BitShares Forum
Main => General Discussion => Topic started by: bytemaster on August 29, 2014, 03:12:02 pm
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I have been putting some serious thought into the nature of BitUSD vs USD and lessons I have learned observing the network thus far. So here is what I have concluded thus far:
1) BitUSD vs USD will work with no market restrictions provided it is a mature market with a proven track record.
2) BitUSD vs USD will not track well in an immature market because BitUSD-deniers will not buy BitUSD and neither will believers. Right now it trades at a discount.
3) While it is perfectly reasonable for BitUSD to trade at a discount to attract new buyers, it confirms the suspicions of the deniers and thus could potentially end up changing the market consensus that BitUSD will go to 0. BitUSD only works so long as the majority of the market expects it to work and that "faith" can be hard to establish early on without a large market maker willing to back it.
Given those facts here are some additional things I have realized:
1) There is never any reason for new BitUSD to be created below the market value assuming we know what that is.
2) Buying BitUSD at 95% parity should always be profitable.
3) If the network has bought BitUSD that it hasn't sold, there is no reason to allow new shorts (the network can sell what it bought at parity).
So what where does this leave us?
New BitUSD should only be created when there is demand for it at prices at or above parity.
All USD should be guaranteed a buyer at 90% parity. This limits the risk to the downside.
There is a HUGE demand to short USD and right now that demand shows up as BitUSD being massively undervalued. I think this demand to short needs to be done via option contracts. Someone can therefore set a price on the option contract and this price will absorb the short demand without breaking the peg.
Suppose I think XTS is going to rise by 50% in the next month. I want an option to buy it at todays prices, so I have to find someone willing to sell me the option to buy it at todays prices within the next month. These options will be purchased by the people who currently wanting to short who otherwise would not be able to.
That said there will still be plenty of demand to short BitUSD directly but due to the price restrictions you would end up with "gas lines" and the question becomes "who goes first". The person who placed the order first or the one who paid the highest fee or perhaps the one who posts the most collateral.
I am thinking we should prioritize shorts by the collateral they are willing to put down. This will turn the surplus demand for shorts into increased security on the network.
So as you can see these represent some pretty major overhauls to the market rules. These rules will not be rolled out over night and will be throughly tested on a test network prior to release. In the mean time the existing BitUSD market can continue to function and the buyers of BitUSD can have greater confidence that BitUSD will eventually reach the market peg.
What are the downsides?
The reliance on a price feed means price discovery is less likely to happen on chain.
To Summarize the Proposed Rules:
1) 51% of delegates must publish a price feed at least daily, the median of which is taken as the "current price".
2) The network has a standing buy order for BitUSD at 90% of the "current price".
3) BitUSD purchased by the network are saved in a Market Account
4) If the Market Account has a non-0 balance, then no new shorts will be executed.
5) If the Market Account has a non-0 balance, then there is a standing sell order at "current price"
6) Any short orders above the "current price" are automatically canceled.
7) Given two short orders at the same price, the one willing to post the highest collateral takes priority.
8) BitUSD vs XTS has no trade restrictions on it.
What I think will happen:
1) Market makers will step in to provide liquidity at prices above 90% the "current price" now that their "down side" is covered.
2) The market maker bot will never have to execute.
3) All new BitUSD will be created at a value at or above 100% the "current price".. ie: $1.01+
4) The median price will lag real price movements and will be "predictable". This timing delay will create arbitrage opportunities.
5) The average margin will be much higher than 2x due to competition to get the short positions.
6) The probability of "unbacked BitUSD" will go down dramatically.
Once again... this is just a proposal for review and feedback.
We are going to focus on stabilizing the current code and then move toward a more controlled release of any proposed fixes.
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+5% +5% +5%
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Could the market account hold 2 balances:
BTSX
bitUSD
If these balances are equal in value (regardless of base currency) it should trade at feed price (well lets take 1% for the balance in the force).
If one of the reserves decreases below 50% it should trade at feed price +- 10% (depending on the smaller reserve (don't forget the toll of the force)).
If one of the balances is depleted => no trade.
PS: And who will provide market's initial balance ?
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where does the market account get its funds from?
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where does the market account get its funds from?
The market maker bot would have to print XTS.... but the XTS it prints would be effectively locked up in the collateral of someone until they cover.
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+5%
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Please focus on fixing bugs instead.
IMO- The reason bitUSD is trading at a discount is there aren't enough buyers yet, it has nothing to do with the system being broken. Let it mature and depth & liquidity increase, then bitUSD will more closely equal a US dollar.
We need to create more uses for bitUSD so people have more of a reason to buy it. I don't think it being stable and/or speculating BTSX will fall are good enough reasons to create ample buying pressure.
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where does the market account get its funds from?
The market maker bot would have to print XTS.... but the XTS it prints would be effectively locked up in the collateral of someone until they cover.
Is there another way, could existing xts be lent to the market account as a fixed rate bond say +5%. The interest could be paid from profits.
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1) BitUSD vs USD will work with no market restrictions provided it is a mature market with a proven track record.
This is not true.
Given those facts here are some additional things I have realized:
1) There is never any reason for new BitUSD to be created below the market value
This we agree on. So, please just make the change that prevents any short that is below the median price feed from being matched.
Everything else is over complication, wasted time, and opening new attack vectors.
Any reason not to make the change?
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BitUSD needs interest, based on an interest rate that is determined by the supply and demand of BitUSD. This is the solution to the long term market peg without delegates' price feed.
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Please focus on fixing bugs first, give the system time to mature.
Limiting the downside to 90% will inhibit price discovery and free markets.
I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.
What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.
Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.
Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.
Against this suggestion.
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In addition to only being allowed to short at parity and having options trading separate...
What if when you short @ 1-1 you pay a 2% fee which goes to the long?
So if the exchange rate is 25 BTSX to $. I have to pay 25 BTSX plus 0.5 BTSX per $ to short even on the main BitUSD market.
BitUSD besides being new, currently has no utility and costs 1/2% to covert to real $. Shorts are more than willing to pay that to longs, this recognition of conversion cost fee should be applied to BitUSD imo.
(People buying at 1-1 will struggle to sell at parity even without being in competition with shorts while this 'utility friction' exists as a result little new BitUSD will be created. We should acknowledge this friction imo.)
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6) Any short orders above the "current price" are automatically canceled.
Did you mean below the "current price"?
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Please focus on fixing bugs first, give the system time to mature.
Limiting the downside to 90% will inhibit price discovery and free markets.
I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.
What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.
Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.
Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.
Against this suggestion.
I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.
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Given those facts here are some additional things I have realized:
1) There is never any reason for new BitUSD to be created below the market value
This we agree on. So, please just make the change that prevents any short that is below the median price feed from being matched. Believe it or not, this is all you need to do.
Everything else is over complication, wasted time, and opening new attack vectors.
Any reason not to make the change?
+5% completely agree. Its pretty close to working no need for drastic changes. This suggestion would help dramatically till the market matures.
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My thinking:
0 NO PRINTING OF ANY ASSET!
1 NO PRINTING OF ANY ASSET!
2 Fix bugs (as you already do) before taking decisions.
3 The following seems reasonable:
make the change that prevents any short that is below the median price feed from being matched.
4 My proposal:
Market account that has reserves in BTSX and bitUSD that trades at abovementioned thresholds. NO PRINTING OF ASSETS! Although some attacks might be executed on this. The one who grants the initial funds should take the risk.
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Please focus on fixing bugs first, give the system time to mature.
Limiting the downside to 90% will inhibit price discovery and free markets.
I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.
What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.
Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.
Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.
Against this suggestion.
I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.
I don't believe that people need to believe 1 bitUSD = 1 USD for this to work. When there are market frictions present, possibly due to difference in liquidity, market participants, limits to arbitrage, the same asset can and often will trade for different prices. That doesn't hurt anything, its simply a manifestation of limits of arbitrage and market frictions.
In BitsharesX case, there are big limits of arbitrage. I work in quantitative investing, and am interested in building an automated market maker and arbitrage bot, however I am not sure how to go about it (lack of time to develop it, not obvious where to go for information on how to connect with any soft of bitsharesx api, etc.). If this information was more easy to come about perhaps I would develop one, or other like minded people.
There is also large market frictions, in that in order to trade on the platform I need to either buy BTSX for USD, or buy BTC for USD, and then BTSX for USD, then transfer those to my wallet and then I'm ready to go. During that transformation I have lost trading fees, withdrawal fees etc. It is therefore costly to start trading at BitsharesX. All this leads to lower liquidity and differences in pricing.
Improving the arbitrage/cross hedging infrastructure, and making it easy for (not super experienced) developers to interact with the platform should slowly reduce these problems.
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Please do not make this a "government" controlled market. With this you would destroy any arbitrage opportunities.
Please read this:
http://www.reddit.com/r/BitShares/comments/2exj8j/why_i_am_really_positive_surprised_how_well_the/
I also think that there should be several bitUSD markets at different interest rates (1%,2%,3%,4%,5%,10% and 20%). I perhaps do not save at one bank which pays me 0.1%, but going to another bank which pays me 15% I perhaps would save in USD... So just create the markets and let the markets decide and earn money with arbitrage.
I know that in the short run this would split the few buyers to different interest rates, but I surely would not hold bitUSD at 5% interest.... instead I would prefer to do arbitrage. But I will not do arbitrage if the total volume is 10 USD.
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Please focus on fixing bugs first, give the system time to mature.
Limiting the downside to 90% will inhibit price discovery and free markets.
I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.
What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.
Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.
Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.
Against this suggestion.
I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.
If it falls too low than do your arbitrage and make money on the spot or let someone else do it... if money can be made somebody will do it at some point... earnings have just to be interesting enough. I do not see a death spiral between bitUSD going lower and bitsharesX-price falling as a consequence until both are 0 :D
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Please focus on fixing bugs first, give the system time to mature.
Limiting the downside to 90% will inhibit price discovery and free markets.
I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.
What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.
Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.
Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.
Against this suggestion.
I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.
+5% +5%
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Please do not make this a "government" controlled market. With this you would destroy any arbitrage opportunities.
Please read this:
http://www.reddit.com/r/BitShares/comments/2exj8j/why_i_am_really_positive_surprised_how_well_the/
I also think that there should be several bitUSD markets at different interest rates (1%,2%,3%,4%,5%,10% and 20%). I perhaps do not save at one bank which pays me 0.1%, but going to another bank which pays me 15% I perhaps would save in USD... So just create the markets and let the markets decide and earn money with arbitrage.
I know that in the short run this would split the few buyers to different interest rates, but I surely would not hold bitUSD at 5% interest.... instead I would prefer to do arbitrage. But I will not do arbitrage if the total volume is 10 USD.
Hell, this would be really interesting if I think about it... a bitUSD without interest should equal more or less 1 USD (as in the normal USD the interest is zero forever), at 5% it should be percentagewise higher that a USD until the market expects the USD to have 5% as well of interest... if they expect it in 1 year to be 5% and stay like this forever than the bitUSD5 would cost now 1.05, any price below would create arbitrage opportunities.
But perhaps creating additional markets would be too complicated for the normal user... perhaps better to stay with one market and the fixed rate. I just want to say that an USD which pays 1% interest is not the same like a USD which pays 5% or 10% interest, and where this price has to be paid by the shorter, he cares as well.
So really... please focus on bug fixes and leave the bitUSD market (or any other market on bitshares-x) alone... you would kill the conecept if you do any intervention... and surely therefor you will loose investors in bitshares-X which will depress the price of the shares.
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Please focus on fixing bugs first, give the system time to mature.
Limiting the downside to 90% will inhibit price discovery and free markets.
I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.
What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.
Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.
Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.
Against this suggestion.
I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.
I don't believe that people need to believe 1 bitUSD = 1 USD for this to work. When there are market frictions present, possibly due to difference in liquidity, market participants, limits to arbitrage, the same asset can and often will trade for different prices. That doesn't hurt anything, its simply a manifestation of limits of arbitrage and market frictions.
In BitsharesX case, there are big limits of arbitrage. I work in quantitative investing, and am interested in building an automated market maker and arbitrage bot, however I am not sure how to go about it (lack of time to develop it, not obvious where to go for information on how to connect with any soft of bitsharesx api, etc.). If this information was more easy to come about perhaps I would develop one, or other like minded people.
There is also large market frictions, in that in order to trade on the platform I need to either buy BTSX for USD, or buy BTC for USD, and then BTSX for USD, then transfer those to my wallet and then I'm ready to go. During that transformation I have lost trading fees, withdrawal fees etc. It is therefore costly to start trading at BitsharesX. All this leads to lower liquidity and differences in pricing.
Improving the arbitrage/cross hedging infrastructure, and making it easy for (not super experienced) developers to interact with the platform should slowly reduce these problems.
+5%
Sent from my iPhone using Tapatalk
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I will support this. More I think about it the more I agree with your analysis of shorts and the option contract. When I short a stock, I short it at it's current price I believe. Otherwise, I would use an option.
I think it's fine to have a market maker type of bot to smooth things out. There are parallels to all of this in the stock/options markets. We should leverage good ideas...not re-invent the wheel so to speak.
I think you/we will be able to stablize this in the BitShares ecostem. My concern is ensuring BitUSD can be used to purchase goods and services and/or be converted to Fiat in my bank account if needed. (see Galt's Test of Value :) ) i.e. when BitUSD escapes into the wild.
Would be interested in hearing ideas of how that is envisioned to happen.
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Given those facts here are some additional things I have realized:
1) There is never any reason for new BitUSD to be created below the market value
This we agree on. So, please just make the change that prevents any short that is below the median price feed from being matched.
Everything else is over complication, wasted time, and opening new attack vectors.
Any reason not to make the change?
He is convincing...
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While it is perfectly reasonable for BitUSD to trade at a discount to attract new buyers, it confirms the suspicions of the deniers and thus could potentially end up changing the market consensus that BitUSD will go to 0. BitUSD only works so long as the majority of the market expects it to work and that "faith" can be hard to establish early on without a large market maker willing to back it.
- IMHO a solid market maker is a good idea. Market-makers improve tradeability of most asset classes lacking stable liquidity and suifficient granularity. market makers should be backed by serious funds, just to be able to act in large volume on extreme swings, thus counteracting impulsive and exaggerated moves in their view. the danger is that, unless market maker is regulated by I3, we don't know of their true motivations, which might sometimes include benefitting from the panic. And, whereas a market maker would improve the pricing/liquidity, she is not a lender of last resort (e.g. FED, which ultimately can guarantee that lenders get their fiat money back and so inspires confidence. without the lender of last resort function, the functioning of financial markets would be severily hurt whenever emotional panic feeds on itself so that it becomes rational...). Therefore, even with market-makers, btsx might be targeted by speculative or hostile attack aiming to destroy confidence.
There is a HUGE demand to short USD and right now that demand shows up as BitUSD being massively undervalued. I think this demand to short needs to be done via option contracts. Someone can therefore set a price on the option contract and this price will absorb the short demand without breaking the peg.
Suppose I think XTS is going to rise by 50% in the next month. I want an option to buy it at todays prices, so I have to find someone willing to sell me the option to buy it at todays prices within the next month. These options will be purchased by the people who currently wanting to short who otherwise would not be able to.
BM how can the motivation of option sellers in that case be controlled? e.g. if they delta-hedge options and so continue to build up bitUSD shorts in the system?
Disclosure: Even as I like the idea of derivatives at some point, intuitively this moment doesn't feel right for their introduction. This would create an additional complexity level in a system where most participants get yet easily lost in its current state.
thx - kisa
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I agree with Coin hoarder.
Let's face it. Who of btsx users wants to hold bitusd and miss the gains of btsx?
IT may take time but we should be patient. Remember it took bitcoin nearly 2 years to discover a price at all.
If I understand BM's solution, this is effectively a bailout program. The unwise actors who sold bitUSD below parity are looking to have their investment losses covered by the "system" (read Federal Reserve) creating new btsx (read QE) and creating an artificial market for toxic investments in bitUSD (read Mortgage backed securities)
Markets that are only speculators never work. There must be a customer base first. (regression theorem)
Said another way... In all the readings about market pegs I read, Sally wanted to hedge her position in bitUSD. We never found Sally.
So who wants bitUSD? Who are they? What problem does bitUSD solve?
The only customers for such a service that I can see are exclusively crypto business. Ones that do not want give up their privacy, want to remain out of fiat but have fixed costs and want to avoid the fluctuations of price. But here is the catch.... If my business has costs at the end of the month and I have to pay those costs if I cant pay for it in bitUSD then what was the point? I just held bitUSD for a few weeks and then had to convert to fiat anyway. I may as well have just used bitpay from the get go and gave up my privacy upfront and skipped the bitUSD step.
So I think bitUSD's customers will most likely come from those who will sacrifice everything for privacy. They dont even believe in crypto but are forced to use it because in their industry they must remain anonymous.
Just like bitcoin I think the original users of bitUSD will come from the silkroad type market places. Think Open bazaar/ Dark Market/ Silk Road 2, etc.
And just like bitcoin it may take them 1-3 years to catch on and start using it at all let alone in serious volumes.
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6) Any short orders above the "current price" are automatically canceled.
Did you mean below the "current price"?
Yes..
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i am a friend of kiss - but why make everything more complicated?
just leave the market the market and watch. why act after 5 DAYS with major bugs, many people coundn't buy etc. etc.
keep in mind. maybe the changes will hurt the system in the future and you need changes, after changes - this will hurt BTSX big time!
add one simple rule
1. if the short is x away from the median the margin will double, tripple etc. it should be possible to make a trade but the possibility of a margin call should be increased
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So far the feed back I see is this:
1) No one wants a "DAC Government"
2) Many expect the peg to resolve itself in time and are worried we are not giving it time.
3) Rules for creating arb bots are not clear.
I do believe that liquidity is the primary reason the BitUSD price is low... it is just too hard to take advantage of arb. opportunities this early in the experiment.
I also fully believe that if we use price feeds at all then a blockchain ARB bot will do no harm and can be removed in the future.
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What if there was going to be a substantial instant revaluation of the $ like there was in 1933. Those in the know would sell to BTSX market maker at 0.9 in volume and damage BTSX before the official announcement?
In 1933, through a series of gold-related acts, culminating in the Gold Reserve Act of 1934, America realized a dollar devaluation of 41% when the price of gold was adjusted from $20.67 per ounce of gold to $35 per ounce
http://www.forbes.com/2008/12/09/dollar-devaluation-gold-pf-ii-in_fb_1209soapbox_inl.html
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i am a friend of kiss - but why make everything more complicated?
just leave the market the market and watch. why act after 5 DAYS with major bugs, many people coundn't buy etc. etc.
keep in mind. maybe the changes will hurt the system in the future and you need changes, after changes - this will hurt BTSX big time!
add one simple rule
1. if the short is x away from the median the margin will double, tripple etc. it should be possible to make a trade but the possibility of a margin call should be increased
I thing going short at should prioritize higher collateral but no reason to allow it at prices below parity. We need to provide liquidity for BitUSD longs to sell.
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Any changes made should be limited to ONE VARIABLE. Make one change that you expect will result in the biggest difference and then observe what happens.
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maybe invest some btsx funds from invictus to buy bitUSD and not in BTSX.
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we have longs and shorts of BitUSD in the market already established position, you should avoid changing the rules in the middle of the game, let the game plays itself out, if doesn't work, then start over, it will not be the end of the world. It's only fair.
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In all the readings about market pegs I read, Sally wanted to hedge her position in bitUSD. We never found Sally.
So who wants bitUSD? Who are they? What problem does bitUSD solve?
what's the spelling of "Sally" in Chinese, Russian, or Argentine - maybe there she lives?
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meanwhile, fix the ! bug.
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we have longs and shorts of BitUSD in the market already established position, you should avoid changing the rules in the middle of the game, let the game plays itself out, if doesn't work, then start over, it will not be the end of the world. It's only fair.
The game has been played since the beginning with the knowledge that the goal was to peg as close to parity as possible and that other options would be implemented as needed, so this is all within market expectations and benefits shareholders imo.
I advocated strongly that BitAssets should have been marketed more clearly as 'beta' than they were at launch, not doing so has resulted in Bitassets being oversold initially relative to where the code really was, but that's a separate issue.
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1.The system buys and sells all the bitUSD at current price (average feed provided by the delegates) with 0.5% spread.
2.Everyone can lend BTSX to the system. Any amount (based on current value) can be withdrawn at any time after min 1 week initial requirement. (It is more like a stake in the auto buy bussines)
3.Each week the system calculates profit and distributes the profit proportional to each contributor -(Contributed amount * time);
4.Each week the system if at a loss, calculates current value of $1.
5.If Contributed value (loans/stake) reaches 0 for any reason, the system starts printing BTSX. Newly printed money must again reach 0 before any new profit is distributed.
[edit] Can be done with 2x,3x BTSX value set aside at each particular bitUSD issuance.
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meanwhile, fix the ! bug.
I think this would help the peg tremendously. Can you please fix the "market_add_collateral" command? Thanks. 8)
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if BTSX goes to zero nothing will peg, only thing you can do is to be fair in the mean time to not totally destroy 3i's reputation and intergrity.
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BM's proposal is a good plan B if the peg continues to struggle in a more liquid market or as a fail-safe protocol if someone figures out how to attack/manipulate the peg.
However, I agree with the prevailing sentiment that we need a stable interface and some time before making any serious changes.
The fact that the peg is holding as well as it is given the liquidity/wallet is nothing short of amazing.
I am personally not participating in the market until the wallet is stable and the trading platform is released; there are probably a lot of folks in the same boat.
So I would vote for prioritizing on fixing the bugs and getting the system stabilized as-is, collecting some performance data in a more liquid market and then perhaps tweaking.
There should be a fail-safe protocol that would automatically identify and correct broken/manipulated pegs - would really help with investor confidence in pegged/consensus assets.
Perhaps delegates will have to continuously feed asset prices and the feed vs. market price are given a tolerance that if exceeded engages a bot.
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I am personally not participating in the market until the wallet is stable and the trading platform is released; there are probably a lot of folks in the same boat.
I am in that boat.
However the better BTSX does in general, the more long term BTSX bulls there will be in general, not so?
the more BTSX bulls there are, the more the $ will be shorted on average below the peg. (Because bulls will pay a premium to increase their BTSX exposure) not so?
As a result if the market believes BTSX will be a good investment in the next 12 months vs. the dollar then BitUSD will peg too far below the dollar, therefore BTSX won't be a good investment in the next 12 months...
This is messed up.
As I understand it atm, we need to separate the bulls into an options market or make them pay a premium near parity vs. allowing them to continue shorting below the peg ASAP.
I would like to implement that without the market maker and see the results.
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Will launching BitGLD now be bad for BitUSD?
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Any changes made should be limited to ONE VARIABLE. Make one change that you expect will result in the biggest difference and then observe what happens.
+5%
please just make the change that prevents any short that is below the median price feed from being matched...
Any reason not to make the change?
??
Also, arb bots seem like they could open new attack vectors because they will predictably buy unlimited quantities without changing their price. It gives a gigantic incentive to manipulate feed or take advantage of a bad feed that isn't otherwise there.
Regardless of this, I think arb bot is unnecessary and will waste time.
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Will launching BitGLD now be bad for BitUSD?
I think BitBTC in particular will peg closer to parity with the 'we will ultimately achieve close to parity' mandate. https://bitsharestalk.org/index.php?topic=7718.msg102819#msg102819 As a result it should help BitUSD.
I'm sure long term there is a lot of demand for BitGold, but as gold is the ultimate safe haven and BTSX is not robust/decentralised yet, I imagine genuine BitGLD long demand short term would be limited.
Given how much CNY demand BTSX has, I don't know how much BitCNY demand there will be short term, that is the one that interests me the most.
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please just make the change that prevents any short that is below the median price feed from being matched...
Any reason not to make the change?
Because then the bitasset ecosystem is not truly decentralized. Isn't that what bitassets are all about in the first place? Accurately determining the price of an asset in a completely decentralized manner?
Give the system time to mature. Many people cannot even access their funds and thus the market because of software bugs. It is a broken experiment thus far that was setup for failure. Give time for the bugs to be fixed, market depth and liquidity to increase, THEN judge whether the experiment was successful or not.
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the right thing is to implement ONLY the short restriction via median feed, wait for peg to stabilize, then let delegates experiment with disabling feed and only using moving average to restrict shorts, or experiment with market maker if things start going downhill
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please just make the change that prevents any short that is below the median price feed from being matched...
Any reason not to make the change?
Because then the bitasset ecosystem is not truly decentralized. Isn't that what bitassets are all about in the first place? Accurately determining the price of an asset in a completely decentralized manner?
Give the system time to mature. Many people cannot even access their funds and thus the market because of software bugs. It is a broken experiment thus far that was setup for failure. Give time for the bugs to be fixed, market depth and liquidity to increase, THEN judge whether the experiment was successful or not.
The decentralized feed doesn't change the fact that bitUSD is still decentralized and useful and it doesn't defeat the purpose. Giving it more time won't help and will decrease confidence. I'm confident it won't work for reasons that go beyond looking at the price action. I proposed the feeds because I thought we would need a backstop and I don't know why we switched to moving averages or why everyone hates the feed just on principle. There's nothing wrong with using a feed and it doesn't violate any important principles.
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If we can avoid the feed then we can claim BTSX is allowing price discovery. With the feed, price discover still occurs off chain.
The looser the feeds role the more accurate the market is. Allowing delegates to "switch" to a moving average or similar algorithm is also viable. In this case we remove the average from the validation rules, but can still use it in practice on a "test" basis.
I think an alternative to the "market maker" which could leave the network exposed, is to force "covering at a profit" when someone wants to exit. This adds no risk to the network.
For example, suppose we had the following situation:
Initial Price 1 USD == 1 BTSX and 1 USD == 1 BitUSD
Someone Shorts at 1 BitUSD per BTSX.
The value of 1 BitUSD falls to .90 BTSX (the short has a 10% profit)
Someone wants to sell 1 BitUSD at .90 and there are no takers...
The short is forced to exit their position at a profit.
How the short has 1.1 BTSX and they can "short again" at the feed price.
The result is that liquidity is provided by the shorts who are already profitable without any risk to the network.
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not to many rules/changes please , keep it "simple" as possible ...
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not to many rules/changes please , keep it "simple" as possible ...
I agree... SIMPLE is key here.
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let's stop the market, longs and shorts agree on a fair price, sell/cover all, wipe the slate clean, change the rules, get rid of the bugs, then open the market, start over:)
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have you ever played blackjack? when bets are down, cards are dealt, dealer can't say: OOps, there is a slight rule change, 22 beats 21:)
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concensus is based on fairness, no fairness, no concensus
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concensus is based on fairness, no fairness, no concensus
Yes. Fairness is very important. In this case the goal of BTSX is to engineer a market peg that is as trustless as possible. The "rules" are if you buy BitUSD then it should eventually be worth $1 and if you short BitUSD you should take your gains and losses accordingly.
Every "rule change" being proposed is designed to enforce the consensus on BitUSD and reward people who trade accordingly.
If you are trading BitUSD betting it will go to 0.... then you are betting we will be unable to enforce the rules via markets or price changes.
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please just make the change that prevents any short that is below the median price feed from being matched...
Any reason not to make the change?
Because then the bitasset ecosystem is not truly decentralized. Isn't that what bitassets are all about in the first place? Accurately determining the price of an asset in a completely decentralized manner?
Give the system time to mature. Many people cannot even access their funds and thus the market because of software bugs. It is a broken experiment thus far that was setup for failure. Give time for the bugs to be fixed, market depth and liquidity to increase, THEN judge whether the experiment was successful or not.
The decentralized feed doesn't change the fact that bitUSD is still decentralized and useful and it doesn't defeat the purpose. Giving it more time won't help and will decrease confidence. I'm confident it won't work for reasons that go beyond looking at the price action. I proposed the feeds because I thought we would need a backstop and I don't know why we switched to moving averages or why everyone hates the feed just on principle. There's nothing wrong with using a feed and it doesn't violate any important principles.
There is no such thing as a decentralized feed... the data fed to the "decentralized" feeds are from centralized sources, and there is a smallish group of people that publish the said "decentralized" feeds. There are two weak links in that chain and it is not decentralized... call is pseudo-decentralized if you must, but it is not ideal and not decentralized in the sense of the true meaning of the word.
On top of there being not enough market depth and liquidity, bitUSD has another underlying factor that is stopping it from reaching parity, and changing the way the decentralized exchange functions will not fix it. That underlying issue is that there is simply not much demand for bitUSD. I would venture to say that a deflationary asset (gold/bitcoin?) with the exact same market system as bitUSD would be closer to its actual value, because then people have more of a reason to want to purchase it rather than hold onto their BTSX.
I think we as a community need to get together and organize projects that will increase the utility of bitUSD, because at the moment you can only buy or sell it and nothing else. I think most people in the Bitshares ecosystem are bullish on BitsharesX, so the demand is just not there. We need to get organized, brainstorm about the best use cases for bitUSD, and then raise funds and build those uses for it. I think things like gateways which would allow bitUSD to be spent anywhere Bitcoin is accepted is a good start, perhaps a multi-pool that pays out in bitUSD, things like this will increase the demand and thus keep bitUSD closer to its real life counterpart.
It is not the market system that is broken, the demand is just not there right now. We need to work on that as a community.
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there maybe a lot of ways to keep the peg, you need to give the peg and market a lot of time to prove itself, changed the market engine and hard fork should be the last last resort, if you use AGS BTC buying BTSX again on the open market, we won't have this peg problem:) no rules have to be changed:)
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have you ever played blackjack? when bets are down, cards are dealt, dealer can't say: OOps, there is a slight rule change, 22 beats 21:)
They are not changing the the rules...
https://bitsharestalk.org/index.php?topic=7231.0
Bottom line, we are going with the most market-based solution first and have fall backs to feed based solutions if they prove necessary
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The primary utility for BitUSD within our community is hedging against bubbles.
The secondary utility (longer term) is as a means of payment.
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I know I have more trust in hedging into a decentralized exchange then into a centralized exchange where all my funds can be stolen by hackers. I think that people undervalue security and the skills of hackers. There are very few if any websites that can't be hacked. I really think there are none but there is only one way to prove that so I can't state that as a fact.
EDIT: Once bit(whatever) can be converted to the real version 1:1 we will be in the money.
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have you ever played blackjack? when bets are down, cards are dealt, dealer can't say: OOps, there is a slight rule change, 22 beats 21:)
They are not changing the the rules...
https://bitsharestalk.org/index.php?topic=7231.0
Bottom line, we are going with the most market-based solution first and have fall backs to feed based solutions if they prove necessary
Keeping the peg is the aim, not the rules, the rules are hardcoded into the market engine.
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have you ever played blackjack? when bets are down, cards are dealt, dealer can't say: OOps, there is a slight rule change, 22 beats 21:)
They are not changing the the rules...
https://bitsharestalk.org/index.php?topic=7231.0
Bottom line, we are going with the most market-based solution first and have fall backs to feed based solutions if they prove necessary
Keeping the peg is the aim, not the rules, the rules are hardcoded into the market engine.
I agree - 'keeping the peg is the aim, not the rules' - therefore if we can make the peg better with different rules, then the rules will be adjusted to help the peg.
You should trade with the expectation we will get very close to the peg imo.
(Edit: Because those were 'the rules' that the initial rules could be changed because keeping the peg is the ultimate outcome.)
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There is no such thing as a decentralized feed... the data fed to the "decentralized" feeds are from centralized sources, and there is a smallish group of people that publish the said "decentralized" feeds. There are two weak links in that chain and it is not decentralized... call is pseudo-decentralized if you must, but it is not ideal and not decentralized in the sense of the true meaning of the word.
On top of there being not enough market depth and liquidity, bitUSD has another underlying factor that is stopping it from reaching parity, and changing the way the decentralized exchange functions will not fix it. That underlying issue is that there is simply not much demand for bitUSD. I would venture to say that a deflationary asset (gold/bitcoin?) with the exact same market system as bitUSD would be closer to its actual value, because then people have more of a reason to want to purchase it rather than hold onto their BTSX.
I think we as a community need to get together and organize projects that will increase the utility of bitUSD, because at the moment you can only buy or sell it and nothing else. I think most people in the Bitshares ecosystem are bullish on BitsharesX, so the demand is just not there. We need to get organized, brainstorm about the best use cases for bitUSD, and then raise funds and build those uses for it. I think things like gateways which would allow bitUSD to be spent anywhere Bitcoin is accepted is a good start, perhaps a multi-pool that pays out in bitUSD, things like this will increase the demand and thus keep bitUSD closer to its real life counterpart.
It is not the market system that is broken, the demand is just not there right now. We need to work on that as a community.
I respectfully disagree... maybe it doesn't feel ideal to you right now or doesn't seem "decentralized enough." But at the end of the day I think it's the right way to do it and I think people will trust it.
I think it will make the peg really work and that is what makes bitAssets useful. I also think the bond market I recently proposed could be a big deal for utility of bitAssets.
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There is no such thing as a decentralized feed... the data fed to the "decentralized" feeds are from centralized sources, and there is a smallish group of people that publish the said "decentralized" feeds. There are two weak links in that chain and it is not decentralized... call is pseudo-decentralized if you must, but it is not ideal and not decentralized in the sense of the true meaning of the word.
On top of there being not enough market depth and liquidity, bitUSD has another underlying factor that is stopping it from reaching parity, and changing the way the decentralized exchange functions will not fix it. That underlying issue is that there is simply not much demand for bitUSD. I would venture to say that a deflationary asset (gold/bitcoin?) with the exact same market system as bitUSD would be closer to its actual value, because then people have more of a reason to want to purchase it rather than hold onto their BTSX.
I think we as a community need to get together and organize projects that will increase the utility of bitUSD, because at the moment you can only buy or sell it and nothing else. I think most people in the Bitshares ecosystem are bullish on BitsharesX, so the demand is just not there. We need to get organized, brainstorm about the best use cases for bitUSD, and then raise funds and build those uses for it. I think things like gateways which would allow bitUSD to be spent anywhere Bitcoin is accepted is a good start, perhaps a multi-pool that pays out in bitUSD, things like this will increase the demand and thus keep bitUSD closer to its real life counterpart.
It is not the market system that is broken, the demand is just not there right now. We need to work on that as a community.
I respectfully disagree... maybe it doesn't feel ideal to you right now or doesn't seem "decentralized enough." But at the end of the day I think it's the right way to do it and I think people will trust it.
I think it will make the peg really work and that is what makes bitAssets useful. I also think the bond market I recently proposed could be a big deal for bitAssets.
I like the separate bond market, I think this what I was trying earlier to explain (badly) here https://bitsharestalk.org/index.php?topic=7208.msg96447#msg96447 without the bond market that options trading is being done by shorting below the peg, inadvertently damaging the peg and as a result BTSX.
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The primary utility for BitUSD within our community is hedging against bubbles.
The secondary utility (longer term) is as a means of payment.
So, this may be the answer I've been looking for. We need to make work internally before we can realistically expect to get it to work as a payment system. I guess it makes sense. Has to work for BitShares ecosystem first.
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The primary utility for BitUSD within our community is hedging against bubbles.
The secondary utility (longer term) is as a means of payment.
I agree, but I think there are more bulls than bears which creates a bit of an issue in regards to providing buy support for bitUSD.
Still even with that in mind, I think the market peg could hold given the proper variables. I don't think we can judge the experiment as failed until bitUSD has utility as payment, as we only have half of the empirical evidence of the experiment. Even worse, the half of the empirical evidence that we do have is flawed in that the past couple days since the update a lot of people haven't had access to their BTSX. I have been trying all day long for 2 days to get my balance from 0 to what it was before.. there is something really messed up this update with syncing and/or connecting. I think a lot of these people that don't have access to their BTSX would have been buying bitUSD the past couple days as the price was falling. I know I would have myself if I could of got access to it.
Half of the empirical evidence is flawed and half of it is non-existent (and likely will be for some time.) I think it is too early to tell if the original market functions work or not. If you want to make temporary changes to reach market parity, then I guess I am OK with that, but the original formula should still be tested when we are able to have more fair of a test. I believe the original plan for bitassets and how the market should function will work when all the variables that are needed fall into place. It is unfortunately at this point a flawed experiment that was setup to fail because the evidence is flawed and impartial.
I guess now I am just repeating myself (even within this post haha). That is just my opinion, I trust BM and co to do whatever is good for Bitshares, so whatever you decide I will support it.
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The primary utility for BitUSD within our community is hedging against bubbles.
The secondary utility (longer term) is as a means of payment.
I agree, but I think there are more bulls than bears which creates a bit of an issue in regards to providing buy support for bitUSD.
Still even with that in mind, I think the market peg could hold given the proper variables. I don't think we can judge the experiment as failed until bitUSD has utility as payment, as we only have half of the empirical evidence of the experiment. Even worse, the half of the empirical evidence that we do have is flawed in that the past couple days since the update a lot of people haven't had access to their BTSX. I have been trying all day long for 2 days to get my balance from 0 to what it was before.. there is something really messed up this update with syncing and/or connecting. I think a lot of these people that don't have access to their BTSX would have been buying bitUSD the past couple days as the price was falling. I know I would have myself if I could of got access to it.
Half of the empirical evidence is flawed and half of it is non-existent (and likely will be for some time.) I think it is too early to tell if the original market functions work or not. If you want to make temporary changes to reach market parity, then I guess I am OK with that, but the original formula should still be tested when we are able to have more fair of a test. I believe the original plan for bitassets and how the market should function will work when all the variables that are needed fall into place. It is unfortunately at this point a flawed experiment that was setup to fail because the evidence is flawed and impartial.
I guess now I am just repeating myself (even within this post haha). That is just my opinion, I trust BM and co to do whatever is good for Bitshares, so whatever you decide I will support it.
I want to echo that sentiment. As many others have mentioned, BM sometimes seems to have the patience of Job in explaining everything, sometimes over and over and he is often the first one to chime in when someone thinks they lost their wallet/password/funds. I have no doubt the guy would spends days, weeks and probably months trying to help someone recover any funds lost inadvertently. :)
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To Summarize the Proposed Rules:
2) The network has a standing buy order for BitUSD at 90% of the "current price".
3) BitUSD purchased by the network are saved in a Market Account
4) If the Market Account has a non-0 balance, then no new shorts will be executed.
5) If the Market Account has a non-0 balance, then there is a standing sell order at "current price"
I generally agree with this idea.
Feel free to write a robot to create or consume short orders from the market.
But please do NOT put this in the market code. Otherwise it will break the "free market". Why it is 90% not 91%? it's not the developer to decide.
We can open source the robot code so everyone can set up a robot using their own preference.
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I think an alternative to the "market maker" which could leave the network exposed, is to force "covering at a profit" when someone wants to exit. This adds no risk to the network.
For example, suppose we had the following situation:
Initial Price 1 USD == 1 BTSX and 1 USD == 1 BitUSD
Someone Shorts at 1 BitUSD per BTSX.
The value of 1 BitUSD falls to .90 BTSX (the short has a 10% profit)
Someone wants to sell 1 BitUSD at .90 and there are no takers...
The short is forced to exit their position at a profit.
How the short has 1.1 BTSX and they can "short again" at the feed price.
The result is that liquidity is provided by the shorts who are already profitable without any risk to the network.
Please do not implement rules that penalize short sellers. They are as valuable and important to price discovery as those that are buying. This rule is very dangerous, and hurtful to the market mechanics. You should not force someone out of his position against his will, as long as he has the collateral for the position.
We all need to be patient and let the market work. Create outlets for hedging and arbitrage, and profit motives will take care of the rest. This is what is good for a market long term.
Any interference by creating market structure that is not free and open might lead to short term gains, but will be hurtful for the long term.
Free markets are the most efficient, even if we sometimes temporary don't like the current outcome.
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Please do not implement rules that penalize short sellers. They are as valuable and important to price discovery as those that are buying. This rule is very dangerous, and hurtful to the market mechanics. You should not force someone out of his position against his will, as long as he has the collateral for the position.
+5%
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For a short position to maximize their return they should cover and re-short as often as possible. A rule that would automatically exit their position at a profit would save them 2 transaction fees. It isn't really a punishing the shorts.
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The primary utility for BitUSD within our community is hedging against bubbles.
The secondary utility (longer term) is as a means of payment.
Bingo. This is why you should give it time. We are in a BTSX trough when bitUSD demand is always going to be low. At its crest demand will be higher. That's just how markets work. Give it time. It may suck in the meantime. Get those whales that Stan and Brian keep talking about to get their butts in the market........
Maybe, you should try whatever you want in an open testnet. Let's see if it works. Certainly can't hurt. Although, you guys have 30% of the delegates and control the market depth, so do whatever you want n the real thing, I guess. ;)
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I do believe that liquidity is the primary reason the BitUSD price is low... it is just too hard to take advantage of arb. opportunities this early in the experiment.
If that's the case then the solution is here:
maybe invest some btsx funds from invictus to buy bitUSD and not in BTSX.
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For a short position to maximize their return they should cover and re-short as often as possible. A rule that would automatically exit their position at a profit would save them 2 transaction fees. It isn't really a punishing the shorts.
I can think of three reasons this isn't necessarily true in the real world.
- Every time a short exits and re-enters their short position, they have to pay the bid-ask spread.
- In volatile markets, entering a short, then immediately paying a small fraction of it from your USD balance raises the margin call price and protects you from the 5% margin call penalty (especially if you can't be at the keyboard 24/7 and you don't have any scripts for automated trading)
- Higher leverage increases your variance. You don't always want to have the maximum possible leverage. Although I suppose you could simply re-short the same amount of BitUSD if you wanted the same amount of short exposure, this would be better because less of your BTSX is tied up in collateral.
EDIT:
- The key is "and re-enter". The automatic exit rule wouldn't re-enter the short, and the shorter would have to have a bot watching the blockchain to manually re-enter the short position.
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Maybe loose the restrictions and make short squeeze easier will work. Market will find its balance only after brutal volatilities but not more and more rules.
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One way to absorb the short selling pressure to bitUSD is to throw more bitAssets on the market !!!
Think about it! The only way for someone to "bet" for BTSX if they don't have fresh money/BTC is to short a bitAsset....
Right now there is available only bitUSD, so all the pressure from the BTSX Bulls go there ... If we had bitCNY,bitEUR,bitBTC etc. the pressure would absorb "equally" to all...
so the market peg would be closer to parity for each of one, at least it would helped to some degree...
EXAMPLE:
bitUSD = -30% distance from parity point
bitEUR = -20% distance from parity point
bitCNY = -10% distance from parity point
so a smart BTSX BULL that want to short a bitAsset because they think BTSX will rise 50%, will likely short bitCNY ;D
so the end result on profits would be 50-10= 40% profit (when bitCNY gets 1:1 pegged vs CNY)
instead of 50-30= 20% profit (when bitUSD gets 1:1 pegged vs USD)
I know I have oversimplified my thought process but I wanted to give the idea...
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It will enforce bitusd pegged to usd for sure, but we still have the issue that people do not have incentive to hold bitusd especially when btsx goes up on the external market. At that time, u would never have the opportunity to get cheap bitusd even if u know bitusd would go down soon, and everyone will sell bitusd to system at 90% and no one want to buy it at 100%, then the market frozen. That means the pegging mechanism can not really work, it's just enforced to work. yes, “cheap bitusd” is bad, we need to avoid it, but the better way is to provide incentive for holding bitusd in all the situation. In summay, i believe this would work in short term but could not resolve the issue fundamentally. we need to provide incentive like Gulu's proposal about market driven interest in another thread for mid term before the acceptance of bitusd by massive merchants will provide the incentive to hold and use bitusd in long term finally.
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My suggestion: Convert the BTC sitting in the Angel fund to BitUSD. Do this at 90%, announce it and make it trackable for everybody.
If this is an arbitrage opportunity, instead of complicating the market rules, why not just take advantage of it?
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It will enforce bitusd pegged to usd for sure, but we still have the issue that people do not have incentive to hold bitusd especially when btsx goes up on the external market. At that time, u would never have the opportunity to get cheap bitusd even if u know bitusd would go down soon, and everyone will sell bitusd to system at 90% and no one want to buy it at 100%, then the market frozen. That means the pegging mechanism can not really work, it's just enforced to work. yes, “cheap bitusd” is bad, we need to avoid it, but the better way is to provide incentive for holding bitusd in all the situation. In summay, i believe this would work in short term but could not resolve the issue fundamentally. we need to provide incentive in mid term before the acceptance of bitusd by massive merchants will provide the incentive to hold and use bitusd in long term finally.
I thing we are making the mistake to conclude that people will make decisions depended of BTSX market behavior...
Our target group is not only speculators (at least I hope so).
Many would have incentive to hold bitUSD on their BTSX Vault only for security/volatility reasons for example...
Others because they see an opportunity to make a profit "with no risk" buying undervalued bitUSD without to care about BTSX trend...
Other because they want to hold other bitAssets like bitGOLD etc. ...
PS something I forgot to say before: The BTSX platform must run without so many bugs ASAP and it must get more user friendly!!! It's crucial for mass adoption and to have the necessary liquidity ... I thing with much liquidity and with a big market cap, the market-peg for bitAssets will almost reach parity....
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One way to absorb the short selling pressure to bitUSD is to throw more bitAssets on the market !!!
Think about it! The only way for someone to "bet" for BTSX if they don't have fresh money/BTC is to short a bitAsset....
Right now there is available only bitUSD, so all the pressure from the BTSX Bulls go there ... If we had bitCNY,bitEUR,bitBTC etc. the pressure would absorb "equally" to all...
so the market peg would be closer to parity for each of one, at least it would helped to some degree...
EXAMPLE:
bitUSD = -30% distance from parity point
bitEUR = -20% distance from parity point
bitCNY = -10% distance from parity point
so a smart BTSX BULL that want to short a bitAsset because they think BTSX will rise 50%, will likely short bitCNY ;D
so the end result on profits would be 50-10= 40% profit (when bitCNY gets 1:1 pegged vs CNY)
instead of 50-30= 20% profit (when bitUSD gets 1:1 pegged vs USD)
I know I have oversimplified my thought process but I wanted to give the idea...
Generalised, the current problem is that there are 50m USD worth of BTSX and 0.5m worth of BitAssets (all BitUSD). As long as this ratio is so extreme the BTSX bulls will have an enormous impact on BitAsset peg volatility. More different BitAssets will help close this gap.
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One way to absorb the short selling pressure to bitUSD is to throw more bitAssets on the market !!!
Think about it! The only way for someone to "bet" for BTSX if they don't have fresh money/BTC is to short a bitAsset....
Right now there is available only bitUSD, so all the pressure from the BTSX Bulls go there ... If we had bitCNY,bitEUR,bitBTC etc. the pressure would absorb "equally" to all...
so the market peg would be closer to parity for each of one, at least it would helped to some degree...
EXAMPLE:
bitUSD = -30% distance from parity point
bitEUR = -20% distance from parity point
bitCNY = -10% distance from parity point
so a smart BTSX BULL that want to short a bitAsset because they think BTSX will rise 50%, will likely short bitCNY ;D
so the end result on profits would be 50-10= 40% profit (when bitCNY gets 1:1 pegged vs CNY)
instead of 50-30= 20% profit (when bitUSD gets 1:1 pegged vs USD)
I know I have oversimplified my thought process but I wanted to give the idea...
Generalised, the current problem is that there are 50m USD worth of BTSX and 0.5m worth of BitAssets (all BitUSD). As long as this ratio is so extreme the BTSX bulls will have an enormous impact on BitAsset peg volatility. More different BitAssets will help close this gap.
Exactly! Couldn't say it better! +5%
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As long as this ratio is so extreme the BTSX bulls will have an enormous impact on BitAsset peg volatility. More different BitAssets will help close this gap.
The gap will close after all when BTSX has grown enough and the BULLS are not so aggressive anymore...
Or better to say when the growing "speed" reduces a little bit... because growing will never stop after all :P
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For a short position to maximize their return they should cover and re-short as often as possible.
That's totally unture for a large short trade( like 10,000 BitUSD short in this market).
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I don't like playing shorts because the risk is limitless or at least your entire collateral, but that's the only way to play in the exchange if you think BTSX will go up in value, maybe we should have a options market for the BTSX longs. We may want to open a limited options market or bond market to test first, if all goes well, then open the BitUSD/BTSX market.
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市场锚定？！这是开发者最脑残的想法！一点金融常识都没有，更是违背去中心化和区块链的本质！区块链的核心是不需要信任对方，而BTSX脑残地认为应该信任BitUSD=USD，应该信任喂价。。。。。
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+5% +5%
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One way to absorb the short selling pressure to bitUSD is to throw more bitAssets on the market !!!
Think about it! The only way for someone to "bet" for BTSX if they don't have fresh money/BTC is to short a bitAsset....
Right now there is available only bitUSD, so all the pressure from the BTSX Bulls go there ... If we had bitCNY,bitEUR,bitBTC etc. the pressure would absorb "equally" to all...
so the market peg would be closer to parity for each of one, at least it would helped to some degree...
EXAMPLE:
bitUSD = -30% distance from parity point
bitEUR = -20% distance from parity point
bitCNY = -10% distance from parity point
so a smart BTSX BULL that want to short a bitAsset because they think BTSX will rise 50%, will likely short bitCNY ;D
so the end result on profits would be 50-10= 40% profit (when bitCNY gets 1:1 pegged vs CNY)
instead of 50-30= 20% profit (when bitUSD gets 1:1 pegged vs USD)
I know I have oversimplified my thought process but I wanted to give the idea...
Generalised, the current problem is that there are 50m USD worth of BTSX and 0.5m worth of BitAssets (all BitUSD). As long as this ratio is so extreme the BTSX bulls will have an enormous impact on BitAsset peg volatility. More different BitAssets will help close this gap.
But, if there is more bitUSD out there, there are more people trying to SELL it and less buyers because it's already been printed?
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+5% is the next big thing that will drive the price to the moon
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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.
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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.
I think the insufficient depth comes from I3 pulling their BTSX off the bid/ask. They were artificially creating depth by throwing their shares in the market. This would explain how they are able to halt trading. I certainly hope there isn't a kill switch otherwise.
I think the next fork will lower the depth requirement since participation isn't as robust as they thought.
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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.
+5%
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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.
I think the insufficient depth comes from I3 pulling their BTSX off the bid/ask. They were artificially creating depth by throwing their shares in the market. This would explain how they are able to halt trading. I certainly hope there isn't a kill switch otherwise.
I think the next fork will lower the depth requirement since participation isn't as robust as they thought.
That's exactly it. There is no kill switch, just I3 with a King's ransom 8)
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There's nothing wrong with large demand for short-selling per se. That just reflects optimism about the near-term value of BTSX. (I don't believe that the demand is in any way due to the belief that BitUSD could be going to zero, not with I3's open commitment to helping the peg to hold.) In a liquid market, huge short selling should simply translate into faster price appreciation--just like large options or futures trades lead to price discovery in equities. So why did the price of BTSX go down despite large short sales? I think there were confounding events--wallet bugs, natural correction after the run-up to launch--that made some people believe that short-selling would not lead to BTSX price appreciation. Also, up to now the market rules may have been a bit too favorable and not punitive enough to short-selling. Why not make a conservative change, like increasing collateral requirements or increasing the margin call penalty, and see then if the market can achieve a good peg on its own?
It's clear that achieving a stable peg would help immensely in increasing confidence and growing the network. We all agree that getting there sooner is better than getting there later. But, to really condition traders' expectations and build confidence for long-term success, we need to prove that the peg can work without a heavy-handed restriction based on price feeds. Market participants need a chance to condition their beliefs and learn. Disallowing short sales below the median feed price would not give them this opportunity. Furthermore, such a stop-gap measure is not really a long-term solution. Even if such a measure enforced the peg for now, it would really be a crutch that would become harder and harder to remove over time. If the crutch seemed to work for now, it would prevent true price discovery, much like the blunt short-sale prohibitions for traditional equities that proved to be ill-advised. When the network size is much bigger in the future, it could be very difficult to remove the crutch without causing widespread concern about the robustness of the peg, simply because the market would not have learned on its own to achieve a viable peg. What if the crutch were dispensed at some point and the peg began to fail again? Confidence could be shattered. I believe it would be a mistake to try to bypass the steady learning and conditioning process that needs to take place for long-term robustness of the peg.
So, I say let the market work mostly on its own for a little while longer, when the costs of failure are relatively low. See if things get better. Fix bugs in the client, make it easy for more people to get on the network and participate in the internal market. Make one or two simple, conservative changes to the market rules that don't rely on price feeds. E.g., just increasing collateral requirements from 2x to 3x, decreasing the margin call price, and/or increasing the margin call penalty to 10% may be enough to restore balance between shorts and longs. If the peg can start to hold better with minimal changes, that would be a home run and far superior than using a heavy-handed approach such as restricting short sales below a median price feed.
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we must give more time to the market... it's really to early for conclusions... I like every day the original approach from bytemaster more and more... cause the sharp correction many of us makes wrong conclusions dependent on emotions... If we see the bigger picture bytemaster approach is long-term better than agents86... agents86 proposal is much better in short-term...
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There's nothing wrong with large demand for short-selling per se. That just reflects optimism about the near-term value of BTSX. (I don't believe that the demand is in any way due to the belief that BitUSD could be going to zero, not with I3's open commitment to helping the peg to hold.) In a liquid market, huge short selling should simply translate into faster price appreciation--just like large options or futures trades lead to price discovery in equities. So why did the price of BTSX go down despite large short sales? I think there were confounding events--wallet bugs, natural correction after the run-up to launch--that made some people believe that short-selling would not lead to BTSX price appreciation. Also, up to now the market rules may have been a bit too favorable and not punitive enough to short-selling. Why not make a conservative change, like increasing collateral requirements or increasing the margin call penalty, and see then if the market can achieve a good peg on its own?
It's clear that achieving a stable peg would help immensely in increasing confidence and growing the network. We all agree that getting there sooner is better than getting there later. But, to really condition traders' expectations and build confidence for long-term success, we need to prove that the peg can work without a heavy-handed restriction based on price feeds. Market participants need a chance to condition their beliefs and learn. Disallowing short sales below the median feed price would not give them this opportunity. Furthermore, such a stop-gap measure is not really a long-term solution. Even if such a measure enforced the peg for now, it would really be a crutch that would become harder and harder to remove over time. If the crutch seemed to work for now, it would prevent true price discovery, much like the blunt short-sale prohibitions for traditional equities that proved to be ill-advised. When the network size is much bigger in the future, it could be very difficult to remove the crutch without causing widespread concern about the robustness of the peg, simply because the market would not have learned on its own to achieve a viable peg. What if the crutch were dispensed at some point and the peg began to fail again? Confidence could be shattered. I believe it would be a mistake to try to bypass the steady learning and conditioning process that needs to take place for long-term robustness of the peg.
So, I say let the market work mostly on its own for a little while longer, when the costs of failure are relatively low. See if things get better. Fix bugs in the client, make it easy for more people to get on the network and participate in the internal market. Make one or two simple, conservative changes to the market rules that don't rely on price feeds. E.g., just increasing collateral requirements from 2x to 3x, decreasing the margin call price, and/or increasing the margin call penalty to 10% may be enough to restore balance between shorts and longs. If the peg can start to hold better with minimal changes, that would be a home run and far superior than using a heavy-handed approach such as restricting short sales below a median price feed.
The price feed is not a "crutch." It is not "training wheels." It is an inherently required part of the system that should not ever be removed. BUT THERE IS NOTHING WRONG WITH USING A PRICE FEED. It doesn't diminish the accomplishment or usefulness of bitUSD.
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I gave it more thought. I am kind of OK with now new shorts below the 'current price' (be it feed based or average based).
Just please consider starting bitBTC instead of bitUSD, I believe we will learn more that way.
And yes, with less crushing clients more people will participate.
0.02BTSX
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The percentage of people wanting to short on average is greater than the percentage of people willing to genuinely go long.
What about instead of price feeds first trying upping the collateral required?
A certain range of collateral required could make those two percentages exist (genuine shorts vs. longs) in a better equilibrium very close to the peg without price feeds?
The more collateral required the more secure the BitAsset system is too, which will also bring in more genuine longs.
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The percentage of people wanting to short on average is greater than the percentage of people willing to genuinely go long.
What about instead of price feeds first trying upping the collateral required?
A certain range of collateral required could make those two percentages exist (genuine shorts vs. longs) in a better equilibrium very close to the peg without price feeds?
The more collateral required the more secure the BitAsset system is too, which will also bring in more genuine longs.
I like this proposal... but because I am not an expert what are your thought's bytemaster regarding Empirical1 proposal?
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The percentage of people wanting to short on average is greater than the percentage of people willing to genuinely go long.
What about instead of price feeds first trying upping the collateral required?
A certain range of collateral required could make those two percentages exist (genuine shorts vs. longs) in a better equilibrium very close to the peg without price feeds?
The more collateral required the more secure the BitAsset system is too, which will also bring in more genuine longs.
I like this proposal... but because I am not an expert what are your thought's bytemaster regarding Empirical1 proposal?
I would add that it still requires some periodic action to be taken by the delegates.
I.e. We find the collateral level (which may be very high) that makes the BitAsset mean/average within 2% of 1-1 in the next month, over time though as BitAsset demand increases the mean/average will rise and if it gets above 1-1, the collateral level could be lowered with advance warning by delegates ultimately settling on the current minimum 2x collateral.
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The percentage of people wanting to short on average is greater than the percentage of people willing to genuinely go long.
What about instead of price feeds first trying upping the collateral required?
A certain range of collateral required could make those two percentages exist (genuine shorts vs. longs) in a better equilibrium very close to the peg without price feeds?
The more collateral required the more secure the BitAsset system is too, which will also bring in more genuine longs.
I like this proposal... but because I am not an expert what are your thought's bytemaster regarding Empirical1 proposal?
I would add that it still requires some periodic action to be taken by the delegates.
I.e. We find the collateral level (which may be very high) that makes the BitAsset mean/average within 2% of 1-1 in the next month, over time though as BitAsset demand increases the mean/average will rise and if it gets above 1-1, the collateral level could be lowered with advance warning by delegates ultimately settling on the current minimum 2x collateral.
Did you guys read p7. of the proposal/OP?
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The percentage of people wanting to short on average is greater than the percentage of people willing to genuinely go long.
What about instead of price feeds first trying upping the collateral required?
A certain range of collateral required could make those two percentages exist (genuine shorts vs. longs) in a better equilibrium very close to the peg without price feeds?
The more collateral required the more secure the BitAsset system is too, which will also bring in more genuine longs.
I like this proposal... but because I am not an expert what are your thought's bytemaster regarding Empirical1 proposal?
I would add that it still requires some periodic action to be taken by the delegates.
I.e. We find the collateral level (which may be very high) that makes the BitAsset mean/average within 2% of 1-1 in the next month, over time though as BitAsset demand increases the mean/average will rise and if it gets above 1-1, the collateral level could be lowered with advance warning by delegates ultimately settling on the current minimum 2x collateral.
Did you guys read p7. of the proposal/OP?
That proposal requires price feeds and price fixing BitUSD creation above 1-1.
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I.e. We find the collateral level (which may be very high) that makes the BitAsset mean/average within 2% of 1-1 in the next month, over time though as BitAsset demand increases the mean/average will rise and if it gets above 1-1, the collateral level could be lowered with advance warning by delegates ultimately settling on the current minimum 2x collateral.
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That proposal requires price feeds and price fixing BitUSD creation above 1-1.
price feeds - Yes the proposal does require/includes those. I do not totally get what they think the price feeds will get them (positive thing that is) and personally prefer the average.
'price fixing BitUSD creation above 1-1' - In my view 'No', it merely restricts new short position to prices >= 1:1... ;)
But you suggest market rule changes every other month, and the proposal suggests elegant market based alternative.
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I.e. We find the collateral level (which may be very high) that makes the BitAsset mean/average within 2% of 1-1 in the next month, over time though as BitAsset demand increases the mean/average will rise and if it gets above 1-1, the collateral level could be lowered with advance warning by delegates ultimately settling on the current minimum 2x collateral.
..................
That proposal requires price feeds and price fixing BitUSD creation above 1-1.
price feeds - Yes the proposal does require/includes those. I do not totally get what they think the price feeds will get them (positive thing that is) and personally prefer the average.
'price fixing BitUSD creation above 1-1' - In my view 'No', it merely restricts new short position to prices >= 1:1... ;)
But you suggest market rule changes every other month, and the proposal suggests elegant market based alternative.
Average is the only way to go, price feed continuously is complicated, messy and will fail eventually
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I don't think the first proposal is bad and I will support it if we can not create a better solution, though I would prefer no market maker at first because again that introduces another layer which may not be necessary.
price feeds - Yes the proposal does require/includes those. I do not totally get what they think the price feeds will get them (positive thing that is) and personally prefer the average.
Price feeds require a greater degree of constant trust than a collateral level which can be changed with advanced warning.
(51% of the delegates agreeing to change the collateral level has a limited short term effect, whereas if some collude to alter the feeds, they can potentially create an 'event'? I don't know.)
'price fixing BitUSD creation above 1-1' - In my view 'No', it merely restricts new short position to prices >= 1:1... ;)
I think you are trying to make the unelegant sound elegant :) Though I am personally happy with it if it is the best solution.
But you suggest market rule changes every other month, and the proposal suggests elegant market based alternative.
Yes I think you are correct here. This could require a change as frequently as every month for the first three months but then once every 2/3 months after as it slowly scales down to the 2X collateral level.
This is still only monitoring a total of 7 decisions with advance notice from the delegates over 18 months vs. trusting them with price feeds all the time for that period.
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I don't think the first proposal is bad and I will support it if we can not create a better solution, though I would prefer no market maker at first because again that introduces another layer which may not be necessary.
Ohh wait, the part about the market bot buying and printing money is nothing short of TERRIBLE, I already expressed my utter and complete disagreement with it in the first thread dedicated to the subject.
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There are so many innovative concepts in bitsharesx, a built in market maker would be another one.
However, there are several points I want to make:
1) I like the idea of a built-in market maker as a way to improve liquidity, but I'm worried about the market getting too complex with too many "external" rules. External rules always add a "cost" and an inefficiency. There is a reason why the offset exists, and removing it might not be the best for the market. If the market maker exists within current rules (e.g., buying all shorts listed below spot), that would be ok.
2) I also don't like the market relying on people to feed data into it all the time, I'd like a more natural price discovery.
3a) We can learn from other similar BTC futures markets: If you played the futures BTC market on https://icbit.se/WebTrade/Trading.aspx, you'd know that BTC futures are almost always trading above spot. People are bullish on BTC, and believe that BTC should generally be in "contango." (they call it contango, but technically it's not really contango... but that's another story...). That offset is actually very similar to the current BitUSD market, and is due to perceived future strength of BTC relative to USD, the same way the discount of USD on bitsharesx is probably due to the perceived strength of BTSX to USD. When there is a crash, those shorts would be killed. Once that happened the first time, everyone learned their lesson and the market has been significantly closer to spot ever since. We may need a painful correction for everyone to learn to be careful.
3b) We can learn from other similar BTC futures markets: icbit.se uses variable fees as a way to make the market (adds liquidity to both asks and bids) https://icbit.se/discount. What if the fee to sell short bitUSD is made much larger than sell/buy? People wouldn't be as willing to sell short far below spot and instead find other ways to buy bitUSD (exchanges), which brings me to...
4) we need more liquidity on https://bter.com/trade/btc_bitusd and https://bter.com/trade/bitusd_usd, that is the bottleneck to many arb bots at the moment. (disclosure: i've been working on a market making bot for that. I'm thinking of starting a "market making" delegate where all proceeds get feed into the bots to aid price discovery and peg)
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4) we need more liquidity on https://bter.com/trade/btc_bitusd and https://bter.com/trade/bitusd_usd, that is the bottleneck to many arb bots at the moment. (disclosure: i've been working on a market making bot for that. I'm thinking of starting a "market making" delegate where all proceeds get feed into the bots to aid price discovery and peg)
Actually that is an idea that I really like, just the current delegate fees will make too small of a difference. But hey it is a start.
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I do not totally get what they think the price feeds will get them (positive thing that is) and personally prefer the average.
Average is the only way to go, price feed continuously is complicated, messy and will fail eventually
2) I also don't like the market relying on people to feed data into it all the time, I'd like a more natural price discovery.
I think you guys are thinking the price feed is a critical point of weakness when it isn't. Everyone is responsible for placing their own orders at the price they want. As long as everyone expects the feed to tend toward tracking the dollar in the long run, that's all that really matters. If you had a market maker, than control over the feed could be a more critical problem but I oppose a market maker.
You can't use an average in place of the price feed because it just won't work and wishing it doesn't make it so. The moving average basically just slows down market movement; it's a totally different thing.
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I am against the market maker concept on the principle that it exposes the network to risks if a BitAsset crashes (ie: dollar hyperinflation).
I think the feeds are not an issue given 100 sources and a median. I think that eventually the market will make the feeds less and less necessary.
Given price feeds, I think mandatory covering at $0.90 on the BitUSD for which ever short position is least collateralized adds liquidity and protects the network from under-collateralized shorts.
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The basic problem appears to be that without a mechanism for directly redeeming or exchanging BitUSD for real USD, I can't see how real arbitrage is possible, and there is no reason for tracking to occur in the absence of a crowd consensus that they should. Tell me if I'm wrong, but my understanding is that every bitAsset is essentially a replica, just with a different label on it. Change the label on BitUSD to just Bit, and whose to say why it should track realUSD, pretzels or anything at all? Yet the desire is to convince everyone that it should track its namesake, which relies on this idea of a specifically trained social consensus forming around each of these different labels. In light of this, its already a tremendous result that BitUSD tracks even as closely as it has. I think liquidity and usability is more critical at this stage than how well it tracks realUSD - just let it run for now without heavy handed intervention.
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Given price feeds, I think mandatory covering at $0.90 on the BitUSD for which ever short position is least collateralized adds liquidity and protects the network from under-collateralized shorts.
$0.9, why not 0.89, why not 0.99? when you pull a number out of thin air, you are bound to fail.
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Given price feeds, I think mandatory covering at $0.90 on the BitUSD for which ever short position is least collateralized adds liquidity and protects the network from under-collateralized shorts.
$0.9, why not 0.89, why not 0.99? when you pull a number out of thin air, you are bound to fail.
I agree all "fixed" numbers are a form of "price fixing" and the market has a way of bending elsewhere.
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So what where does this leave us?
New BitUSD should only be created when there is demand for it at prices at or above parity.
All USD should be guaranteed a buyer at 90% parity. This limits the risk to the downside.
Potential Problem: There will be little demand for BitUSD at prices at or above parity in the short term < 3 months.
1. I feel there is at least a 1/2% utility difference that comes from the cost and effort of converting BitUSD.
2. The wallet just being released has bugs etc. this introduces a risk premium that must be accounted for.
3. The problem BM already identified 'BitUSD vs USD will not track well in an immature market because BitUSD-deniers will not buy BitUSD and neither will believers.'
A market determined mechanism that incentivises BitAsset creation is needed in my opinion.
Potential solution: Bring the options contracts into the BitUSD creation mechanism by having shorts compete at parity (or slightly above*) by the fee they are willing to pay to longs.
Of course the problem is if shorts competed via fees that were paid immediately obviously BitUSD would track at parity less fees.
The Twist- Fees are payable in BTSX and are only redeemable after you have held the BitAsset you bought for at least 3 months
(If you sell your BitUSD before 3 months the fee gets paid to the network or the insurance fund.)
-Because the fee is paid in BTSX, the better BTSX does, the more their fee is worth so now people are incentivised to hold their BitAsset even if they think BTSX will do well. (This is important because even with traders tightening the range the peg will fluctuate considerably based on the short term fortunes of BTSX, this dampens that considerably so adds more stability.)
-People selling before 3 months will be adding to the security of the network and appeal of BitAssets because their fees will add to the insurance fund.
This system will find a level that encourages BitAsset creation whereas at the moment there will be very little BitAsset demand.
This delayed gratification also discourages selling and so limits supply of BitUSD with no incentive attached. (Shorts looking to cover will find very little BitUSD for sale driving the price of BitUSD (with no BTSX fee attached) up very close to the peg.)
(* I would actually like shorts to compete at the $1.01 level for BitUSD creation vs. the $1 level so that BitUSD with no incentives is worth $0.99-$1 vs. $0.98-99)
As BitAsset demand increases the fee will eventually become negligible.
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The problem with an options market at this stage is that it is no more likely to correlate to the pegged value than BitUSD for the same reasons - lopsided supply/demand and it requires a developed social consensus. Secondly, an options market will not be divorced from the BitUSD market, as they are linked through arbitrage. A lot of option sellers for example will want to hedge their position by taking the offsetting delta position in the BitUSD market. So the price pressures between the two are inextricably linked. Thirdly the available liquidity will be spread between options and BitUSD, leading to less liquidity in BitUSD. All in all, I don't see how adding options at this stage adds anything but complexity.
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The problem with an options market at this stage is that it is no more likely to correlate to the pegged value than BitUSD for the same reasons - lopsided supply/demand and it requires a developed social consensus. Secondly, an options market will not be divorced from the BitUSD market, as they are linked through arbitrage. A lot of option sellers for example will want to hedge their position by taking the offsetting delta position in the BitUSD market. So the price pressures between the two are inextricably linked. Thirdly the available liquidity will be spread between options and BitUSD, leading to less liquidity in BitUSD. All in all, I don't see how adding options at this stage adds anything but complexity.
The problem for me is that even though BTSX is a great investment on a risk/reward basis for BTSX holders it is probably the riskiest place in the world to store any derivative value in the form of BitAssets for the next 3 months.
If we don't recognise that there is a very big risk premium associated with owning BitAssets at this stage and let shorts compensate longs for that risk in some form then there will be very little demand for BitAssets imo.
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The problem for me is that even though BTSX is a great investment on a risk/reward basis for BTSX holders it is probably the riskiest place in the world to store any derivative value in the form of BitAssets for the next 3 months.
If we don't recognise that there is a very big risk premium associated with owning BitAssets at this stage and let shorts compensate longs for that risk in some form then there will be very little demand for BitAssets imo.
honest academic question: why are bitassets more risky than BTSX? at first glance they should have identical risk, if one fails they both fail. If they have identical risks, then there is value in bitUSD only if 1 bitUSD today is reasonably worth 1 bitUSD tomorrow.
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The problem for me is that even though BTSX is a great investment on a risk/reward basis for BTSX holders it is probably the riskiest place in the world to store any derivative value in the form of BitAssets for the next 3 months.
If we don't recognise that there is a very big risk premium associated with owning BitAssets at this stage and let shorts compensate longs for that risk in some form then there will be very little demand for BitAssets imo.
honest academic question: why are bitassets more risky than BTSX? at first glance they should have identical risk, if one fails they both fail. If they have identical risks, then there is value in bitUSD only if 1 bitUSD today is reasonably worth 1 bitUSD tomorrow.
Simple example to demonstrate the risk profile -
Lets say there is a 50% chance BTSX succeeds and goes up 400% in 3 months and a 50% chance it fails sometime within 3 months.
If I own 1 BitUSD now, in 3 months I will either have circa $1 worth of value or no value. Ergo $1 worth of BitUSD is only worth $0.50 now using the above extreme example.
If I own $1 BTSX now, in 3 months I will either have $4 of value or nothing. Ergo $1 worth of BTSX is worth $2 in the above example.
(However you equate the risk profile of BTSX in your own mind, BitAssets take a a lot of risk and none of the reward.)
Edit this is assuming a sudden failure.
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The problem for me is that even though BTSX is a great investment on a risk/reward basis for BTSX holders it is probably the riskiest place in the world to store any derivative value in the form of BitAssets for the next 3 months.
If we don't recognise that there is a very big risk premium associated with owning BitAssets at this stage and let shorts compensate longs for that risk in some form then there will be very little demand for BitAssets imo.
honest academic question: why are bitassets more risky than BTSX? at first glance they should have identical risk, if one fails they both fail. If they have identical risks, then there is value in bitUSD only if 1 bitUSD today is reasonably worth 1 bitUSD tomorrow.
Great question!
The answer is that if pegged/collectivized asset fail. BTSX is still the leading decentralized exchange where companies, with open eyes for the future, like Overstock, can list their assets.
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In their current form, BitAssets do not represent a claim on anything. BTSX represents a claim on the infrastructure that has and is being developed. So BitAssets are inherently more risky than BTSX. BitAssets holders therefore need higher compensation for this risk.
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In their current form, BitAssets do not represent a claim on anything. BTSX represents a claim on the infrastructure that has and is being developed. So BitAssets are inherently more risky than BTSX. BitAssets holders therefore need higher compensation for this risk.
Hmmm do you mean they are riskier in terms of risk / reward? If BTSX goes to zero, both BitAssets and BTSX are worthless while if BTSX quadruples in value, the holders of BitAssets get none of that gain? Thus, the BitAssets are riskier?
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Kind of. Apart from standard volatility, failure risk needs to be considered. Every BitAsset shares the risk of BTSX failing, but BTSX can still survive if any particular BitAsset fails because of the value in the platform. A BitAsset is more likely to fail because there is no underlying value or redeem-ability that can be called upon should the consensus fail to hold the peg. Therefore any BitAsset will likely bear a discount relative to its peg price to compensate.
If the BitAsset peg provably succeeds in the long run, then failure risk disappears, and holding either BitAsset or BTSX will both have volatility risks commensurate with their respective return potentials.
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thanks tonyk starspirit MeTHoDx. BitSharesX is so different than anything out there, I'm trying to find the "easy" way of explaining some of these fundamentals.
BTSX = represents stake in infrastructure, does not rely on a working peg. The DAC pays dividends based on the usage of the infrastructure.
BitAssets = cryptocurrency representing the value of the representative asset. It depends on an accurate peg to a real world asset in units of BTSX.
Since BitAssets cannot be redeemed for the representative currency, then theoretically BitAsset value must be guaranteed by the system to be the equivalent value of BTSX. So the value of the BitAsset is leveraging the real-world profit that BTSX can generate in order to ensure the value. User must have confidenec in the BTSX-BitAsset system to enforce pegging.
I am very much a free-market person, but I think that in order for the BTSX market/exchange to be a free market, the system MUST have have rules to enforce pegging. For now, the feeds are a direct way by which people who can exchange BitUSD for real currency off chain (via exchanges) will have a value such that 1 BitUSD ~ 1 USD.
If you assume BitUSD is not a speculative currency but instead a 1:1 mapping of the underlying asset value (or at least bterUSD/exchangeUSD) - there should be no such thing as a USD BitUSD market. Once you take that assumption, then BTSX and the need for market pegging becomes a little clearer.
However, when you do not take that assumption that bitUSD:exchangeUSD=1:1, there are legitimate economic reasons why BitUSD might trade higher OR lower than USD (if BitUSD is seen as more/less convenient store of value than in USD due to lack of liquidity or potential for system failure loss). For now the liquidity and market makes BitUSD less convenient, and people want to leverage as much as they can.
FUNNY THOUGHT: Just popped in my head, so silly I never saw this... BTSX will either succeed like crazy or go out in a bang. If it goes out like a bang, no matter how many BTSX I have, I get 0. If it takes off like crazy, I get money proportional to my holdings. In this game, I should leverage EVERYTHING I have as much as possible to get as many BTSX on margin as possible. If it goes up, i make a lot more than if I didn't leverage. If it goes down, I loss the exact same as if I did not leverage. The optimal move is to leverage and max out no matter what the BTSX-USD exchange rate.
For this reason there MUST be a market peg enforced externally for the indefinite future!
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FUNNY THOUGHT: Just popped in my head, so silly I never saw this... BTSX will either succeed like crazy or go out in a bang. If it goes out like a bang, no matter how many BTSX I have, I get 0. If it takes off like crazy, I get money proportional to my holdings. In this game, I should leverage EVERYTHING I have as much as possible to get as many BTSX on margin as possible. If it goes up, i make a lot more than if I didn't leverage. If it goes down, I loss the exact same as if I did not leverage. The optimal move is to leverage and max out no matter what the BTSX-USD exchange rate.
who would give you a loan for buying BTSX "on margin"? unless the creditor believes nearly 100% in BTSX, in which case they are better off investing themselves ;) margin trading is usually available as long as margin not exceeded, e.g. for comparatively low volatility assets...
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FUNNY THOUGHT: Just popped in my head, so silly I never saw this... BTSX will either succeed like crazy or go out in a bang. If it goes out like a bang, no matter how many BTSX I have, I get 0. If it takes off like crazy, I get money proportional to my holdings. In this game, I should leverage EVERYTHING I have as much as possible to get as many BTSX on margin as possible. If it goes up, i make a lot more than if I didn't leverage. If it goes down, I loss the exact same as if I did not leverage. The optimal move is to leverage and max out no matter what the BTSX-USD exchange rate.
who would give you a loan for buying BTSX "on margin"? unless the creditor believes nearly 100% in BTSX, in which case they are better off investing themselves ;) margin trading is usually available as long as margin not exceeded, e.g. for comparatively low volatility assets...
that's exactly my point: very few people will let you buy on margin, that's why bitUSD was trading so low (you had to pay a premium). And people didn't care they were paying a premium since if BTSX collapsed, they would get nothing either way.
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I didnt really participate in this discussion so it might be redundant.
But what if shorts can be executed at any price but all other trades are fixed to the price feed? Also the short trade redeems his collateral at the ratio of bitusd/btsx he actually shorted at. All other trades would be converting bitusd into btsx (which is how a merchant measures the value of a bitusd), what else?
Would there be an immediate arbitrate possibility? If so what about making it like fututre contracts that need a certain amount of time to be able to be converted back into btsx again?
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FUNNY THOUGHT: Just popped in my head, so silly I never saw this... BTSX will either succeed like crazy or go out in a bang. If it goes out like a bang, no matter how many BTSX I have, I get 0. If it takes off like crazy, I get money proportional to my holdings. In this game, I should leverage EVERYTHING I have as much as possible to get as many BTSX on margin as possible. If it goes up, i make a lot more than if I didn't leverage. If it goes down, I loss the exact same as if I did not leverage. The optimal move is to leverage and max out no matter what the BTSX-USD exchange rate.
who would give you a loan for buying BTSX "on margin"? unless the creditor believes nearly 100% in BTSX, in which case they are better off investing themselves ;) margin trading is usually available as long as margin not exceeded, e.g. for comparatively low volatility assets...
that's exactly my point: very few people will let you buy on margin, that's why bitUSD was trading so low (you had to pay a premium). And people didn't care they were paying a premium since if BTSX collapsed, they would get nothing either way.
agree this strategy would make sense in a binary one-period scenario. however, the reality is probably far from one-period binary. e.g. people pursuing that strategy would risk losing some bitshares, if BTSX went down somewhat to trigger margin calls, and then recovered. hasn't that happened already?
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Many people have lost money due to margin calls from the $100M to $40M fall in BTSX value. Volatility is the risk that shorts must be concerned about.