There are certainly times when dilution makes sense, but there are also times it does not. But it is always coercive, especially for the many smaller stakeholders whose vote counts for less than larger stakeholders. (Note the method of voting is fair, just not the consequence of this type of vote).

If one thinks of BTS as a share of the accumulated capital within the bitshares ecosystem, then it makes sense that if there is some sort of capital infusion into the ecosystem, such as the merger of another network, that dilution ensures everyone maintains a fair share of the new capital base. In such a case, I think dilution is warranted. That is similar to a situation under the gold standard where new notes are produced in the economy in exchange for new participants adding gold to the capital base, and destroyed when part of the capital base is redeemed.

However, even in the case of a capital infusion, where the value of that new capital may be evaluated differently by different stakeholders, a fixed dilution voted by stakeholders will be coercive upon all other stakeholders, and not voluntary. As a result for some people it will be a gift, for others theft. Might a theoretical alternative be for everybody in the system to publicly state the amount they are willing to dilute their own stake by, which is transparent in their community reputation going forward? A practical mechanism would be required to ensure nobody is diluted by more than this percentage. (I know this is practically difficult, but in principle).

Then we have the situation where people do work within the system, but for the benefit of the community at large rather than specific stakeholders (the latter is accommodated by simple payments). Rather than force everyone in the system to pay for this work whether they want to or not, what if we had a voluntary system where:

- delegates put up a proposal for value add
- donors can voluntarily contribute to the cause, proving funding and salary to the delegate to accomplish the goal
- if the delegate's production adds real value to the system, anybody within the system can donate to the delegate
- the delegate will reward their donors for their support from the contributions they receive
- reputations for donating, contributing etc affect how everyone is regarded in the system, keeping them fair and honest

In a way, each delegate is then like a mini-DAC. And this does not have to be restricted to delegates, but actually could be anybody (or any group of people?) in the system. It avoids dilution and coercion.

If we think of bitshares as a country, by allowing coercive dilution for these many circumstances we have set a precedent for the replication of traditional government structures (and a burgeoning "public sector") that coercively taxes the people. Whether that's voted upon is not the issue - one should not be able to vote to take wealth from other people. I would rather see if we can create an economy of voluntary human action.

BM and others - what do you think?

Edit 4 Nov 14: I improperly framed this discussion with misuse of the word coercive in the subject header, which is not true because there is no threat of violence. My mistake. But dilution is still involuntarily imposed on all individual participants whether they agree its to their benefit or not. My key point was to consider whether there are voluntary alternatives that could be considered instead of blanket dilution, at least in some situations. My view has evolved somewhat to the point that in principle voluntarism is better, but in practice its better to keep it simple but effective for now. When the system grows there will be better was of doing things as long as we don't lose sight of basic principles like the rights of individuals to choose what is best for them.

There is an underlying assumption I see often that BTS market cap must always expand with bitUSD market cap, because demand for bitUSD forces up demand for BTS, the collateral. And further for the pool of all bitAssets. But is this logically true? I found this complex to think through, so would genuinely not be surprised if I were wrong. But my conclusion is that the statement is not necessarily true - one does not necessarily drive the other.

First we need to recognise that at least from a valuation perspective, there is no reason why BTS should by necessity demand a higher valuation as a direct consequence of bitUSD growth. If all BTS ever earned as income from providing the platform were some small transaction fee for bitUSD usage (which in theory could be close to zero), its fair valuation should relate to that income, not the market cap of bitUSD.

Now let's think about the market dynamic.

1) Imagine somebody demands a huge amount of bitUSD today, but that overall market expectations for BTS valuation are unchanged. This party goes to an exchange and buys bitUSD with their fiat USD, driving the price above 1 fiat USD.
2) Seeing this favourable price, some arbitragers buy bitUSD with their BTS, sell it at the exchange for the higher fiat USD price, buy back their original BTS with fiat USD, and pocket a profit. This leads to an equalisation of the bitUSD premium on the exchanges and on the BTS/bitUSD exchange, but has had no net effect on BTS demand.
3) Now seeing this favourable BTS/bitUSD price another set of arbitragers that are current holders of BTS are able to come in and create new supply in bitUSD through shorts. The arbitrage is to short bitUSD (making them longer BTS), and to sell BTS on the exchanges, which maintains their overall exposure to BTS. Again there has been no net effect on BTS demand. But importantly BTS has moved from the hands of the arbitragers into the collateral pool to support the larger supply of bitUSD.

The end result of this sequence is that there has been no change in the net demand for BTS, but that there has been a movement of BTS into the collateral pool.

If demand were ongoing, and BTS value were unchanged, this sequence could be repeated until all the BTS sat in the collateral pool. The only condition is that the market cap of BTS needs to remain more than 3x the market cap of bitUSD, otherwise its likely that forced covering of the shorts due to under-collateralisation would begin to unwind the supply and so release BTS collateral from the pool again (which incidentally, on its own still has no net effect on BTS demand).

The logical conclusion I draw, if this is correct (),  is that the market cap of BTS bears no direct relation to the market cap of bitUSD, except that the market cap of bitUSD bumps against a ceiling as it approaches 1/3 the market cap of BTS. The only economic relationship that can drive growth for BTS is whether BTS derives greater value of transaction and other platform fees from the larger supply of bitUSD.

Can anybody see the flaw if there is one?

[Edit 12 Nov 2014: After having reviewed the discussion and thought some more on it, I now interpret the result like this. For the market cap of bitAssets to grow up to the ceiling, it does not require BTS market cap to rise at all. The growth can be facilitated completely by arbitragers without increasing their net demand for BTS, if the market is stubborn in the valuation it places upon BTS. However, the result still allows the potential for the market to increase its evaluation of BTS if bitAsset markets grow, which in all likelihood it will do if enough people follow the meme that "bitAsset growth justifies higher valuations of BTS". But this is not a given, and if BTS valuation were constrained by other issues, even strong demand for bitUSD could not be fulfilled beyond the ceiling.

As a minor technical point, I also now believe that in step 3 of the sequence above, these players are not strictly implementing a risk-free arbitrage (in actual fact, there is no risk-free arbitrage for shorts). Instead they are speculating that the premium of the bitUSD price over the peg will fall, which is not guaranteed if demand remains consistently strong. This does not alter the argument or conclusions above, it only affects their incentive to participate in meeting the demand.]



 

It's only small, but it would be easier to read through the order queues in the market if all the quantities were right-hand aligned instead of left-hand aligned, so that place values lined up.

Looking here at v0.4.21,
https://github.com/dacsunlimited/bitsharesx/releases

I'm used to seeing a green button with a .dmg download, which I download and then copy straight to applications. All I can see with this release are buttons for the zipped source code, which I'm not sure what to do with.

thanks

I am now a fan of the 30 day expiry on shorts because I believe that it will dramatically improve confidence for buyers and traders that they can get in and out without a large haircut when selling, with flow-on effects to overall market liquidity and marketability of BitUSD. I think it was right to grandfather existing positions, because nobody likes the rules changed on existing positions. But my question is what do shorts with these positions actually lose by voluntarily rolling them over to the new expiry regime?

If BTSX rises substantially, their collateral position will increase in value, and to maintain leverage it would actually be beneficial at that stage to roll anyway.
If BTSX falls substantially, the shorts can only be retained to the point where there is a forced margin call.
In the interim, instead of sitting and waiting for a year for the grandfathering to roll off (an eternity in the competitive crypto landscape), if the shorts were rolled this might increase liquidity and the peg in BitUSD, increasing the value of BTSX to their gain.

Maybe such voluntary rolls are happening, I'm not sure how to check. But if there are shorts reluctant to do this, I'm just curious to know what your reasons might be.

This is just an open question, not a criticism by any means, because it is not for me to question subjective rationality.

Technically it might be that BitAssets need to be backed by BTSX, I'm not sure. What else, if anything, is within the realms of practical possibility?
e.g. Can BTC be used to back BitBTC?

In the Nubits thread, member Chronos points out the difference in current buy-side liquidity between Nubits and BitUSD, here:
https://bitsharestalk.org/index.php?topic=9057.285;topicseen

Any discussion on Nubits v BitUSD can stay in that thread - my interest in this post is liquidity in BitUSD. I know there's been talk in other threads about running market-making bots, and I'm thinking about trying it myself at some point, but they do not appear to be very active based on current spreads and liquidity. What are currently the biggest barriers to current and would-be market-makers?