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General Discussion / Suppose we actually didn't need forced settlement (for bitUSD etc)...
« on: November 28, 2015, 03:09:09 am »
I posted a reply earlier today where I said I thought it was absolutely required(!)...but then started wondering a bit!! 
Suppose the price feed combined with collateral rules,
(along with the interests of the parties wishing to short and hold bitUSD), mean that we could in practice still track the real price.
The argument against is that buyers of bitUSD wouldn't do so unless they had a guaranteed way out at around the real price.
But, while they hold bitUSD someone else has to have their BTS tied up as collateral.
So at any point in time there should always be holders of bitUSD and shorters of bitUSD wishing to exit.
An agreed price would be settled upon.
If the price of BTS goes up, the bitUSD shorter can remove collateral.
If the price of BTS goes down, the bitUSD shorter has to add collateral.
If the shorter's collateral to back the asset falls below e.g. 1.5 x the current value, the system takes ownership of it and a buy order is placed at the price feed.
Could this be enough to mean we track the real price?
I guess we maybe tried something like this with BTS1.0, but the thing I'm wondering is if what was tried was exactly like this - I.e., price feed for collateral, but no other rules?
Also BTS1.0 didn't have a simple way where anyone could just create bitUSD (although this may be a minor thing).
(Another argument is that nuBits still seems to be working...)
I probably wouldn't use nuBits because it's not backed in a trust-less way (so not much better than an exchange).
But this smart-coin would still be collateralized at x times a real-value asset (BTS, where the value comes from voting stake + maybe even at some stage, profit
).
With nuBits, all of the asset created is done by the market maker.
In this system it wouldn't be. But, nevertheless, shorters might not typically wish to short much below the real price;
buyers might not typically wish to buy much above the real price.
And perhaps we'd see interested parties creating 1% spreads exactly on the real price...
The present system is very cool (and an amazing achievement IMO), but the fact that holders can settle at any time means the shorter must build in a high premium to guard against volatility because they can't exit at any time. But pricing the required premium is difficult. How do the market participants figure this out (10%, 20%, 50% above..). With the system where neither side can automatically exit, the pricing can naturally be simple and the market might conceivably centre on somewhere near the actual price.
But I still find it hard to imagine this would work, and that common-sense dictates the current system is required(!) But maybe this is wrong for the above reasons, and that the thing that shouldn't possibly work might actually work!
So perhaps it so could be worth trying, with an experimental new alt. asset - e.g 'bitUSD-exp'?
Suppose the price feed combined with collateral rules,
(along with the interests of the parties wishing to short and hold bitUSD), mean that we could in practice still track the real price.
The argument against is that buyers of bitUSD wouldn't do so unless they had a guaranteed way out at around the real price.
But, while they hold bitUSD someone else has to have their BTS tied up as collateral.
So at any point in time there should always be holders of bitUSD and shorters of bitUSD wishing to exit.
An agreed price would be settled upon.
If the price of BTS goes up, the bitUSD shorter can remove collateral.
If the price of BTS goes down, the bitUSD shorter has to add collateral.
If the shorter's collateral to back the asset falls below e.g. 1.5 x the current value, the system takes ownership of it and a buy order is placed at the price feed.
Could this be enough to mean we track the real price?
I guess we maybe tried something like this with BTS1.0, but the thing I'm wondering is if what was tried was exactly like this - I.e., price feed for collateral, but no other rules?
Also BTS1.0 didn't have a simple way where anyone could just create bitUSD (although this may be a minor thing).
(Another argument is that nuBits still seems to be working...)
I probably wouldn't use nuBits because it's not backed in a trust-less way (so not much better than an exchange).
But this smart-coin would still be collateralized at x times a real-value asset (BTS, where the value comes from voting stake + maybe even at some stage, profit
). With nuBits, all of the asset created is done by the market maker.
In this system it wouldn't be. But, nevertheless, shorters might not typically wish to short much below the real price;
buyers might not typically wish to buy much above the real price.
And perhaps we'd see interested parties creating 1% spreads exactly on the real price...
The present system is very cool (and an amazing achievement IMO), but the fact that holders can settle at any time means the shorter must build in a high premium to guard against volatility because they can't exit at any time. But pricing the required premium is difficult. How do the market participants figure this out (10%, 20%, 50% above..). With the system where neither side can automatically exit, the pricing can naturally be simple and the market might conceivably centre on somewhere near the actual price.
But I still find it hard to imagine this would work, and that common-sense dictates the current system is required(!) But maybe this is wrong for the above reasons, and that the thing that shouldn't possibly work might actually work!
So perhaps it so could be worth trying, with an experimental new alt. asset - e.g 'bitUSD-exp'?
