The take away from this is that people don't want Dollars, they want the VALUE of a dollar. You can have a dollar worth of anything, People don't buy gold because they want gold, they buy gold because they want the exposure to the price. Any asset that tracks the value of gold faithfully is as good as gold for 99% of the people who aren't using gold for industry.
None of these explain why it actually tracks...
Sent from my SCH-I535 using Tapatalk
None of these explain why it actually tracks...
Sent from my SCH-I535 using Tapatalk
Explain it like you're talking to a FIVE year old.
Try this:
1dollar bill equals $1.
4 quarters equal $1.
10 dimes equal $1.
20 nickels equal $1.
100 pennies equal $1.
So sometimes you have different coin worth different amounts and depending on how many of each coin you have they can add up to $1.
BTSX and bitUSD are similar in this same way.
BTSX are the coins that can add up to 1 bitUSD. The only difference is that people get to decide how much value BTSX has every day, hour, minute and second relative to a dollar. Thus, BTSX will constantly be changing from a "Penny" coin one day, to a "quarter" coin on some other day.
For example:
2 days ago, 115 BTSX equaled 1 bitUSD (approximations)
Yesterday, 33 BTSX equaled 1 bitUSD
Today, 40 BTSX equals equals 1 bitUSD
Here is the kicker: 1 bitUSD always equals $1.
For everyone to act as if bitUSD represents USD is a better Nash equilibrium than ignoring bitUSD. That's one-sentence explanation that should suffice for people who know what a Nash equilibrium is.I had to goole it :) - doesn't hurt for the reader to also goole that term!
In game theory, the Nash equilibrium is a solution concept of a non-cooperative game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy.[1] If each player has chosen a strategy and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium.
I want to add an article to the reddit "Explain it like I'm Five" section. Please edit or tell me why it's a complete fabrication and I should start over :) . I am writing this as a person who has a basic understanding of the stock market but am by no means an economist.
https://docs.google.com/document/d/1C_4MR4d8AsoqWQw8UMCyKeuvhO5TSws_TPHG421HVJg/edit?usp=sharing (https://docs.google.com/document/d/1C_4MR4d8AsoqWQw8UMCyKeuvhO5TSws_TPHG421HVJg/edit?usp=sharing)
Let's take Google. The share price of Google is supposed to be their book value plus some fudging for revenue, growth potential, etc. It's why share-price/book is a key stat that tries to guess how much intangible value pushing the price above or below book is correct.
Now let's take two day traders:
Trader A looks at the price of Google and says, "$400? Heck no. They're about to be regulated out of existence and Amazon is releasing Amazon Search soon. I think it's worth $80" so they short.
Trader B thinks Trader A is off his rocker. The Google pipeline looks awesome and the stock will easily reach $600 by the end of the year. He bids long $500.
And so the game goes on. The big take away from this is neither have even the slightest interest in gaining a controlling stake in Google. It could be the worth of fiddle sticks for all they care. The important thing is one person thinks it's worth more than the other and the market transactions tend toward a consensus of the intangible value above/below book.
Call them Google Shares or bitGoogle, it doesn't matter. It's not like if you had a Google share you could walk into Google HQ and start scarfing down the free food. The share really only has demand, and therefore value, because someone else thinks they can sell it for more later.
I want to add an article to the reddit "Explain it like I'm Five" section. Please edit or tell me why it's a complete fabrication and I should start over :) . I am writing this as a person who has a basic understanding of the stock market but am by no means an economist.
https://docs.google.com/document/d/1C_4MR4d8AsoqWQw8UMCyKeuvhO5TSws_TPHG421HVJg/edit?usp=sharing (https://docs.google.com/document/d/1C_4MR4d8AsoqWQw8UMCyKeuvhO5TSws_TPHG421HVJg/edit?usp=sharing)
Let's take Google. The share price of Google is supposed to be their book value plus some fudging for revenue, growth potential, etc. It's why share-price/book is a key stat that tries to guess how much intangible value pushing the price above or below book is correct.
Now let's take two day traders:
Trader A looks at the price of Google and says, "$400? Heck no. They're about to be regulated out of existence and Amazon is releasing Amazon Search soon. I think it's worth $80" so they short.
Trader B thinks Trader A is off his rocker. The Google pipeline looks awesome and the stock will easily reach $600 by the end of the year. He bids long $500.
And so the game goes on. The big take away from this is neither have even the slightest interest in gaining a controlling stake in Google. It could be the worth of fiddle sticks for all they care. The important thing is one person thinks it's worth more than the other and the market transactions tend toward a consensus of the intangible value above/below book.
Call them Google Shares or bitGoogle, it doesn't matter. It's not like if you had a Google share you could walk into Google HQ and start scarfing down the free food. The share really only has demand, and therefore value, because someone else thinks they can sell it for more later.
Not backed yet. But it isn't impossible to make a Ripple Gateway which turns BitUSD into USD.
How many 5 year old bettors do you know? Just kidding... :)
Or one with knowledge of Nash equilibrium?
The primary assumption is that there exists a crypto-asset with no counter party and a non-zero value. IE: bitcoin, Nxt, and BTSX.
The secondary assumption is that the volatility of this asset is within some reasonable range. 200% initial collateral seems to be reasonable, but it could easily be 400% if the volatility called for it.
Given these assumptions we then assume there are two individuals in the free market that want a "contract for difference". Contracts for difference are well established and proven and even used in counter party. One person is given price stability and the other is given leverage.
If you assume the contract for difference was settled by a 3rd party price feed then it is clear how it would work.
So given those initial fundamentals we can slowly build up to BitAssets. The first step is to take the same contract and remove the 3rd party price feed and instead use Nash Equilibrium. Both parties will want to exit at some point and thus have to agree on a price in the future. Assuming they were both equally wanting to exit their position the price they would agree at would be the "fair price". Now clearly if there are only two parties to the trade they may not want to exit at the same time. So you allow the "long" side to sell his position to others and you allow the "short" side to cover with anyone.
If someone wants to be a stubborn jerk and not settle then that is fine.... eventually a margin call will be triggered. The peg will fluctuate as the relative demand for longs vs shorts settling causes the peg to have a settlement premium sufficient to motivate settlement.
I think it is fairly clear that if there is a price feed from a trusted source that was used to enforce settlement then the system would work to the extent that you could trust the feed. The hypothesis is that this price feed is irrelevant given a market full of speculators and market makers willing to hold until a short voluntarily covers at a fair market price.
I hope that through this perspective I have shown what the economic incentives are and how the core principles are sound. All that remains to be seen is whether "market consensus and speculation" is enough to enforce a peg via a "decentralized price feed" or "prediction market" mechanic. My understanding of game theory and economic incentives tells me this will work, but even if I am wrong I know that price feeds can be used as a "trusted" judge on the "smart contracts for difference". It is an entirely different game to trust someone to produce a fair feed (or 101 someones) than to trust someone to maintain a vault full of gold.
I'm starting to see how BitUSD could maintain it's expected market peg to USD within the BitShares system but I'm also starting to think about how one would spend either BitUSD or USD as one still needs to these days until people and organization directly accept BitUSD in place of fiat USD. So, it seems to me that for me to pay my mortage if I am holding in BitUSD it would be:
BitUSD->BTSX->Bter Exchange->BTC->Coinbase->Bank Account->Mortgage Company
which is still too unnecessarily convoluted. What is the Ideal? BitUSD->Mortgage Company ??
Yes
What is realistic? BitUSD-> CoinBase ->Bank Account->Mortgage Company ?
Yes, as in CoinBase or somebody else.
I'm starting to see how BitUSD could maintain it's expected market peg to USD within the BitShares system but I'm also starting to think about how one would spend either BitUSD or USD as one still needs to these days until people and organization directly accept BitUSD in place of fiat USD. So, it seems to me that for me to pay my mortage if I am holding in BitUSD it would be:
BitUSD->BTSX->Bter Exchange->BTC->Coinbase->Bank Account->Mortgage Company
which is still too unnecessarily convoluted. What is the Ideal? BitUSD->Mortgage Company ??
Yes
What is realistic? BitUSD-> CoinBase ->Bank Account->Mortgage Company ?
Yes, as in CoinBase or somebody else.
It works because everyone else thinks it works. If you don't think it will work, you will lose money by trading the wrong way, because you disagree with the majority. So the only people that stay in and make money are those that agree.
None of these explain why it actually tracks...
Sent from my SCH-I535 using Tapatalk
Explain it like you're talking to a FIVE year old.
It works because everyone else thinks it works. If you don't think it will work, you will lose money by trading the wrong way, because you disagree with the majority. So the only people that stay in and make money are those that agree.
The other explanations are more complex *and* fail to explain *why* it works, they just say *how*.
Why it works... because humans can sometimes be very irrational. :)Ther market peg is actually VERY rational .. it is a so called "negative feedback" loop that forces the price towards the consensus the more it moves a way from it ..
Why it works... because humans can sometimes be very irrational. :)Ther market peg is actually VERY rational .. it is a so called "negative feedback" loop that forces the price towards the consensus the more it moves a way from it ..
I can probably find some very nice examples from control theroy .. let me search
EDIT:
on wikipedia there are some quite technical examples
http://en.wikipedia.org/wiki/Negative_feedback#Examples
Maybe someone can write sth up with this:
http://en.wikipedia.org/wiki/File:Ballcock.svg
(http://upload.wikimedia.org/wikipedia/commons/thumb/2/23/Ballcock.svg/1000px-Ballcock.svg.png)
My english is not sooo good .. but I think of
whenever the water level is to low .. the market makers start 'creating' USD such that the levels rise ..on the other hand theirs a leakage .. such that the need to find the balance between .. so that their is not too much water (increases the leakage) and too few water (opens up the refiller)(I got that wrong)
When the water level rises too much, the ventil closes the ventil such that the level is maintained ...
now if you want to have some of those you need to take water out of the bucket ... consequence ... the level drops .. new water comes in
when you want to get rid of your water you put it un the bucket .. the level rises .. and someone else can get water out of it without the the need for the market makers to open the venitl ..
Does that sound valid? Can someone with native english experience rewrite that to an easy understandable text?
Most people won't understand market science,I like that ...
but they will soon believe a bitAsset will hit its target too.
I like it!! +5%I'm starting to see how BitUSD could maintain it's expected market peg to USD within the BitShares system but I'm also starting to think about how one would spend either BitUSD or USD as one still needs to these days until people and organization directly accept BitUSD in place of fiat USD. So, it seems to me that for me to pay my mortage if I am holding in BitUSD it would be:
BitUSD->BTSX->Bter Exchange->BTC->Coinbase->Bank Account->Mortgage Company
which is still too unnecessarily convoluted. What is the Ideal? BitUSD->Mortgage Company ??
Yes
What is realistic? BitUSD-> CoinBase ->Bank Account->Mortgage Company ?
Yes, as in CoinBase or somebody else.
Very nice Xeroc. I bet someone could put together one of those animated videos explaining the market peg using the water control system graphic animations.
If such a video could be made so that a non finance guy like myself would have a light bulb go off then this thread will have accomplished its mission.
Yhea, but shit always goes one direction ... ever tried pumping it back into clean water pipes?Very nice Xeroc. I bet someone could put together one of those animated videos explaining the market peg using the water control system graphic animations.
If such a video could be made so that a non finance guy like myself would have a light bulb go off then this thread will have accomplished its mission.
I am sure some random NXT guy will come with a toilet example
Hi i'm a new poster on the forum and i'm not a tech guy so please bare with me. I maybe completely wrong with some of my thoughts so please excuse my ignorance and put me right. The way i'v read bitUSD is-You migth want to try to ask precise questions if you want a reply that helps. I would say reading this http://wiki.bitshares.org/index.php/Main_Page and this http://wiki.bitshares.org/index.php/Bitshares_X in sprticular is the fastest way to understand.
People want exposure to the USD because they figure it is less volatile than even the most stable cryptocurrancy.
BitUSD is decentralised on the block chain the government cant touch it or tax it, and bitUSD guarantees a 5% interest rate return. Most high street rates are around 0% so its a great store of value. Sounds very promising
The market dictates whether bitUSD is worth 1:1 for a dollar, its not set by any institution (NXT/XRP) its a question of decentralised concensus.
'Toast'
''It works because everyone else thinks it works. If you don't think it will work, you will lose money by trading the wrong way, because you disagree with the majority. So the only people that stay in and make money are those that agree''
Are we talking game theory here along the lines of the ''prisoner's dilemma'' ?????????
rational cooperative bitUSD
vs
unrational uncoperative bitUSD
Maybe we could have separate markets? :)
Is it the greedy ''pump and dump'' blag artists who are going to wreck this experiment?
Greedy people looking for a quick return?
Nash equilibrium.............pardon the pun but maybe most people don't have such a ''Beautiful Mind''?
Iv studied logic and bizarrely i'm tempted to bet it will fail, even though it will cost me money?????? will short term greed & pessimism kill bitUSD?
Your thoughts please, i'm new posting on the forum even though i have followed it for a number of months. I'm really enjoying watching the Bitshares project pan out.
to me the easiest way to explain to someone why bitsud = usd is that you can buy bitusd and exchange them for btsx, then exchange btsx to external platforms for bitcoins, then exchange your bitcoin for usd.I guess that's a very similar conclusion to the one I've arrived at.
BitUSD requires a liquid market...... right now BitUSD is the best hedge against a falling BTSX because it is cheaper than $1 USD due to all the demand to short.
What we need are tools that show the arbitrage opportunities... and people willing to accept profits from arbitrage as more reliable than gains in BTSX.
BitUSD requires a liquid market...... right now BitUSD is the best hedge against a falling BTSX because it is cheaper than $1 USD due to all the demand to short.So if I understand this correctly to protect the market peg we need both BTSX/bitUSD and BTSX/USD markets set up on the third party exchange (like bter). Because this will open up the arbitrage opportunities.
What we need are tools that show the arbitrage opportunities... and people willing to accept profits from arbitrage as more reliable than gains in BTSX.
BitUSD requires a liquid market...... right now BitUSD is the best hedge against a falling BTSX because it is cheaper than $1 USD due to all the demand to short.So if I understand this correctly to protect the market peg we need both BTSX/bitUSD and BTSX/USD markets set up on the third party exchange (like bter). Because this will open up the arbitrage opportunities.
What we need are tools that show the arbitrage opportunities... and people willing to accept profits from arbitrage as more reliable than gains in BTSX.
In other words, what we need is to enable both bitUSD and USD to be competing ways to purchase BTSX. This will create arbitrage and arbitrage will guard the market peg. Is it correct?
BitUSD requires a liquid market...... right now BitUSD is the best hedge against a falling BTSX because it is cheaper than $1 USD due to all the demand to short.So if I understand this correctly to protect the market peg we need both BTSX/bitUSD and BTSX/USD markets set up on the third party exchange (like bter). Because this will open up the arbitrage opportunities.
What we need are tools that show the arbitrage opportunities... and people willing to accept profits from arbitrage as more reliable than gains in BTSX.
In other words, what we need is to enable both bitUSD and USD to be competing ways to purchase BTSX. This will create arbitrage and arbitrage will guard the market peg. Is it correct?
BitBTC may be needed... then we can have BitUSD vs BitBTC on chain. This will also help with arb. ops.
BitUSD requires a liquid market...... right now BitUSD is the best hedge against a falling BTSX because it is cheaper than $1 USD due to all the demand to short.So if I understand this correctly to protect the market peg we need both BTSX/bitUSD and BTSX/USD markets set up on the third party exchange (like bter). Because this will open up the arbitrage opportunities.
What we need are tools that show the arbitrage opportunities... and people willing to accept profits from arbitrage as more reliable than gains in BTSX.
In other words, what we need is to enable both bitUSD and USD to be competing ways to purchase BTSX. This will create arbitrage and arbitrage will guard the market peg. Is it correct?
BitBTC may be needed... then we can have BitUSD vs BitBTC on chain. This will also help with arb. ops.
The demand for shorts has outstripped demand for BitUSD thus far.... so right now BitUSD is cheap relative to USD. Few players are performing the arb. role at this point in time... I think it will take a while for things to get there.
The demand for shorts has outstripped demand for BitUSD thus far.... so right now BitUSD is cheap relative to USD. Few players are performing the arb. role at this point in time... I think it will take a while for things to get there.
Can you teach us to play that role? More players would take the role if we understood the markets but right now it's too complex for most people.
I think the best idea is to just buy BitUSD and wait out the storm.
The demand for shorts has outstripped demand for BitUSD thus far.... so right now BitUSD is cheap relative to USD. Few players are performing the arb. role at this point in time... I think it will take a while for things to get there.
Can you teach us to play that role? More players would take the role if we understood the markets but right now it's too complex for most people.
I think the best idea is to just buy BitUSD and wait out the storm.
When the BitUSD price of BTSX is high... sell BTSX to buy BitUSD... for a while the price was .05 BitUSD per BTSX... when the price falls to .04 BitUSD per BTSX, sell your BitUSD back to the market at the peg price. You will make the gain from selling BTSX at .05 and buying it back at .04....
The challenge here is that you have to separate out your investment in BTSX from your arb profits. If BTSX doubles to $0.10, you can still make money from your arb assuming you can sell your BitUSD for BTSX at 0.10. You missed the capital gains must you made arb. gains. Arb gains should be less risky than BTSX and can be made in any market condition (up/down/sideways). If you want to bet on BTSX to the max, then you may not make as much from arm.
My personal recommendation is that your BTSX holdings are more likely to go up if you help maintain the peg and add liquidity... so everyone should use at least 10% of their holdings to add liquidity. The combined strategy will likely cause your BTSX holdings to grow faster than if no one provided liquidity.
The demand for shorts has outstripped demand for BitUSD thus far.... so right now BitUSD is cheap relative to USD. Few players are performing the arb. role at this point in time... I think it will take a while for things to get there.
Can you teach us to play that role? More players would take the role if we understood the markets but right now it's too complex for most people.
I think the best idea is to just buy BitUSD and wait out the storm.
When the BitUSD price of BTSX is high... sell BTSX to buy BitUSD... for a while the price was .05 BitUSD per BTSX... when the price falls to .04 BitUSD per BTSX, sell your BitUSD back to the market at the peg price. You will make the gain from selling BTSX at .05 and buying it back at .04....
The challenge here is that you have to separate out your investment in BTSX from your arb profits. If BTSX doubles to $0.10, you can still make money from your arb assuming you can sell your BitUSD for BTSX at 0.10. You missed the capital gains must you made arb. gains. Arb gains should be less risky than BTSX and can be made in any market condition (up/down/sideways). If you want to bet on BTSX to the max, then you may not make as much from arm.
My personal recommendation is that your BTSX holdings are more likely to go up if you help maintain the peg and add liquidity... so everyone should use at least 10% of their holdings to add liquidity. The combined strategy will likely cause your BTSX holdings to grow faster than if no one provided liquidity.
The demand for shorts has outstripped demand for BitUSD thus far.... so right now BitUSD is cheap relative to USD. Few players are performing the arb. role at this point in time... I think it will take a while for things to get there.
Can you teach us to play that role? More players would take the role if we understood the markets but right now it's too complex for most people.
I think the best idea is to just buy BitUSD and wait out the storm.
When the BitUSD price of BTSX is high... sell BTSX to buy BitUSD... for a while the price was .05 BitUSD per BTSX... when the price falls to .04 BitUSD per BTSX, sell your BitUSD back to the market at the peg price. You will make the gain from selling BTSX at .05 and buying it back at .04....
The challenge here is that you have to separate out your investment in BTSX from your arb profits. If BTSX doubles to $0.10, you can still make money from your arb assuming you can sell your BitUSD for BTSX at 0.10. You missed the capital gains must you made arb. gains. Arb gains should be less risky than BTSX and can be made in any market condition (up/down/sideways). If you want to bet on BTSX to the max, then you may not make as much from arm.
My personal recommendation is that your BTSX holdings are more likely to go up if you help maintain the peg and add liquidity... so everyone should use at least 10% of their holdings to add liquidity. The combined strategy will likely cause your BTSX holdings to grow faster than if no one provided liquidity.
I played for a bit today... with an average position of probably 750 bitUSD. And while I did made about $100 it is not user friendly at all at the moment... I have a hundred suggestions but the main point is 'Manual arbitrage with the current state of the system is nothing short of energy draining...'
my 0.02 BTSX
My personal recommendation is that your BTSX holdings are more likely to go up if you help maintain the peg and add liquidity... so everyone should use at least 10% of their holdings to add liquidity. The combined strategy will likely cause your BTSX holdings to grow faster than if no one provided liquidity.
We will build more help into the GUI.That'd be nice but a 5 minute video describing the full cycle of going short and covering would do the job.
+5% +5% +5%The demand for shorts has outstripped demand for BitUSD thus far.... so right now BitUSD is cheap relative to USD. Few players are performing the arb. role at this point in time... I think it will take a while for things to get there.
Can you teach us to play that role? More players would take the role if we understood the markets but right now it's too complex for most people.
I think the best idea is to just buy BitUSD and wait out the storm.
When the BitUSD price of BTSX is high... sell BTSX to buy BitUSD... for a while the price was .05 BitUSD per BTSX... when the price falls to .04 BitUSD per BTSX, sell your BitUSD back to the market at the peg price. You will make the gain from selling BTSX at .05 and buying it back at .04....
The challenge here is that you have to separate out your investment in BTSX from your arb profits. If BTSX doubles to $0.10, you can still make money from your arb assuming you can sell your BitUSD for BTSX at 0.10. You missed the capital gains must you made arb. gains. Arb gains should be less risky than BTSX and can be made in any market condition (up/down/sideways). If you want to bet on BTSX to the max, then you may not make as much from arm.
My personal recommendation is that your BTSX holdings are more likely to go up if you help maintain the peg and add liquidity... so everyone should use at least 10% of their holdings to add liquidity. The combined strategy will likely cause your BTSX holdings to grow faster than if no one provided liquidity.
Perhaps we should incorporate a robotic trading assistant into the wallet.
Most of the market operations are algorithmic and do not require much thinking beyond what the end goal is. People know what they want to do, they just don't know which buttons to push to get there.
ie. The user could select an investment goal (BTSX bull/bear, arb, hedge, etc. or perhaps simpler choices like 'I think BTSX is going up', 'I think BTSX is going down', 'High risk', 'Low risk', 'Provide liquidity'. etc.) and the assistant (wizard!) could take them through step by step. Alternatively, user can designate assets have the assistant execute. The assistant should have access to live price feeds and be aware of user balances/portfolio holdings.
There are robotic asset management services out there that do this sort of thing, and they are gaining in popularity.
Implementing a robotic trading assistant would be a huge value-added service that would make it easier for non-investors to participate and not get frustrated/hosed, ie. make the initial investing/trading experience positive and most importantly quick and easy.
This is an opportunity for Bitshares to leapfrog the industry, like skipping landlines and going straight to mobile.