so you're building up a much better portfolio picture," he says.

They have a very complex risk management model to hedge their exposure wherever it's not easily cancelled out and presumably very few of our markets would be liquid and evenly matched at the beginning.

I like the idea of simple Smartcoin accounts but I think we'd have to incentivize others to put up collateral and then let market participants decide if they're happy with it. If we allowed BTS to be the loser if we were over-exposed/not properly hedged then we put BTS at serious risk imo.

[tbone]

I think if we combine @Empirical1.2 's yield harvesting proposal (link below) with either a liquidity pool or rewards for providing liquidity, we'll be well on our way.  @JonnyBitcoin, I haven't seen you comment on this idea at all and hope you'll take a closer look and serious consider supporting it.  @cylonmaker2053, what about you?  I'm hoping we can start to coalesce around a smart idea like this. And keep in mind it doesn't require major structural changes to BitAssets, perhaps just tweaking settlement. 

https://bitsharestalk.org/index.php/topic,21597.0.html

i just replied on that linked thread. i'm not a fan of dilution if it means what i think it does --expanding the planned BTS supply. Having a fixed supply that isn't up for vote is a big allure of crypto to me.

why not recycle fees from the asset markets into some sort of yield, either to people who borrow smartcoins into existence, or to liquidity providers?

We're just talking about using funds available for worker proposals.  You can read further discussion about this on that thread now. 
 
https://bitsharestalk.org/index.php/topic,21597.0.html

[CoinHoarder]

I am not in favor of any proposal that limits the utility of Bitshares' features. Having different kinds of Smartcoins is one of Bitshares' strengths. I want to be able to diversify into multiple assets like gold, silver, Bitcoin, Nasdaq, etc... bitUSD is so boring to me.

[cylonmaker2053]

I think if we combine @Empirical1.2 's yield harvesting proposal (link below) with either a liquidity pool or rewards for providing liquidity, we'll be well on our way.  @JonnyBitcoin, I haven't seen you comment on this idea at all and hope you'll take a closer look and serious consider supporting it.  @cylonmaker2053, what about you?  I'm hoping we can start to coalesce around a smart idea like this. And keep in mind it doesn't require major structural changes to BitAssets, perhaps just tweaking settlement. 

https://bitsharestalk.org/index.php/topic,21597.0.html

i just replied on that linked thread. i'm not a fan of dilution if it means what i think it does --expanding the planned BTS supply. Having a fixed supply that isn't up for vote is a big allure of crypto to me.

why not recycle fees from the asset markets into some sort of yield, either to people who borrow smartcoins into existence, or to liquidity providers?

[tbone]

We should do both, but the must be seperate proposals. If they are combined we would never agree on the details and end of not passing it.

I agree.  The yield harvesting proposal stands on its own.  Although it is perfectly compatible with any liquidity measures we decide separately to put into place.  Beyond that, @Empirical1.2 has also mentioned that it would tie in nicely with a bond market, although perhaps he can explain that a little further.

[Pheonike]

We should do both, but the must be seperate proposals. If they are combined we would never agree on the details and end of not passing it.

[tbone]

The more i think about this and see responses, i the more i'm weighing towards not supporting this proposal. i see merit in the idea, and would have likely supported something like this as a single market roll out for Bitshares in the beginning, but at this point i think our community has suffered from too many pivots; i also love our trading system and enjoy having a variety of markets to trade. it doesn't sit well with me trying to force volume from smartcoins people are voicing their preferences to trade (by actually trading them). it's possible some, or more, of that volume will simply disappear with discontent and more uncertainty from a major pivot.

there are always multiple solutions to the same problem, and in this context we have several other proposals to boost liquidity. One involves a complicated subsidization scheme, which is also a reasonable idea, but i prefer simply providing discounts for trading frequency.

we already have a great system, i think we're lacking on getting the word out to candidate traders. a persistent marketing campaign to retail and crypto traders is where i think we'd get the biggest bang for the effort.

I think we all agree that liquidity is the problem.
The elephant in the room for me is I can't buy $1000 of bitusd at anywhere near the peg.
Bitusd is only created when it is borrowed in existence. These creators of bitusd are rightly afraid that they will not be able to buy back to cover their debts.
Getting the word out or more marketing will not fix this issue.

People seem to be trying to fix the symptoms of poor liquidity rather than the underlying cause.

I love bitshares and if we can come up with a suitable system for liquidity then I think bitshares will sell itself.

I think if we combine @Empirical1.2 's yield harvesting proposal (link below) with either a liquidity pool or rewards for providing liquidity, we'll be well on our way.  @JonnyBitcoin, I haven't seen you comment on this idea at all and hope you'll take a closer look and serious consider supporting it.  @cylonmaker2053, what about you?  I'm hoping we can start to coalesce around a smart idea like this. And keep in mind it doesn't require major structural changes to BitAssets, perhaps just tweaking settlement. 

https://bitsharestalk.org/index.php/topic,21597.0.html

[cylonmaker2053]

I think we all agree that liquidity is the problem.
The elephant in the room for me is I can't buy $1000 of bitusd at anywhere near the peg.
Bitusd is only created when it is borrowed in existence. These creators of bitusd are rightly afraid that they will not be able to buy back to cover their debts.
Getting the word out or more marketing will not fix this issue.

People seem to be trying to fix the symptoms of poor liquidity rather than the underlying cause.

I love bitshares and if we can come up with a suitable system for liquidity then I think bitshares will sell itself.

agreed and well said. what we really need is a bullish whale willing to buy $10M worth of BTS and systematically commit to borrowing bitUSD into existence and putting large chunks up for sale at whatever rate is demanded on the buy side. The only incentive we have at the moment to borrowing any smartcoin into existence is to leverage a long bet on BTS. Is there a better incentive, or is that sufficient to induce our first whale to bite?

the long-awaited bond market is all i think we'll need on the demand side.

[JonnyB]

The more i think about this and see responses, i the more i'm weighing towards not supporting this proposal. i see merit in the idea, and would have likely supported something like this as a single market roll out for Bitshares in the beginning, but at this point i think our community has suffered from too many pivots; i also love our trading system and enjoy having a variety of markets to trade. it doesn't sit well with me trying to force volume from smartcoins people are voicing their preferences to trade (by actually trading them). it's possible some, or more, of that volume will simply disappear with discontent and more uncertainty from a major pivot.

there are always multiple solutions to the same problem, and in this context we have several other proposals to boost liquidity. One involves a complicated subsidization scheme, which is also a reasonable idea, but i prefer simply providing discounts for trading frequency.

we already have a great system, i think we're lacking on getting the word out to candidate traders. a persistent marketing campaign to retail and crypto traders is where i think we'd get the biggest bang for the effort.

I think we all agree that liquidity is the problem.
The elephant in the room for me is I can't buy $1000 of bitusd at anywhere near the peg.
Bitusd is only created when it is borrowed in existence. These creators of bitusd are rightly afraid that they will not be able to buy back to cover their debts.
Getting the word out or more marketing will not fix this issue.

People seem to be trying to fix the symptoms of poor liquidity rather than the underlying cause.

I love bitshares and if we can come up with a suitable system for liquidity then I think bitshares will sell itself.

 

 

[JonnyB]

Keep all UIAs.
What I'm saying is we need a master USD smartcoin for fiat.
Use the master as a base smartcoin to create all other fiat smartcoins from.

These other sub smartcoins would hold value in euros or yen etc but couldn't be traded only used to hold value.
They would need to be turned back to BitUSD if you want to do trading.

these sub smartcoins would work by transfering bitusd in to a special EUR wallet which uses a CFD behind the scenes to keep the the value correct by either adding or subtracting Bitusd.

I'm a bit slow with these things.

Lets say I have 1215 BitUSD & I put it into a special Gold wallet because I want to be long 1 ounce of Gold.

Gold then increases by 300% vs. USD.

Where does the additional $2400 come from to pay me my gains. Who loses on that trade?

The blockchain/reserve pool would have to cover these costs. 
But lets get some perspective. For every winning trade there will be a similar number of losing trades which would offset losses and may even make profit.
I think should only be for fiat currencies.
Another way of offsetting any losses would be to charge a 1% fee when users choose to lock their Bitusd to another fiat currency.
Another way to offset this proposed systems excessive long USD position might with prediction markets.

This makes no sense, you don't really seem to understand how BitAssets work.You propose to just get rid of what makes BTS a good technology for a DEX.
Plus, the market peg on BitCNY is much better than with BitUSD, with much more efforts from the Chinese geared toward that. Getting rid of BitCNY would be completely disdainful.

I'm not suggesting we get rid of the bitasset mechanism, I'm saying concentrate it to one market.
I think the way bitassets work is good but we need at least 10x the volume and depth on bitusd for it to become a viable option for people. 
Maybe theres a case for keeping BitCNY but you are wrong when you say the market peg with BitCNY is better than bitUSD.
Anyway I said to keep a pegged CNYcoin but just not make it tradable. 

[JonnyB]

Keep all UIAs.
What I'm saying is we need a master USD smartcoin for fiat.
Use the master as a base smartcoin to create all other fiat smartcoins from.

These other sub smartcoins would hold value in euros or yen etc but couldn't be traded only used to hold value.
They would need to be turned back to BitUSD if you want to do trading.

these sub smartcoins would work by transfering bitusd in to a special EUR wallet which uses a CFD behind the scenes to keep the the value correct by either adding or subtracting Bitusd.

I'm a bit slow with these things.

Lets say I have 1215 BitUSD & I put it into a special Gold wallet because I want to be long 1 ounce of Gold.

Gold then increases by 300% vs. USD.

Where does the additional $2400 come from to pay me my gains. Who loses on that trade?

The blockchain/reserve pool would have to cover these costs. 
But lets get some perspective. For every winning trade there will be a similar number of losing trades which would offset losses and may even make profit.
I think should only be for fiat currencies.
Another way of offsetting any losses would be to charge a 1% fee when users choose to lock their Bitusd to another fiat currency.
Another way to offset this proposed systems excessive long USD position might with prediction markets.

Why do no real world companies offer this exact service unless their exposure is hedged?...

Imo the closest we can come to offering this service is something like my 'Simple Smartcoin Account' approach.. https://bitsharestalk.org/index.php/topic,21507.0.html

The real world example that does exactly this would be IG index (the worlds largest spreadbetting company )

Andrew Bole, Risk director at IG index

As counterparty to thousands of spread trades every day, from small punts to large trading positions, IG Index has to manage a significant amount of market risk. But hedging every spread trade as it is placed is not practical.

There are two ways around this problem. First, in highly active markets, many of the spread bets cancel each other out. "If it's a very busy market, you will have a lot of two-way business, which is ideal. We are just acting as another market-maker," says Bole.

However, in less liquid markets, such as spread bets on single stocks, IG Index cannot rely on investors taking both sides of the market. Instead, it hedges its exposure using futures on the underlying stock.

[cylonmaker2053]

The more i think about this and see responses, i the more i'm weighing towards not supporting this proposal. i see merit in the idea, and would have likely supported something like this as a single market roll out for Bitshares in the beginning, but at this point i think our community has suffered from too many pivots; i also love our trading system and enjoy having a variety of markets to trade. it doesn't sit well with me trying to force volume from smartcoins people are voicing their preferences to trade (by actually trading them). it's possible some, or more, of that volume will simply disappear with discontent and more uncertainty from a major pivot.

there are always multiple solutions to the same problem, and in this context we have several other proposals to boost liquidity. One involves a complicated subsidization scheme, which is also a reasonable idea, but i prefer simply providing discounts for trading frequency.

we already have a great system, i think we're lacking on getting the word out to candidate traders. a persistent marketing campaign to retail and crypto traders is where i think we'd get the biggest bang for the effort.

[Empirical1.2]

Keep all UIAs.
What I'm saying is we need a master USD smartcoin for fiat.
Use the master as a base smartcoin to create all other fiat smartcoins from.

These other sub smartcoins would hold value in euros or yen etc but couldn't be traded only used to hold value.
They would need to be turned back to BitUSD if you want to do trading.

these sub smartcoins would work by transfering bitusd in to a special EUR wallet which uses a CFD behind the scenes to keep the the value correct by either adding or subtracting Bitusd.

I'm a bit slow with these things.

Lets say I have 1215 BitUSD & I put it into a special Gold wallet because I want to be long 1 ounce of Gold.

Gold then increases by 300% vs. USD.

Where does the additional $2400 come from to pay me my gains. Who loses on that trade?

The blockchain/reserve pool would have to cover these costs. 
But lets get some perspective. For every winning trade there will be a similar number of losing trades which would offset losses and may even make profit.
I think should only be for fiat currencies.
Another way of offsetting any losses would be to charge a 1% fee when users choose to lock their Bitusd to another fiat currency.
Another way to offset this proposed systems excessive long USD position might with prediction markets.

Why do no real world companies offer this exact service unless their exposure is hedged?...

Imo the closest we can come to offering this service is something like my 'Simple Smartcoin Account' approach.. https://bitsharestalk.org/index.php/topic,21507.0.html