We are working on something that the community might find interesting. We'll reveal more about it "soon". Our focus is on making Ethereum/Graphene interoperability easy and accessible. The holy grail would be to make a trustless or near-trustless two way peg in the future, but at first we're taking baby steps.

We have decided not to make a worker proposal for now as we have found a better way to monetize our product, and we think worker proposals should be reserved for public goods that cannot be monetized in other ways.

The logic is as follows:

The insurance is equal to the amount needed to buy a put option [with exercise price equal to the black swan event price of BTC] – so you can sell all BTC held as collateral for at least that price if BTC goes below it. The option's theoretical price itself is a complete reflection of the probability of BTC price going below the strike price of the option.

 A mainstream (the most popular arguably) way to calculate that put price is presented in the  post above.

Interesting logic. So what initial insurance rate would you argue for? Once the system is running we are simply going to profit maximize for mkr, adjusting the insurance rate to optimize dai supply growth - but setting the initial insurance rate value is really difficult because its so arbitrary yet important to price correctly for early adoption.

The team behind Maker is now in the process of branding ourselves as a company with a business model similar to Cryptonomex - we call ourselves Nexus and will focus on dapp development and development as a service. Our whole team went to the Blockchain Summit in Shanghai and I wrote an update about the trip today:

https://forum.makerdao.com/t/blog-draft-nexus-report-shanghai-global-blockchain-summit/315

The one thing I didn't include in the update (as this is still a very new idea) is that Nexus plans to also focus on the opportunities within the BitShares ecosystem as a part of our business model that we'll use to sustain ourselves on the road to deploying Maker and accomplishing other of our long term goals.

Among things we're considering are: Making a worker proposal in exchange for products that will improve the value of BTS, and making a registration and referral funnel. We're still just exploring the various opportunities, and as a part of that me and possibly some other Nexus members are planning to hold a hangout in the MKR room on the beyond bitcoin mumble server this afternoon 3 pm east coast time (9 pm european time) to hear the communities thoughts regarding worker proposals and what kind of products we can offer the BitShares community.

If you have any questions or suggestions feel free to write here as well, I'll try to respond before the hangout, or answer during the hangout.

Sorry for getting mad at you Tony, I was stressed and it made me late for a meeting with some investors and the yunbi team, since I obviously couldnt just wait with replying to such a post. Ultimately Im glad to hear your opinions on this, I just wish you would make it sound less like FUD and also stop assuming that we are idiots.

Also I should have just explained the debt ceiling mechanism instead of referring to the whitepaper. There are individual debt ceilings for each collateral type that have to be manually increased over time. So in the beginning the portfolio could be something like:

ETH: 1000k max debt
MKR: 100k max debt
EMAXBTC: 1000k max debt (emax is our E-Money licensed partner exchange who will do a btc IOU on ethereum)
EMAXBTS: 300k max debt
DGXGOLD: 500k max debt (digix is a company that puts fully audited and regulated physical commodity IOUs by singapore vaults on ethereum)
etc etc

These rates will then be manually increased over time, each increase a subject of discussion and review by the community and board of governors, and any action taken has a priming delay ensuring a bad decision can be reversed. We are going to be very careful and conservative with this as MKR holders insure everything and are thus highly incentivized to not fuck up.

Another thing to understand is that long term Maker will not just be a platform for margin trading, as that is just a small part of the market, it will simply be a general platform for collateralized credit and most of the CDP's will use DAO shares or company stock (delivered on the ethereum blockchain by services such as Emax or DACX). And rather than use the Dai they issue for margin trading, they will use them for day to day liquidity for financing operations, something most small companies currently pay 10-15% rates for even when the discount rate is negative.

Once publicly traded SME's have direct access to credit with as few middlemen as possible things will really start to change as the economies of scale in the current financial system is one of the biggest factors causing companies to be overly bloated and centralized, and thus needlessly inefficient.

Quote from: Rune on September 17, 2015, 12:31:23 am

Quote from: tonyk on September 16, 2015, 11:27:33 pm

I thought I already won the second bounty by saying it does not really matter what % you choose. Real Insurances must have all the money upfront, what you are doing is collecting money for a rainy day. It really does not matter what % you chose.

On the same note - you can set aside from launch an amount that you dedicate for that purpose (i.e. insurance) from the total supply - not a perfect solution but the ONLY one that makes some sense.

Infinite makercoin is set aside from launch for insurance

The assertion that the system is fundamentally flawed in an obvious way that can be described with a few lines on a forum post is easily contradicted by the fact that MKR has a market value. (Unless you want to argue that all MKR investors/employees are idiots, which seems a bit harsh even for the crypto community)

If you think that argument sucks, I hope you'll be  encouraged to do more research and come up with arguments for your position, so I'll have something real to make a rebuttal of. If you manage to prove with real arguments (such as examples using microeconomics) that forced inflation doesn't work as an insurance fund (as long as the asset still has market value) then you'll definitely get the bounty . In fact this makes me think I should make another, much higher bounty for finding a flaw in the whitepaper. How much money would motivate you to do real research?

What research and more proof do you need Rune - As I said in the other thread that:
1. in the case of falling MKR coin prices from the very beginning, the shorters (or whatever they are called in you system) demand being paid interest (instead of paying for interest and insurance)  => no insurance fund.
2.  If black swan occurs at some point during this price decline you have no funds to cover the stable asset so you print more MKR. Driving the price further down.
The only thing needing proof in the above is the claim that at falling prices (and  expectations the price decline to continue) the shorters demand being paid interest. If that is the proof that you need I can gladly do it for you.

Interest rates going negative when there is bear market in  a single asset is just a blind assertion. Take a look at historical btc price vs interest rate on btc collateralized debt if you want to actually try to prove this (hint: reality won't fit your beliefs). Secondly if it was true its still completely disconnected from the second part of your argument. Interest rates can be negative while the insurance rate stays positive..

I think what's causing you trouble is wrapping your head around the negative interest with positive insurance rate. It appears counterintuitive so you conclude that the system would go into a weird failure mode with a damaging positive feedback on the insurance rate.

However, consider the scenario where yield is -5% and the insurance rate is 2%. Dai issuers would see their outstanding debt fall with -3% APR, achieving what you just thought impossible! Bear in mind that this scenario requires either absurd Dai demand, or a global economic downturn of cataclysmic levels. Despite that, the insurance rate and Makers income relative to outstanding Dai would remain the same.

Bounty 1: I want to try to pay back the 30% haircut that all holders of CFSGOLD had to take (and possibly other CFS assets), however it's not immediately apparent for me or Riverhead how to figure out the addresses and amount now that we have bought back most of the CFSGOLD. Instead I want to offer a bounty of 500 USD in BTS/BTC/BitUSD or another liquid asset of your choice for someone who can provide me a list of the addresses that I owe as well as the amounts of the haircuts they received, backed by hard evidence of course. I'll increase this bounty over time if no one bites as I want to make sure to pay back all outstanding debts (im estimating it was around 5k USD that was lost, so still a significant amount of money). Trusted users can get access to data from us, if you can think of something that would be useful for this purpose.

Bounty 2: We are now beginning discussions on how to set the insurance rate of the Dai Credit System. It's a variable rate that will be optimized on as the system progresses, but it still needs an initial value that isn't completely bonkers. Currently the best argument for this is 4% per year (meaning if debt interest is 11% then dai yield is 7%), if someone comes up with a solid public argument on the Maker forum for a different initial value I'll pay 1000 USD for the effort. See my post here: https://forum.makerdao.com/t/argument-for-a-4-insurance-rate/279/4?u=rune

I also want to know what the community thinks of me using general discussion here to cross post announcements of various new projects and assets over the coming days (alongside forum.makerdao.com, /r/ethereum, /r/ethtrader and /r/makerotc). There's a lot coming, and everything except one involves bitshares from its inception.

Also, if I register a short UIA name for 500k BTS now, will it carry over to graphene without any change? How much will short UIA names cost post graphene?

I'm curious what will happen to UIA names after the switch? I haven't been able to get information on whether we will be able to keep the MKRCOIN name.

Quote from: Rune on September 05, 2015, 02:58:20 pm

Quote from: tonyk on September 05, 2015, 07:13:39 am

And btw the MKR system is broken the same way BTS 1.0 is:

i.e. the stable coin creator has no incentive to pay insurance (even at 0%, say nothing at 2%) or interest on the so called loan, in the case of stable or falling MKR price (or expectation of such price move). Quite the opposite - she will demand interest for creating the product -  the stable coin (or whatever you chose to call it). THe nightmare will get even bigger when people realize that MKR system is running with 1.no insurance fund, 2 on top of general purpose (read slow) system 3.

The system supports negative interest rates if the supply and demand ends up moving it in that direction (so you could potentially earn money by issuing Dai if Dai demand is huge). But considering that the interest rate for leveraged BTC trading on bitfinex sits at around 20% APR at the moment..... I don't think that's gonna happen any time soon.

ETH rates haven't really stabilized yet but I'm expecting them to start out a similar level, and ETH margin trading is likely going to be our primary usecase in the short run - so from that I'm expecting a nice yield.

Quote

Their only hope of keeping the stable coin stable is by printing even more of the already falling MKR tokens.

I think you might have misunderstood how the system works. MKR inflation only happens in case there is an ETH (or BTC/MKR etc.) black swan event to the point where some of the CDP's (Dai issuing collateralized debt positions) become undercollateralized and have to be bailed out by Maker. We're setting our BTC margin requirements competetively with bitfinex (allowing 3x leverage) which we consider to be a safe level based on analysis of historical BTC price data. ETH leverage will be set at 2x since we prefer to err to the side of caution, and this is a very conservative number when you compare it to well established services like Kraken that are already offering 5x ETH margin. MKR will be set at 2x as well, but with a very low debt ceiling.

We're still working on explanations that are less technically dense than the whitepaper (or rather, a scalable pipeline for outputting such material), so these mechanisms become easier to understand. I really appreciate anyone giving the system a critical look - it will be vital that any potential pitfalls are discovered early.

Here's the most updated version of the DCS whitepaper: https://docs.google.com/document/d/1UPMEd407jT6zyvxZRH3N6ay_rjlO4SVKPiaxCgVUIbc/edit#heading=h.33vkknjnanfu

Anyone can add comments directly on the page if you have critique, suggestions or something that needs clarification.

First - thanks for answering. Second thanks for confirming I correctly understood how your system works. Now to the highly unlikely scenario of a black swan event. Not saying this will happen but a theoretical response is needed anyway to prove that the system works!

Here is the case:
1. MKR starts with flat or falling share price (or predominant perception for such move).
2. Point one leads to negative yield (aka the shorters demand to be paid interest instead of giving any interest) - I am pretty sure I have several posts on this forum explaining precisely why this happens and the exact mechanics of this.
3. Point 2 leads to empty insurance fund.
4. In case of black swan and point 3., the only way to compensate the stable coin holders is to print more BKR, which unfortunately leads to even bigger drop in its price. And that is in addition to the price drop that caused the black swan event.

=> not only the stable coin holders do not get interest, but they use a coin that is not insured anymore than the  BTS bitUSD holders (which do not have any insurance fund to begin with).

MKR is just one of the many types of collateral that are going to back the Dai (and it will be a minor part of it since the debt ceiling will be very low). The vast majority of Dai are going to be backed by major assets like BTC, ETH, gold (through Digixglobal) and whatever else there is demand by traders to margin trade with. If the MKR price is falling it just means nobody is gonna do leveraged longs with MKR, that's perfectly fine as long as there's some other asset people want to margin trade (as mentioned before the interest rate for borrowing USD for BTC margin trade currently sits at around 20% APR, meaning there is an abundance of demand)

Also there is no "insurance fund". The market cap of MKR is the insurance fund, and the money for black swan event bailouts comes from forced MKR inflation. The Maker vault is more of a checking account that all cash flow passes through, and money that doesnt go to operational expenses are funnelled to the MKR holders through buy & burn