BackgroundThe recent release of GUI wallet introduces a 'Force Settlement' button. This Force Settlement function allows some users to exploit the current 'loophole' in the bitCNY market and gain profit at the expense of the bitCNY providers.
(See
https://bitsharestalk.org/index.php/topic,20283.0.html and
https://bitsharestalk.org/index.php/topic,20287.0.html)
Transwiser (a major partner who provides bitCNY<->CNY fiat) and a number of Chinese users who depend on this service are suffering big losses. This is not the worst. They fear more losses to come.
The Force Settlement function closes the borrow/short positions with lowest collateral ratio and sells their collateral at the settlement price. For the bitCNY market, this means an immediate loss to the shorters (and a gain for the ‘force settle’ users) because bitCNY is trading below the feed price. As we found out, the feed price does not accurately reflect the CNY price. It is in fact lower than the price listed in major China websites like OKCoin. The price discrepancy created an artificial arbitrage opportunity for the ‘Force Settle’ opportunists.
In addition, the shorters will be forced to sell their collateral even if they have sufficient collaterals to avoid a margin call.
All this means that the Force Settle opportunists could force settle to exchange bitCNY for BTS on the DEX and then sell them at profit in a centralized chinese exchange eg BTC38. This HURTS A LOT of bitCNY shorters, no matter the liquidity available in the DEX.
Effectively, they are being forced to sell their collaterals and close their positions against their will. This introduction of this ‘force settlement’ was not known by the Chinese community at large. Little wonder that the Chinese community considers this behaviour as ‘robbing the shorters’.
Urgent call for helpbitcrab and alt, representing the Chinese community, called on the committee members for help. After a lengthy and intense discussion (for over six hours), we consider the situation warrants an urgent response as follows:
1) Temporarily SUSPEND the "force settlement" function by raising its fee to 1Billion for about a week.
This will give us time to put in a remedy:
1) Disable frontend "settlement" button when there are buy orders available above the feed (requires Svk work)
2) Adjust price feed for bitCNY market by including other Chinese exchanges in sourcing CNY prices (xeroc has agreed to work on the changes)
3) Get a CNY liquidity bot to put up buy orders with bids over the feed price and so protecting the shorters from abusing the force settlement function for an opportunistic gain. ( bitcrab to work on it)
In normal circumstances, the Committee would like to give the Community enough time to discuss the proposals we intend to put up - first with a forum discussion and then setting the proposal period to one week.
As we are facing a crisis now, we would like to ask the Community to support the Chinese’s call for help - and to make this change as soon as possible (within 24 hours) in order to save the Chinese shorters from further losses.
We seek your kind understanding and support for this proposal.
The Bitshares Committee
Show Posts
?
