Hello everyone,
Currently i am investigating the posibility of an AEX-ETF as smartcoin on BitShares. For the research i have some questions that are still unclear and i hope that you can help me with it.
Hello
again,
-What are the pros and cons of an ETF on BitShares instead of current ETF from a bank?
The naive pitch is on
slide 8 on the presentation.
Since my presentation I had the opportunity to speak with many poeple on the topic, so let me try to summarize it here for an open discussion with everyone:
An ETF on Bitshares is similar to a
Fully funded synthetic ETF.
Generally there is
pro/cons versus physical ones, but interestingly doing it the Bitshares MPA way keeps all the pros and fixes most of the cons: transparancy, liquidity and counterparty risks.
This means:
Pros:
- all the benefits of a Fully funded synthetic ETF: better index tracking, possible on less liquid underlyings
- all the benefits of crypto/blockchain/digitial assets: fast settlement, audit, no third party custodian, ...
- all the benefits of the decentralized exchanges: multiple gateways, by default can be traded against all other assets (but still can have whitelisted/blacklisted assets), ...
- faster time to market (from idea to listing) for the issuer, everything could be done through the Bitshares UI.
- cheap (Bitshares fees to create an asset are ridiculous compared to fees to list on an organized exchanges).
- issuer is autonomous (organized exchanges won't let you create an ETF if it won't bring enough liquidity as it's too costly for them)
- automated and transparent distributions of fees to the issuer thanks to the market fees attribute on the Smart Coin and Bitshares cashflow mecanisms;
- as an investor, you have no counterparty risk as the blockchain guaranty you that the collateral is always there and you can exit whenever you want thanks to the force settlement feature (even if there is no sellers)
- potentially more liquidity as anyone can issue shares by putting collateral (contrary to usual ETF where only Authorized Participants/banks can), this brings also more market making/arbitrage opportunities (primary + secondary market).
Cons:
- regulation is currently undefined (some will argue it's a pro...)
- overcollaterization (so additional costs for the borrower)
- currently all collateral/transactions/balances/order book are public (this also could be argued as a pro...)
- physical management is easier than synthethic (additional risk on borrower side)
- the collateral is a crypto token (BTS or BitXXX), which might have no value for the ETF buyer.
Note that you can do a traditional physical ETF using an IOU token, it will have many of the above benefits and none of the cons.
Did I miss something?
-Which steps has to be done for creating an ETF on BitShares?(how can the token be created)
1. Create the Smart Coin (see
http://docs.bitshares.org/bitshares/tutorials/uia-create-gui.html)
You can get the values from an existing ETF like
https://wallet.bitshares.org/#/asset/TWENTIX 2. Whitelist a known account as price publisher
3. Schedule a batch that will regularly publish a price on the blockchain from that account (see
http://docs.bitshares.org/bitshares/tutorials/publish-feed.html)
If you want to have independant price publishers, you will need to publish the composition of your ETF on the blockchain, so anyone can read the composition and publish a price.
See for example
bittwenty.feed.
And the sample code
here.
-If the value of the AEX changes, the new price of the ETF has to be published through witness or Authorized account. How can this be done?
As explained above, you need to schedule a price feed that will send the price regularly on the blockchain.
Thanks in advance
Hope this will help you, and anyone else to start their ETF business on Bitshares!
Anyway my thought on the topic:
- There is a HUGE business oppurtunity
- It requires skilled professionnal traders
- Regulation / legal aspects on the topic should be investigated
- This could have a major impact on the value of BTS token