BitShares Forum

Main => General Discussion => Topic started by: puvar on August 26, 2014, 11:37:19 pm

Title: When is BitUSD destroyed?
Post by: puvar on August 26, 2014, 11:37:19 pm
BitUSD is created when somebody puts a short order. Is BitUSD destroyed when the original short order is closed?
Title: Re: When is BitUSD destroyed?
Post by: puppies on August 26, 2014, 11:38:20 pm
That is correct.
Title: Re: When is BitUSD destroyed?
Post by: puvar on August 26, 2014, 11:43:44 pm
That is correct.

If so, then I'm confused. Suppose I bought BitUSD by accepting somebody's short. If they close the original short will my BitUSD be converted to BTSX?
Title: Re: When is BitUSD destroyed?
Post by: puppies on August 26, 2014, 11:46:54 pm
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.
Title: Re: When is BitUSD destroyed?
Post by: puvar on August 26, 2014, 11:52:54 pm
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?
Title: Re: When is BitUSD destroyed?
Post by: puppies on August 26, 2014, 11:56:38 pm
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?
  It doesn't have to be a short.  He could purchase Someones bitusd that is ready to sell.
Title: Re: When is BitUSD destroyed?
Post by: merockstar on August 27, 2014, 12:05:59 am
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?

no because supply isn't the only thing a market cap is based on. it's also based on demand.
Title: Re: When is BitUSD destroyed?
Post by: tonyk on August 27, 2014, 12:11:30 am
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?
no because supply isn't the only thing a market cap is based on. it's also based on demand.
**cough**cough
Title: Re: When is BitUSD destroyed?
Post by: merockstar on August 27, 2014, 12:23:57 am
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?
no because supply isn't the only thing a market cap is based on. it's also based on demand.
**cough**cough

forgive me the aspergerish symptoms, but I legitimately don't know what the coughs imply...
Title: Re: When is BitUSD destroyed?
Post by: tonyk on August 27, 2014, 12:32:34 am
He does not really mean cap. He means bitUSD supply.
And you can explain why it is not constantly growing.
Title: Re: When is BitUSD destroyed?
Post by: merockstar on August 27, 2014, 12:39:24 am
He does not really mean cap. He means bitUSD supply.
And you can explain why it is not constantly growing.

supply cap. duh. thanks.

honestly, the only answer I can come up with for that one is that people use it to cover their shorts.
Title: Re: When is BitUSD destroyed?
Post by: toast on August 27, 2014, 12:45:41 am
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?

The supply will grow if demand for BitUSD increases and shrink if demand for BitUSD decreases
Title: Re: When is BitUSD destroyed?
Post by: tonyk on August 27, 2014, 12:47:30 am
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?
  It doesn't have to be a short.  He could purchase Someones bitusd that is ready to sell.

And in the case it is from somebody who is already long bitUSD (as opposed by from somebody opening new short position), the (supply)/total number of bitUSD in circulation is reduced.
Title: Re: When is BitUSD destroyed?
Post by: theoretical on August 27, 2014, 12:54:53 am
Suppose I bought BitUSD by accepting somebody's short. If they close the original short will my BitUSD be converted to BTSX?

Closing a short is a two-step process for the short seller:

- Obtain BitUSD.
- Destroy the BitUSD to free the collateral (e.g. by clicking "Cover" in the GUI wallet).

In general, if you bought Alice's short for 100 BitUSD, and later she closes her short position, in between those things happening Alice must have provided $100 worth of value to some BitUSD holder in order to obtain the 100 BitUSD she used to close the position.  Likely this $100 value was provided in the form of BTSX in an order on the BitUSD / BTSX market, but it could just as easily be Bob's payment to Alice for painting his fence.

So if they close the original short, *somebody's* BitUSD was "converted" into whatever consideration Alice gave to buy back the BitUSD (but this was a mutually voluntary free market transaction).  The only exception is Alice's BitUSD can be converted involuntarily into BTSX if the price rises and the network enforces a margin call, but that's Alice's problem -- short holders (like Alice) can be forced out of their positions by the margin call, but long BitUSD holders (like you) cannot.
Title: Re: When is BitUSD destroyed?
Post by: puvar on August 27, 2014, 12:58:45 am
No.  When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral.  In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.

So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?

The supply will grow if demand for BitUSD increases and shrink if demand for BitUSD decreases

Yes, thanks for the explanation. By "cap" I meant the supply of BitUSD, of course.

I guess I understand now. For every BitUSD there is a short somewhere and they are always created together. It's like matter and anti-matter in physics: when particle and anti-particle are created, the energy is consumed; when particle and anti-particle annihilate, the energy is released. The same here: when BitUSD (matter) and a short (anti-matter) annihilate, the BTSX collateral (energy) is released.