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Messages - MolonLabe

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46
General Discussion / Re: bitGold
« on: March 19, 2014, 12:50:00 am »
Quote from: toast on March 18, 2014, 06:33:40 pm
The assumption that all the options have to have the same expected return is a strictly weaker requirement

What do you mean by "strictly weaker"? Focal Points are defined in a game where the Players could meet anywhere, as long as they end up together. So it is really the only requirement.

Quote from: toast on March 18, 2014, 06:33:40 pm
("peg to a price everyone else pegs to and you win AND everyone else who agrees wins, else you all lose")
If someone owns a small amount of BTS, they would "lose" disproportionally in the "else you all lose" clause making it a weak threat (unless the plan is to have everyone own the same proportion of BTS at all times a la "Communism"). If someone owns a competing system, they would gain (if "you all lose") making it an incentive.

47
General Discussion / Re: bitGold
« on: March 18, 2014, 06:10:21 pm »
Quote from: toast on March 17, 2014, 08:06:59 pm
Quote from: JoeyD on March 17, 2014, 07:52:42 pm
I'm trying to understand how the system comes to a consensus and trying to figure out what's keeping everyone on the same page, so to speak.
...
Are you familiar with the concept of a Schelling point? Unless there is a global decision made to price BitUSD at something other than USD that the majority of the capital in the market is aware of and wants to participate in, the *only* rational profit-seeking move you can make it trade BitUSD at USD, since the only "consensus point" you could make in a distributed environment is just to look at the name of the asset.

So back to GLD: If you see, absent any other information, that BitGLD has been trading for $1300-ish, the only profit-seeking rational move you can make is to assume BitGLD refers to one ounce of gold and place orders accordingly. To kick off the process, the chain creator should be clear about what denomination they are talking about. Everyone doing this at once pushes the price to the real ratio.

The Schelling Point assumes a game where the (Benefits - Costs) of each Option are exactly the same...
Quote from: Wikipedia
they could win by both choosing any square
...and are NOT affected by anything external. Hence the need to use an intrinsic coordinator (such as a name).

BitSharesX does not satisfy this assumption because:
1] Margin calls can force you sell a losing position, giving someone an external incentive to push the direction causing such a forced sale (currently under discussion here https://bitsharestalk.org/index.php?topic=3130.90).
2] The Benefits for each Option will be different for each player (they are Sale Price - FutureValue(Purchase Price)), and not in a way that they are perfectly offset by the previously-locked-in Costs for each Option.
3] The Cost for each Option will be different for each player (they are FV(Purchase Price)), and not in a way that they are perfectly offset by the expected benefits for each purchase.

48
General Discussion / Re: bitGold
« on: March 17, 2014, 05:31:54 pm »
Quote from: biophil on March 17, 2014, 02:34:40 pm
There's a great analogy running around somewhere called "Bookie Bob's solution to bitcoin volatility."

http://invictus-innovations.com/bookie-bob/

It's interesting but it actually does not address the question. The relevant section says:
Quote from: BB Analogy
If bitcoins go up,
...
If bitcoins go down,

But does not discuss how BitSharesX becomes aware of this (ie, how it knows that Price of Bitcoins has 'gone up' or 'gone down'). Similarly, JoeyD's question is about the difference between the price of gold, and the price of BitGold.

49
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 13, 2014, 03:09:03 pm »
Quote from: bytemaster on March 13, 2014, 01:04:32 am
Fees are calculated based upon how much of the order book you walk.

Given bids of 99, 98, 97, and 95.... to buy it all up in one go you enter an ask for 4@95.   You will receive 4*95=380 rather than 99+98+97 = 389 for a fee of '9'.    Obviously, if you attempted walk the book all the way down to 50, your fees are going to average 25%.

That's clever. Everyone gets exactly what they asked for, and the service is compensated for mediating the transaction. However, I'm paying no fees when I Bid on my own Asks as the price drifts upward, so for a large return even the fast version may be worth it (and the slow version is still always worth it).

Quote from: bytemaster on March 13, 2014, 01:04:32 am
With respect to the 'risk free' return.... I think you are discounting a risk:  such an attack will devalue all of the BTS you 'won'.   So I wouldn't lend someone ANYTHING to perform this attack.

This seems correct. I was thinking about it this morning, and had an insight: the attack is deadlier with heterogeneous markets...if some are large and some are small, the attack is worth it on only the smaller markets. However, if all markets are similar size, the attack is difficult to coordinate.

I was trying to think of a way of coordinating market depths/volumes but could not think of one. This implies that if a market becomes relatively (not absolutely) unpopular it may suddenly undergo this phenomena.


Since people apparently are expected to name their attacks, I'm going to suggest the "Up and Away" (UA) Attack (because the price [in BTS] goes up and takes money away from the shorts).

Do you have a comment on the market depth calculation? This attack relies on not tripping this rule. My intuition is that, unless it is costly to place or cancel an order, the rule will be easy to evade.

50
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 13, 2014, 12:08:21 am »
Quote from: bytemaster on March 12, 2014, 05:28:25 pm

All of these types of attacks depend upon a thin order book.   We recently added changes to require a minimum market depth before trading can occur.   Also, shorts are only forced to accept a high price *when* there is a margin call.  Otherwise they are unaffected.  By increasing the margin to 10x you would have to manipulate the price up by 5x before you could trigger such a call.
How are you calculating market depth (there are many ways)? Can you give examples of market's and their measured depths? What prevents me from faking the market depth with orders that are never filled?

More importantly, you overlooked my previous explanation for why this rule does not prevent the attack:
Quote from: MolonLabe on March 11, 2014, 02:18:16 am
Quote from: pariah99 on March 11, 2014, 02:08:18 am
...There's already a mechanism to limit the effect of a short squeeze by increasing margin requirements.
... This attack produces a risk free return, not a finite payoff, so if anything the ability to put more money into the attack should make it easier to find someone to lend me the money required to pull it off.

In other words, it costs 5x more perhaps, but I can make 5x more money so it doesn't matter.


Quote from: bytemaster on March 12, 2014, 05:28:25 pm
The fees would be very high to manipulate it up all at once, and if you attempt to do it slowly new shorts will enter the game.

How are fees calculated?

Why on earth would shorts enter the game? There remains a nonzero risk of them losing their entire position, correct? If I sensed the attack beginning I wouldn't go anywhere near the game, in fact I would go long regardless of my belief about the price.

51
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 12, 2014, 04:51:31 am »
Quote from: drltc on March 12, 2014, 03:43:02 am
Quote from: MolonLabe on March 11, 2014, 03:41:21 am
I don't see how that changes the fundamental idea of buying Asks and then sucking out their money with a fake high price.

I propose putting a speed limit on the percentage change of the current price, as seen from the short liquidation logic.  So a short-term action that wipes out the entire Ask side of the book doesn't result in immediate liquidation of every single existing short position.

I agree that this would help, but one interesting property of a virtual market like this one (where I can't redeem my Gold for Gold) is that if ANY possibility of attack remains it can become completely self-fulfilling.

The speed limit assumes that there is a counterbalancing force (sort of like a car sliding down a hill...a speed limit would help ensure that the care never makes it up and over the hill), but if there's no counterbalancing force the speed of attack doesn't matter (ie the car will eventually go over the hill if it is not sliding down, as long as it has positive speed). So if any attack is possible, people may abandon the effort to return the market price to its 'true value' and instead view the market as an opportunity to use the mechanism to steal BTS.

For example, imagine that every market, priced in BTS, just permanently rises at the speed limit. This is the last iteration of rationalizable behavior before the following undesirable Nash Equilibrium: people decide to NEVER sell (including short sales) and the market vanishes. Traders could even coordinate with people they don't trust to pull this off, as it is a win for every long. People could even go long on the off chance that someone else does it.

So all attacks must be completely removed, not just discouraged.

52
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 12, 2014, 02:30:28 am »
Quote from: toast on March 11, 2014, 03:41:36 pm
Oh I think I see the mixup: the shorts don't have to buy from you, the network just buys whichever usd are cheapest. So in addition to your matched bid/ask you'd have to place an unmatched ask at the higher price. Would that make it unprofitable?

This stuff is hard to think about without drawing pictures =[

Sent from my SCH-I535 using Tapatalk

Maybe. I can't figure out exactly how you are measuring market depth, specifically the units. Can you provide an example? My guess is that it may lower the attack from 100% hitrate to possibly <50% hitrate but not remove the core idea. This order depth rule wasn't in the video...from the paper it seems that you can't cancel orders instantly? That might help prevent the attack, as with 'cancellable orders' anyone can fake an infinite order book at finite cost (with infinite bid and infinite ask, either of which you just cancel if someone starts actually trading with you). Do you know precisely how an 'order' is defined? (In addition to the market depth measurement question).

I'm hammering the ASKs, though, so my intuition is that I temporarily control that whole side. Anyone who makes an Ask might lose money if the price continues upward.

I didn't think about this on the train (where I get all of my best ideas) but reconsidering it now I'm wondering what would happen if multiple people used the "place simultaneous Bid Ask to set a price" idea at once (with different prices). Anyone shorting with an Ask is taking a big risk though, assuming the attack's logic is still sound.

A picture is worth a thousand words...I have a whole 'whiteboard room' in my house.

53
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 11, 2014, 03:41:21 am »
Quote from: toast on March 11, 2014, 03:16:26 am
One minor point is that the shorts only had 2x collateral at the price they shorted at so you'd only get 2*(.01666 + .02 + .025)

Otherwise I think this attack is basically a variant of the SIDS attack described in the OP. I think the defense against this is just to have sufficient market depth: "b) no market trading will be allowed anytime either side of the order book has a depth below D% of the share supply."

I don't see how that changes the fundamental idea of buying Asks and then sucking out their money with a fake high price.

For example, I can repeat what I did several times: build a full order book on both sides and walk it up slowly, I just place Bid, Ask, Bid, Ask, Bid, Ask, at higher and higher prices (Bitshares per Bitasset), and I'm always buying my own Bitasset (leaving me unexposed), or placing BIDs that go permanently unfilled.

Then the price just rolls up and up and up. I have to tie up more capital, but I get all of it back when I later combine my own long and short positions (both of which I already own) to cover. I still steal everyone's money that had an ASK and double up almost instantly.

To prevent this, you'd need a way of telling a scenario like this from a different scenario where the underlying asset DID actually slowly increase to 2x 4x its initial value (because BitSharesX needs to be able to handle that to qualify as an exchange).


I'm going to sleep but I'll check this sometime tomorrow, I was just watching the video and was curious about how this worked. I have a background in mechanism design but I still found this question puzzling. I assumed that I misunderstood the mechanism but now the case may be that I uncovered a defect, which is far more interesting. Perhaps on the train tomorrow I will try to block my own attack in a convenient way.

54
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 11, 2014, 02:57:53 am »
Sure. I don't even know if it works, but this is what I was thinking:

(I am thinking about it in bts/usd, I dont see why that should make a difference as it is only a question of units [but I guess it might]).

BID 1 usd @ .01       bts/usd    (100 usd/bts)
BID 1 usd @ .01111 bts/usd    (90 usd/bts)
BID 1 usd @ .0125   bts/usd    (80 usd/bts)
BID 1 usd @  (1/70) bts/usd
ASK 1 usd @  (1/60) bts/usd
ASK 1 usd @  (1/50) bts/usd
ASK 1 usd @  (1/40) bts/usd

Buy all Asks:
I have spent .0559523809 bts on +3 usd, lets call them: [ -.0559523809, +3] total.
Counterparties are:
   [ + .0166666 = (1/60), -1 ]   (first short)
   [ + .02, -1 ] 
   [ + .025, -1 ] 

BID 1 usd @ .01       bts/usd    (100 usd/bts)
BID 1 usd @ .01111 bts/usd    (90 usd/bts)
BID 1 usd @ .0125   bts/usd    (80 usd/bts)
BID 1 usd @  (1/70) bts/usd
+
BID 1 usd @  (1/20) bts/usd
ASK 1 usd @  (1/20) bts/usd

These cancel, but they also 'set' the price at 1/20 = .05
The video claims that the 3 shorts must repurchase "at the new price".

 [ + .0166666 = (1/60), -1 ]    +   (cover) [ - .05,  + 1]   =   [-.03333333, 0]  (this individual lost .03333 bts to close out their position at net=0)
 [ + .02, -1 ]                            +   (cover) [ - .05,  + 1]   =   [-.03, 0]
 [ + .025, -1 ]                          +   (cover) [ - .05,  + 1]   =   [-.025, 0]

For myself:
[ -.0559523809, +3]  +  [ +.15 , -3] (my proceeds from the sale to close out my position) =  [ .0940476191 , 0 ]   profit, for a + 168.0851% return.

55
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 11, 2014, 02:26:44 am »
Quote from: toast on March 11, 2014, 02:21:29 am
The part I still don't get is how you cleared the entire ask side (all the shorts) but then still somehow you can cause a margin call when your bid/ask is matched at the higher price. Shorts put down collateral at the price they're taking the short position on, no?

Do you see in the video where Sam shorted something, paying =1 bitshare / BitUSD  for something but then HAD to repurchase it for 1.5 bitshares / BitUSD?

(notice the units are flipped in the video).

56
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 11, 2014, 02:18:16 am »
Quote from: pariah99 on March 11, 2014, 02:08:18 am
That's essentially a smaller version of a "slingshot" attack as outlined in the first post.  There's already a mechanism to limit the effect of a short squeeze by increasing margin requirements.
I don't see why that would work. Can you explain it? This attack produces a risk free return, not a finite payoff, so if anything the ability to put more money into the attack should make it easier to find someone to lend me the money required to pull it off.

Quote from: pariah99 on March 11, 2014, 02:08:18 am
Another way you could prevent it is to make the definition of a BID order to "the MAXIMUM price you are willing to pay to obtain an asset".  That way, the strike price will be dictated by the ASK prices.  I may be a bit naive here, but I can't think of a reason why anybody would want to pay more for an asset than the ask prices unless they are trying to manipulate the market in some way.

I bought all the ASKs in 2 for this reason. Also, if ASKs realize what is happening they will panic (and disappear) as they are sitting ducks to instantly lose money.

57
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 11, 2014, 02:12:15 am »
Quote from: toast on March 11, 2014, 01:57:24 am
Quote from: MolonLabe on March 11, 2014, 01:47:31 am
I have an attack idea.

1] Select a market,
 1a] for example lets choose BitBTC,
 1b] for consistency let's refer to the market price as units of "Bitshares per Bitcoin" ie (BS/BTC) ,
 1c] lets assume the Last traded market price was 500 Bitshares for each Bitcoin, or '500',
2] Place a huge Bid of the amount equal to all current Ask orders,
 2a] let's imagine this costs a total of "Z bitshares",
 2b] I am now betting that the value (BS/BTC) will go up, ie that a Bitcoin will be worth more than 500 Bitshares,
3] Place a new Ask order at a much higher price,
4] Place a new Bid order at this exact price, (this tricks BitSharesX into believing that the price has gone way, way up, say from 500 to 1000),
5] Force shorts to close out your position (as BitSharesX forces them to cover), by selling to you (at twice what you just paid).

Can even rinse-and-repeat this strategy with higher and higher prices.

Market depth makes this attack costlier, but simultaneously, more profitable, so a different type of solution may be required.

Not sure I understand this, if you're able to match your bid/ask at a much higher price doesn't that mean you would have cleared out the entire ask side of the market? So then it's not "tricking bitshares X" but actually pushing the price up. Step 5 actually happens during step 2 and if you succeeded, that just means you moved the price up and you don't profit from matching your bid/ask at 1000

Yes, you understand, I am pushing the price up but I used the word 'trick' to reflect the fact that the "real" price probably did not change, let alone double.

I don't intend to profit or otherwise do anything with the small trades in 3-4. I'm "Alice" in this clip from the video. http://www.youtube.com/watch?v=5BV55IrZi7g&t=5m50s

58
General Discussion / Re: BitShares XT - Security against Market Manipulation FIND ATTACKS FOR TIPS
« on: March 11, 2014, 01:47:31 am »
I have an attack idea.

1] Select a market,
 1a] for example lets choose BitBTC,
 1b] for consistency let's refer to the market price as units of "Bitshares per Bitcoin" ie (BS/BTC) ,
 1c] lets assume the Last traded market price was 500 Bitshares for each Bitcoin, or '500',
2] Place a huge Bid of the amount equal to all current Ask orders,
 2a] let's imagine this costs a total of "Z bitshares",
 2b] I am now betting that the value (BS/BTC) will go up, ie that a Bitcoin will be worth more than 500 Bitshares,
3] Place a new Ask order at a much higher price,
4] Place a new Bid order at this exact price, (this tricks BitSharesX into believing that the price has gone way, way up, say from 500 to 1000),
5] Force shorts to close out your position (as BitSharesX forces them to cover), by selling to you (at twice what you just paid).

Can even rinse-and-repeat this strategy with higher and higher prices.

Market depth makes this attack costlier, but simultaneously, more profitable, so a different type of solution may be required.

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