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Quote from: tonyk on December 02, 2015, 12:56:49 amQuote from: bytemaster on December 01, 2015, 08:07:38 pmQuote from: tonyk on December 01, 2015, 08:03:05 pmQuote from: bytemaster on December 01, 2015, 07:58:13 pmAn option with a 10 year expiration is close enough to infinite. The further in the future you go the smaller the difference in price.So do your estimation based upon the curve generated by 3 month, 6 month, and 12 month expirations.Do you have any idea how much an option with 3 y expiration and the volatility of BTS will cost?I bet it will be hitting 1usd per 1usd if not more.I actually think that the option is not infinite in term because the option doesn't have a fixed price. So I think that is the wrong algorithm to use.When I go short, I am pricing the cost of finding someone else to take over my short position in the future relative to the BitUSD holder wishing to exercise. With liquidity and no fixed price, the premium can be much lower.1 bitCNY - is 1) 'smart instrument' and 2)the right to sell this instrument for a price of 1 CNY at any point in the future.So this is definitely some instrument[we are not concerned with exactly here] plus a put option with strike of 1 CNY [ aka giving you the right to sell said instrument for 1 CNY = straight definition of an option]...except it has no expiration date.When you are buying the bitCNY you are paying one CNY for the underlying contract (or smart instrument) and anything above 1 CNY is the premium for the put option.And yes any option definitely has a price (theoretical value) at any point in time.I think the place you went wrong is saying you have the right to sell said instrument for 1 CNY... which is no true, you have the right to sell it for 1 CNY worth of BTS. So the person selling the BitCNY into circulation simply has a callable (on-demand) loan. You borrow money that is callable on demand (24 hour notice)... considering the loan is interest-free itself we can consider the premium on BitCNY to be PRICE_OF_OPTION - PREPAID_INTEREST where PREPAID_INTEREST is a variable that represents the value gained by the short and is proportional to the expected change in price of the collateral. There are a lot of variables in play, but I do not think it is fair to say the premium is just the cost of the option. It factors in the cost of capital for collateral required to stay in the top 98% where you do not have to provide the option. In other words the bottom 2% of least-collateralized shorts must assume the cost of the option. The other 98% don't have to provide the option. So the premium is pro-rated between these two costs.
Quote from: bytemaster on December 01, 2015, 08:07:38 pmQuote from: tonyk on December 01, 2015, 08:03:05 pmQuote from: bytemaster on December 01, 2015, 07:58:13 pmAn option with a 10 year expiration is close enough to infinite. The further in the future you go the smaller the difference in price.So do your estimation based upon the curve generated by 3 month, 6 month, and 12 month expirations.Do you have any idea how much an option with 3 y expiration and the volatility of BTS will cost?I bet it will be hitting 1usd per 1usd if not more.I actually think that the option is not infinite in term because the option doesn't have a fixed price. So I think that is the wrong algorithm to use.When I go short, I am pricing the cost of finding someone else to take over my short position in the future relative to the BitUSD holder wishing to exercise. With liquidity and no fixed price, the premium can be much lower.1 bitCNY - is 1) 'smart instrument' and 2)the right to sell this instrument for a price of 1 CNY at any point in the future.So this is definitely some instrument[we are not concerned with exactly here] plus a put option with strike of 1 CNY [ aka giving you the right to sell said instrument for 1 CNY = straight definition of an option]...except it has no expiration date.When you are buying the bitCNY you are paying one CNY for the underlying contract (or smart instrument) and anything above 1 CNY is the premium for the put option.And yes any option definitely has a price (theoretical value) at any point in time.
Quote from: tonyk on December 01, 2015, 08:03:05 pmQuote from: bytemaster on December 01, 2015, 07:58:13 pmAn option with a 10 year expiration is close enough to infinite. The further in the future you go the smaller the difference in price.So do your estimation based upon the curve generated by 3 month, 6 month, and 12 month expirations.Do you have any idea how much an option with 3 y expiration and the volatility of BTS will cost?I bet it will be hitting 1usd per 1usd if not more.I actually think that the option is not infinite in term because the option doesn't have a fixed price. So I think that is the wrong algorithm to use.When I go short, I am pricing the cost of finding someone else to take over my short position in the future relative to the BitUSD holder wishing to exercise. With liquidity and no fixed price, the premium can be much lower.
Quote from: bytemaster on December 01, 2015, 07:58:13 pmAn option with a 10 year expiration is close enough to infinite. The further in the future you go the smaller the difference in price.So do your estimation based upon the curve generated by 3 month, 6 month, and 12 month expirations.Do you have any idea how much an option with 3 y expiration and the volatility of BTS will cost?I bet it will be hitting 1usd per 1usd if not more.
An option with a 10 year expiration is close enough to infinite. The further in the future you go the smaller the difference in price.So do your estimation based upon the curve generated by 3 month, 6 month, and 12 month expirations.
Quote from: tonyk on December 01, 2015, 05:58:44 pmQuote from: maqifrnswa on December 01, 2015, 04:08:47 pmProblem:Mathematically, the value of the premium shorts sell to longs is a function of expected future variance in the value of that same premium - which makes it very difficult to calculate. However, markets do this all the time - it's basically pricing the derivative of a derivative. It's like trading options of VIX.http://sixfigureinvesting.com/2010/01/trading-vix-options/actually it is trading options with no expiration date on VIX...which makes the task...close to impossible.otherwise great post + 1No expiration?Quote7. Expiring In-the-Money VIX options give a cash payout. The payout is determined by the difference between the strike price and the VRO quotation on the expiration day. For example the payout would be $1.42 if the strike price of your call option was $15 and the VRO was $16.42.8. The expiration or “print” amount when VIX options expire is given under the ^VRO symbol (Yahoo) or $VRO (Schwab). This is the expiration value, not the opening cash VIX on the Wednesday morning of expiration. VIX options expire at market open on expiration day, so they are not tradeable on that day.9. VIX options do not expire on the same days as equity options. It is almost always on a Wednesday See this post for upcoming expirations. This odd timing is driven by the needs of a straightforward settlement process. On the expiration Wednesday the only SPX options used in the VIX calculation are the ones that expire in exactly 30 days. For more on this process see Calculating the VIX—the easy part.
Quote from: maqifrnswa on December 01, 2015, 04:08:47 pmProblem:Mathematically, the value of the premium shorts sell to longs is a function of expected future variance in the value of that same premium - which makes it very difficult to calculate. However, markets do this all the time - it's basically pricing the derivative of a derivative. It's like trading options of VIX.http://sixfigureinvesting.com/2010/01/trading-vix-options/actually it is trading options with no expiration date on VIX...which makes the task...close to impossible.otherwise great post + 1
Problem:Mathematically, the value of the premium shorts sell to longs is a function of expected future variance in the value of that same premium - which makes it very difficult to calculate. However, markets do this all the time - it's basically pricing the derivative of a derivative. It's like trading options of VIX.http://sixfigureinvesting.com/2010/01/trading-vix-options/
7. Expiring In-the-Money VIX options give a cash payout. The payout is determined by the difference between the strike price and the VRO quotation on the expiration day. For example the payout would be $1.42 if the strike price of your call option was $15 and the VRO was $16.42.8. The expiration or “print” amount when VIX options expire is given under the ^VRO symbol (Yahoo) or $VRO (Schwab). This is the expiration value, not the opening cash VIX on the Wednesday morning of expiration. VIX options expire at market open on expiration day, so they are not tradeable on that day.9. VIX options do not expire on the same days as equity options. It is almost always on a Wednesday See this post for upcoming expirations. This odd timing is driven by the needs of a straightforward settlement process. On the expiration Wednesday the only SPX options used in the VIX calculation are the ones that expire in exactly 30 days. For more on this process see Calculating the VIX—the easy part.
I agree with your definition of the requirements, but the conclusion is just the current description of how bitshares works...and I'm not sure this is the only possible way it *could* work.
General rules:1) When in oversupply, destruction (settling) should be incentivized2) When in undersupply, creation (shorting) should be incentivized
Q) Is there another design which doesn't have the same biased risk profile, or is this just a natural consequence of not having redeemability?
The problems as I see them: BTS price continues to fall. The declining value of BTS cannot support the creation and maintenance of bitassets The market mechanics are not well documented and over complicated for even the most advanced traders The market mechanics are skewed towards bitasset holders instead of shorts. This innevitably leads to less liquidity and inefficient markets As a result of number 3, it is far less risky and more profitable to margin trade on centralized exchanges than on Bitshares. Why would you short BTC releative to BTS on Bitshares when you can do so on Poloniex while incurring less of a costMarket making for bitasset markets is not profitable and far too riskyI'm sure there are more problems that I have not enumerated. I have some idea of how to solve them, but I don't see the BM/community taking the necessary actions to fix these problems. We are wasting time adding features like stealth transfers to the GUI instead of making our core product actually work. I'm at my wits end and I've been here since the beginning.
Its important to remember that much progress has been made and the building blocks are in place: DPOS, basic market infrastructure, a (mostly polished) user-friendly web interface, ect. We have to remember that this is programmable finance. What does not work now can always be changed. Eventually we will find the right formula. I think there is a good chance we will see some solid adoption with the implementation of a bond/swap market. Also, I have stated before that Smartcoins for physical commodities may be the ticket to real user adoption. No other project can compete with that at this point in time.
I'm sure there are more problems that I have not enumerated. I have some idea of how to solve them, but I don't see the BM/community taking the necessary actions to fix these problems. We are wasting time adding features like stealth transfers to the GUI instead of making our core product actually work. I'm at my wits end and I've been here since the beginning.
Even if you don't agree with my analysis for the cause of the premium, you must acknowledge that it was designed to trade at a premium. I think this is suboptimal.
Quote from: merivercap on November 26, 2015, 04:28:20 amYou believe because one side gets margin-called and has to actively maintain collateral that that creates a premium. I don't believe that. With respect, you're wrong. I can prove it:Lets call the risk of getting margin called Rm and the risk of a black swan Rb. Now, each of these risks has a probability associated with it (call them Pm and Pb)... Even if they are very difficult to quantify, we can say with certainty that Pm > Pb at all times. Equilibrium price in the bitUSD market is the feed price. When I borrow bitUSD from the market I take on Rm. When I buy bitUSD from the market I take on Rb. If I borrow bitUSD and then sell it at the feed price, I'm saying Rm == Rb, which is obviously a false assumption. If we know that Pm>Pb at all times, then as a rational trader I must sell by borrowed bitUSD greater than the feed price, to make sure I satisfy Pm>Pb.
You believe because one side gets margin-called and has to actively maintain collateral that that creates a premium. I don't believe that.
Quote from: sittingduck on November 26, 2015, 07:13:49 pmThe point was to create a currency, not a trading instrument. The currency use case requires fungible long positions. But is it impossible to create a pegged currency that trades at parity which is also fungible?
The point was to create a currency, not a trading instrument. The currency use case requires fungible long positions.
Quote from: clout on November 24, 2015, 10:10:19 pmQuote from: bytemaster on November 24, 2015, 07:52:11 pmQuote from: yvv on November 23, 2015, 07:00:56 pmThanks for bringing up this discussion. Was wondering similar questions. Bitshares advertises bitAssets as a cool way to store value. You like gold, here we have bitGold for you, its value is pegged to gold. But, in order for bitGold to be a cool store of value, somebody have to issue enough and make the market. How do you issue a bitAsset risk free way? If you borrow bitAsset and BTS falls, you are screwed.If I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).Only selling BitUSD in the BTS market is creating leverage risk.This is not true if you are subject to an SQP above 100%agree with you, we need to set all SQP to 1000, then ask people who borrowed bitCNY to sell bitCNY for CNYfor other assets which don't have a gateway, you can sell it for stable asset, for example: sell bitUSD for bitCNY/bitGOLD ....if all people who borrowed bitUSD/bitCNY, only sell for stable asset instead of BTS/BTC, the peg will become more stable.other people who bought bitUSD can use it to buy BTS/BTC.all people who borrowed bitCNY can get profit from marketmaker fees.
Quote from: bytemaster on November 24, 2015, 07:52:11 pmQuote from: yvv on November 23, 2015, 07:00:56 pmThanks for bringing up this discussion. Was wondering similar questions. Bitshares advertises bitAssets as a cool way to store value. You like gold, here we have bitGold for you, its value is pegged to gold. But, in order for bitGold to be a cool store of value, somebody have to issue enough and make the market. How do you issue a bitAsset risk free way? If you borrow bitAsset and BTS falls, you are screwed.If I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).Only selling BitUSD in the BTS market is creating leverage risk.This is not true if you are subject to an SQP above 100%
Quote from: yvv on November 23, 2015, 07:00:56 pmThanks for bringing up this discussion. Was wondering similar questions. Bitshares advertises bitAssets as a cool way to store value. You like gold, here we have bitGold for you, its value is pegged to gold. But, in order for bitGold to be a cool store of value, somebody have to issue enough and make the market. How do you issue a bitAsset risk free way? If you borrow bitAsset and BTS falls, you are screwed.If I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).Only selling BitUSD in the BTS market is creating leverage risk.
Thanks for bringing up this discussion. Was wondering similar questions. Bitshares advertises bitAssets as a cool way to store value. You like gold, here we have bitGold for you, its value is pegged to gold. But, in order for bitGold to be a cool store of value, somebody have to issue enough and make the market. How do you issue a bitAsset risk free way? If you borrow bitAsset and BTS falls, you are screwed.
Where is the reward in your logic? If I buy bitUSD, I don't get any reward, if I borrow bitUSD, I may get a reward depending on market sentiments ..
In the end, you want to answer this question to your self:Do you want to incentivize customers moving their funds into a stable system?Do you want to incentivize merchants to use the system?Or do you want to equally incentivize both parties?
Just wonder how to deposit BitUsd to openledger wallet! Sorry for newbie question
With a few small changes we could make the following safe:1. Borrowing BitUSD + Holding BitUSD means no margin call (account holdings and open orders can be used to cover).2. If you have no access to BitUSD then your collateral will be sold.
Quote from: merivercap on November 24, 2015, 11:05:00 pmI think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear. No. I'm going to try and make this as simple as possible to understand. Outside of a systematic failure:Q) Can you get margin called, when you borrow bitUSD?Q) Can you get margin called buying bitUSD?
I think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear.
Quote from: yvv on November 23, 2015, 07:00:56 pmThanks for bringing up this discussion. Was wondering similar questions. Bitshares advertises bitAssets as a cool way to store value. You like gold, here we have bitGold for you, its value is pegged to gold. But, in order for bitGold to be a cool store of value, somebody have to issue enough and make the market. How do you issue a bitAsset risk free way? If you borrow bitAsset and BTS falls, you are screwed.If I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).
now you and the 'get only what you asked for' order matching invention.... this was a great square wheel, imo... I really do not get the grunge you hold against it.
I just recently push a new upgrade to the price feed script so that witnesses can pick SQP on a per asset basis ..
Quote from: xeroc on November 25, 2015, 07:54:59 amQuote from: clout on November 25, 2015, 07:16:11 amQuote from: merivercap on November 24, 2015, 11:05:00 pmQuote from: monsterer on November 24, 2015, 09:38:19 pmQuote from: merivercap on November 24, 2015, 09:17:19 pmHence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.I think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear. thisSince the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?No. SQP doesn't make any sense regardless of the liquidity. Long positions should not arbitrarily be afforded the opportunity to sell Bitassets at a premium. If long positions do not want to sell they shouldn't be induced to sell. The collateral of undercollateralized short positions should sit on the orderbook at the feed price and long positions can redeem their bitassets with the appropriate amount of BTS at anytime. The SQP is a ill-conceived improvement to the market engine, just like the 'you get what you pay for' rule in Bitshares 1.0. Both attempt to solve problems that don't exist and in the process diminish the utility of Bitshares as an exchange.
Quote from: clout on November 25, 2015, 07:16:11 amQuote from: merivercap on November 24, 2015, 11:05:00 pmQuote from: monsterer on November 24, 2015, 09:38:19 pmQuote from: merivercap on November 24, 2015, 09:17:19 pmHence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.I think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear. thisSince the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?
Quote from: merivercap on November 24, 2015, 11:05:00 pmQuote from: monsterer on November 24, 2015, 09:38:19 pmQuote from: merivercap on November 24, 2015, 09:17:19 pmHence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.I think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear. this
Quote from: monsterer on November 24, 2015, 09:38:19 pmQuote from: merivercap on November 24, 2015, 09:17:19 pmHence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.I think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear.
Quote from: merivercap on November 24, 2015, 09:17:19 pmHence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.
Hence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.
He meant to say that we could only apply an SQP of 1000 to liquid markets, because the point of the SQP is to protect against low liquidity. I agree with you that "it is the greatest stupidity anyone can come up with." Its one of those things that only a really intelligent guy like BM could come up with. Intellectuals tend to over think things. This is one of those instances.
Quote from: xeroc on November 25, 2015, 07:54:59 amQuote from: clout on November 25, 2015, 07:16:11 amQuote from: merivercap on November 24, 2015, 11:05:00 pmQuote from: monsterer on November 24, 2015, 09:38:19 pmQuote from: merivercap on November 24, 2015, 09:17:19 pmHence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol. Then you'd be closer to identifying why premiums occur.That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.I think there's some mixing up of ideas and also mixing up of cause and effect, but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price. Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price. We discussed that on another thread a while back and I agree.Easy fix: Make SQP equal the Price Feed and the premium will probably mostly disappear. thisSince the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?@ xeroc while I am not sure you are not joking...but as it is not usually your styleSQP is supposed to be.... hopefully.... working... in LIQUID markets...in illiquid ones , and in BTS case more than anywhere else it is the greatest stupidity anyone can come up with...(well, that and exchange without API... but I am drifting here)
Quote from: clout on November 24, 2015, 10:12:46 pmQuote from: yvv on November 24, 2015, 09:29:00 pmQuote from: bytemaster on November 24, 2015, 07:52:11 pmIf I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).And what is incentive for doing this?Market making for a given bitasset and its real world counterpart. You profit from the spread of that market and don't have to worry about the price movement of any assets. At the end of the day you are still just long BTS.How can you do market making for bitGold:Gold or bitOil:Oil? Something like bitGold -> bitUSD -> USD -> Gold ?
Quote from: yvv on November 24, 2015, 09:29:00 pmQuote from: bytemaster on November 24, 2015, 07:52:11 pmIf I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).And what is incentive for doing this?Market making for a given bitasset and its real world counterpart. You profit from the spread of that market and don't have to worry about the price movement of any assets. At the end of the day you are still just long BTS.
Quote from: bytemaster on November 24, 2015, 07:52:11 pmIf I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).And what is incentive for doing this?
If I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).
Quote from: merivercap on November 24, 2015, 07:29:56 pmOk technically you're correct, but pooling shouldn't be significant. The money you put into the pool is the collateral so having to maintain it individually or not should not be a major issue. Maintaining collateral for the shorts is just an expected part of the trade. I will concede that being long is more hassle-free, but I believe it's a minor difference. That's like saying the risk of the entire system getting black swanned == the risk of one user getting margin called.
Ok technically you're correct, but pooling shouldn't be significant. The money you put into the pool is the collateral so having to maintain it individually or not should not be a major issue. Maintaining collateral for the shorts is just an expected part of the trade. I will concede that being long is more hassle-free, but I believe it's a minor difference.
Quote from: merivercap on November 24, 2015, 11:42:05 amThe BTS you use to purchase bitUSD is the collateral. If you buy bitUSD with dollars, you are essentially buying BTS combined with a CFD. The idea that you can hold it forever without doing a thing shouldn't be a big deal. Not individually it isn't. The BTS I use for purchase gets pooled together with all the BTS in the collateral pool, the failure mode here is systemic, it doesn't apply directly to my need to maintain any collateral. That is a big difference.edit: to put this simply - 1 single user getting margin called != black swan event
The BTS you use to purchase bitUSD is the collateral. If you buy bitUSD with dollars, you are essentially buying BTS combined with a CFD. The idea that you can hold it forever without doing a thing shouldn't be a big deal.
Quote from: merivercap on November 24, 2015, 11:23:48 amIn Bitshares, long and short both put up BTS as collateral and select an asset to settle any differences. If the asset goes up the short pays the long and if the asset goes down the long pays the short. Neither have an advantage aside from forced settlement. Maintaining collateral is just a standard part of trading with leverage. Most all markets require people to maintain collateral and that's not an additional risk, it's just part of the trade. Aside from not having a settlement date (which some might say favors shorts), the only peculiar aspect of the protocol is the forced settlement.The longs don't put up any collateral. I can go into the spot market and buy a bitUSD and just hold it forever without doing a thing.
In Bitshares, long and short both put up BTS as collateral and select an asset to settle any differences. If the asset goes up the short pays the long and if the asset goes down the long pays the short. Neither have an advantage aside from forced settlement. Maintaining collateral is just a standard part of trading with leverage. Most all markets require people to maintain collateral and that's not an additional risk, it's just part of the trade. Aside from not having a settlement date (which some might say favors shorts), the only peculiar aspect of the protocol is the forced settlement.
Quote from: merivercap on November 23, 2015, 07:46:30 pmI think there are a couple very simple tweaks to increase liquidity and remove the premium. 1) Remove forced settlement. (Even the idea of forced settlement may create a race to be the least collateralized position, reduces liquidity and creates a premium. It's good to start with the most minimal design. Any design to help merchants at the expense of others should be placed outside the protocol at the gateways/bridges)2) Make the short squeeze protection price equal the price feed.Those two very easy tweaks will get pretty much what most people want and expect. More liquidity and a closer peg. I don't think forced settlement creates the premium. IMO what creates the premium is the risk of borrowing from the network compared to the risk of spot buying the asset - look at it like this, if you have to actively maintain your collateral in order to keep your position from getting margin called, your sale price must compensate you for that risk.If the risk of being long was the same as borrowing, you can achieve parity more easily. This is what we need to strive for, IMO.
I think there are a couple very simple tweaks to increase liquidity and remove the premium. 1) Remove forced settlement. (Even the idea of forced settlement may create a race to be the least collateralized position, reduces liquidity and creates a premium. It's good to start with the most minimal design. Any design to help merchants at the expense of others should be placed outside the protocol at the gateways/bridges)2) Make the short squeeze protection price equal the price feed.Those two very easy tweaks will get pretty much what most people want and expect. More liquidity and a closer peg.
Q) Why is there a problem implementing pegged assets?A) The primary answer is that there can be no redeemability to the real asset on chain, for obvious reasons (since fiat/gold/silver/oil are not digital in the first place).
Q) Why is bitshare's current solution inadequate?A) Those who borrow bitUSD from the system are at much higher risk than those who buy it from the market because the borrower must actively maintain his collateral and can get margin called by the system if the feed price moves enough
Q) What effect does this have on the price?A) The borrower is forced to price his risk into the sale price of the bitUSD he borrows from the system - this leads to a situation where the price of bitUSD will always trade at a premium compared to the feed price, this damages the viability of the product as a whole.
Q) Is there another design which doesn't have the same biased risk profile, or is this just a natural consequence of not having redeemability?A) Discuss
This is fine, it is designed to be at a premium.
Bias risk profile is fine to have. The problem is when there is no equilibrium in risk. Since there are no arbitrage opportunities for shorters, equilibrium is difficult to quantify or obtain. If fiat:bitFIAT on/off ramps exist, that would enable arbitrage, or if the blockchain provided a backstop (automatically shorting at settlement +10%), that would help too.
*) A merchant has to price everything in bitUSD *less* than he would have in regular dollars to achieve the same value - this is crazy
Quote from: JonnyBitcoin on November 23, 2015, 03:41:03 pmI had an idea how to create depth and liquidity for MPAsThere should be an option on the trade page that says buy or sell at live price feed which will place an order on the books at the settlement price but crucially your order will move with the price feed so you don't have to keep updating it.Yeah, that may help and could make things a lot simpler as well imo. Quote from: Empirical1.2 on November 08, 2015, 06:14:37 pmI might be the only one that thinks like this, but on https://bitshares.openledger.info/#/market/BTS_USDOn the sell side in brackets I'd like to see the deviation from the peg based on the feed price. So on the buy side I would see trades starting at for example ($0.98) and on the sell side ($1.02) The main thing I want to know (Without working it out) is how much a premium over the peg I am paying when buying BitUSD and vice versa.Then you just place an order at $0.98 and you will be filled when BitUSD is selling 2% below the feed. Sure that kind of relative tracking is hard to implement though.
I had an idea how to create depth and liquidity for MPAsThere should be an option on the trade page that says buy or sell at live price feed which will place an order on the books at the settlement price but crucially your order will move with the price feed so you don't have to keep updating it.
I might be the only one that thinks like this, but on https://bitshares.openledger.info/#/market/BTS_USDOn the sell side in brackets I'd like to see the deviation from the peg based on the feed price. So on the buy side I would see trades starting at for example ($0.98) and on the sell side ($1.02) The main thing I want to know (Without working it out) is how much a premium over the peg I am paying when buying BitUSD and vice versa.
I am not an economist, but why is this FUNDAMENTALLY worse? Does it not dependon the perspective? For a merchant it is better since he can be sure that hewill be able to redeem AT LEAST at parity.For bitUSD long, it is a wash since if they pay with bitUSD.Only people outside BTS wanting to move into BTS need to pay a premium to enter
I expect there will always be a premium with a volatility proportional to BTS volatility.
This is fundamentally worse than the same volatility centered around parity.
I expect there will always be a premium with a volatility proportional to BTS volatility. This is fundamentally worse than the same volatility centered around parity.
Or a giant middle finger.
Quote from: monsterer on November 23, 2015, 02:36:46 pmHow do you expect to sell bitUSD to someone if the average price is $1.25?Do you think the premium will be as big if we had market makers providing liquidity as in nubits?
How do you expect to sell bitUSD to someone if the average price is $1.25?
Please define "stable"!Please define "peg"!If the peg means that the price of a token highly correlates with the underlay .. then nubits is as good as bitUSD .. nubits trades AROUND parity and bitusd trades ABOVE parity .. both correlated with USD
How can a pegged currency be designed to trade above parity? This seems like a logical fallacy.
It's not really a "flaw" in the system .. it is how it designed and supposed to be working ..
Quote from: Empirical1.2 on November 23, 2015, 02:07:43 pmdollar stable product that's what it isbut does stability = security?maybe, until MtGox
dollar stable product
Quote from: Empirical1.2 on November 23, 2015, 01:37:00 pmQuote from: giant middle finger on November 23, 2015, 01:20:37 pm"BitUSD would have as much liquidity as Nubits if it was as easy to use for the past year."Wrong. NuBits liquidity has almost nothing to do with its ease of use. of course, but I did not imply such causationI'm not saying that Nubits is easy to use, I'm saying that BitShares is not and of course, something difficult and complex is capable of having much liquidity as well as something easy to usecorrelation does not cause hangovers:Fact is, that if our wallet was easier to use (back up, documented, etc), then I'd be providing $15k liquidity in the bitUSD and CNY markets myself right now.
Quote from: giant middle finger on November 23, 2015, 01:20:37 pm"BitUSD would have as much liquidity as Nubits if it was as easy to use for the past year."Wrong. NuBits liquidity has almost nothing to do with its ease of use.
"BitUSD would have as much liquidity as Nubits if it was as easy to use for the past year."
The problem with market making is its only profitable in mean reverting markets (sometimes referred to as ranging), as soon as you get a strong trend the market maker will lose money because it will end up with an unbalanced inventory of assets. That risk makes designing a good one very very complicated.
In fact, I don't even know how to create a paper wallet, and until I do, I'm cash (BTS) on the sidelines, waiting for the next wiz kid who is smarter than me delete his cash cache
Your statements are absolutely correct and have been communicated that way for quite some time .. it's called 'floor or parity' ...It's not really a "flaw" in the system .. it is how it designed and supposed to be working ..In order to be safe against falling prices you will always need to have more then 1x collateral ..The only thing that you can do differently is .. also allow other kinds of assets to be used as collateral ... much like what MAKER is doing with the DAI on ethereum ..