BitShares Forum
Main => General Discussion => Topic started by: bytemaster on September 05, 2014, 03:40:08 pm
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
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GREAT Idea in general!
+5% +5% +5%
Let's smooth out '3)If you hold a balance for less than one year', and do it!
[edit]
Is my math correct:
For 2 mo.
(1+(2/12)^2)^6 > 1 ???
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So basically holding bitUSD in the system would pretty much be the same as holding money in a high interest bank account, but with higher interest rate and all the advantages and flexibility of crypto. Also the longer you hold, the higher the interest rate, pretty much the same as for term deposits where the interest rate increases the longer you sign up for. And the best is that you still have access to your funds at any time.
Wow!
I like this very much!!!
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2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
This made me laugh :)
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
I don't have a degree in economics but this sounds like classical interest .. that depends on the volume traded on the exchange ..
I like it ..
It also sounds like a POS scheme within an asset that is secured by DPOS ..
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
No we can go print shirts :)
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I think short term holders should benefit too. Since this is an "experiment", holding for a month to a year doesn't seem like enough incentive to park large amounts of capital in the system just yet. Also, this still doesn't give any more incentive for merchants to adopt. If they already have the Credit/Debit infrastructure, why would they deviate away from it to pay the same amount in conversion fees and spread fees?
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So basically holding bitUSD in the system would pretty much be the same as holding money in a high interest bank account, but with higher interest rate and all the advantages and flexibility of crypto. Also the longer you hold, the higher the interest rate, pretty much the same as for term deposits where the interest rate increases the longer you sign up for. And the best is that you still have access to your funds at any time.
The interest rate (as I understood it) depends on the fees earned from the trades on the exchange .. not sure that they are
a) high
b) and/or constant
but for sure .. >=0% ... na .. too pesimistic: fees are > 0%
lol
+5%
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You don't mean to give as interest the entire "rainy day" fund , do you? I hope it is just a percentage of it.
That 10% might greatly vary with different types of transactions but it might work as magic word for average Joe.
Personally I like the idea but I think it is too early for that.
If everyone uses this just as a savings account the volume might be lower and the expected "rainy day" fund might grow a lot slower.
And if the expectations aren't met on the beginning it might hurt the system.
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If interest is high (10%), there will be extra demand for bitUSD - it might hurt the peg. BitUSD may trade above USD.
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You don't mean to give as interest the entire "rainy day" fund , do you? I hope it is just a percentage of it.
That 10% might greatly vary with different types of transactions but it might work as magic word for average Joe.
Personally I like the idea but I think it is too early for that.
If everyone uses this just as a savings account the volume might be lower and the expected "rainy day" fund might grow a lot slower.
And if the expectations aren't met on the beginning it might hurt the system.
Yes... the whole rainy day fund. It is there for the BitUSD holders anyway. If the black swan happens and there are "fractionally backed USD" the USD holders still got the "value" and the interest will probably offset any fractional backing concerns.
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If interest is high (10%), there will be extra demand for bitUSD - it might hurt the peg. BitUSD may trade above USD.
There will be plenty of people willing to Short USD to maintain the peg because BTSX will grow at 2x the rate of BitUSD demand.
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I think the key is make bitusd liquidity, if nobody use it , it means nothing.
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I think the key is make bitusd liquidity, if nobody use it , it means nothing.
That too (if you mean useable by itself), but the 2 processes will help each other, in my view.
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I think the key is make bitusd liquidity, if nobody use it , it means nothing.
If there is demand it will become liquid.
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
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What about the original idea of shorters paying interest to the longs - is that lo longer workable? I always thought that was nice and simple because you could charge a fixed amount from shorters relative to how long the short position was open for.
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What about the original idea of shorters paying interest to the longs - is that lo longer workable? I always thought that was nice and simple because you could charge a fixed amount from shorters relative to how long the short position was open for.
Shorts pay market fees to enter their positions, these fees go into the fund, and thus get transferred to the USD holders. Shorts "bid" to be first in line to short and thus the interest rate they pay is now also determined by the market.
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I think the key is make bitusd liquidity, if nobody use it , it means nothing.
If there is demand it will become liquid.
If you think a little about this statement .. can you come up with anything similar in the current financial world??
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What about the original idea of shorters paying interest to the longs - is that lo longer workable? I always thought that was nice and simple because you could charge a fixed amount from shorters relative to how long the short position was open for.
Shorts pay market fees to enter their positions, these fees go into the fund, and thus get transferred to the USD holders. Shorts "bid" to be first in line to short and thus the interest rate they pay is now also determined by the market.
We could "price fix" a minimum amount the short must out-bid the ask and thus a guaranteed fee.
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I think the key is make bitusd liquidity, if nobody use it , it means nothing.
If there is demand it will become liquid.
If you think a little about this statement .. can you come up with anything similar in the current financial world??
If people *WANT IT* then you can *SELL IT*. Something only becomes illiquid if there are fewer buyers today than there are sellers and sellers are unwilling to take a loss.
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.
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But isn't is usual that the interest is NOT fixed? at least in germany that is the case :)
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.
Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.
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But isn't is usual that the interest is NOT fixed? at least in germany that is the case :)
No I am also searching for workaround because we do not actually know how much fees will be collected, so promising 5 or 10% is kind of misleading. And I want to be able to tell them 'our interest is higher than the one in the bank'.
Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.
True, but as explained above, telling the people it is higher than in the bank is a powerful selling point, imo.
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
+5% +5% +5%
Glad you are thinking about the average joe. So important. Putting aside the fact that I am no expert in the economics of this all, I'd have to say that THIS SOUNDS GREAT!! If this works, it has an almost frightening level of possibilities. :)
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.
Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.
Agreed, you could package it like interest, but there's very little fundamentally that makes this interest. It is revenue sharing, plain and simple. Presenting it as revenue sharing makes it obvious that the "interest rate" is negatively correlated to the quantity of bitUSD, which makes it easier to see that it's not a Ponzi scheme, nor is it inflationary, nor is it price-fixed.
Sent from my SCH-S720C using Tapatalk 2
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+5% +5% +5%
Bitcoin 1.0 : CANNOT issue monetary policy.
Bitcoin 2.0 : CAN issue monetary policy.
That about sums up the reason BTSX is a game changer.
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If interest is high (10%), there will be extra demand for bitUSD - it might hurt the peg. BitUSD may trade above USD.
There will be plenty of people willing to Short USD to maintain the peg because BTSX will grow at 2x the rate of BitUSD demand.
Exactly. If anything this would balance out the bulls and the bears.
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Reading the thread changed my mind.
"Rainy days" fund is better entirely sent as dividends.
And the key word here is dividends (instead of interest).
If this is made clear then this seems like an extremely nice feature.
When will we have it?
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Here is an idea. The proposal stays as revenue sharing plan/dividends.
-At the same time everybody can offer true interest bearing CDs. (fix rate/fix time/known penalty for early withdrawal).
-The amount received in bitUSD is kept as collateral, plus additional amount for the interest promised;
=> the person saving the bitUSD is absolutely secured the amount + interest;
and The person offering this deposit benefits is this profit sharing produces more than the promised interest?
CD seems as US term only - here is the link: http://www.investopedia.com/terms/c/certificateofdeposit.asp
Thoughts?
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I am very exited about this idea. (I know it is mine :) )
But:
People using the service - are not lied to- their interest, is true interest, it is known and fully guaranteed by the system. (not the party offering the CD).
People wanting interest on their savings can choose the CDs or the profit sharing - more choices are great, right.
The risk and benefits are taken by the parties willing to do so. Free market at its best!
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
If implemented/marketed successfully this could bring a tsunami of wealth into the system.
A few suggestions:
- While technically revenue sharing the payout should be marketed as interest. This aligns with industry norms and investor expectations when holding low risk assets like USD etc. Investors will suspect a scam/ponzi if someone is marketing payment of dividends for holding USD etc.
- Interest paid should be capped at 5% and additional revenue diverted to a liquidity fund; no one can complain about getting paid up to 5% interest to hold low risk assets like USD. That is a better risk/yield ratio than any investment in the world. The Eurozone is now offering negative interest on deposits. We cannot fathom the wealth that would pour into bitUSD5.
- The interest mechanism should be implemented on all currencies by default, including gold and silver, but not on other assets like equities and commodities (bitOSTK, bitOIL, etc.). Revenues from assets other than currency and gold/silver should be diverted to the liquidity fund or burned or some combination of the two
- Consideration should be given to using the liquidity fund or some percentage thereof as capital for automated lending, see this post https://bitsharestalk.org/index.php?topic=7208.msg96159#msg96159 (https://bitsharestalk.org/index.php?topic=7208.msg96159#msg96159). The revenue potential is staggering
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+5% for the plan
i don't get it how you calculate the time of the bitUSD holding? if i everyday sell and buy bitUSD but my average holding is 1000 bitUSD do i get interest?
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let us also have a way (through delegates maybe) to easily adjust the percentage so that we do not need to do hardforks over and over ..
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+5% for the plan
i don't get it how you calculate the time of the bitUSD holding? if i everyday sell and buy bitUSD but my average holding is 1000 bitUSD do i get interest?
probably not because the blockchain (with TITAN) does simply not know that the transaction are yours ..
You will need to let the sit still .. and unmoved (guessing thought)
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I strongly support Bytemaster's proposal. We guessed this day would come. Let's tell the world about BitUSD!
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.
There is no need to represent a fixed interest rate.
This will be interpreted more as deposit interest and folks are accustomed to banks changing the rate frequently.
Per my last, all that is needed is to market the interest as 'receive up to 5% interest on bitUSD holdings' and then show a graph of historical interest rates.
Who among us wouldn't buy bitUSD with that kind of offer?
Imagine merchants being able to earn interest on their float... imaging APPL being able to get 5% on their cash pile.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
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There is no need to represent a fixed interest rate.
This will be interpreted more as deposit interest and folks are accustomed to banks changing the rate frequently.
Per my last, all that is needed is to market the interest as 'receive up to 5% interest on bitUSD holdings' and then show a graph of historical interest rates.
Who among us wouldn't buy bitUSD with that kind of offer?
Imagine merchants being able to earn interest on their float... imaging APPL being able to get 5% on their cash pile.
I hate the phrase 'up to' personally, I hope it works and I am the odd man out.
1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
I think it should apply to all bitCurrencies. As for bitGold/bitSilver, my first reaction is -'NO'.
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I am think of calling them "USD Rewards" like a credit card "rewards program".
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+5% for the plan
i don't get it how you calculate the time of the bitUSD holding? if i everyday sell and buy bitUSD but my average holding is 1000 bitUSD do i get interest?
I think the idea is for people to hold and use as static savings. If you bought, sold, and bought again you haven't really held it continually.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
Ah good point! I forgot that the shares being burned are BTSX and NOT BitUSD.
EDIT: Couldn't the BTSX be used to create BitFiat?
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This would apply to all BitAssets.
This would reinforce the peg because the "best of all worlds" trading strategy is:
Short 100 USD
Hold 100 USD
if BTSX goes up, borrow 100 USD on your credit card, and cover at a profit, pay off your credit card with 0% interest.. keep the profit.
if BTSX goes down, Cover with 100 USD and keep the rewards.
Thus there will be heavy demand to enter this position, but the only way to enter this position is to be the "first in line to short" which means paying a high initial shorting fee *AND* that the peg is holding at parity.
Thus I believe this rewards program will make the peg stick no lower than the feed price.
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I am think of calling them "USD Rewards" like a credit card "rewards program".
I do not think it will get the full market potential of 'Interest'.
I also wonder what Toast thinks on this issue, as this idea of yours, is the best thing after the sliced bread (I mean, as yours go, after bitUSD [edit] I probably lack the technical knowledge to appreciate DPOS enough in the middle of those, so excuse me in that regard[/edit]), imho.
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Is this proposal for all BitAssets or only for BitUSD?
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I am think of calling them "USD Rewards" like a credit card "rewards program".
This makes me think gimmick and I don't think investors would take it seriously. My personal experience with reward programs is that are designed to entrap and extract.
'Interest' is universally understood and will require no explaining, a critical point when releasing a new product to a global audience.
The bitUSD5 concept will be met with heavy scepticism upon release, no one will believe it is not a scam/ponzi. Best not hand out ammo.
Of course, once there are a couple years of ROI on the books (proof of concept) the flow of wealth will be unstoppable.
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There is no need to represent a fixed interest rate.
This will be interpreted more as deposit interest and folks are accustomed to banks changing the rate frequently.
Per my last, all that is needed is to market the interest as 'receive up to 5% interest on bitUSD holdings' and then show a graph of historical interest rates.
Who among us wouldn't buy bitUSD with that kind of offer?
Imagine merchants being able to earn interest on their float... imaging APPL being able to get 5% on their cash pile.
I hate the phrase 'up to' personally, I hope it works and I am the odd man out.
1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
I think it should apply to all bitCurrencies. As for bitGold/bitSilver, my first reaction is -'NO'.
Gold and silver are a currency/commodity combo and I agree that inclusion with pure currencies is a bit a arbitrary.
That said, the amount of wealth stored in those two metals is enormous and I think too much would be left on the table not to include them.
With regard to 'up to' I'm not sure guaranteeing an interest is possible or desirable. The interest will essentially vary with the market activity of the asset and no representations or guarantees should be made. What I would like to see is a cap and then additional revenues used for liquidity or lending.
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This proposal sounds great to me
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With regard to 'up to' I'm not sure guaranteeing an interest is possible or desirable. The interest will essentially vary with the market activity of the asset and no representations or guarantees should be made. What I would like to see is a cap and then additional revenues used for liquidity or lending.
Read my proposal - Guaranteed interest is possible, and of course desirable for some people/situation. Of course it will very over time, but after the 'deal' is entered into, it will be fixed and guaranteed, as it should be. The current state of affairs is made 'the norm' because it suites the banks' interest (no pun intended) better than what is actually fair and normal.
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A side effect of paying variable interest to BitUSD holders, which depends on income levels generated by BitShares X, would be that holders of BitUSD would have incentive to promote BitShares X to others, becoming a special kind of stakeholders in the system.
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With regard to 'up to' I'm not sure guaranteeing an interest is possible or desirable. The interest will essentially vary with the market activity of the asset and no representations or guarantees should be made. What I would like to see is a cap and then additional revenues used for liquidity or lending.
Read my proposal - Guaranteed interest is possible, and of course desirable for some people/situation. Of course it will very over time, but after the 'deal' is entered into, it will be fixed and guaranteed, as it should be. The current state of affairs is made 'the norm' because it suites the banks' interest (no pun intended) better than what is actually fair and normal.
I think guaranteed interest is a great idea via a "CD" where people selling the "CD" take the variable rate (rewards from USD) and give the holder a "fixed rate". To implement on a blockchain would require the lender to post 100% of the interest up front as collateral.
This particular instrument would only be of interest (no pun) to those who absolutely *need* a predictable income... however, the average yield you would get from such an instrument would be lower than the average yield you would get from just keeping the rewards yourself. So how relevant is the "volatility" in the rewards program to people?
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A side effect of paying variable interest to BitUSD holders, which depends on income levels generated by BitShares X, would be that holders of BitUSD would have incentive to promote BitShares X to others, becoming a special kind of stakeholders in the system.
Exactly!
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FYI... I have already implemented the rewards program :) at the blockchain level. I just need to add a few wallet operations and do some testing on a test-net, but it should be ready to go next week.
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Will the balance have to be locked during that time?
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Will the balance have to be locked during that time?
No restrictions on use of your balances. Entirely automatic behind the scenes.
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With regard to 'up to' I'm not sure guaranteeing an interest is possible or desirable. The interest will essentially vary with the market activity of the asset and no representations or guarantees should be made. What I would like to see is a cap and then additional revenues used for liquidity or lending.
Read my proposal - Guaranteed interest is possible, and of course desirable for some people/situation. Of course it will very over time, but after the 'deal' is entered into, it will be fixed and guaranteed, as it should be. The current state of affairs is made 'the norm' because it suites the banks' interest (no pun intended) better than what is actually fair and normal.
I think guaranteed interest is a great idea via a "CD" where people selling the "CD" take the variable rate (rewards from USD) and give the holder a "fixed rate". To implement on a blockchain would require the lender to post 100% of the interest up front as collateral.
Yes
This particular instrument would only be of interest (no pun) to those who absolutely *need* a predictable income... however, the average yield you would get from such an instrument would be lower than the average yield you would get from just keeping the rewards yourself.
True
So how relevant is the "volatility" in the rewards program to people?
Let's see!!!
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FYI... I have already implemented the rewards program :) at the blockchain level. I just need to add a few wallet operations and do some testing on a test-net, but it should be ready to go next week.
Anybody else get the feeling BM is changing the world with every stroke of the keyboard?
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A side effect of paying variable interest to BitUSD holders, which depends on income levels generated by BitShares X, would be that holders of BitUSD would have incentive to promote BitShares X to others, becoming a special kind of stakeholders in the system.
Exactly!
Well, sort of. There's an incentive in the other direction too: the more bitUSD that exists, the smaller each person's share of the trading profits. What bitUSD holders will *really* want to promote is day trading, since that's where their income comes from.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
Sent from my SCH-S720C using Tapatalk 2
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Anybody else get the feeling BM is changing the world with every stroke of the keyboard?
Ever since, my good luck brought me to this forum.
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I like it - bitAssets in a way becomes a DAC inside of a DAC...
get ready for the kick
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
That idea is genius!
So what you're saying is we can get compound interest just from holding BitUSD?
That gives us the incentive to literally put our life savings in BitUSD ASAP if we don't believe in BTSX and if we do then it encourages the believers to buy as much BTSX as possible and hold or perhaps short. There will come a point though where even the bulls will find BitUSD with 10% interest attractive if that is a realistic number.
In the short term it should be marketed to merchants because now they'll have a reason to hold BitUSD over Bitcoin or anything else. BitPay for example could adopt BitUSD so that merchants like Overstock can choose to collect interest.
I would say approach Overstock immediately if this works.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
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So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.
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Wallet now has a method / API call to report your accumulated rewards.
Now all that is left is to implement a wallet method to generate the transaction to claim them :)
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But isn't is usual that the interest is NOT fixed? at least in germany that is the case :)
No I am also searching for workaround because we do not actually know how much fees will be collected, so promising 5 or 10% is kind of misleading. And I want to be able to tell them 'our interest is higher than the one in the bank'.
Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.
True, but as explained above, telling the people it is higher than in the bank is a powerful selling point, imo.
Just call it a variable interest rate. Other exchanges have something similar.
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Wallet now has a method / API call to report your accumulated rewards.
Now all that is left is to implement a wallet method to generate the transaction to claim them :)
wallet_saver_withdraw_pay <saver_name> <to_account_name> <amount_to_withdraw> [memo]
in re of:
wallet_delegate_withdraw_pay <delegate_name> <to_account_name> <amount_to_withdraw> [memo]
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Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
Sent from my SCH-S720C using Tapatalk 2
So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.
Yeah, so burn some and convert others to bitAssets. Some of the burn is implicit dividends for BTSX holders, some is explicit dividends for bitAsset holders.
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I am think of calling them "USD Rewards" like a credit card "rewards program".
Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.
Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards? It's actually not unusual for people to get interest on their cryptocurrency deposits.
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2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
what about the inactivity fee if you dont move your funds once a year? or is that applied to BTSX only and not BitUSD?
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I am think of calling them "USD Rewards" like a credit card "rewards program".
Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.
Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards? It's actually not unusual for people to get interest on their cryptocurrency deposits.
dividends might be more accurate since it is a distribution of profit (fees). I agree the "rewards" sounds like a marketing thing. Interest and dividends sounds like a finance thing.
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With regard to 'up to' I'm not sure guaranteeing an interest is possible or desirable. The interest will essentially vary with the market activity of the asset and no representations or guarantees should be made. What I would like to see is a cap and then additional revenues used for liquidity or lending.
Read my proposal - Guaranteed interest is possible, and of course desirable for some people/situation. Of course it will very over time, but after the 'deal' is entered into, it will be fixed and guaranteed, as it should be. The current state of affairs is made 'the norm' because it suites the banks' interest (no pun intended) better than what is actually fair and normal.
Then it should be guaranteed to be at least 5%. If it ends up being 10% then no one will complain.
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I am think of calling them "USD Rewards" like a credit card "rewards program".
Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.
Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards? It's actually not unusual for people to get interest on their cryptocurrency deposits.
dividends might be more accurate since it is a distribution of profit (fees). I agree the "rewards" sounds like a marketing thing. Interest and dividends sounds like a finance thing.
Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?
We are speaking in metaphors. The metaphors don't have to be real world accurate they just have to get the point across in the most simple to the point way. All this legalese financial speak is just going to confuse people. Talk of rewards will make people think it's a video game with points.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
Sent from my SCH-S720C using Tapatalk 2
So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.
Yeah, so burn some and convert others to bitAssets. Some of the burn is implicit dividends for BTSX holders, some is explicit dividends for bitAsset holders.
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Why is extra deflation even necessary? Even without the burn, BTSX is deflationary by default. Investing 100% of the burned shares into interest bearing assets would be much more strategically beneficial to adoption and therefore BTSX holders.
PS: Love your tagline!
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Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?
Maybe accurate isn't the right word - I'm actually talking about marketing.
When I hear "rewards" I think of a marketing gimmick. When I hear "dividends" or "interest" I think of banking. The better marketing decision may be to not use a "marketing" word.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
Sent from my SCH-S720C using Tapatalk 2
So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.
Yeah, so burn some and convert others to bitAssets. Some of the burn is implicit dividends for BTSX holders, some is explicit dividends for bitAsset holders.
Sent from my SCH-S720C using Tapatalk 2
Why is extra deflation even necessary? Even without the burn, BTSX is deflationary by default. Investing 100% of the burned shares into interest bearing assets would be much more strategically beneficial to adoption and therefore BTSX holders.
PS: Love your tagline!
I think we need some burning too. The reason is some people need to be encouraged to hold BTSX and buy BTSX. At least until we reach a point where BitAssets are what people buy and not BTSX you will need dividends for holders of BTSX, interest for BitAssets.
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I am think of calling them "USD Rewards" like a credit card "rewards program".
I have a Dividend Credit Card and a Rebate Rewards Credit, they are same actually. But I prefer the word "dividend", it's a more professional financial word.
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against the word "rewards"
we already have the slogan "earn 5% or more"
5% is not a reward it is interest or dividend, but not a reward!
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I am think of calling them "USD Rewards" like a credit card "rewards program".
I have a Dividend Credit Card and a Rebate Rewards Credit, they are same actually. But I prefer the word "dividend", it's a more professional financial word.
Stocks give dividend. Dividend should be reserved for BitAssets which are acting as stock. Interest should be reserved for BitAssets which act as currency. Rewards should be reserved for BitAssets which act as IOUs such as if Overstock issued some sorta Overstock rewards gift token.
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bank interest == bit interest
so what about "bitinterest" ?
or "bit%"
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1) If you hold a balance for less than 1 month, you earn nothing.
This might be a bad idea because initially people might only hold for a few weeks as the market isn't going to be mature enough that people will hold for months at a time. I think the interest should kick in immediately on a daily or even hourly basis just as what happens with https://mcxnow.com/
Their economic model is proven to work already for an exchange. Why not just copy exactly how they do it? People seem to like receiving frequent rewards even if they are very small each day or each hour. If you can feed them interest in real time that is even better for attracting holders and then once you get them holding you hook them in by increasing the rewards the longer they hold (more consecutive days is better).
So minimum could be 5% but if they hold beyond a certain amount of consecutive days then the 5% limit is removed and it can go as high as it goes.
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1) If you hold a balance for less than 1 month, you earn nothing.
This might be a bad idea because initially people might only hold for a few weeks as the market isn't going to be mature enough that people will hold for months at a time. I think the interest should kick in immediately on a daily or even hourly basis just as what happens with https://mcxnow.com/
Their economic model is proven to work already for an exchange. Why not just copy exactly how they do it? People seem to like receiving frequent rewards even if they are very small each day or each hour.
I think the same thing. Maybe older balances are eligible for a larger fraction of the rewards, but I think every balance should get something.
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1) If you hold a balance for less than 1 month, you earn nothing.
This might be a bad idea because initially people might only hold for a few weeks as the market isn't going to be mature enough that people will hold for months at a time. I think the interest should kick in immediately on a daily or even hourly basis just as what happens with https://mcxnow.com/
Their economic model is proven to work already for an exchange. Why not just copy exactly how they do it? People seem to like receiving frequent rewards even if they are very small each day or each hour. If you can feed them interest in real time that is even better for attracting holders and then once you get them holding you hook them in by increasing the rewards the longer they hold (more consecutive days is better).
So minimum could be 5% but if they hold beyond a certain amount of consecutive days then the 5% limit is removed and it can go as high as it goes.
As implemented it is continuos.
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I am think of calling them "USD Rewards" like a credit card "rewards program".
Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.
Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards? It's actually not unusual for people to get interest on their cryptocurrency deposits.
dividends might be more accurate since it is a distribution of profit (fees). I agree the "rewards" sounds like a marketing thing. Interest and dividends sounds like a finance thing.
This.
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"dividends" and "interest" are difficult words to legally market.
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"dividends" and "interest" are difficult words to legally market.
ah got it, that trumps all!
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Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?
Maybe accurate isn't the right word - I'm actually talking about marketing.
When I hear "rewards" I think of a marketing gimmick. When I hear "dividends" or "interest" I think of banking. The better marketing decision may be to not use a "marketing" word.
I own a marketing firm here in Ontario, I've spent my entire adult life as a marketer...
Go with whichever has the most "perceived value". For me, it's unquestionably "interest". I put my wealth into something that has a high interest rate. I choose a credit card that gives me "rewards". The underlying incentives are totally different for each. BitUSD early adopters will park their wealth for the interest, not rewards.
Ultimately we're discussing semantics / psychology. The words we choose to describe our product are very important. If we use the wrong ones, someone else will use the right ones.
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"dividends" and "interest" are difficult words to legally market.
Other exchanges are doing it and they seem to be okay, and those are centralized exchanges.
Why would the law matter to a decentralized exchange?
If you can't use the word "interest" then don't do official marketing. Let someone else do that but at least in the client itself it should be called "interest" because otherwise no one is going to understand what is going on.
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Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?
Maybe accurate isn't the right word - I'm actually talking about marketing.
When I hear "rewards" I think of a marketing gimmick. When I hear "dividends" or "interest" I think of banking. The better marketing decision may be to not use a "marketing" word.
I own a marketing firm here in Ontario, I've spent my entire adult life as a marketer...
Go with whichever has the most "perceived value". For me, it's unquestionably "interest". I put my wealth into something that has a high interest rate. I choose a credit card that gives me "rewards". The underlying incentives are totally different for each. BitUSD early adopters will park their wealth for the interest, not rewards.
Ultimately we're discussing semantics / psychology. The words we choose to describe our product are very important. If we use the wrong ones, someone else will use the right ones.
It's possible that Invictus Innovations cannot promise Interest? But they already have promised it in their marketing documents (and previous websites). The title of this thread has interest in it.
Why change now that everyone has accepted interest for BitUSD as a goal? If it's that legally touchy then market it officially as "percentage points" but let the client have "interest". Then the community can figure out what it means.
Considering the client is made by DACSUNLIMITED they aren't really concerned about the legal situation when designing the GUI.
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"dividends" and "interest" are difficult words to legally market.
Other exchanges are doing it and they seem to be okay, and those are centralized exchanges.
Why would the law matter to a decentralized exchange?
If you can't use the word "interest" then don't do official marketing. Let someone else do that but at least in the client itself it should be called "interest" because otherwise no one is going to understand what is going on.
+5%
Decentralized marketing.
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you call it bitUSD and here is no problem?
then call it bit% - bitinterest - btsinterest - bitUSD%
"If you hold bitUSD for a long time the collected fees from the market transaction will be paid back as an (insentive, reward, interest, dividend) to the bitUSD holders. This will slowly increase the holders bitUSD amount. The future will tell how much of gain you will get from holding bitUSD but we expect something between 2-5% every year".
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Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?
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Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?
In active BitUSD is charged 5% and is given to the others as rewards.
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Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?
In active BitUSD is charged 5% and is given to the others as rewards.
Wait...rewards for holding bitUSD...but fines for holding bitUSD?
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Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?
In active BitUSD is charged 5% and is given to the others as rewards.
Wait...rewards for holding bitUSD...but fines for holding bitUSD?
Collect your USD interest annually and you will have no fines.
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.
Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.
the mechanics being as they may, IF it is possible to position this as interest, IMHO it would be better from a marketing perspective. The average joe (vast majority) understand interest and are exposed to it every day. Not everyone is exposed to investing or profit sharing. Thus the "interest" concept would have the broadest appeal. This concept could be a major, major, major game changer for BitShareX!
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But isn't is usual that the interest is NOT fixed? at least in germany that is the case :)
No I am also searching for workaround because we do not actually know how much fees will be collected, so promising 5 or 10% is kind of misleading. And I want to be able to tell them 'our interest is higher than the one in the bank'.
Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.
True, but as explained above, telling the people it is higher than in the bank is a powerful selling point, imo.
+5% +5%
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
If implemented/marketed successfully this could bring a tsunami of wealth into the system.
+5% +5%
A few suggestions:
- While technically revenue sharing the payout should be marketed as interest. This aligns with industry norms and investor expectations when holding low risk assets like USD etc. Investors will suspect a scam/ponzi if someone is marketing payment of dividends for holding USD etc.
+5% +5%
- Interest paid should be capped at 5% and additional revenue diverted to a liquidity fund; no one can complain about getting paid up to 5% interest to hold low risk assets like USD. That is a better risk/yield ratio than any investment in the world. The Eurozone is now offering negative interest on deposits. We cannot fathom the wealth that would pour into bitUSD5.
- The interest mechanism should be implemented on all currencies by default, including gold and silver, but not on other assets like equities and commodities (bitOSTK, bitOIL, etc.). Revenues from assets other than currency and gold/silver should be diverted to the liquidity fund or burned or some combination of the two
- Consideration should be given to using the liquidity fund or some percentage thereof as capital for automated lending, see this post https://bitsharestalk.org/index.php?topic=7208.msg96159#msg96159 (https://bitsharestalk.org/index.php?topic=7208.msg96159#msg96159). The revenue potential is staggering
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
don't call it rewards.
why not interestfees or shareinterest and short interest?
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"dividends" and "interest" are difficult words to legally market.
ah got it, that trumps all!
Yep, loud and clear.
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
don't call it rewards.
why not interestfees or shareinterest and short interest?
Just stick with "+5%", the interest part is implied.
Problem solved.
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earnings would also be better
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
don't call it rewards.
why not interestfees or shareinterest and short interest?
Drumroll..... bitInterest.
Not a legally defined term, fits with the ecosystem and communicates the intent with clarity.
"Investors earn 5% bitInterest on bitUSD holdings"
Edit: bitEarnings might also be highly marketable... bitIncome, bitDividends, etc.
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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.
Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.
It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.
There is no need to represent a fixed interest rate.
This will be interpreted more as deposit interest and folks are accustomed to banks changing the rate frequently.
Per my last, all that is needed is to market the interest as 'receive up to 5% interest on bitUSD holdings' and then show a graph of historical interest rates.
Who among us wouldn't buy bitUSD with that kind of offer?
Imagine merchants being able to earn interest on their float... imaging APPL being able to get 5% on their cash pile.
I'm more for the 10% that Bytemaster mentioned. It helps better to attached USD given that the network is still unproven and may have unknown risks
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There is no need to represent a fixed interest rate.
This will be interpreted more as deposit interest and folks are accustomed to banks changing the rate frequently.
Per my last, all that is needed is to market the interest as 'receive up to 5% interest on bitUSD holdings' and then show a graph of historical interest rates.
Who among us wouldn't buy bitUSD with that kind of offer?
Imagine merchants being able to earn interest on their float... imaging APPL being able to get 5% on their cash pile.
I hate the phrase 'up to' personally, I hope it works and I am the odd man out.
1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
I think it should apply to all bitCurrencies. As for bitGold/bitSilver, my first reaction is -'NO'.
+5%
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I am think of calling them "USD Rewards" like a credit card "rewards program".
This makes me think gimmick and I don't think investors would take it seriously. My personal experience with reward programs is that are designed to entrap and extract.
'Interest' is universally understood and will require no explaining, a critical point when releasing a new product to a global audience.
The bitUSD5 concept will be met with heavy scepticism upon release, no one will believe it is not a scam/ponzi. Best not hand out ammo.
Of course, once there are a couple years of ROI on the books (proof of concept) the flow of wealth will be unstoppable.
+5% +5%
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is this post why the ask side of bitusd dried up?
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
don't call it rewards.
why not interestfees or shareinterest and short interest?
Drumroll..... bitInterest.
Not a legally defined term, fits with the ecosystem and communicates the intent with clarity.
"Investors earn 5% bitInterest on bitUSD holdings"
Edit: bitEarnings might also be highly marketable... bitIncome, bitDividends, etc.
Shentist already came up with that. ;)
you call it bitUSD and here is no problem?
then call it bit% - bitinterest - btsinterest - bitUSD%
"If you hold bitUSD for a long time the collected fees from the market transaction will be paid back as an (insentive, reward, interest, dividend) to the bitUSD holders. This will slowly increase the holders bitUSD amount. The future will tell how much of gain you will get from holding bitUSD but we expect something between 2-5% every year".
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
don't call it rewards.
why not interestfees or shareinterest and short interest?
Drumroll..... bitInterest.
Not a legally defined term, fits with the ecosystem and communicates the intent with clarity.
"Investors earn 5% bitInterest on bitUSD holdings"
Edit: bitEarnings might also be highly marketable... bitIncome, bitDividends, etc.
Shentist already came up with that. ;)
you call it bitUSD and here is no problem?
then call it bit% - bitinterest - btsinterest - bitUSD%
"If you hold bitUSD for a long time the collected fees from the market transaction will be paid back as an (insentive, reward, interest, dividend) to the bitUSD holders. This will slowly increase the holders bitUSD amount. The future will tell how much of gain you will get from holding bitUSD but we expect something between 2-5% every year".
Oops... right you are! :P
Kudos to Shentist... this seems to be the ideal term.
Is there any reason it can't be used, legally or otherwise?
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I am think of calling them "USD Rewards" like a credit card "rewards program".
Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.
Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards? It's actually not unusual for people to get interest on their cryptocurrency deposits.
+5%
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I am think of calling them "USD Rewards" like a credit card "rewards program".
Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.
Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?
Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards? It's actually not unusual for people to get interest on their cryptocurrency deposits.
dividends might be more accurate since it is a distribution of profit (fees). I agree the "rewards" sounds like a marketing thing. Interest and dividends sounds like a finance thing.
Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?
We are speaking in metaphors. The metaphors don't have to be real world accurate they just have to get the point across in the most simple to the point way. All this legalese financial speak is just going to confuse people. Talk of rewards will make people think it's a video game with points.
+5% +5% +5%
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
Sent from my SCH-S720C using Tapatalk 2
So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.
Yeah, so burn some and convert others to bitAssets. Some of the burn is implicit dividends for BTSX holders, some is explicit dividends for bitAsset holders.
Sent from my SCH-S720C using Tapatalk 2
Why is extra deflation even necessary? Even without the burn, BTSX is deflationary by default. Investing 100% of the burned shares into interest bearing assets would be much more strategically beneficial to adoption and therefore BTSX holders.
PS: Love your tagline!
+5% Agreed. This is just like when a company is in a fast growth industry, they usually do not pay dividends because they can create better (more) shareholder value by investing the profits in to the business. If BitshareX can create more value by using the fees/earnings (that are burned) to pay for interest and attract people to the network, then that is what should be done.
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1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.
2) Does this apply to all BitAssets or just BitUSD specifically?
Wouldn't that create unbacked bitUSD?
No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.
Sent from my SCH-S720C using Tapatalk 2
So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.
There is not need to reduce supply to provide value if you can increase the demand side much more by offering interest.
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FYI... I have already implemented the rewards program :) at the blockchain level. I just need to add a few wallet operations and do some testing on a test-net, but it should be ready to go next week.
Anybody else get the feeling BM is changing the world with every stroke of the keyboard?
Who would have thought, the G*d D**n kid built a "bank"!!
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Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?
Maybe accurate isn't the right word - I'm actually talking about marketing.
When I hear "rewards" I think of a marketing gimmick. When I hear "dividends" or "interest" I think of banking. The better marketing decision may be to not use a "marketing" word.
I own a marketing firm here in Ontario, I've spent my entire adult life as a marketer...
Go with whichever has the most "perceived value". For me, it's unquestionably "interest". I put my wealth into something that has a high interest rate. I choose a credit card that gives me "rewards". The underlying incentives are totally different for each. BitUSD early adopters will park their wealth for the interest, not rewards.
Ultimately we're discussing semantics / psychology. The words we choose to describe our product are very important. If we use the wrong ones, someone else will use the right ones.
+5% +5%
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"dividends" and "interest" are difficult words to legally market.
dividends and interest sound like money to me. Rewards could be anything. Points, tokens, mileage, coupons etc...
I want money!
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
The plan has always been 5% for the USD (bitUSD) holder. I just have never heard of a workable solution how this can be done...
until today.
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This is awesome. Why would you hold bitcoin over bitbtc if this gets implemented for that asset as well? So cool!!
Just don't call it rewards anything but that!
Edit: dividends makes sense to me, it's essentially what you are getting, can't see why that would cause legal concern.
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That is a good, brilliant idea. I am quite excited right know.
The possibilities seem vertiginous.
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We're taking the fees that would normally be given to wasteful miners and creating a financial product out of it.
Game changer.
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I don't like the word 'rewards' - sounds like a cheap marketing ploy that I ignore from my brick and mortar banks. I like the expression 'dividends through profit sharing' or something along those lines. It subconsciously emphasizes the fact that DACs are companies that are designed to earn profits, and that those profits are being returned to the user. It also implies that the size of the dividends are dependent on the profitability of the company. +5%
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The general outline of this proposal sounds perfect to me.
I can't even think what else to write, I'm speechless, the impact of this is huge imo.
This feature would have a greater impact on adoption than just about anything else being discussed.
Yes.
FYI... I have already implemented the rewards program :) at the blockchain level. I just need to add a few wallet operations and do some testing on a test-net, but it should be ready to go next week.
Anybody else get the feeling BM is changing the world with every stroke of the keyboard?
It's amazing really.
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I don't like the word 'rewards' - sounds like a cheap marketing ploy that I ignore from my brick and mortar banks. I like the expression 'dividends through profit sharing' or something along those lines. It subconsciously emphasizes the fact that DACs are companies that are designed to earn profits, and that those profits are being returned to the user. It also implies that the size of the dividends are dependent on the profitability of the company. +5%
+5% That sounds perfect to me.
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Where can you store long term BitUSD can this be stored in wallet/vault ?
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Where can you store long term BitUSD can this be stored in wallet/vault ?
Yes. Your vault holds the private keys. As long as you don't lose your wallet export (the .json file) or forget your password your bit USD is safely recorded on the block chain.
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Maybe I'm the only one who disagrees with all this, but I really don't like it.
I don't like making money off the spread by matching shorts that are below the feed with bids that are above it. I think this reduces liquidity in the market and hurts the peg.
I would much rather see shorts prioritized by amount of collateral.
How I would fine tune the market:
I would create a small delay from the time that new feeds are posted and the time they are active, maybe a few minutes. That way traders can know the exact median feed price a little before it takes effect so all traders are on even ground. Aggressive shorts can then enter their orders at the exact feed price and compete on who posts the most collateral to be first in line to be matched. This allows traders to profit by shorting at $1 and quickly buying back at $.99 when they can.
If you do it the way proposed in this thread then you artificially increase transaction costs which hurts liquidity and only attract long term shorts who will be reluctant to cover (they can't turn around and cover at $.99 to make a profit because they may have only got $.95 or less worth of BTSX from their short).
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
Why require a minimum of a month and why have a quadratic dependence on FRACTION_OF_YEAR_HELD? What is the purpose in creating incentives for BitUSD holders to hold BitUSD balances for long periods of time? The fact that they have the money as BitUSD in the first place already adds value to BTSX.
And are the rewards claimed at the time of transaction? Do those rewards get immediately deducted from COLLECTED_FEES_BALANCE when that transaction occurs? How do I know when I have officially locked in the specific nominal rewards (in BitUSD)?
I like the general idea, but I worry that your implementation makes things unnecessarily complicated for the user in figuring out the rewards they will receive. It will probably also force extra complications in the client implementations for the purpose of maximizing the interest the user receives from their balance.
For example, what is the best way to maximize my return on some fixed initial sum of BitUSD? Let's define X = (COLLECTED_FEES_BALANCE / TOTAL_USD). Do I want to hold for 11 months and 29 days and then make the transaction right before the inactivity fee deadline, so that FRACTION_OF_YEAR_HELD^2 is as large as possible? In that case my annual reward is approximately P*(1+X), where P is the principal, or a annual return of (X*100)%. Or do I want to break that up into (12/k) k-month intervals to take advantage of compound interest? In that case my annual reward is P*(1 + X*(k/12)^2)^(12/k) assuming X remains constant over the year throughout the entire compounding process, giving an annual return of (((1 + X*(k/12)^2)^(12/k) - 1)*100)%. Since X has to be less than 1 (if I understand COLLECTED_FEES_BALANCE and TOTAL_USD correctly), this means holding it for a year would always be better (http://www.wolframalpha.com/input/?i=%28%28%281+%2B+X*%28k%2F12%29%5E2%29%5E%2812%2Fk%29+-+1%29*100%29+-+X*100%2C+X+%3D+0+to+1%2C+for+k+%3D+1+to+12) than compounding with k-month intervals for any k. But this was assuming X is fixed. In reality, X will fluctuate as COLLECTED_FEES_BALANCE changes (increasing as more fees are collected and decreasing as people claim the the reward). I would hope reward claims would be randomly distributed so that COLLECTED_FEES_BALANCE only has small deviations around a relatively stable value over time. If it wasn't random however, there would be an advantage to the people who claim first. Let's say nearly all BitUSD holders initiated their balance in September and intended to hold for a year to maximize returns. Over the course of a year, the COLLECTED_FEES_BALANCE grew to a large sum S, and in next September, all the BitUSD holders suddenly claimed nearly 100% of COLLECTED_FEES_BALANCE. But the first guy who owns f1 fraction of TOTAL_USD gets f1*S, the guy with fraction f2 gets f2*S*(1-f1), the guy after that gets f3*S*(1-f1-f2), until the last guy gets a tiny fraction of what he could have gotten had he claimed first (again assuming I understand your proposed implementation and calculation of COLLECTED_FEES_BALANCE correctly).
Why create all of this complication for users? The implementation should not have users receive different returns depending on when they move their balances. I don't see why it should withhold rewards for people who held the BitUSD for less than a month either. Why not take a portion of the fees collected in a given block, put it in a fund, and divide the money added to that fund during the block by the total BitUSD held by users (the existing BitUSD not collected by the network) at the time of that block to calculate the interest rate for that block. When a BitUSD balance is moved, the sum of the interest rates for each block on which that balance existed (called the ACCUMULATED_INTEREST_RATE) is used to determine the reward on that balance (ACCUMULATED_INTEREST_RATE*BALANCE). The rewards on these BitUSD balances act as extra BitUSD (effectively coming from the fund) on the input of the transaction that can be claimed by the outputs. This way all of the money in fund can be considered consumed at every block, and the interest payment on balances is continuous over time and cannot be strategically manipulated by timing when to move the BitUSD.
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Maybe I'm the only one who disagrees with all this, but I really don't like it.
I don't like making money off the spread by matching shorts that are below the feed with bids that are above it. I think this reduces liquidity in the market and hurts the peg.
I would much rather see shorts prioritized by amount of collateral.
How I would fine tune the market:
I would create a small delay from the time that new feeds are posted and the time they are active, maybe a few minutes. That way traders can know the exact median feed price a little before it takes effect so all traders are on even ground. Aggressive shorts can then enter their orders at the exact feed price and compete on who posts the most collateral to be first in line to be matched. This allows traders to profit by shorting at $1 and quickly buying back at $.99 when they can.
If you do it the way proposed in this thread then you artificially increase transaction costs which hurts liquidity and only attract long term shorts who will be reluctant to cover (they can't turn around and cover at $.99 to make a profit because they may have only got $.95 or less worth of BTSX from their short).
Aside from fact that this is not the right thread that you disagree with. I also I have my doubts that the actual market will play as described.- i.e. demand for shorting resulting in offering up to 10% discount. I would expect shorts entering very near the 'peg price' and waiting the order to be filled (even if it means days).
If you talk about the interest proposal here, the (rather raw) calculations are not taking into an account this 'shorting pressure discount' so we must be safe in that regard.
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I don't like the word 'rewards' - sounds like a cheap marketing ploy that I ignore from my brick and mortar banks. I like the expression 'dividends through profit sharing' or something along those lines. It subconsciously emphasizes the fact that DACs are companies that are designed to earn profits, and that those profits are being returned to the user. It also implies that the size of the dividends are dependent on the profitability of the company. +5%
+5% That sounds perfect to me.
I also feel the same about 'rewards' but I think apparently describing it using the words 'dividends', 'interest' or a derivative of them is a no go.
"dividends" and "interest" are difficult words to legally market.
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Maybe I'm the only one who disagrees with all this, but I really don't like it.
I don't like making money off the spread by matching shorts that are below the feed with bids that are above it. I think this reduces liquidity in the market and hurts the peg.
I would much rather see shorts prioritized by amount of collateral.
How I would fine tune the market:
I would create a small delay from the time that new feeds are posted and the time they are active, maybe a few minutes. That way traders can know the exact median feed price a little before it takes effect so all traders are on even ground. Aggressive shorts can then enter their orders at the exact feed price and compete on who posts the most collateral to be first in line to be matched. This allows traders to profit by shorting at $1 and quickly buying back at $.99 when they can.
If you do it the way proposed in this thread then you artificially increase transaction costs which hurts liquidity and only attract long term shorts who will be reluctant to cover (they can't turn around and cover at $.99 to make a profit because they may have only got $.95 or less worth of BTSX from their short).
Aside from fact that this is not the right thread that you disagree with. I also I have my doubts that the actual market will play as described.- i.e. demand for shorting resulting in offering up to 10% discount. I would expect shorts entering very near the 'peg price' and waiting the order to be filled (even if it means days).
If you talk about the interest proposal here, the (rather raw) calculations are not taking into an account this 'shorting pressure discount' so we must be safe in that regard.
I felt like most of the money that was expected to be paid in "interest" was due to taking advantage of this spread. That's why I feel it was relevant. As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:
1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)
Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account. To do this BitUSD needs to offer a return that is explicit. IE: it shouldn't be done via the value deviating from the peg.
Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD). This income is saved for a "rainy day" which we don't actually expect to happen, but could. The value as an insurance system could be better used to pay interest to USD holders. If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.
So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading. This is about .4% yield every 2 weeks or about 10% per year. I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders. The more people hold BitUSD the more BTSX is worth. So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.
I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount. (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2
The result is that long-term holders of BitUSD earn much higher yields than short-term holders. The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:
1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.
This feature would have a greater impact on adoption than just about anything else being discussed.
Discuss.
Why require a minimum of a month and why have a quadratic dependence on FRACTION_OF_YEAR_HELD? What is the purpose in creating incentives for BitUSD holders to hold BitUSD balances for long periods of time? The fact that they have the money as BitUSD in the first place already adds value to BTSX.
And are the rewards claimed at the time of transaction? Do those rewards get immediately deducted from COLLECTED_FEES_BALANCE when that transaction occurs? How do I know when I have officially locked in the specific nominal rewards (in BitUSD)?
I like the general idea, but I worry that your implementation makes things unnecessarily complicated for the user in figuring out the rewards they will receive. It will probably also force extra complications in the client implementations for the purpose of maximizing the interest the user receives from their balance.
For example, what is the best way to maximize my return on some fixed initial sum of BitUSD? Let's define X = (COLLECTED_FEES_BALANCE / TOTAL_USD). Do I want to hold for 11 months and 29 days and then make the transaction right before the inactivity fee deadline, so that FRACTION_OF_YEAR_HELD^2 is as large as possible? In that case my annual reward is approximately P*(1+X), where P is the principal, or a annual return of (X*100)%. Or do I want to break that up into (12/k) k-month intervals to take advantage of compound interest? In that case my annual reward is P*(1 + X*(k/12)^2)^(12/k) assuming X remains constant over the year throughout the entire compounding process, giving an annual return of (((1 + X*(k/12)^2)^(12/k) - 1)*100)%. Since X has to be less than 1 (if I understand COLLECTED_FEES_BALANCE and TOTAL_USD correctly), this means holding it for a year would always be better (http://www.wolframalpha.com/input/?i=%28%28%281+%2B+X*%28k%2F12%29%5E2%29%5E%2812%2Fk%29+-+1%29*100%29+-+X*100%2C+X+%3D+0+to+1%2C+for+k+%3D+1+to+12) than compounding with k-month intervals for any k. But this was assuming X is fixed. In reality, X will fluctuate as COLLECTED_FEES_BALANCE changes (increasing as more fees are collected and decreasing as people claim the the reward). I would hope reward claims would be randomly distributed so that COLLECTED_FEES_BALANCE only has small deviations around a relatively stable value over time. If it wasn't random however, there would be an advantage to the people who claim first. Let's say nearly all BitUSD holders initiated their balance in September and intended to hold for a year to maximize returns. Over the course of a year, the COLLECTED_FEES_BALANCE grew to a large sum S, and in next September, all the BitUSD holders suddenly claimed nearly 100% of COLLECTED_FEES_BALANCE. But the first guy who owns f1 fraction of TOTAL_USD gets f1*S, the guy with fraction f2 gets f2*S*(1-f1), the guy after that gets f3*S*(1-f1-f2), until the last guy gets a tiny fraction of what he could have gotten had he claimed first (again assuming I understand your proposed implementation and calculation of COLLECTED_FEES_BALANCE correctly).
Why create all of this complication for users? The implementation should not have users receive different returns depending on when they move their balances. I don't see why it should withhold rewards for people who held the BitUSD for less than a month either. Why not take a portion of the fees collected in a given block, put it in a fund, and divide the money in that fund by the total BitUSD held by users (the existing BitUSD not collected by the network) at the time of that block to calculate the interest rate for that block. When a BitUSD balance is moved, the sum of the interest rates for each block on which that balance existed (called the ACCUMULATED_INTEREST_RATE) is used to determine the reward on that that balance (ACCUMULATED_INTEREST_RATE*BALANCE). The rewards on these BitUSD balances act as extra BitUSD (effectively coming from the fund) on the input of the transaction that can be claimed by the outputs. This way all of the money in fund can be considered consumed at every block, and the interest payment on balances is continuous over time and cannot be strategically manipulated by timing when to move the BitUSD.
Seems an idea, worth considering in order to iron out the general proposal, imo.
Additionally the first person to point out where my math got screwed up (Thanks.)
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As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
To tell you the truth, I am in total shock by this statement.
Do you have time to explain further?
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Why require a minimum of a month?
I'm not anywhere near the same maths or trading level as you guys but these are my thoughts.
- Instead of selling their BitAssets for BTSX in a bubble or in a panic during a technical problem. BitAsset holders are now incentivised to hold and not create as much volatility.
- Not sure about this one, but doesn't giving people an incentive to hold, take some BitUSD out of general circulation so there will be less available for shorts looking to cover for example thereby increase demand and making BitUSD average closer to the peg than the few % below I hear it averages now?
- Doesn't this proposal reward savers over traders?
Just like keeping your funds for any length of time on a centralised exchange is risky, till BTSX has proved itself so too is holding BitAssets. (BitAsset savers take on a lot of the risks of BTSX with few of the benefits) Maximising their reward attracts genuine saving not just trading demand for BitAssets.
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As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
To tell you the truth, I am in total shock by this statement.
Do you have time to explain further?
Me too. Agent86, does bytemaster's implementation not appeal to you or the idea of paying interest to BitAssets? I thought the appeal of interest on BitUSD would be obvious; it becomes a super easy way to market BitShares X to the average Joe: you get higher interest rates keeping your BitUSD in BitShares X than keeping your USD in your regular bank.
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Why require a minimum of a month?
I'm not anywhere near the same maths or trading level as you guys but these are my thoughts.
- Instead of selling their BitAssets for BTSX in a bubble or in a panic during a technical problem. BitAsset holders are now incentivised to hold and not create as much volatility.
- Not sure about this one, but doesn't giving people an incentive to hold, take some BitUSD out of general circulation so there will be less available for shorts looking to cover for example thereby increase demand and making BitUSD average closer to the peg than the few % below I hear it averages now?
- Doesn't this proposal reward savers over traders?
Just like keeping your funds for any length of time on a centralised exchange is risky, till BTSX has proved itself so too is holding BitAssets. (BitAsset savers take on a lot of the risks of BTSX with few of the benefits) Maximising their reward attracts genuine saving not just trading demand for BitAssets.
Don't we want more people trading not hording? More trading = closer to peg value over time especially when the price is moving. IF people need to hold onto their bit assets it discourages trading which decreases liquidity. There should be no minimum time. Also more trading = more fees, which is also good.
Unless I'm missing something?
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Why require a minimum of a month?
I'm not anywhere near the same maths or trading level as you guys but these are my thoughts.
- Instead of selling their BitAssets for BTSX in a bubble or in a panic during a technical problem. BitAsset holders are now incentivised to hold and not create as much volatility.
- Not sure about this one, but doesn't giving people an incentive to hold, take some BitUSD out of general circulation so there will be less available for shorts looking to cover for example thereby increase demand and making BitUSD average closer to the peg than the few % below I hear it averages now?
- Doesn't this proposal reward savers over traders?
Just like keeping your funds for any length of time on a centralised exchange is risky, till BTSX has proved itself so too is holding BitAssets. (BitAsset savers take on a lot of the risks of BTSX with few of the benefits) Maximising their reward attracts genuine saving not just trading demand for BitAssets.
Don't we want more people trading not hording? More trading = closer to peg value over time especially when the price is moving. IF people need to hold onto their bit assets it discourages trading which decreases liquidity. There should be no minimum time. Also more trading = more fees, which is also good.
Unless I'm missing something?
You may be right. I'm not hot with these things. I'm sure the main guys will be able to clue us in here.
I would think traders would come in whenever there is a profit to be made from an imbalance anyway, they don't need the interest as an incentive.
I also think there is a risk to holding BitAssets long term as well as a conversion cost and lack of utility short term for someone looking to move some of their BTC position over to BitBTC for example so those people are the ones we want to maximise the rewards for.
Also if trading is anything like poker. The traders want as many of the average Joe savers in the game because that's who they get their edge from.
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As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
To tell you the truth, I am in total shock by this statement.
Do you have time to explain further?
Me too. Agent86, does bytemaster's implementation not appeal to you or the idea of paying interest to BitAssets? I thought the appeal of interest on BitUSD would be obvious; it becomes a super easy way to market BitShares X to the average Joe: you get higher interest rates keeping your BitUSD in BitShares X than keeping your USD in your regular bank.
I'm in favor of interest, I just think the right way to do it is make a bond market… I proposed the idea here:
https://bitsharestalk.org/index.php?topic=7816.0
I think this has much more potential to be useful and popular and drive people into bitAssets.
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good +5%
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As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
To tell you the truth, I am in total shock by this statement.
Do you have time to explain further?
Me too. Agent86, does bytemaster's implementation not appeal to you or the idea of paying interest to BitAssets? I thought the appeal of interest on BitUSD would be obvious; it becomes a super easy way to market BitShares X to the average Joe: you get higher interest rates keeping your BitUSD in BitShares X than keeping your USD in your regular bank.
I'm in favor of interest, I just think the right way to do it is make a bond market… I proposed the idea here:
https://bitsharestalk.org/index.php?topic=7816.0
I think this has much more potential to be useful and popular and drive people into bitAssets.
Please read my proposed bond/CD idea in this thread and through your opinion.
Thanks.
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what about replace "interest " with "Bitshares"... +5% bitshares per year ... 5% value of bitUSD but you get it in the equivalent of BTSX (?)...
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Please read my proposed bond/CD idea in this thread and through your opinion.
Thanks.
Ok, If I understand that you are talking about using a CD to smooth out the extra bitUSD distributions for people who want something more reliable. I don't really like distributing the bitUSD fees to bitUSD holders as described so offering CDs on top of that I don't think helps it. I like using bonds generally though.
Here is an idea. The proposal stays as revenue sharing plan/dividends.
-At the same time everybody can offer true interest bearing CDs. (fix rate/fix time/known penalty for early withdrawal).
-The amount received in bitUSD is kept as collateral, plus additional amount for the interest promised;
=> the person saving the bitUSD is absolutely secured the amount + interest;
and The person offering this deposit benefits is this profit sharing produces more than the promised interest?
CD seems as US term only - here is the link: http://www.investopedia.com/terms/c/certificateofdeposit.asp
Thoughts?
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Interest bearing bonds require a separate market and implementation from the core BitUSD market. A BTSX holder can sell a collateralized promise to pay a certain amount of bitUSD at a certain date in the future. There can then be a "bond market" for these promissory notes. The present day value of these future promises to pay BitUSD will determine short term and long term interest rates.
Seems like a fine addition to me. Although, I have a concern with the collateral being enough to cover the debt by the future date. A BitUSD holder relies on there being enough traders to sell their BitUSD as the price changes to cover the shorts with dangerously low collateral. Then new shorts can enter the system at the newer prices. Since BitUSD is fungible, the BitUSD holder doesn't have to care about the price changes and can be assured that there will be enough collateral available (ignoring black swan events) when he wants to sell his BitUSD. But these promissory notes aren't fungible are they? Someone has to hold on to a bond that pays a specific amount at a specific future date and has a specific amount of BTSX as collateral backing it. They can always sell it in the bond market, but there is a responsibility on the bond holders to keep an eye on the price changes of BTSX/BitUSD to make sure their bond has enough collateral value to pay the debt at the future date. In fact, in theory if the collateral isn't large enough to cover a drop in the price of BTSX from when the bond was purchased until when it pays the debt, then the effective interest rate can decrease and even become negative.
I think for many BitUSD holders, they would rather not worry about all of this stuff. They would just like to get some variable interest on their BitUSD balance, just like they would in their bank savings account. Using the BitUSD fees to pay this interest makes things much easier for these users. If they are unsatisfied with the rates they are getting, then they can look into the bond market.
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What effect (if any) do you guys think the 5% interest will do to the price of Bitassets? Take something like bitUSD which already inflates via the US government by about 2% per year. Then we add 5% on top of that. How will the 7% annual inflation rate affect the price of Bitshares- if it will at all?
I know this is about creating a demand for Bitassets and I think it will, but are there any long term side effects regarding to the bitasset market peg in making bitUSD annual inflation at 7% when the actual inflation rate is closer to 2%???
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What effect (if any) do you guys think the 5% interest will do to the price of Bitassets? Take something like bitUSD which already inflates via the US government by about 2% per year. Then we add 5% on top of that. How will the 7% annual inflation rate affect the price of Bitshares- if it will at all?
I know this is about creating a demand for Bitassets and I think it will, but are there any long term side effects regarding to the bitasset market peg in making bitUSD annual inflation at 7% when the actual inflation rate is closer to 2%???
Bit assets do not inflate. Nor are they debased. Usd inflation is not relevant.
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Maybe I'm the only one who disagrees with all this, but I really don't like it.
I don't like making money off the spread by matching shorts that are below the feed with bids that are above it. I think this reduces liquidity in the market and hurts the peg.
I would much rather see shorts prioritized by amount of collateral.
How I would fine tune the market:
I would create a small delay from the time that new feeds are posted and the time they are active, maybe a few minutes. That way traders can know the exact median feed price a little before it takes effect so all traders are on even ground. Aggressive shorts can then enter their orders at the exact feed price and compete on who posts the most collateral to be first in line to be matched. This allows traders to profit by shorting at $1 and quickly buying back at $.99 when they can.
If you do it the way proposed in this thread then you artificially increase transaction costs which hurts liquidity and only attract long term shorts who will be reluctant to cover (they can't turn around and cover at $.99 to make a profit because they may have only got $.95 or less worth of BTSX from their short).
Aside from fact that this is not the right thread that you disagree with. I also I have my doubts that the actual market will play as described.- i.e. demand for shorting resulting in offering up to 10% discount. I would expect shorts entering very near the 'peg price' and waiting the order to be filled (even if it means days).
If you talk about the interest proposal here, the (rather raw) calculations are not taking into an account this 'shorting pressure discount' so we must be safe in that regard.
I felt like most of the money that was expected to be paid in "interest" was due to taking advantage of this spread. That's why I feel it was relevant. As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
I think I agree with your idea that shorts should be at the peg price and be prioritized by collateral instead. This makes me wonder how much money would actually be generated in BitUSD fees. It still could be a considerable amount from the overlap of bid and asks. The value in that overlap can be extracted as BTSX or the BitAsset being traded (or some combination of each totaling 100% of the value of the overlap). By extracting the overlap as BTSX fees, the DAC provides income for delegates (and, maybe in the future, workers) and dividends to BTSX shareholders. By extracting the overlap as BitAsset fees, the DAC provides an insurance fund for black swan events on that BitAsset and could also provide rewards to the BitAsset holders.
I think it would be great if the shareholders had ways to define the amounts to be paid to the delegates, amounts to be paid to other specified accounts (workers), the amount of BitAssets to store as insurance for each BitAsset (as a percentage of the total BitAssets issued), and the interest rate to be paid for each BitAsset. Then, in addition to collected transaction fees, the DAC would automatically adjust what percentage of fees were collected as BTSX vs BitAsset from the bid-ask overlap to collect enough BTSX and BitAssets as fees so that the DAC could afford to do following (in order of priority): pay delegates their income; pay workers their mandatory income; grow insurance fund of BitAsset if necessary; pay rewards at prescribed interest rate to BitAsset holders; pay workers their discretionary income if any; pay leftover as dividends to BTSX holders.
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What effect (if any) do you guys think the 5% interest will do to the price of Bitassets? Take something like bitUSD which already inflates via the US government by about 2% per year. Then we add 5% on top of that. How will the 7% annual inflation rate affect the price of Bitshares- if it will at all?
I know this is about creating a demand for Bitassets and I think it will, but are there any long term side effects regarding to the bitasset market peg in making bitUSD annual inflation at 7% when the actual inflation rate is closer to 2%???
Inflation is bad, interest is good.
So when they say there's 2% inflation it means at the end of the year $1 will on buy you $0.98 of the stuff it does today. Whereas 2% interest p.a means at the end of the year means $1 will buy you $1.02 worth of stuff. (Though if there was 2% inflation the two would cancel out.)
In your example of 5% interest and a dollar with 2% inflation would mean $1 would be worth $1.03 at the end of the year.
What will it mean for BTSX?
Very good things. Imagine two identical places. Place A gave you no interest on your money and place B did. Assuming all else is equal, you would put your money in Place B.
It's likely the BitAsset interest rate while variable will be higher than most traditional places so it means BitAssets will attract a lot of new money.
Also the nice thing if I understand it correctly is that our interest rate is self-regulating.
So for example right now there is not a lot of BitAsset buying demand but a lot of people who want to short BitAssets. They are competing with each other by essentially who is willing to pay the most when there is a chance to short. These contribute some of the fees that are then used to pay the interest. This interest attracts buyers. More buyers mean the shorts have to compete less which means less fees for interest, less interest means less demand and so on...
I think for many BitUSD holders, they would rather not worry about all of this stuff. They would just like to get some variable interest on their BitUSD balance, just like they would in their bank savings account. Using the BitUSD fees to pay this interest makes things much easier for these users. If they are unsatisfied with the rates they are getting, then they can look into the bond market.
+5%
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1) If you hold a balance for less than 1 month, you earn nothing.
This might be a bad idea because initially people might only hold for a few weeks as the market isn't going to be mature enough that people will hold for months at a time. I think the interest should kick in immediately on a daily or even hourly basis just as what happens with https://mcxnow.com/
Their economic model is proven to work already for an exchange. Why not just copy exactly how they do it? People seem to like receiving frequent rewards even if they are very small each day or each hour. If you can feed them interest in real time that is even better for attracting holders and then once you get them holding you hook them in by increasing the rewards the longer they hold (more consecutive days is better).
So minimum could be 5% but if they hold beyond a certain amount of consecutive days then the 5% limit is removed and it can go as high as it goes.
+5%
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Interest bearing bonds require a separate market and implementation from the core BitUSD market. A BTSX holder can sell a collateralized promise to pay a certain amount of bitUSD at a certain date in the future. There can then be a "bond market" for these promissory notes. The present day value of these future promises to pay BitUSD will determine short term and long term interest rates.
The part about the interest rates is good.
The part where I see the biggest challenge is such collateralization working on a blockchain. I can not figure out a way (neither have I read somebody suggesting working solution) where both conditions are met -repayment of the bond (debt is) guaranteed and at the same time incentive for the issuer of such bond is still present. In other words if the whole amount received through the bond sell is kept as collateral + additional collateral for the interest is needed, where is the incentive for the issuer? Anything less than that collateral leaves the bond buyer exposed to the risk of not receiving his money back.
[edit] It will take a truly independent bond market, where special market participants, will act as bond issuer and will collateralize a series of bonds (with deferent expiration dates), for this to truly work.
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In the past I have been stongly oposing what is now called BitUSD5 based on the fear that it would trade so high above the peg to dry up the market and even cause a run-away towards infinite prices.
This current "rewards" proposal seems to be much more workable. One thing I would like to add to the discussion:
Any thoughts on how sustainable a level of 5 or even 10 % p.a. of interest/dividends/rewards, as it was mentioned, would be? My guess is that it would quickly drop to something insignificant - like the fractions of one per cent on mcxnow.
The current amount of BitUSD existing is tiny and they have all been created recently - so lots of fees for few BitUSD.
Once interest payments start many big holders will trade with themselves to create equivalent short and long positions, effectively tying most of their BTSX holdings up in collateral. This is at no risk to them (they can cover anytime at any price) but gives them the advantage of getting a large cut of the interest payed. All this means not so many fees for very many BitUSD.
Some thoughts on other issues related:
- Wallet would have to ensure that balances are LIFO.
- Don't promise a minimum rate if you can't garantee a minimum fee's income which you can't.
- I don't like the word reward either, it sounds like someone wants me to sign up for some card to get my address and spending profile. I think interest is the wrong word for this concept and would prefer dividend but I do understand that the terms interest and dividend might be legally challenging.
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Instead of 5% interest Promise 50% of Btsx-BitUSD transaction fees or something amongst all holders of BitUSD
Sent from my iPhone using Tapatalk
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SO THIS WHAT THE +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.
Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.
As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.
This is genius!
+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
don't call it rewards.
why not interestfees or shareinterest and short interest?
Benefits?
Anything is better than rewards.
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earnings would also be better
Earnings is pretty good too. Rewards just sounds really scammy. I hope they don't go with that.
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In the past I have been stongly oposing what is now called BitUSD5 based on the fear that it would trade so high above the peg to dry up the market and even cause a run-away towards infinite prices.
This current "rewards" proposal seems to be much more workable. One thing I would like to add to the discussion:
Any thoughts on how sustainable a level of 5 or even 10 % p.a. of interest/dividends/rewards, as it was mentioned, would be? My guess is that it would quickly drop to something insignificant - like the fractions of one per cent on mcxnow.
The current amount of BitUSD existing is tiny and they have all been created recently - so lots of fees for few BitUSD.
Once interest payments start many big holders will trade with themselves to create equivalent short and long positions, effectively tying most of their BTSX holdings up in collateral. This is at no risk to them (they can cover anytime at any price) but gives them the advantage of getting a large cut of the interest payed. All this means not so many fees for very many BitUSD.
Some thoughts on other issues related:
- Wallet would have to ensure that balances are LIFO.
- Don't promise a minimum rate if you can't garantee a minimum fee's income which you can't.
- I don't like the word reward either, it sounds like someone wants me to sign up for some card to get my address and spending profile. I think interest is the wrong word for this concept and would prefer dividend but I do understand that the terms interest and dividend might be legally challenging.
good points.
only if we have trades we will get fees to get paid back as interest.
so it is to be expected that the interest will go down over time, but will help to hold the peg.
i agree that the proposel is to complicated. maybe bytemaster should count in every Joe. why not pay it out every day? would be much easier to understand and to follow.
"today 1000 BTSX in fees are collected. 1000 BTSX / 485.000 bitUSD = 0.00206185 BTSX per bitUSD or 0.75% annual bitInterest"
please consider KISS
@Agent
i don't get the bond market. how can i promise to pay something in the future and why do i want to use it? looks to me too complicated and against - KISS. on the mentioned thread i didn't found an explaination how the bond market will function and why the participants are in the market at all.
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Okay, after thinking about it more I don't like the bond market idea (because of the collateral risk and fungibility issues) but I also don't like shorts created at a price below the peg (peg being either the feed price or 1-hour average if feed not present). Instead, taking inspiration from bytemaster's post here (https://bitsharestalk.org/index.php?topic=8235.msg108254#msg108254), I have the following proposal for implementing interest for BitAsset holders.
A short position has collateral from two sources: one is the BTSX paid by the BitAsset buyer (I call this BTSX the reserve); the other is the BTSX paid by the short seller (I call this BTSX the margin). The collateral = reserve + margin. The current rule is that the margin needs to be at least equal to the reserve initially (200% backed initially). At some point the short seller covers or the DAC does a margin call. If the price of BTSX goes down with respect to the BitAsset, then some of the margin is needed to cover the BitAsset debt when covering. Whether the short seller covers at a loss or the DAC does a margin call, the mechanism would work the same way it currently does. However, if the short seller covers at a profit, things would work a little bit differently compared to today. If the short position is covered at a profit, that means that only a portion of the reserve is needed to pay the debt and the remainder is profit. This remainder should be split according to some percentage specified when the short position was created and one part is paid as profit to the short seller and the other part is collected by the DAC as a fee (in reality the cover would require excess BitAssets to not only cover the debt but also the value of the fee according to the current price so that the DAC essentially trades the BTSX fee for the BitAsset fee). These fees are collected to pay variable interest to the BitAsset holders in a way similar to what I described earlier (https://bitsharestalk.org/index.php?topic=8396.msg109810#msg109810).
Since shorts would be limited to the peg price, short sellers need some other way of competing with each other to get their shorts matched. The market rule would be that in the case of a tie in price, the short position with the highest percentage of profit burned as fees wins. The percentage of profit burned should adjust according to market dynamics to balance the BitAsset long and short demand since as the percentage of profit burned goes up the short sellers lose their incentive to short but BitAsset buyers have an increased incentive to hold the BitAsset due to the higher expected interest rates. If the price of the BitAsset in terms of BTSX drops even a little from the peg that it was shorted at, the short seller still has an incentive in the short-term to cover to get their percentage of the small profit. Agent86, do you see any liquidity problems with this method? Anyone see any issues with this proposal?
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We should remember the fact the BitSharesX exchange is de-centralised is a significant marketable advantage over the centralised exchanges who offer an interest capability (mcxnow) or even support BitAssets...
I for one would be very uncomfortable holding any significant amount of savings in an any centralised exchange due to the real risk of hacking, dishonesty and regulatory/government intervention.
Probability of loosing funds increases with length of time funds are kept on the centralised exchange!
I have no such concerns with BitSharesX.
If this proposal goes ahead - let make sure we highlight this front and centre
BitSharesX - Trustless Banking for Everyone
I expect this proposal could be huge for Chinese investors given the limited domestic investment options and the ever present threat of shutting down the countries access to the traditional centralised BitCoin exchanges.
As an aside - I'd like a term deposit type capability within the exchange... i.e. I'd like to lock away BTSX, BitGold, BitBTC for a period of 3months, 1 year, 5 years... mostly to force myself to invest for the long term and not FUD myself out of holding long term. Combined with BitSharesX interest this could be a great capability.
And finally - I came across this post from some crazy guy talking about this same idea back in May 2013... ;D
https://bitcointalk.org/index.php?topic=213588.0 (https://bitcointalk.org/index.php?topic=213588.0)
Congratulations on seeing your vision to reality BM - it's a hell of an achievement!
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This proposal is problematic because it destroys the fungibility of BitUSD. BitUSD that haven't moved are suddenly different from, and more valuable than, other BitUSD. His proposal encourages "banks" to spring up -- businesses that allow users to deposit their BitUSD on a fiduciary basis, and try really hard to keep from moving their BitUSD. Users then have some outside mechanism to move around claims against BitUSD deposits while the deposits themselves sit in the bank vaults and accumulate the maximum interest since they never move. The users and banks would then split the enhanced interest they extract, making this arrangement economically sustainable.
You can read about my alternative proposal here: https://bitsharestalk.org/index.php?topic=8422.0
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This proposal is problematic because it destroys the fungibility of BitUSD. BitUSD that haven't moved are suddenly different from, and more valuable than, other BitUSD. His proposal encourages "banks" to spring up -- businesses that allow users to deposit their BitUSD on a fiduciary basis, and try really hard to keep from moving their BitUSD. Users then have some outside mechanism to move around claims against BitUSD deposits while the deposits themselves sit in the bank vaults and accumulate the maximum interest since they never move. The users and banks would then split the enhanced interest they extract, making this arrangement economically sustainable.
You can read about my alternative proposal here: https://bitsharestalk.org/index.php?topic=8422.0
Very good point! Essentially this means having a progressive interest rate would encourage trading outside of BitSharesX rather than within.
A short position has collateral from two sources: one is the BTSX paid by the BitAsset buyer (I call this BTSX the reserve); the other is the BTSX paid by the short seller (I call this BTSX the margin). The collateral = reserve + margin. The current rule is that the margin needs to be at least equal to the reserve initially (200% backed initially). At some point the short seller covers or the DAC does a margin call. If the price of BTSX goes down with respect to the BitAsset, then some of the margin is needed to cover the BitAsset debt when covering. Whether the short seller covers at a loss or the DAC does a margin call, the mechanism would work the same way it currently does. However, if the short seller covers at a profit, things would work a little bit differently compared to today. If the short position is covered at a profit, that means that only a portion of the reserve is needed to pay the debt and the remainder is profit. This remainder should be split according to some percentage specified when the short position was created and one part is paid as profit to the short seller and the other part is collected by the DAC as a fee (in reality the cover would require excess BitAssets to not only cover the debt but also the value of the fee according to the current price so that the DAC essentially trades the BTSX fee for the BitAsset fee). These fees are collected to pay variable interest to the BitAsset holders in a way similar to what I described earlier (https://bitsharestalk.org/index.php?topic=8396.msg109810#msg109810).
I'm not sure introducing a Capital Gains Tax into BTSX is a good marketing tool. :)
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I like the idea of BitUSD longs receiving interest to better improve the demand-side. However, I find another set of rules to consider is making things more confusing to me over time, and such rules still have no way of ensuring ample liquidity around the peg price. Why is the idea (proposed elsewhere) of a floating rate paid from shorts to longs apparently being rejected?
Like Agent86 I don't like where this is sourced from - being a transaction fee (up to 11%) on shorts. This is not really sustainable if we want strong market growth, which is accommodated by growth in new long/short positions.
I would also be upset if having to hold more than 12 months to fully earn this reward. I want to use my BitUSD as much as possible. Isn't that the goal?
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A short position has collateral from two sources: one is the BTSX paid by the BitAsset buyer (I call this BTSX the reserve); the other is the BTSX paid by the short seller (I call this BTSX the margin). The collateral = reserve + margin. The current rule is that the margin needs to be at least equal to the reserve initially (200% backed initially). At some point the short seller covers or the DAC does a margin call. If the price of BTSX goes down with respect to the BitAsset, then some of the margin is needed to cover the BitAsset debt when covering. Whether the short seller covers at a loss or the DAC does a margin call, the mechanism would work the same way it currently does. However, if the short seller covers at a profit, things would work a little bit differently compared to today. If the short position is covered at a profit, that means that only a portion of the reserve is needed to pay the debt and the remainder is profit. This remainder should be split according to some percentage specified when the short position was created and one part is paid as profit to the short seller and the other part is collected by the DAC as a fee (in reality the cover would require excess BitAssets to not only cover the debt but also the value of the fee according to the current price so that the DAC essentially trades the BTSX fee for the BitAsset fee). These fees are collected to pay variable interest to the BitAsset holders in a way similar to what I described earlier (https://bitsharestalk.org/index.php?topic=8396.msg109810#msg109810).
I'm not sure introducing a Capital Gains Tax into BTSX is a good marketing tool. :)
It is amazing how the same exact mechanism can be viewed in so many different moral ways due to different perspectives. This is a "Capital Gains Tax" where you get to decide the tax rate, not the government. You can choose a zero "tax rate" but if the market decides you are being too cheap, then you will never get your short matched. Just like if you are being too cheap with your bid/ask you might not ever get that matched. When there is bid/ask overlap, the DAC could in theory return that value back to the traders, but it "taxes" it instead, and we don't seem to have a problem with that. I'm sure marketing people can avoid making the mechanism sound like a "bad thing" to people. Anyway, any thoughts about the mechanics/economics itself?
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I see the need for interest on BitUSD but why offer more interest if BitUSD is held longer without selling (not only totally but proportionally)?
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I see the need for interest on BitUSD but why offer more interest if BitUSD is held longer without selling (not only totally but proportionally)?
Apparently the non-linear interest is already history. BM mentioned that somewhere in the mumble.
https://bitsharestalk.org/index.php?topic=8423.0;topicseen
https://soundcloud.com/beyond-bitcoin-hangouts/bitshares-community-and-developer-hangout-9-5-2014
Sorry, I forgot the timestamp :)
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I see the need for interest on BitUSD but why offer more interest if BitUSD is held longer without selling (not only totally but proportionally)?
Apparently the non-linear interest is already history. BM mentioned that somewhere in the mumble.
https://bitsharestalk.org/index.php?topic=8423.0;topicseen
https://soundcloud.com/beyond-bitcoin-hangouts/bitshares-community-and-developer-hangout-9-5-2014
Sorry, I forgot the timestamp :)
Ok :)
What is the status on: How is it decided who's trade is executed if there is a demand/supply imbalance between bitUSD longs / shorts? -> Amount of collateral if there is more demand to short bitUSD?
In case more ppl want to go long bitUSD / short btsx then there would be no limit upwards regarding at which prices bitUSD can be shorted?
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A quick question:
delegates are payed by the transactions fees ... currently paid in btsx.
once we can pay transaction fees in bitUSD or any other bitAsset are those fees still going to the delegates? or are they going to the fund?
will the delegates then earn the fees as bitUSD or will they be exchange automatically for btsx?
can delegates expect to see a list of different fee 'currencies'/'shares' collected?
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I've gone through the whole thread and here are my thoughts:
1. Dividends are a very important enhancement for Bitshares X and definitely worth trying to implement ASAP.
2. The word "reward" has very bad connotations for me in this context: it sounds as if someone is giving me a reward in order to hide some ugly downsides. Interest and dividend are much better and I'd stick with one of them unless there actually occurs a legal challenge - then we can choose to fight it or just change the name.
3. Bonds (agent86) and CD (tonyk) ideas might make sense in the future but I think it's much too early to consider implementing them now. Bitshares X are already extremely complex and we need to give people time to get used to such complexity. Only after that there will be space to think about building more financial tools on top of what we have.
4. The initial BM's idea of only paying interest to long term bitAssets holders seems to be wrong as it encourages hoarding and thus hurts liquidity. I think the interest should be linear and accrued on a daily basis.
5. It looks like a big part of the discussion is a dilemma of how much of the trading fees can be transferred to bitAssets holders. Surely there must be some sweet spot: we'd like to tax the trading a bit so that we can make the bitAssets more attractive but we don't want to tax them too much because that will kill liquidity. The sweet spot needs to be flexible over time so this idea seems to be addressing it well:
I think it would be great if the shareholders had ways to define the amounts to be paid to the delegates, amounts to be paid to other specified accounts (workers), the amount of BitAssets to store as insurance for each BitAsset (as a percentage of the total BitAssets issued), and the interest rate to be paid for each BitAsset. Then, in addition to collected transaction fees, the DAC would automatically adjust what percentage of fees were collected as BTSX vs BitAsset from the bid-ask overlap to collect enough BTSX and BitAssets as fees so that the DAC could afford to do following (in order of priority): pay delegates their income; pay workers their mandatory income; grow insurance fund of BitAsset if necessary; pay rewards at prescribed interest rate to BitAsset holders; pay workers their discretionary income if any; pay leftover as dividends to BTSX holders.
7. Also this looks like a good concept to me:
A short position has collateral from two sources: one is the BTSX paid by the BitAsset buyer (I call this BTSX the reserve); the other is the BTSX paid by the short seller (I call this BTSX the margin). The collateral = reserve + margin. The current rule is that the margin needs to be at least equal to the reserve initially (200% backed initially). At some point the short seller covers or the DAC does a margin call. If the price of BTSX goes down with respect to the BitAsset, then some of the margin is needed to cover the BitAsset debt when covering. Whether the short seller covers at a loss or the DAC does a margin call, the mechanism would work the same way it currently does. However, if the short seller covers at a profit, things would work a little bit differently compared to today. If the short position is covered at a profit, that means that only a portion of the reserve is needed to pay the debt and the remainder is profit. This remainder should be split according to some percentage specified when the short position was created and one part is paid as profit to the short seller and the other part is collected by the DAC as a fee (in reality the cover would require excess BitAssets to not only cover the debt but also the value of the fee according to the current price so that the DAC essentially trades the BTSX fee for the BitAsset fee). These fees are collected to pay variable interest to the BitAsset holders in a way similar to what I described earlier (https://bitsharestalk.org/index.php?topic=8396.msg109810#msg109810).
Since shorts would be limited to the peg price, short sellers need some other way of competing with each other to get their shorts matched. The market rule would be that in the case of a tie in price, the short position with the highest percentage of profit burned as fees wins. The percentage of profit burned should adjust according to market dynamics to balance the BitAsset long and short demand since as the percentage of profit burned goes up the short sellers lose their incentive to short but BitAsset buyers have an increased incentive to hold the BitAsset due to the higher expected interest rates. If the price of the BitAsset in terms of BTSX drops even a little from the peg that it was shorted at, the short seller still has an incentive in the short-term to cover to get their percentage of the small profit. Agent86, do you see any liquidity problems with this method? Anyone see any issues with this proposal?
Indeed it sounds like Capital Gains Tax but it shouldn't be discarded just because nobody likes taxes. Shorts who've made a profit are more in the position to share it with bitAssets holders. This concept looks attractive to me because I feel it might hurt liquidity less than the current bid-ask overlap fee.
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would it be not fair and motivating that a percentage of taken fees go back as a reward to high volume traders? "The more you trade the more you win "
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I'm not totally against daily interest myself.
However I think interest will have a limited incentive effect for traders, speculators and weak hands.
Traders will come when there's a profitable imbalance, speculators are looking to make short term gains and weak hands will dump their BitAssets regardless of interest.
However who would be incentivised by interest are people looking to genuinely store value in BitAssets. Those people are imo are who BTSX is currently lacking (No left side of the order book) They are also the ones who would be most exposed to a BTSX failure (risk) which would not be compensated for.
As I said in another thread if the chance of total BTSX failure is 2% this year. BitAssets are only worth 0.98 to them. Plus without utility genuine BitAsset holders have to take into account the conversion cost to acquire the real world counterpart (Or at least the fiat equivalent) their BitAsset is mirroring.
By translating shorting demand into fees for 'rewards' and also not giving those rewards to speculators, traders and weak hands then you create a very attractive pot for people genuinely looking to hold value in BitAssets.
The result is a correction of the demand imbalance & a very healthy left side of the order book and BitAssets that are worth more than 1-1 to a person genuinely looking to put some of their portfolio into BitAssets.
This increase in demand at or above 1-1 may even eventually nullify the situation of shorts needing to compete much to find buyers. (At which point the interest will be going down & the system will be self regulating.)
Over time as BTSX is viewed as safe, reliable & decentralised. When there are gateways &/or utility plus the many other advantages of BitAssets will make them attractive to genuine holders @ 1-1 or even above without interest.
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What about the original idea of shorters paying interest to the longs - is that lo longer workable? I always thought that was nice and simple because you could charge a fixed amount from shorters relative to how long the short position was open for.
Yeah... I thought this as well... why not fix 5% interest from shorters?
What also could be done is a combination of both.... so the sales pitch would be 5% fix + x% variable...
For now I would just love to be able to install 0.4.12 on windows 8.1 or linux. Windows returns an error that it cannot be run and linux does not compile...
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Try 32 bit windows
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I think we need to keep this as simple as possible. There is already so much for new investors to get their head around. A complicated rewards program just adds to their confusion.
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I have a concern with the collateral being enough to cover the debt by the future date... there is a responsibility on the bond holders to keep an eye on the price changes of BTSX/BitUSD to make sure their bond has enough collateral value to pay the debt at the future date. In fact, in theory if the collateral isn't large enough to cover a drop in the price of BTSX from when the bond was purchased until when it pays the debt, then the effective interest rate can decrease and even become negative.
The part where I see the biggest challenge is such collateralization working on a blockchain. I can not figure out a way (neither have I read somebody suggesting working solution) where both conditions are met -repayment of the bond (debt is) guaranteed and at the same time incentive for the issuer of such bond is still present. In other words if the whole amount received through the bond sell is kept as collateral + additional collateral for the interest is needed, where is the incentive for the issuer? Anything less than that collateral leaves the bond buyer exposed to the risk of not receiving his money back.
[edit] It will take a truly independent bond market, where special market participants, will act as bond issuer and will collateralize a series of bonds (with deferent expiration dates), for this to truly work.
A bond that pays 1000 bitUSD on a particular date in the future (face value is $1000) must initially be backed by 2x that value in BTSX by the issuer. The issuer is responsible to maintain the margin just like a bitUSD short; if the collateral value drops to 1.5x the issuer is also subject to a margin call and bitUSD is bought off the market to cover and bitUSD is deposited into the collateral account. If the issuer doesn't fund the bond collateral with bitUSD by the maturity date (payout date) they are also subject to a margin call on that date.
I think the chance that the margin call can't find a bitUSD seller at the price needed is VERY small. In that event, the bond holder gets the BTSX shares instead. (just like if a company can't pay a bond, then the bond holders can take the company)
If the issuer sells this bond for $950. They can then buy more BTSX to get more exposure to the upside of BTSX. Or do something else with the money raised while maintaining their exposure to BTSX in their locked up collateral.
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Agent86... like always you are a very passionate debater who frequently convinces me of things. I would like to explain why I don't like your proposal at this point in time.
I have had white board designs for how to reenforce the peg via 2 markets. 1 market sets the "premium" shorts must pay.. ie: the amount they must bid over the ask. With this 2-market system the short interest would be curtailed by those speculating on the premium market. The result would be a peg and automatic "interest" rate setting for BitUSD.
BitUSD would always be valued at $1 because the interest rate/risk premium would adjust to compensate for supply/demand/risk assessments of the market.
That said we have a MAJOR bootstrapping problem with all markets. They require a network effect and high liquidity to function. It is hard enough to find speculators on the BitUSD vs BTSX market let alone a "meta-market". A system that requires 2 markets to function is way too difficult to bootstrap at the same time.
A bitbond market would have similar problems. A bond market is even more difficult to bootstrap than a pure prediction market, especially if there are different maturity dates, interest rates, that make them non-fungible.
So while I do not want to dismiss your idea, I just do not think it is viable at this stage in the development of BitMarkets.
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In the interest of simplification I would like to add the following note:
1) cashing out interest once per day or once per year should yield the same return minus 364 transaction fees. This will keep all balances "fungible" and reduce the cognitive load on deciding when to handle it.
2) no interest should be paid in amounts less than 1 BTSX. This will be the "small balance fee". If your balance is so small that is cannot earn at least 1 BTSX in interest then too bad, so sad. This will help prevent dusting and situations where the transaction fee to claim the interest is greater than the interest itself.
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Agent86... like always you are a very passionate debater who frequently convinces me of things. I would like to explain why I don't like your proposal at this point in time.
I have had white board designs for how to reenforce the peg via 2 markets. 1 market sets the "premium" shorts must pay.. ie: the amount they must bid over the ask. With this 2-market system the short interest would be curtailed by those speculating on the premium market. The result would be a peg and automatic "interest" rate setting for BitUSD.
BitUSD would always be valued at $1 because the interest rate/risk premium would adjust to compensate for supply/demand/risk assessments of the market.
That said we have a MAJOR bootstrapping problem with all markets. They require a network effect and high liquidity to function. It is hard enough to find speculators on the BitUSD vs BTSX market let alone a "meta-market". A system that requires 2 markets to function is way too difficult to bootstrap at the same time.
A bitbond market would have similar problems. A bond market is even more difficult to bootstrap than a pure prediction market, especially if there are different maturity dates, interest rates, that make them non-fungible.
So while I do not want to dismiss your idea, I just do not think it is viable at this stage in the development of BitMarkets.
Thanks BM. I don't honestly think the idea is a high immediate priority either. I just think it is the right direction for the eventual evolution of things. What are your thoughts that matching shorts below feed with orders above the feed stops shorts from quickly covering when bitUSD is undervalued to maintain the peg. (matching based on collateral provides better incentives)?
discussed here: https://bitsharestalk.org/index.php?topic=8415.0
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Yes, simple is a must. If savers cannot transparently see past average interest rates and how much they have earned over the past month, year, and so on, they won't be very interested. After all, it's the savers this would appeal to, not the traders. But isn't the vision for the network that the peg is mainly supported through trading and "arbitrage" activity, not because of a coincidental balance between saver and shorting demand? So, this might not boost BitUSD demand as much in the short term as one might hope. In the longer term, traders will be doing most of the work supporting the peg within tight ranges, so here again the savers are less important in maintaining the peg.
I think if an interest program is implemented, it should be in the main BitUSD, not a separate bitasset. A bitUSD5 would kill off demand for the main BitUSD asset, making it even harder to maintain the peg.
I also worry that even paying interest on the main BitUSD could change people's perception somehow. This changes the entire dynamic. With an interest program, BitUSD would seem less like a twin to the USD and make it harder to eventually maintain a really tight peg.
Finally, consider what would happen if, someday in the future, inflation goes high (which forces nominal interest rates to rise--they will need to be above inflation in equilibrium). Would interest on BitUSD still be competitive if traditional interest rates rise to 10%, 15%, 20%?
Basically what I'm saying is that paying interest seems like only an indirect, blunt way to artificially stimulate demand for BitUSD. It could work in the short term, but it certainly has some drawbacks and could have a weaker-than-expected effect on demand BitUSD since it appeals to savers, not traders. It also could have a number of unintended consequences and weaken the psychological basis for a tight peg.
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If you talk about the interest proposal here, the (rather raw) calculations are not taking into an account this 'shorting pressure discount' so we must be safe in that regard.
I felt like most of the money that was expected to be paid in "interest" was due to taking advantage of this spread. That's why I feel it was relevant. As far as paying out the collected bitUSD as "interest"... I hadn't considered this but it seems overly complicated and does not appeal to me.
I just realize - isn't that spread producing BTSX and not bitUSD for the system?
How and when are those converted in bitUSD?
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This is the moonshot idea! +5% is +5%
Agreeing with simple and not "rewards."
Someone do a few back-of-the-envelope-calculations for interest on USD
given optimistic but reasonable x's, y's and z's please :)
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if traditional interest rates rise to 10%, 15%, 20%?
I doubt that anyone of us will still be alive when this day come...That's why we invest in cryptos...lol..
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if traditional interest rates rise to 10%, 15%, 20%?
I doubt that anyone of us will still be alive when this day come...That's why we invest in cryptos...lol..
Don't be too sure... the Fed has pretty much quintupled (5x) the US monetary base since 2008. What happens when velocity picks up?
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if traditional interest rates rise to 10%, 15%, 20%?
I doubt that anyone of us will still be alive when this day come...That's why we invest in cryptos...lol..
Don't be too sure... the Fed has pretty much quintupled (5x) the US monetary base since 2008. What happens when velocity picks up?
How about staying in bitGold?
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...Finally, consider what would happen if, someday in the future, inflation goes high (which forces nominal interest rates to rise--they will need to be above inflation in equilibrium). Would interest on BitUSD still be competitive if traditional interest rates rise to 10%, 15%, 20%?
Therefore, BitUSD interest might be dynamically adjusted, based on an intuitive, honest and public algorithm - rather than being set at a constant 5%. This might ultimately influence confidence in a self-regulating system, as there would be less risk of knee-jerk corrections down the line.
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1) cashing out interest once per day or once per year should yield the same return minus 364 transaction fees. This will keep all balances "fungible" and reduce the cognitive load on deciding when to handle it.
Yes, good. So the rewards will be implemented in a way that addresses my concern here (https://bitsharestalk.org/index.php?topic=8396.msg109810#msg109810) and drltc's concern here (https://bitsharestalk.org/index.php?topic=8396.msg109922#msg109922), correct? None of that quadratic dependence on time stuff.
Agent86... like always you are a very passionate debater who frequently convinces me of things. I would like to explain why I don't like your proposal at this point in time.
I have had white board designs for how to reenforce the peg via 2 markets. 1 market sets the "premium" shorts must pay.. ie: the amount they must bid over the ask. With this 2-market system the short interest would be curtailed by those speculating on the premium market. The result would be a peg and automatic "interest" rate setting for BitUSD.
BitUSD would always be valued at $1 because the interest rate/risk premium would adjust to compensate for supply/demand/risk assessments of the market.
That said we have a MAJOR bootstrapping problem with all markets. They require a network effect and high liquidity to function. It is hard enough to find speculators on the BitUSD vs BTSX market let alone a "meta-market". A system that requires 2 markets to function is way too difficult to bootstrap at the same time.
A bitbond market would have similar problems. A bond market is even more difficult to bootstrap than a pure prediction market, especially if there are different maturity dates, interest rates, that make them non-fungible.
So while I do not want to dismiss your idea, I just do not think it is viable at this stage in the development of BitMarkets.
Bytemaster, I would really appreciate your feedback on my proposal here (https://bitsharestalk.org/index.php?topic=8396.msg109907#msg109907). The idea is to let the market decide the effective interest rates (based on fees collected for the rewards program, not a separate prediction market) in a way that balances the long and short demand, while at the same time attempting to address Agent86's liquidity concerns due to short prices being created well below the peg in the current design. Also, Agent86, I would like feedback from you too.
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Bytemaster, I would really appreciate your feedback on my proposal here (https://bitsharestalk.org/index.php?topic=8396.msg109907#msg109907). The idea is to let the market decide the effective interest rates (based on fees collected for the rewards program, not a separate prediction market) in a way that balances the long and short demand, while at the same time attempting to address Agent86's liquidity concerns due to short prices being created well below the peg in the current design. Also, Agent86, I would like feedback from you too.
I can understand where you might be going with it, but I still don't like it. I like prioritizing shorts based on collateral not fees. I think high collateral incentivizes shorts to cover quickly when profit from spread is presented. It also naturally protects the market from short squeezes and flash crashes of BTSX.
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Don't be too sure... the Fed has pretty much quintupled (5x) the US monetary base since 2008. What happens when velocity picks up?
Nothing...The fact that the FED is printing and printing money and stocks rise and rise has nothing to do with the real economy. People are still starving, unemployment is bigger than ever and people when they get some money they don't tend to invest or spend them or consume them, or buy a house or whatever to drive the real economy up as before but rather save them for a rainy day...Interest rates will never be 10%.
The only thing that will be again inevitable will be a new stock crash and come back to 2008 crisis.. Bitcoin and especially Bitshares X will skyrocket to the moon. The rest of people will be again bankrupt. Then we will have another QE and another and another until unfortunately in the end there will be a huge world war so things get back in order. I think history repeats itself all the time and we never learn.. By the end of this war everyone will be in cryptos...Not that this will change anything...People will start believing in a new financial order, a more "fair" economic system until we realise that in reality again some people with economic power manipulate everything for their interest..so the same shits will happen again and again and again until we are all dead...
Hmmm..let's see in a couple of years...Maybe this post will be famous for predicting the future...lol.. ;)
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Don't be too sure... the Fed has pretty much quintupled (5x) the US monetary base since 2008. What happens when velocity picks up?
... People are still starving, unemployment is bigger than ever and people when they get some money they don't tend to invest or spend them or consume them, or buy a house or whatever to drive the real economy up as before but rather save them for a rainy day.....
100% Agree.
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Bytemaster, I would really appreciate your feedback on my proposal here (https://bitsharestalk.org/index.php?topic=8396.msg109907#msg109907). The idea is to let the market decide the effective interest rates (based on fees collected for the rewards program, not a separate prediction market) in a way that balances the long and short demand, while at the same time attempting to address Agent86's liquidity concerns due to short prices being created well below the peg in the current design. Also, Agent86, I would like feedback from you too.
I can understand where you might be going with it, but I still don't like it. I like prioritizing shorts based on collateral not fees. I think high collateral incentivizes shorts to cover quickly when profit from spread is presented. It also naturally protects the market from short squeezes and flash crashes of BTSX.
I suppose I can understand that. Although I am not sure why you say the high collateral incentivizes shorts to cover more quickly than they otherwise would? Also, the main issue I have with your proposal is that prioritizing collateral does not to bring up BitAsset demand, it only reduces the shorting incentive. While this can achieve a better peg, I worry that it dries up activity in the BitAsset market. I guess you think that activity should go to the bond market instead in which case BitAsset demand stays low (just amounts used for spending and transactions) but BitAsset bond demand goes up (which to be fair does still increase BTSX value); that way it won't screw up the peg, BitAsset longs get the interest they desire, and short sellers get to satisfy their short desires. However, I have already explained why I think that is a less attractive option (https://bitsharestalk.org/index.php?topic=8396.msg109852#msg109852) to BitAsset holders than simply getting interest on their balance. BitAsset bonds are not fungible like BitAssets themselves. Users have an extra personal responsibility of managing these bond assets to ensure proper returns. With rewards on balances (paid for by the fees of short profits) users just get returns on their balances by default without having to do anything other than just hold a balance. This is a much more attractive proposition for regular customers, which I think should more easily and quickly bring in value into the DAC than if the only option for interest was the bond market.
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Don't be too sure... the Fed has pretty much quintupled (5x) the US monetary base since 2008. What happens when velocity picks up?
I think history repeats itself all the time and we never learn..
'History never repeats itself but it rhymes'
- Mark Twain
Now when everyone gets excited about bitAssets paying interest, I would like to point out to macro-economical perspective---
Why is that bank deposit used to pay positive nominal (and sometimes even positive real) interest throughout the most of the recent history?
- well, this is primarily because banks were lending money, received from savers, to businesses, property buyers etc. at somewhat higher interest rates than they paid out to the savers on deposits.
And why were most businesses and property buyers were able to pay those higher interest rates on their borrowings?
- well, that's primarily because there was some positive real growth in the economy, meaning nominal growth rates exceeded inflation rate, and corporate profits and household income growth exceeded the higher interest rate which was due to the banking sector. E.g. fiat USD from savings were put into productive use by extending credit for investment within the economy.
So, here my questions:
- how would credit business work with regards to BitsharesX?
- how can bitUSD be lent out to businesses or property buyers?
- how would credit risk in such system be managed?
Any thougts from the community? I will try to formulate some ideas on the topic in the near future.
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What is the status on how to decide which short will be executed when there is a short demand overhang (since we have the price feed which limits lowering prices for shorting bitUSD)? Or is that still completely open?
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Now when everyone gets excited about bitAssets paying interest, I would like to point out to macro-economical perspective---
Why is that bank deposit used to pay nominal interest throughout the most of the recent history?
- well, this is primarily because banks were lending money, received from savers, to businesses, property buyers etc. at somewhat higher interest rates than they paid out to the savers on deposits.
And why were most businesses and property buyers were able to pay those higher interest rates?
- well, that's primarily because there was some positive real growth in the economy, meaning nominal growth rates exceeded inflation rate, and corporate profits and household income growth exceeded the higher interest rate which was due to the banking sector. E.g. fiat USD from savings were put into productive use by extending credit for investment within the economy.
So, here my questions:
- how would credit business work with regards to BitsharesX?
- how can bitUSD be lent out to businesses or property buyers?
- how would credit risk in such system be managed?
I will try to formulate more thoughts on the topic in the near future.
I am not sure if I am understanding your question properly, but let me attempt to answer anyway. First of all, BitShares X does not have any lending functionality as it is typically understood (meaning requiring trust in how the lent money will be used to eventually pay back the debt). I hope a future DAC will enable that functionality (I have some thoughts on that subject here (https://bitsharestalk.org/index.php?topic=6669.msg88757#msg88757)).
It is true in a sense, however, that just like a bank, BitShares X is taking deposits (BTSX bids) and is making use of them to hopefully earn profits (in this case from shorting BitAssets, and the profits mostly go to the people doing the shorting not the DAC itself), and perhaps with this new interest proposal will now be sharing some of those profits with the depositors (BitAsset holders) by giving them "interest".
I do like how you are focusing on where the actual growth is coming from. So where is the growth coming from in the case of BitShares X that allows for such high (expected) interest rates? The answer is that it comes from the expected increase in value of BTSX. As more people adopt the system, meaning transfer their wealth outside the blockchain into BitAssets, this should drive the market cap of BTSX up. Shorts and BTSX holders get to benefit from that price increase. Since shorts can get higher returns than just holding BTSX, there is an incentive to short if you are a BTSX bull rather than just holding. But there is competition for shorting (there is after all limited BitAsset demand). So shorts are forced to share some of their expected profits with the BitAsset holders to incentivize them to allow the shorts to happen in the first place, just like banks need to incentivize depositors with interest to allow the deposits to happen in the first place. As long as on average BTSX value keeps growing at high rates, a high interest rate on BitAssets can also be sustained. Eventually, sometime in the future, when BitShares X is saturated (meaning there aren't any new people with wealth left to convince to adopt this system), BTSX growth should settle down and thus BitAsset interest rates will be forced to go down. I think some non-zero interest rate should still be possible then because the DAC is still able to earn revenue from transaction fees and market fees from operating the decentralized exchange.
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Eventually, sometime in the future, when BitShares X is saturated (meaning there aren't any new people with wealth left to convince to adopt this system), BTSX growth should settle down and thus BitAsset interest rates will be forced to go down. I think some non-zero interest rate should still be possible then because the DAC is still able to earn revenue from transaction fees and market fees from operating the decentralized exchange.
first, arhag - thanks for your elaborate answer! this makes sense as long as BTSX can grow at decent rates.
"at saturation", the question becomes how much annual profit can BitsharesX potentially generate without getting involved into credit business. E.g. if annual profits can be at USD 2bn from operating a worldwide decentralised exchange, then perhaps market cap of USD 20bn sounds reasonable, with some non-negative interest still being paid on bitAssets. What I am pointing out, is that it would be difficult even in theory to get an order of magnitude bigger than that, unless BitsharesX gets somehow involved into extending credit - perhaps a decentralised lending union DAC... banking business has been primarily about credit throughout the civilised history, so it might be worth a thought. perhaps too early though, or BM already has answers ;)
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Eventually, sometime in the future, when BitShares X is saturated (meaning there aren't any new people with wealth left to convince to adopt this system), BTSX growth should settle down and thus BitAsset interest rates will be forced to go down. I think some non-zero interest rate should still be possible then because the DAC is still able to earn revenue from transaction fees and market fees from operating the decentralized exchange.
first, arhag - thanks for your elaborate answer! this makes sense as long as BTSX can grow at decent rates.
"at saturation", the question becomes how much annual profit can BitsharesX potentially generate without getting involved into credit business. E.g. if annual profits can be at USD 2bn from operating a worldwide decentralised exchange, then perhaps market cap of USD 20bn sounds reasonable, with some non-negative interest still being paid on bitAssets. What I am pointing out, is that it would be difficult even in theory to get an order of magnitude bigger than that, unless BitsharesX gets somehow involved into extending credit - perhaps a decentralised lending union DAC... banking business has been primarily about credit throughout the civilised history, so it might be worth a thought. perhaps too early though, or BM already has answers ;)
I guess that at different growth phases the distribution of trading fees to bitasset and btsx holders has to be newly established. Which brings up the question whether this can be somewhat decided by the market? Has this been thought about?
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Eventually, sometime in the future, when BitShares X is saturated (meaning there aren't any new people with wealth left to convince to adopt this system), BTSX growth should settle down and thus BitAsset interest rates will be forced to go down. I think some non-zero interest rate should still be possible then because the DAC is still able to earn revenue from transaction fees and market fees from operating the decentralized exchange.
first, arhag - thanks for your elaborate answer! this makes sense as long as BTSX can grow at decent rates.
"at saturation", the question becomes how much annual profit can BitsharesX potentially generate without getting involved into credit business. E.g. if annual profits can be at USD 2bn from operating a worldwide decentralised exchange, then perhaps market cap of USD 20bn sounds reasonable, with some non-negative interest still being paid on bitAssets. What I am pointing out, is that it would be difficult even in theory to get an order of magnitude bigger than that, unless BitsharesX gets somehow involved into extending credit - perhaps a decentralised lending union DAC... banking business has been primarily about credit throughout the civilised history, so it might be worth a thought. perhaps too early though, or BM already has answers ;)
Yeah, it is hard to tell how much revenue (as a percentage of BitUSD issued) the DAC can generate from fees alone (excluding profit sharing of shorts). Personally, I don't really care if the interest rate is zero in the saturation stage. I think BitShares X should be used for currency and other DACs would be used to store other forms of wealth: different DACs with corporation-issued assets representing stock in the company; Lending DACs with loans and bonds collateralized only by reputation or perhaps liens on other digital assets that can sold on the decentralized exchange (like shares in corporations ) or go up for auction (like BitShares domains); even traditional financial institutions using the blockchain to issue user-issued assets representing mutual/hedge funds. I think there are a lot of possibilities for the future, but in all of these cases it requires the wealth holder to exercise due diligence and evaluate the investment, and it typically requires trusting other people and perhaps locking up capital for some period of time.
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I have had white board designs for how to reenforce the peg via 2 markets. 1 market sets the "premium" shorts must pay.. ie: the amount they must bid over the ask. With this 2-market system the short interest would be curtailed by those speculating on the premium market. The result would be a peg and automatic "interest" rate setting for BitUSD.
BitUSD would always be valued at $1 because the interest rate/risk premium would adjust to compensate for supply/demand/risk assessments of the market.
That said we have a MAJOR bootstrapping problem with all markets. They require a network effect and high liquidity to function. It is hard enough to find speculators on the BitUSD vs BTSX market let alone a "meta-market". A system that requires 2 markets to function is way too difficult to bootstrap at the same time.
Indeed, this would be the ultimate solution. It would create two interconnected markets:
- the first one being the bitUSD/BTSX market as we have now (with shorts artificially prevented from shorting below 90% of the market feed)
- and second one ("meta-market") trading the predicted dividend (or interest rate) that bitUSD shorts need to pay to bitUSD longs on the first market to keep the supply and demand on the first market in balance
Thus the second market will be trying to predict future imbalances on the first market and the result of this prediction will be applied on the first market. Looks like a solid solution fully addressing the problem that I have when I think about implementing interest rates: how to flexibly adjust the sweet spot that will make bitAssets holders happy without overcharging the bidUSD/BTSX traders (as overcharging kills liquidity).
The two-market solution would be a very nice approach but I agree with BM that it's probably too early for Bitshares X to be able to bootstrap two interconnected markets at the same time.
But maybe we can achieve a good solution by combining the existing trading rules and the proposals made it this thread.
Let's assume the following:
- there is a rule that prevents bitUSD shorting below 90% of the market feed (as we have now)
- bid-ask overlap is collected by the system as a trading fee (as we have now)
- a fixed percent (e.g. 50%) of the trading fee gets paid to the bitUSD holders as dividend (as it was proposed in this thread)
It seems to me that the above elements constitute a nice self-regulating mechanism:
1. When shorts are supplying more bitUSD than there is demand for it, this sequence of events happens:
-> the shorts quote close to the 90% limit
-> this produces big bid-ask overlaps so the trading fees collected by the system get bigger
-> the system has a large pool of trading fees to be distributed to the bitUSD longs as dividends
-> as dividends grow there is an increasing incentive to hold bitUSD so the demand for it rises and this counteracts the initial imbalance
2. When there is more demand for bitUSD than the shorts are willing to supply, this sequence of events happens:
-> the shorts quote far from the 90% limit
-> there are very few bid-ask overlaps so the trading fees collected by the system get smaller
-> the system has a small pool of trading fees to be distributed to the bitUSD longs as dividends
-> as dividends get smaller there is a decreasing incentive to hold bitUSD so the demand for it falls and this counteracts the initial imbalance
My only doubt is whether this feedback loop is quick enough to be effective.
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Now when everyone gets excited about bitAssets paying interest, I would like to point out to macro-economical perspective---
Why is that bank deposit used to pay nominal interest throughout the most of the recent history?
- well, this is primarily because banks were lending money, received from savers, to businesses, property buyers etc. at somewhat higher interest rates than they paid out to the savers on deposits.
And why were most businesses and property buyers were able to pay those higher interest rates?
- well, that's primarily because there was some positive real growth in the economy, meaning nominal growth rates exceeded inflation rate, and corporate profits and household income growth exceeded the higher interest rate which was due to the banking sector. E.g. fiat USD from savings were put into productive use by extending credit for investment within the economy.
So, here my questions:
- how would credit business work with regards to BitsharesX?
- how can bitUSD be lent out to businesses or property buyers?
- how would credit risk in such system be managed?
I will try to formulate more thoughts on the topic in the near future.
I am not sure if I am understanding your question properly, but let me attempt to answer anyway. First of all, BitShares X does not have any lending functionality as it is typically understood (meaning requiring trust in how the lent money will be used to eventually pay back the debt). I hope a future DAC will enable that functionality (I have some thoughts on that subject here (https://bitsharestalk.org/index.php?topic=6669.msg88757#msg88757)).
It is true in a sense, however, that just like a bank, BitShares X is taking deposits (BTSX bids) and is making use of them to hopefully earn profits (in this case from shorting BitAssets, and the profits mostly go to the people doing the shorting not the DAC itself), and perhaps with this new interest proposal will now be sharing some of those profits with the depositors (BitAsset holders) by giving them "interest".
I do like how you are focusing on where the actual growth is coming from. So where is the growth coming from in the case of BitShares X that allows for such high (expected) interest rates? The answer is that it comes from the expected increase in value of BTSX. As more people adopt the system, meaning transfer their wealth outside the blockchain into BitAssets, this should drive the market cap of BTSX up. Shorts and BTSX holders get to benefit from that price increase. Since shorts can get higher returns than just holding BTSX, there is an incentive to short if you are a BTSX bull rather than just holding. But there is competition for shorting (there is after all limited BitAsset demand). So shorts are forced to share some of their expected profits with the BitAsset holders to incentivize them to allow the shorts to happen in the first place, just like banks need to incentivize depositors with interest to allow the deposits to happen in the first place. As long as on average BTSX value keeps growing at high rates, a high interest rate on BitAssets can also be sustained. Eventually, sometime in the future, when BitShares X is saturated (meaning there aren't any new people with wealth left to convince to adopt this system), BTSX growth should settle down and thus BitAsset interest rates will be forced to go down. I think some non-zero interest rate should still be possible then because the DAC is still able to earn revenue from transaction fees and market fees from operating the decentralized exchange.
I think it's important to preserve the distinction between asset interest, shorting profit, and BTSX share value appreciation and deflation. The default position for participants is holding BTSX, and profiting as adoption increases demand, and destroyed fees deflate the supply. As these things happen, the BTSX shares you hold increase in value.
Shorting and longing assets is a distinct sub-business. The shorters are leveraging to amplify their gains betting on BTSX increases, but doing so requires finding asset holders who are willing to miss out on potential BTSX gains in exchange for stability and interest payments. The asset holders have to bet that the shorters are over enthusiastic about BTSX appreciation.
The actual value growth is all from adoption and usage of the entire platform, and that's the baseline for shorting and asset holding. Relative to that baseline, at any given moment it will be profitable to go short or long, but not both. Either the shorts profit at the expense of the longs, or the longs profit at the expense of the shorts. The interest rate should be such that the market is approximately evenly split on which is expected to be the more profitable position.
I don't think normal transaction fees and revenue should ever be used for asset interest, because that erodes the baseline. Interest should be exclusively payed by those taking short positions.
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I think it's important to preserve the distinction between asset interest, shorting profit, and BTSX share value appreciation and deflation. The default position for participants is holding BTSX, and profiting as adoption increases demand, and destroyed fees deflate the supply. As these things happen, the BTSX shares you hold increase in value.
Shorting and longing assets is a distinct sub-business. The shorters are leveraging to amplify their gains betting on BTSX increases, but doing so requires finding asset holders who are willing to miss out on potential BTSX gains in exchange for stability and interest payments. The asset holders have to bet that the shorters are over enthusiastic about BTSX appreciation.
The actual value growth is all from adoption and usage of the entire platform, and that's the baseline for shorting and asset holding. Relative to that baseline, at any given moment it will be profitable to go short or long, but not both. Either the shorts profit at the expense of the longs, or the longs profit at the expense of the shorts. The interest rate should be such that the market is approximately evenly split on which is expected to be the more profitable position.
I don't think normal transaction fees and revenue should ever be used for asset interest, because that erodes the baseline. Interest should be exclusively payed by those taking short positions.
Well said. I just have two comments.
The interest rate should be such that the market is approximately evenly split on which is expected to be the more profitable position.
I don't quite agree that it needs to be evenly split. There is a lot of value in having short-term stability in the BitAsset (it makes it useful as a currency) that holders may demand the BitAsset even if they aren't getting "their fair share" of the interest. But the larger point of this statement is that it means the interest rate should be variable because the baseline growth of BTSX is going to be variable.
I don't think normal transaction fees and revenue should ever be used for asset interest, because that erodes the baseline. Interest should be exclusively payed by those taking short positions.
Not necessarily. BTSX holders and shorters are getting a benefit from dividends. Those dividends come from transaction and other market fees (after paying delegates). So why not share part of those dividends with the BitAsset holders as well? That would make the shorts and longs more evenly split.
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Why not loan out my bitusd to systerm or other peaple, then I get Interest.
System's interest is m;Private's interest is n*m.
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Why not loan out my bitusd to systerm or other peaple, then I get Interest.
System's interest is m;Private's interest is n*m.
There are two kinds of shorts: those creating new USD backed by BTSX... and those borrowing and selling existing USD backed by BTSX. I think we can facilitate the second kind of market where people bid on interest rate. Now people will BUY USD to lend to SHORT at interest. This will really support the peg by creating a ton of buying demand without increasing the supply of BTSX. This second kind of shorting can be done with User Issued assets as well.
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Why not loan out my bitusd to systerm or other peaple, then I get Interest.
System's interest is m;Private's interest is n*m.
There are two kinds of shorts: those creating new USD backed by BTSX... and those borrowing and selling existing USD backed by BTSX. I think we can facilitate the second kind of market where people bid on interest rate. Now people will BUY USD to lend to SHORT at interest. This will really support the peg by creating a ton of buying demand without increasing the supply of BTSX. This second kind of shorting can be done with User Issued assets as well.
Have you figured out how to collateralize such bitUSD loans?
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Why not loan out my bitusd to systerm or other peaple, then I get Interest.
System's interest is m;Private's interest is n*m.
There are two kinds of shorts: those creating new USD backed by BTSX... and those borrowing and selling existing USD backed by BTSX. I think we can facilitate the second kind of market where people bid on interest rate. Now people will BUY USD to lend to SHORT at interest. This will really support the peg by creating a ton of buying demand without increasing the supply of BTSX. This second kind of shorting can be done with User Issued assets as well.
There is a lot of merit in this idea. Although technically the extra demand in the BitUSD market from those buying and lending must be exactly matched by the BitUSD supply from those borrowing and selling (net neutral on demand), both parties ought to be willing to trade close to the peg price in the bitUSD market because the appropriate compensation/cost is now borne in the lending market. This allows the market to escape the current impasse where bitUSD longs and shorts can't easily meet within the price constraints on the bitUSD market. It should lead to a lot more liquidity and trading, if only for the ability to lend and borrow.
Those who decide to buy BitUSD and not lend (e.g. money held for liquidity needs by merchants and consumers) would earn zero (apart from the about-to-begin transaction fee sharing scheme) just as users of real USD cash earn zero, but reward can be obtained for lending money for various periods to those that want to use it (just like depositing or lending real USD in the current financial system). Borrowing/lending matching services could be opened to the free market to provide.
This idea should be explored further!
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What about the downside when a new X DAC, say Bitshares XC is announced and the distribution is based on the snapshot of BitsharesX chain?
If say Bitshares XC snapshot of Bitshares X is announced, would there be a run for BTSX and all(or a large number of) short positions are closed?
PS: Bitshares X is (still) supposed to be the protoDAC of the X family, meaning future X DACs will 100% honour BitsharesX right?
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The best approach would be a where bitassets are also honored proportional to asset market cap
Sent from my SCH-I535 using Tapatalk
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The best approach would be a where bitassets are also honored proportional to asset market cap
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True, but if we can learn from past experience, he will probably be true financial and marketing genius.... Then he will offer 10% to just the BTSX (even only those not held in collateral), will make the best IPO of all IPOs for 45% and will award himself with the remaining 30% just cause it is the only way to make BTS WWX from billion dollar business into a trillion dollar one....
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I do like how you are focusing on where the actual growth is coming from. So where is the growth coming from in the case of BitShares X that allows for such high (expected) interest rates? The answer is that it comes from the expected increase in value of BTSX. As more people adopt the system, meaning transfer their wealth outside the blockchain into BitAssets, this should drive the market cap of BTSX up. Shorts and BTSX holders get to benefit from that price increase.
I think that what you described is some kind of ponzi design. Bitshares plans to promise high fixed interest rates, but only under condition that there will be ever expanding flow of new money to system. If that fails to materialize entire thing will collapse, because there will be no way to pay promised interest.
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I do like how you are focusing on where the actual growth is coming from. So where is the growth coming from in the case of BitShares X that allows for such high (expected) interest rates? The answer is that it comes from the expected increase in value of BTSX. As more people adopt the system, meaning transfer their wealth outside the blockchain into BitAssets, this should drive the market cap of BTSX up. Shorts and BTSX holders get to benefit from that price increase.
I think that what you described is some kind of ponzi design. Bitshares plans to promise high fixed interest rates, but only under condition that there will be ever expanding flow of new money to system. If that fails to materialize entire thing will collapse, because there will be no way to pay promised interest.
"Ponzi scheme" is thrown around way too much these days.
It has nothing to do with that in my understanding. Basically the more transactions there are, the more there will be transaction fees collected, the more there will be to redistribute to BTSX holders through the burn rate. In the case of bitAssets, more there are shorts, more there is bitAssets created, the higher the market cap of BTSX will need to be to have enough collateral for all those bitAssets. The fees collected from those shorts will then be redistributed to bitAssets holders (anyone, correct me if I'm wrong).
Tell me where the definition of "Ponzi scheme" fit in?
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I do like how you are focusing on where the actual growth is coming from. So where is the growth coming from in the case of BitShares X that allows for such high (expected) interest rates? The answer is that it comes from the expected increase in value of BTSX. As more people adopt the system, meaning transfer their wealth outside the blockchain into BitAssets, this should drive the market cap of BTSX up. Shorts and BTSX holders get to benefit from that price increase.
I think that what you described is some kind of ponzi design. Bitshares plans to promise high fixed interest rates, but only under condition that there will be ever expanding flow of new money to system. If that fails to materialize entire thing will collapse, because there will be no way to pay promised interest.
The entire thing will not collapse if the growth of BTSX stops. Even if interest/yields on BitAssets is zero, there is still some demand for holding on to them because people want price stability. In fact, even during the saturation stage it would still be possible to provide some yield to BitAssets because the revenue of the DAC (from transaction fees and bid-ask overlap) can still exceed the costs (which only need to be the relatively low costs of the delegates' running their servers).
My comment on the high yields was made when the shorts were effectively paying the longs through the old market rules. In the old rules, if you wanted to get your short matched, you had to effectively pay a fee through bid-ask overlap. These fees were then used to pay yields on BitAssets. Obviously, that would only be sustained if short demand is greater than long demand (meaning everyone believes that BTSX value is going to grow). If we reach a point of saturation (say BitShares X adoption is already huge), then the short demand will no longer be very high and the fees from that bid-ask overlap would become much smaller (thus the yields to BitAssets would have to be smaller).
Now, with the new market rules, shorts are prioritized by collateral rather than the fee they pay. So you can think of the revenue from bid-ask overlap fees to be what they would have been during the saturation stage. This means that BitAsset yields will be smaller than they would have otherwise been (but it is all for a good reason: a stronger peg).
Also, I think it is important that we don't advertise that we are promising any specific yield on BitAssets. That is a promise that we cannot really deliver since it is out of our hands. We should be saying BitAssets provide yields up to 5% per year (or whatever we think the number should be). Meaning that it is possible that the yield rate could be 0%. These yields are added benefits of holding BitAssets in the system, but it is not necessary for BitShares X to be valuable.
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Also, I think it is important that we don't advertise that we are promising any specific yield on BitAssets. That is a promise that we cannot really deliver since it is out of our hands. We should be saying BitAssets provide yields up to 5% per year (or whatever we think the number should be). Meaning that it is possible that the yield rate could be 0%. These yields are added benefits of holding BitAssets in the system, but it is not necessary for BitShares X to be valuable.
I was confused with all these promises of fixed yield payed from shorts to longs. It won't work this way, but if yield is variable and comes from fees than it might be ok.