BitShares Forum
Main => General Discussion => Topic started by: bytemaster on September 17, 2014, 03:54:59 pm
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It has been discussed many times before that we should prioritize shorts based upon collateral rather than fee. Agent86 has been visiting me this week in Virginia and we have had some serious debates and have identified a refinement that should drive the peg *AND* liquidity much tighter than we have today.
Lets start with some fundamental principles:
1) the more collateral there is behind BitUSD the less leverage there is in the system (and less profit to the short)
2) price fixing the collateral at 2x is bad because 2x may not be what the market needs
3) charging the shorts a "fee" means they start out under 2x collateral and requires us to place an artificial limit on valid short prices.
4) charging the shorts a "fee" means that market makers cannot operate while maintaining a BTSX bullish stance. To be a market maker today requires that you sell BTSX and hold BitUSD which means that few players are willing to provide much liquidity due to the USD exposure.
Suppose we were to change things up as follows:
1) When you "short" you specify the following: Number of dollars you want to sell, BTSX per dollar you are willing to put in collateral, and the Maximum price ($ per BTSX) you are willing to short.
2) When the market executes, if there is a buyer of BitUSD at the feed price, then the short with the highest collateral per USD is chosen provided the feed is less than the maximum price ($ per BTSX) set by the short.
3) Delegates publish their feeds once per hour on average (but slightly randomized to get even distribution / steady updates)
What this would allow market makers to do is this:
1) Short USD with high collateral at the price feed.
2) Buy USD at .99 or more to cover their position.
3) Cover their shorts with lower-collateral speculators when the price falls (minimizing their downside risk)
Under this market the BTSX BULLS could safely play market maker and the market makers would be competing to offer the narrowest spread *AND* most collateral and thus increasing the backing/value of BitUSD. We need the BULLS to play market maker because BTSX is risky and the bears (those who would rather hold dollars than BTSX) are not likely to see BitUSD as a dollar equivalent. The result is that asking the BEARS to play market maker results is much wider spreads.
Lastly as a result of people competing to be the "market makers" so they could have both "leverage" and "buy/sell spread" BitUSD will end up with far more than 2x collateral on average.
There are two primary states the market can be in:
1) Real Price > Price Feed
2) Real Price < Price Feed
And in each of these cases the market makers / shorts have to make a decision on what to do:
1) Real Price > Price Feed
When this is the case then those with BitUSD will be willing to pay more for BTSX than the price feed will allow the SHORTS to execute, thus the market sets the price without restriction.
2) Real Price < Price Feed
- high collateral shorts and market makers will cancel/move their orders while covering (supporting the peg)
- market markers that are "short" will be looking to cover (buy USD) to minimize losses from their leveraged position supporting the peg.
- speculators who want to short "long-term" with higher leverage get an opportunity to be the most collateralized short. They start out at a "small loss" like they do today, but they help sell to the market makers looking to cover. Thus the speculators support the peg by providing market makers liquidity allowing market makers to operate with narrower spreads.
The result of this whole process is this:
1) market makers who want BTSX exposure with leverage risk and to earn money from the spread are able to operate safely with narrow spreads because speculators who want long-term leverage on BTSX price movements are there to provide market makers liquidity.
2) If market makers can be liquid and earn a profit with narrow spreads then BitUSD will be liquid and there will be high confidence.
The downside of this process:
1) A slightly higher reliance on the price feed. The more accurate/responsive the feed is at all times the better the market will function.
2) High reliance on the feed means that delegates will need to have many safe guards in place against feed manipulation by centralized exchanges and that delegates should not source their data from the same places:
a) price movements more than a certain percent should be *manually confirmed* by the delegates.
b) some delegates should operate at slower rates than other delegates
c) some delegates should be "completely manual" and set the price based upon the "buy walls" or "sell walls" on various exchanges rather than "last feed".
d) it is generally better for the price feed to be "low" than "high" because that will result in the BitUSD longs setting the price rather than the feed.
e) based upon this the feed should be "slow to rise" and "quick to fall"
f) with lagging price feed there will exist arbitrage opportunities for USD longs to maintain the peg by selling at a profit until the shorts (following the feed) can catch up.
g) all of these guidelines need not be coded into the blockchain, but delegates can compete, debate, and publish feeds that produce the most effective price peg.
h) shorts can minimize harm from feed manipulation by having tight limits on their order range.
3) Yield on BitUSD will be slightly lower because overlap from short orders will no longer go into the yield funds, but they still get overlap on Long/Long orders.
All things considered I think this will dramatically help the peg because all of us BULLS can make the market with minimal risk and thus make it a safe place for the bears (BitUSD holders).
Thoughts?
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aha .. that's the reason why we are holding of GLD :)
//edit: I see a lot of work coming my way to modify my feed script :\
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If training wheels are required is does not matter whether they are touching the ground (proposed) or raised up (existing).
Given that there is no way to eliminate feeds completely the platform may as well utilize them to fullest extent possible.
But caution is required - we don't want to end up with a 10 year-old that needs training wheels. ;)
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I do not think this proposal would achieve the goal of 1:1 peg.
The reason why there lacks liquidity is because the peg does not work well. The reason why the peg does not work well is because there are imbalanced demands from two sides of the market. Right now, there is not much incentive to hold BitCNY or BitUSD. Sometime in the future, there might be too much incentive to hold BTAs, if much forced coverage occurs, which makes the interest of holding BTAs high enough. That is to say, the demands from two sides of the market will fluctuate, and we need a self-adjustable tool to compensate the demand difference. There will be ALWAYS uneven demands from the two sides.
Under this proposal, even if the collateral multiple is raised, as a BTSX bull, I personally do not have the incentive to hold BitUSD/BitCNY and be a market maker. I don't care as much for the collateral as for how much interest I would receive for holding BTAs. Take BitCNY for example, why would I want to hold BitCNY while I can earn higher interest holding real CNY outside?
What is our goal? 1:1 peg for BTAs, right? Only when this occurs, will there be exchange agents that honors 1:1 exchange. Then merchants are willing to take BitUSD/BitCNY as payment, because they know they can exchange for real USD/CNY anytime.
Market makers want to earn the spread. This is their only goal. Simple as that. In a one-sided market, no one dares to be the market makers, because they would end up holding most of the BitUSD/BitCNY while no one else wants to hold. Higher/adjustable collateral would not solve the problem of one-sided market.
Open to discussion, and ready to be persuaded.
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I do not think this proposal would achieve the goal of 1:1 peg.
The reason why there lacks liquidity is because the peg does not work well. The reason why the peg does not work well is because there are imbalanced demands from two sides of the market. Right now, there is not much incentive to hold BitCNY or BitUSD. Sometime in the future, there might be too much incentive to hold BTAs, if much forced coverage occurs, which makes the interest of holding BTAs high enough. That is to say, the demands from two sides of the market will fluctuate, and we need a self-adjustable tool to compensate the demand difference. There will be ALWAYS uneven demands from the two sides.
Under this proposal, even if the collateral multiple is raised, as a BTSX bull, I personally do not have the incentive to hold BitUSD/BitCNY and be a market maker. I don't care as much for the collateral as for how much interest I would receive for holding BTAs. Take BitCNY for example, why would I want to hold BitCNY while I can earn higher interest holding real CNY outside?
What is our goal? 1:1 peg for BTAs, right? Only when this occurs, will there be exchange agents that honors 1:1 exchange. Then merchants are willing to take BitUSD/BitCNY as payment, because they know they can exchange for real USD/CNY anytime.
Market makers want to earn the spread. This is their only goal. Simple as that. In a one-sided market, no one dares to be the market makers, because they would end up holding most of the BitUSD/BitCNY while no one else wants to hold. Higher/adjustable collateral would not solve the problem of one-sided market.
Open to discussion, and ready to be persuaded.
The purpose of this proposal is to address exactly what you said: market makers shouldn't have to hold BitUSD *EVER* because who wants BitUSD in an experimental system unless they really believe in the peg *and* believe BTSX is currently overvalued *or* they are using BitUSD as a merchant who doesn't want volatility.
The early adopters, the bulls, are the ones who want the peg to work and they should be able to provide a peg and "make the market" without being stuck holding BitUSD.
So as a market maker if you "short" 100% of the BitUSD you sell... then you you buy BitUSD you go from being "leveraged BTSX" to just "BTSX". You make the spread without exposure to USD.
There is demand for checking accounts that don't pay interest or "trading accounts" which don't pay interest as high as available elsewhere. If there is a dollar crisis and banks start paying 50% interest then no one will want to hold USD for long (due to hyper-inflation) but that is an issue with the USD and not BTSX.
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Agent86 has entered the building! 8)
I just want to say, keep the eagle eye view firmly in mind: In the end nobody is going to care how much work the price feed does if they get 30% on bitUSD and it is regarded as safe enough and close enough pegged to USD. Whoever does this will destroy everyone else.
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This is an earlier proposal.
https://bitsharestalk.org/index.php?topic=7865.0
The main point is to add an market-adjusted interest rate. The interest is from the collateral, serving as a fee from the shorts paid to the longs. This adds cost for shorting BTAs. Of course, the interest rate can be negative, if the demand ever reverses. In the traditional stock market, you do pay fees to your broker for borrowing stocks.
The adjustable interest rate can be determined from parameters in the market. For example, if BitUSD is consistently trading under feed price, then the interest rate rises, adding incentive for people to buy and hold BitUSD.
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I do not think this proposal would achieve the goal of 1:1 peg.
The reason why there lacks liquidity is because the peg does not work well. The reason why the peg does not work well is because there are imbalanced demands from two sides of the market. Right now, there is not much incentive to hold BitCNY or BitUSD. Sometime in the future, there might be too much incentive to hold BTAs, if much forced coverage occurs, which makes the interest of holding BTAs high enough. That is to say, the demands from two sides of the market will fluctuate, and we need a self-adjustable tool to compensate the demand difference. There will be ALWAYS uneven demands from the two sides.
Under this proposal, even if the collateral multiple is raised, as a BTSX bull, I personally do not have the incentive to hold BitUSD/BitCNY and be a market maker. I don't care as much for the collateral as for how much interest I would receive for holding BTAs. Take BitCNY for example, why would I want to hold BitCNY while I can earn higher interest holding real CNY outside?
What is our goal? 1:1 peg for BTAs, right? Only when this occurs, will there be exchange agents that honors 1:1 exchange. Then merchants are willing to take BitUSD/BitCNY as payment, because they know they can exchange for real USD/CNY anytime.
Market makers want to earn the spread. This is their only goal. Simple as that. In a one-sided market, no one dares to be the market makers, because they would end up holding most of the BitUSD/BitCNY while no one else wants to hold. Higher/adjustable collateral would not solve the problem of one-sided market.
Open to discussion, and ready to be persuaded.
The purpose of this proposal is to address exactly what you said: market makers shouldn't have to hold BitUSD *EVER* because who wants BitUSD in an experimental system unless they really believe in the peg *and* believe BTSX is currently overvalued *or* they are using BitUSD as a merchant who doesn't want volatility.
The early adopters, the bulls, are the ones who want the peg to work and they should be able to provide a peg and "make the market" without being stuck holding BitUSD.
So as a market maker if you "short" 100% of the BitUSD you sell... then you you buy BitUSD you go from being "leveraged BTSX" to just "BTSX". You make the spread without exposure to USD.
There is demand for checking accounts that don't pay interest or "trading accounts" which don't pay interest as high as available elsewhere. If there is a dollar crisis and banks start paying 50% interest then no one will want to hold USD for long (due to hyper-inflation) but that is an issue with the USD and not BTSX.
A little confused. Are you saying someone can short with less than X1 collateral? Could you give an example, please?
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Sorry that I could not post faster... just had to buy some bitAssets to be ready to cover my extensive short positions and even to be a bit long now....
Now, buying bitAssets instead of outright selling means that I ultimately believe in the system (as always). Not so happy with the month and a halve we (read you) are going to work hard to implement this market 'non-improvements', instead of concentrating on having a stable (non-buggy product) and start marketing to the world, increasing the demand for bitUSD. Utility of bitUSD is the ONLY thing that will ultimately strengthen the peg.
PS
Quick question -Which order will go first?
short 1 bitUSD at 0.99999, with 2x collateral, or
short 1 bitUSD at 1.00000 BTSX/bitUSD, with 17x collateral?
PSS
It will not be the first time I state this - but I do believe your final decisions are in the extremely good to genius range.
Just the periods when you decide to think with the right side of your brain (also called A86) often drive me crazy.
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This is an earlier proposal:https://bitsharestalk.org/index.php?topic=7865.0
The main point is to add an market-adjusted interest rate. The interest is from the collateral, serving as a fee from the shorts paid to the longs. This adds cost for shorting BTAs. Of course, the interest rate can be negative, if the demand ever reverses. In the traditional stock market, you do pay fees to your broker for borrowing stocks.
The adjustable interest rate can be determined from parameters in the market. For example, if BitUSD is consistently trading under feed price, then the interest rate rises, adding incentive for people to buy and hold BitUSD.
As Vitalik Buterin argued here: https://bitcointalk.org/index.php?topic=324830.msg3581512#msg3581512
The peg will either tend towards 0 or 1 (0 under a black swan event when it breaks), 1 otherwise. What we need is a system such that the further away from 1 (up or down) the more incentive to bring it back to 1, above 1 shorts have an incentive, below 1 longs have an incentive and further away the more incentive. Thus you will not tend towards 0 under a black swan as incentive should be high enough to start bringing it back to 1. Ofcourse you argued that time should be considered and that may be a valid parameter, ie: the longer it is above 1 the more incentive, and people start to anticipate the event that it goes below 1 and the covers happen.
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So under bytemaster's proposal, shorts would all execute at the feed price and compete on collateral.
I like the idea of letting high collateral positions absorb the short demand: The more BTSX is tied up in collateral, the better the BTSX price.
I dislike the increased reliance on the feed. And as gulu noted, forcing shorters to sell at the feed will risk a "demand crisis": When BitUSD demand is high, it might blow through the "short wall" at the feed and get little resistance thereafter, since few BitUSD holders would want to place Ask orders when they think BitUSD is going up.
What if we allow two different types of shorts: "feed shorts" which must sell at the feed and compete with each other by offering more collateral (but 2.20x is the minimum), and "fixed-price shorts" which sell for 2x collateral? Feed shorts always get priority over normal shorts, but normal shorts are there to back up the system when nobody wants to feed short (i.e. in a bear market).
If we do see a bear market and nobody wants to feed short because everyone thinks BitUSD will go up in the short term, then normal shorts will still be able to sell at a premium to the feed, increase the supply, limit BitUSD rise, and prevent a BitUSD shortage or "demand crisis" where everyone wants BitUSD but there isn't enough to satisfy the demand, driving prices upward.
I would also like to propose adding an optional minimum price (as well as a maximum price) to a feed short. Giving users more control is always good!
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We have fixed price shorts... they only sell when the "feed is below their price" and can set what ever collateral ratio they want (greater than 2x).
Blowing through the sell wall won't be a problem because at a certain price BitUSD demand goes away to. "high BitUSD" is much less of a problem than "low BitUSD".
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We have fixed price shorts... they only sell when the "feed is below their price" and can set what ever collateral ratio they want (greater than 2x).
Blowing through the sell wall won't be a problem because at a certain price BitUSD demand goes away to. "high BitUSD" is much less of a problem than "low BitUSD".
But this reliance on feeds is becoming necessary whereas a properly designed incentive system can do away from a feed? (thinking long term) We need to try to keep dependence on feed down upon design reviews not increase them? I only say properly as I believe there is a solution out there without the feeds.
I've always that either you are a bull or a bear, you can't be both long term. Ofcourse it will increase liquidity but I think marketing the product will go a longer way to help with the spreads. I'm not so sure about the assumption that the bears would cause a higher spread if there simply just more bears around.
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BM, look like delegates need to spend more resource/time on you new proposal.
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We have fixed price shorts... they only sell when the "feed is below their price" and can set what ever collateral ratio they want (greater than 2x).
Blowing through the sell wall won't be a problem because at a certain price BitUSD demand goes away to. "high BitUSD" is much less of a problem than "low BitUSD".
So how exactly do the feeds compete on collateral then? Under your system, if there's a short at 32.00 offering 2x collateral and another short at 32.01 offering 10x collateral, and the feed is at 31.80, what happens?
My understanding was that both shorts would be forced to execute at 31.80, since the number (32.00 or 32.01) is a maximum price. And then the 10x collateral would win (take priority). Am I misunderstanding?
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BM, look like delegates need to spend more resource/time on you new proposal.
Agreed. If delegates are expected to update something once per (day, hour, minute) then a delegate account in the top 101 should be allowed to publish the update once per (day, hour, minute) without paying a fee.
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BM, look like delegates need to spend more resource/time on you new proposal.
Agreed. If delegates are expected to update something once per (day, hour, minute) then a delegate account in the top 101 should be allowed to publish the update once per (day, hour, minute) without paying a fee.
More demands on delegates means two things: (1) it becomes less of a Decentralized Autonomous Company and more of a Delegate Accountable Company, where delegates are responsible for actually controlling the market a little bit (since they now have to control how fast/slow changes happen). (2) More responsibility means it is more like a job, and as such need to be compensated competitively (which goes back to my request for variable delegate pay in order to allow for market forces).
Overall, the system makes sense - but on principle I'd rather not have delegates be required to make judgement calls (where are the walls, what is an acceptable spread, how fast/slow should things change). Feeding in pure data from an exchange is OK, the system just needs to digest that data. When delegates make judgement calls, the delegates (not the system or the market) have to digest the data.
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This proposal only focuses on killing the short demand. It does not do much on the bidding side. It would probably help, but may not be enough.
Compare the cost to the benefit. I am not convinced.
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Agent86 has entered the building! 8)
I just want to say, keep the eagle eye view firmly in mind: In the end nobody is going to care how much work the price feed does if they get 30% on bitUSD and it is regarded as safe enough and close enough pegged to USD. Whoever does this will destroy everyone else.
+5%
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I cannot agree more with Vitalik that BitUSD will either be 1 or 0. To extend the theory, BitUSD20 will either be 1 or infinity, providing that 20% of interest is higher than most shorts willing to pay.
A market-adjusted interest rate is the best tool I can think of so far. The goal is to let the market determine the right interest rate in an unmanned way, meaning there needs feedback from the market. The feedback would better not be based on price feed. Let us think about what the market would do when the interest rate is too high. And let that characteristic be the feedback.
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I cannot agree more with Vitalik that BitUSD will either be 1 or 0. To extend the theory, BitUSD20 will either be 1 or infinity, providing that 20% of interest is higher than most shorts willing to pay.
A market-adjusted interest rate is the best tool I can think of so far. The goal is to let the market determine the right interest rate in an unmanned way, meaning there needs feedback from the market. The feedback would better not be based on price feed. Let us think about what the market would do when the interest rate is too high. And let that characteristic be the feedback.
Thing is fear is always a stronger driver than greed (that is why the market always falls faster than it rises). So imagine if the incentive was even there, increasing as bitUSD fell. Confidence would also fall inline with an increase of interest rates (fees at which shorts have to pay increase)... thus we could have a case where people are "willing" to take a cut for an extended period of time because they beleive the system is broken and place a higher value in the system returning them any funds rather than a lucrative interest rate. If fees tend towards infinity as price tends towards 0, it will never get to 0. But it may stay away from 1 for a long time, and that it what will help people realize that the peg is here to stay and works. You need those incidences which make people have that fear and greed and we come out just fine... thats what drives market confidence up through the roof. Over time the spread will narrow and confidence rises, the black swans will happen but confidence curve will have higher lows every time, subsequently higher btsx prices. In fact you can probably draw a parallel between the decrease of spreads and the increase in btsx long term. They should be inverse of each other. Don't try to artificially fix what naturally should occur.
Im not sure about bitUSD above 1 and what incentive you can place to bring it back to 1, maybe long's pay fees to shorts?
Who would pay the fees to short on bitusd20? Why would someone use this and pay more when bitusd would have the liqudity they need?
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I cannot agree more with Vitalik that BitUSD will either be 1 or 0. To extend the theory, BitUSD20 will either be 1 or infinity, providing that 20% of interest is higher than most shorts willing to pay.
A market-adjusted interest rate is the best tool I can think of so far. The goal is to let the market determine the right interest rate in an unmanned way, meaning there needs feedback from the market. The feedback would better not be based on price feed. Let us think about what the market would do when the interest rate is too high. And let that characteristic be the feedback.
In another proposal, I presumed that shorts would proactively cover their position when the interest rate is too high, resulting in more proactive buy orders of BitUSD to take the already-existing sell orders. Or because high interest rate pushed BitUSD price to be greater than 1, there are more proactive sell orders than buy ones. But either way, we can use this kind of characteristic to lower the interest rate, slowly. This method does not require price feed.
For the time being, we can make the advantage of price feed to determine the interest rate. It probably will be much easier from implementation perspective. If it works, then move on to getting rid of price feed, meaning use parameters inside of the market.
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I cannot agree more with Vitalik that BitUSD will either be 1 or 0. To extend the theory, BitUSD20 will either be 1 or infinity, providing that 20% of interest is higher than most shorts willing to pay.
A market-adjusted interest rate is the best tool I can think of so far. The goal is to let the market determine the right interest rate in an unmanned way, meaning there needs feedback from the market. The feedback would better not be based on price feed. Let us think about what the market would do when the interest rate is too high. And let that characteristic be the feedback.
Thing is fear is always a stronger driver than greed (that is why the market always falls faster than it rises). So imagine if the incentive was even there, increasing as bitUSD fell. Confidence would also fall inline with an increase of interest rates (fees at which shorts have to pay increase)... thus we could have a case where people are "willing" to take a cut for an extended period of time because they beleive the system is broken and place a higher value in the system returning them any funds rather than a lucrative interest rate. If fees tend towards infinity as price tends towards 0, it will never get to 0. But it may stay away from 1 for a long time, and that it what will help people realize that the peg is here to stay and works. You need those incidences which make people have that fear and greed and we come out just fine... thats what drives market confidence up through the roof. Over time the spread will narrow and confidence rises, the black swans will happen but confidence curve will have higher lows every time, subsequently higher btsx prices. In fact you can probably draw a parallel between the decrease of spreads and the increase in btsx long term. They should be inverse of each other. Don't try to artificially fix what naturally should occur.
Im not sure about bitUSD above 1 and what incentive you can place to bring it back to 1, maybe long's pay fees to shorts?
Who would pay the fees to short on bitusd20? Why would someone use this and pay more when bitusd would have the liqudity they need?
Yes, the longs would pay to the shorts when interest rate is negative. The key here is that the rate needs to be floating and self-adjustable.
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A variable interest rate on shorts (potentially negative) would also drive a peg, but it would be a much slower process. You could have the delegates publish an interest rate and then you would end up playing FED :)
I am viewing this from an entirely new perspective: BitUSD is a mechanism whereby those who wish to offer USD IOUs and profit from the redemption of those IOUs can compete with each other to offer the most collateralized USD. They don't make any money if there is no churn.
So if my "business" is issuing USD IOUs and I make money every time someone converts between my IOU and BTSX then I need to keep the spread competitive to make money. This business goes up in value if more people are using its IOUs (BitUSD) and thus there is huge financial incentive to minimize the spread provided you can do so while taking on leverage in your own shares and without going long USD.
So the reason I know the peg will hold under the new rules is because I have already designed a trading bot that I can employ that will allow me to make money while enforcing the peg without going long USD or having to speculate on BTSX moving on a day to day basis. The trading algorithm is relatively simple, supports spread of less than 1% and on average gives me increased exposure to BTSX with high collateral so I don't have to worry about margin calls. The existence of the trading bot will in turn make BitUSD hold which will then drive BTSX up.
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We have fixed price shorts... they only sell when the "feed is below their price" and can set what ever collateral ratio they want (greater than 2x).
Blowing through the sell wall won't be a problem because at a certain price BitUSD demand goes away to. "high BitUSD" is much less of a problem than "low BitUSD".
So how exactly do the feeds compete on collateral then? Under your system, if there's a short at 32.00 offering 2x collateral and another short at 32.01 offering 10x collateral, and the feed is at 31.80, what happens?
My understanding was that both shorts would be forced to execute at 31.80, since the number (32.00 or 32.01) is a maximum price. And then the 10x collateral would win (take priority). Am I misunderstanding?
You people and your intent on pricing dollars in terms of BTSX rather than BTSX in terms of dollars!
Assuming you are pricing things in BTSX...
All orders below the feed are sorted by collateral so in your case the 10x order at 32.01 is run first... if the feed moved to 32.001 then the 2x order at 32 is no longer in the running.
So you can place orders over a range... short at any price above 32, but don't short below 32. Thus the "short wall" is the sum of all shorts willing to short below the current feed price. Shorts can still place orders above the feed price and as the feed adjusts they will be there to support the market.
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You should limit the bitAsset trading to bitUSD. Limit BTSX exchange to the currencies. This will force people into buying bitU$D. It certainly would make the bitU$D market more liquid.
*This of course wouldn't be viable until there is more assets and more liquidity all around. Sort of a chicken or the egg scenario.
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So let's reason from first principals:
1) We want btsx to be valuable.
2) We want bitUSD to be worth $1.
Given these two desires, we need to create self reinforcing incentives that drive people towards both of those goals. If a minority of actors defect from those goals, they should be "punished" by losing value, whether they are holding bitAssets or btsx.
Some other truths:
1) the value of btsx relative to actual $ has been volatile
2) the value of bitUSD relative to actual $ has been volatile
3) bitUSD is (obviously) only priced in btsx.
4) we need shorts and longs in equal supply, because only when someone goes short can someone else go long and create bitUSD.
5) paying longs to hold bitUSD with transaction fees is good for them, and creates incentives for them to hold it.
6) forcing shorts to put up collateral btsx is good for them collectively, because it sequesters btsx and drives up the value of btsx. This enables shorts to make money.
6a) forcing shorts to put up collateral btsx is bad for them individually, because buying btsx is hard and a short doesn't have an infinite supply of btsx.
6b) Therefore, we have what in economics is called a collective action problem. The more shorts that short and the more collateral they put up, the better it is for them as a group, but each short wants to defect and let the OTHER shorts put up the collateral. Of course, since we demand a fix amount of collateral now by protocol, they can't defect. They can just choose to sit out.
7) If the peg isn't holding, it is because the short demand and the long demand are imbalanced. Therefore, we want to add longs when there are lots of shorts, and add shorts when there are lots of longs.
The obvious solution to pay the group that is insufficiently supplied. Any other solution will simply cause the smaller group to sit out. Since we are already tapping transaction fees to pay longs already, and they still seem to be in insufficient supply, where can we get more cash? They answer is from the group that is in larger supply. Just add a fee paid from shorts to longs (or longs to shorts, depending on the market). The fee should be something that is part of their bid.
Let the market decide the fees, and the peg will hold. No feed from delegates required.
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You people and your intent on pricing dollars in terms of BTSX rather than BTSX in terms of dollars!
BTSX is like cash, and BitUSD is some weird derivative contract. It makes more sense to say "a contract is worth 32 BTSX" than to say "a BTSX is worth 0.03125 contracts". In addition, if your "price" is how many BitUSD one BTSX is worth, then "shorting" means betting that the price will rise!
So when you said "maximum" you really meant "minimum." I have the following picture now (using BTSX as the price):
Bob wants to short 100 BitUSD at a price of 32 BTSX per BitUSD. Bob must put up 3200 collateral minimum, as currently, but Bob can optionally put up more collateral. Let's say Bob puts up 4000 BTSX. Let's also say Carol shorted $100 at 32.15 with 3215 BTSX collateral and Dan shorted $100 at 32.50 with 5000 BTSX collateral.
As long as the feed is below 32, Alice can place a Bid order at 32 BTSX and be matched against Bob; Carol and Dan were outpriced.
But when the feed rises above 32, Bob's short moves up with it (instead of being cancelled as in the current paradigm). It can only move up as long as price times quantity is less than or equal to Bob's collateral, though; so Bob's short won't execute above a price of 40 BTSX / BitUSD.
If the feed moves up to, say, 33, then Carol is out of the running due to insufficient collateral, and Bob and Dan's shorts are both at 33. If Alice bids at 32, she can only be filled from Ask orders (until and unless the feed falls back to 32 or below). If Alice bids 33, she'll be matched against Dan's order; Bob won't be able to get any buyers until Dan's order is filled (or the feed moves below 32.50 so Bob is again offering a better price than Dan).
Is this a fair summary of the proposed mechanics?
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Maybe the entire currency market should act as a single giant market maker bot.
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So let's reason from first principals:
1) We want btsx to be valuable.
2) We want bitUSD to be worth $1.
Given these two desires, we need to create self reinforcing incentives that drive people towards both of those goals. If a minority of actors defect from those goals, they should be "punished" by losing value, whether they are holding bitAssets or btsx.
Some other truths:
1) the value of btsx relative to actual $ has been volatile
2) the value of bitUSD relative to actual $ has been volatile
3) bitUSD is (obviously) only priced in btsx.
4) we need shorts and longs in equal supply, because only when someone goes short can someone else go long and create bitUSD.
5) paying longs to hold bitUSD with transaction fees is good for them, and creates incentives for them to hold it.
6) forcing shorts to put up collateral btsx is good for them collectively, because it sequesters btsx and drives up the value of btsx. This enables shorts to make money.
6a) forcing shorts to put up collateral btsx is bad for them individually, because buying btsx is hard and a short doesn't have an infinite supply of btsx.
6b) Therefore, we have what in economics is called a collective action problem. The more shorts that short and the more collateral they put up, the better it is for them as a group, but each short wants to defect and let the OTHER shorts put up the collateral. Of course, since we demand a fix amount of collateral now by protocol, they can't defect. They can just choose to sit out.
7) If the peg isn't holding, it is because the short demand and the long demand are imbalanced. Therefore, we want to add longs when there are lots of shorts, and add shorts when there are lots of longs.
The obvious solution to pay the group that is insufficiently supplied. Any other solution will simply cause the smaller group to sit out. Since we are already tapping transaction fees to pay longs already, and they still seem to be in insufficient supply, where can we get more cash? They answer is from the group that is in larger supply. Just add a fee paid from shorts to longs (or longs to shorts, depending on the market). The fee should be something that is part of their bid.
Let the market decide the fees, and the peg will hold. No feed from delegates required.
That's what Ive already said. BM replied by saying delegates can pass around an interest rate. I would say to that that you can calculate interest rate based on the order (distance between the order price being executed and 1). If each node knows what the bid/asks are and they all have the same calculation why do you have to pass around an interest rate via delegates? YOu would only play FED if you manipulate the interest rate by pushing source that everyone has to accept? Kind of a force majeure, but still its up to the people to switch in that case...
I'm a fan of keeping it simple and this approach definitely is the most simply intuitive approach that I think would work. However maybe this problem needs a complex solution because it is a complex problem. Once we get more assets it gets more complex as we get different types of assets one day. Maybe in that case we need the IOU strategy he explained but it would need a ton of explaining so that new people wouldn't have to sit down with a napkin everytime to figure out how to trade in the ecosystem.
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So let's reason from first principals:
1) We want btsx to be valuable.
2) We want bitUSD to be worth $1.
Given these two desires, we need to create self reinforcing incentives that drive people towards both of those goals. If a minority of actors defect from those goals, they should be "punished" by losing value, whether they are holding bitAssets or btsx.
Some other truths:
1) the value of btsx relative to actual $ has been volatile
2) the value of bitUSD relative to actual $ has been volatile
3) bitUSD is (obviously) only priced in btsx.
4) we need shorts and longs in equal supply, because only when someone goes short can someone else go long and create bitUSD.
5) paying longs to hold bitUSD with transaction fees is good for them, and creates incentives for them to hold it.
6) forcing shorts to put up collateral btsx is good for them collectively, because it sequesters btsx and drives up the value of btsx. This enables shorts to make money.
6a) forcing shorts to put up collateral btsx is bad for them individually, because buying btsx is hard and a short doesn't have an infinite supply of btsx.
6b) Therefore, we have what in economics is called a collective action problem. The more shorts that short and the more collateral they put up, the better it is for them as a group, but each short wants to defect and let the OTHER shorts put up the collateral. Of course, since we demand a fix amount of collateral now by protocol, they can't defect. They can just choose to sit out.
7) If the peg isn't holding, it is because the short demand and the long demand are imbalanced. Therefore, we want to add longs when there are lots of shorts, and add shorts when there are lots of longs.
The obvious solution to pay the group that is insufficiently supplied. Any other solution will simply cause the smaller group to sit out. Since we are already tapping transaction fees to pay longs already, and they still seem to be in insufficient supply, where can we get more cash? They answer is from the group that is in larger supply. Just add a fee paid from shorts to longs (or longs to shorts, depending on the market). The fee should be something that is part of their bid.
Let the market decide the fees, and the peg will hold. No feed from delegates required.
Based on my limited understanding, this makes sense. I'm guessing BM's proposal attempts to accomplish this in some similar way (that is harder for me to understand :) )
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Maybe the entire currency market should act as a single giant market maker bot.
This was supposed to be plan B.
Actually, I have suggested reasonable plan, with incentive for the willing bullish BTSX holders to fund such bot, if the need arises to go to plan B... But going there just because the peg does not hold at 100% with useless (with no practical use as of yet) bitUSD; using a client that nobody in his right mind will use for trading (or will remain in his right mind if he does use it for prolonged periods of time), is acting on emotions...
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You can think of increasing the collateral requirement like decreasing the leverage and thus the ROI.
There are two ways to adjust short supply: provide constant leverage (2:1) and variable cost (interest rate) or provide variable leverage and constant cost (0 interest rate). There comes a point where the leverage gained by going short is not worth the risk.
If you want the interest rate model to work you require two prediction markets working at the same time. This approach is potentially viable because any attempt to "short BitUSD out of existence" would end up in sending the interest rate prediction market through the roof.
The demand for BitUSD is highly correlated to how well the peg is holding up. If it does not hold up well and has a wide spread then the demand will be low. If it holds up very well then the demand will be very high because it is a proxy for the dollar.
The "dual market" approach may be the only viable solution that can operate without a price feed. It is very challenging in deed.
Given a price feed we can prioritize shorts very effectively by collateral.
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Maybe the entire currency market should act as a single giant market maker bot.
Yes, if this could be done without transferring risk to people that didn't sign up for it we would do it.
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I have a question (that I considered too early to ask, in my hopes this idea goes on the way side).
Buyers will pay what price exactly with this collateralization ordering of the shorts?
How will asks be ordered in this new world view (assuming same/less/more price) than those short orders?
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Maybe the entire currency market should act as a single giant market maker bot.
Yes, if this could be done without transferring risk to people that didn't sign up for it we would do it.
Do not let me search for the whole proposal - in short willing BTSX holders deposit funds in the bot account and the bot just sells/buys at feed price.... Willing bot sponsors will 'always' be available as they are BTSX bulls, and in reasonably long run, the bot will sell at ever decreasing bitUSD price (price in BTSX terms, that is). Any profits are dispersed per depositor's request and proportional to the time the BTSX were kept in the bots account.
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I have a question (that I considered too early to ask, in my hopes this idea goes on the way side).
Buyers will pay what price exactly with this collateralization ordering of the shorts?
How will asks be ordered in this new world view (assuming same/less/more price) than those short orders?
The asks are unchanged from the current system. They get what they asked for.
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You can think of increasing the collateral requirement like decreasing the leverage and thus the ROI.
There are two ways to adjust short supply: provide constant leverage (2:1) and variable cost (interest rate) or provide variable leverage and constant cost (0 interest rate). There comes a point where the leverage gained by going short is not worth the risk.
If you want the interest rate model to work you require two prediction markets working at the same time. This approach is potentially viable because any attempt to "short BitUSD out of existence" would end up in sending the interest rate prediction market through the roof.
The demand for BitUSD is highly correlated to how well the peg is holding up. If it does not hold up well and has a wide spread then the demand will be low. If it holds up very well then the demand will be very high because it is a proxy for the dollar.
The "dual market" approach may be the only viable solution that can operate without a price feed. It is very challenging in deed.
Given a price feed we can prioritize shorts very effectively by collateral.
How is it a second prediction market if its tied to an input that everyone has and is the same? Output is predicted and created from the input that is the prediction market for bitasset price.
I can imagine a big number showing the interest rate in a positive or negative % when viewing that market.. kind of like a currency swap its a simple precalculated number you see before entering in a trade.
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You can think of increasing the collateral requirement like decreasing the leverage and thus the ROI.
There are two ways to adjust short supply: provide constant leverage (2:1) and variable cost (interest rate) or provide variable leverage and constant cost (0 interest rate). There comes a point where the leverage gained by going short is not worth the risk.
If you want the interest rate model to work you require two prediction markets working at the same time. This approach is potentially viable because any attempt to "short BitUSD out of existence" would end up in sending the interest rate prediction market through the roof.
The demand for BitUSD is highly correlated to how well the peg is holding up. If it does not hold up well and has a wide spread then the demand will be low. If it holds up very well then the demand will be very high because it is a proxy for the dollar.
The "dual market" approach may be the only viable solution that can operate without a price feed. It is very challenging in deed.
Given a price feed we can prioritize shorts very effectively by collateral.
Why not a third, variable leverage and variable cost.
Have the collateral base the effective range of what interest a short would be required to pay. Rank the shorts by the amount of interest they are willing to pay. Shorts willing to pay higher interest take priority. higher leverage requires higher interest.
Average the % interest from actual trades and this is your base interest requirement.
I'm very much more in favor of the proposed interest rate models around Gulu's line, and agree that having a working client is by far the most effective, most needed work.
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You can think of increasing the collateral requirement like decreasing the leverage and thus the ROI.
There are two ways to adjust short supply: provide constant leverage (2:1) and variable cost (interest rate) or provide variable leverage and constant cost (0 interest rate). There comes a point where the leverage gained by going short is not worth the risk.
If you want the interest rate model to work you require two prediction markets working at the same time. This approach is potentially viable because any attempt to "short BitUSD out of existence" would end up in sending the interest rate prediction market through the roof.
The demand for BitUSD is highly correlated to how well the peg is holding up. If it does not hold up well and has a wide spread then the demand will be low. If it holds up very well then the demand will be very high because it is a proxy for the dollar.
The "dual market" approach may be the only viable solution that can operate without a price feed. It is very challenging in deed.
Given a price feed we can prioritize shorts very effectively by collateral.
Why not a third, variable leverage and variable cost.
Have the collateral base the effective range of what interest a short would be required to pay. Rank the shorts by the amount of interest they are willing to pay. Shorts willing to pay higher interest take priority. higher leverage requires higher interest.
Average the % interest from actual trades and this is your base interest requirement.
I'm very much more in favor of the proposed interest rate models around Gulu's line, and agree that having a working client is by far the most effective, most needed work.
So I was proposing a fixed up front fee, rather than interest, since it is easier for a person to understand what their costs would be up front. However, from a game theory perspective it shouldn't matter.
Regardless, the problem with letting both things float is that you end up with a "two dimensional" market, where shorts and longs have to agree on two parameters instead of one. This adds complexity, and provides a greater opportunity for shorts and longs to not agree and sit out of the market. That said, the more I think about it, the more I think this is required.
The entire point of the peg is that we want price of btsx / $ to always equal btsx / bitUSD. So we really don't want shorts and longs competing with each other on price. They need something else to compete with. The feed encourages them to stay near the peg, but it won't respond to volatility in the btsx / $ market fast enough. People just sit out of markets if they think they can't make money, and all of our attempts so far with feeds and only letting shorts trade in a range is just making people sit out of the market.
I think we need to let the fee or interest paid float, as well as the price. Then the consensus of the market will encourage the fees to vary, rather than the price straying from the peg, but it still gives somewhere for the "market pressure" to go without forcing them out of the market entirely.
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This proposal is adding to a "big book of rules" to scare people off, and for little gain in my humble opinion.
It is completely unnecessary to attract BTSX-bulls as market-makers. It is stated that BTSX-bulls can't easily be market-makers because in the absence of being able to cost-effectively open shorts they are forced to be long BitUSD. But why can't they just buy extra BTSX with other funds to compensate for the exposure lost in buying BitUSD. Simple! They can be long BTSX elsewhere and earn spreads as a market-maker on BitUSD. No complicated market rules are necessary!
Second, market-making does not ensure the peg. A market-maker does not in fact care whether the market is at the peg or not. They make money from the spread. If the market price is not near the feed price, market-makers can still make money but make no contribution whatsoever to whether the market trades near the peg or not. It is flawed to believe market-makers will help pegging. They will simply follow the market liquidity, wherever it is. You may be able to set up a bot to make money by "trading around the peg", but it is only theoretical if the market is not already at the peg - you will never trade any volume if the market wants to be somewhere else.
Is there a strong reason why the numerous and simpler ideas already around about a floating incentive between shorts and longs are being rejected?
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You people and your intent on pricing dollars in terms of BTSX rather than BTSX in terms of dollars!
BTSX is like cash, and BitUSD is some weird derivative contract. It makes more sense to say "a contract is worth 32 BTSX" than to say "a BTSX is worth 0.03125 contracts". In addition, if your "price" is how many BitUSD one BTSX is worth, then "shorting" means betting that the price will rise!
So when you said "maximum" you really meant "minimum." I have the following picture now (using BTSX as the price):
Bob wants to short 100 BitUSD at a price of 32 BTSX per BitUSD. Bob must put up 3200 collateral minimum, as currently, but Bob can optionally put up more collateral. Let's say Bob puts up 4000 BTSX. Let's also say Carol shorted $100 at 32.15 with 3215 BTSX collateral and Dan shorted $100 at 32.50 with 5000 BTSX collateral.
As long as the feed is below 32, Alice can place a Bid order at 32 BTSX and be matched against Bob; Carol and Dan were outpriced.
But when the feed rises above 32, Bob's short moves up with it (instead of being cancelled as in the current paradigm). It can only move up as long as price times quantity is less than or equal to Bob's collateral, though; so Bob's short won't execute above a price of 40 BTSX / BitUSD.
If the feed moves up to, say, 33, then Carol is out of the running due to insufficient collateral, and Bob and Dan's shorts are both at 33. If Alice bids at 32, she can only be filled from Ask orders (until and unless the feed falls back to 32 or below). If Alice bids 33, she'll be matched against Dan's order; Bob won't be able to get any buyers until Dan's order is filled (or the feed moves below 32.50 so Bob is again offering a better price than Dan).
Is this a fair summary of the proposed mechanics?
Agreed. All BTAs need to be priced in BTSX. The other way makes too much confusion.
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Agreed. All BTAs need to be priced in BTSX. The other way makes too much confusion.
You can click the "Flip Market" icon to price USD (and other bitAssets) in BTSX rather than the other way around. I think the new GUI that Cass and Brian are working on will probably help clarify these things or user preferences.
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This proposal is adding to a "big book of rules" to scare people off, and for little gain in my humble opinion.
It is completely unnecessary to attract BTSX-bulls as market-makers. It is stated that BTSX-bulls can't easily be market-makers because in the absence of being able to cost-effectively open shorts they are forced to be long BitUSD. But why can't they just buy extra BTSX with other funds to compensate for the exposure lost in buying BitUSD. Simple! They can be long BTSX elsewhere and earn spreads as a market-maker on BitUSD. No complicated market rules are necessary!
Second, market-making does not ensure the peg. A market-maker does not in fact care whether the market is at the peg or not. They make money from the spread. If the market price is not near the feed price, market-makers can still make money but make no contribution whatsoever to whether the market trades near the peg or not. It is flawed to believe market-makers will help pegging. They will simply follow the market liquidity, wherever it is. You may be able to set up a bot to make money by "trading around the peg", but it is only theoretical if the market is not already at the peg - you will never trade any volume if the market wants to be somewhere else.
Is there a strong reason why the numerous and simpler ideas already around about a floating incentive between shorts and longs are being rejected?
Agreed. In a one-side market as of now, the market makers would end up drawing all of their funds into BitUSD, if they ever dare to try 1:1 peg.
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Agreed. All BTAs need to be priced in BTSX. The other way makes too much confusion.
You can click the "Flip Market" icon to price USD (and other bitAssets) in BTSX rather than the other way around. I think the new GUI that Cass and Brian are working on will probably help clarify these things or user preferences.
Right. Options in GUI are fine. But we need to get rid of confusion while discussing. It does not make sense that some BTAs are priced in BTSX like BitGLD, while some (BitUSD) are the other way around. Too much confusion.
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The demand for BitUSD is highly correlated to how well the peg is holding up. If it does not hold up well and has a wide spread then the demand will be low. If it holds up very well then the demand will be very high because it is a proxy for the dollar.
Demand for BitUSD is not under control of bitshares and depend only on utility of BitUsd. If there is nothing productive you can do with bitusd why would anyone exchange real usd to bitusd? You can offer interest, but then why would anyone want to provide this interest?
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Can a swap rate be introduced that automatically adjusts based on market inefficiencies?
e.g. take avg traded for last hour v.s. feed price. if BitUSD is trading below the feed price, award BitUSD holders with interest, paid by the shorters.
So if BitUSD has been trading 20% below it's expected price, set the swap rate at 20% APR.
Likewise if BitUSD has been trading at 20% premium, it would have negative interest. (i.e. shorters would be rewarded)
This provide incentives for market participants to do the right thing. Might not be easy to implement a swap rate, but it will be well worth it.
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Market-making does not change the peg, it only tightens the spread. We do not need more complicated rules muffling short supply. Already BitUSD prices are not made by shorts but by asks (those on the same side of the orderbook as shorts). Accept that for now BitAssets will trade at around 95% and have a ±5% trading range. This will improve over time.
What is needed most to reduce volatility:
Arbitrage possibilities between inside BitShares and outside. The internal BTSX/BitUSD market alone is too one-sided for market-making to be viable and that is because the bid side (those buying BitUSD) is too shallow, not the short side too deep.
I am thinking of a bot that trades BTSX/BitUSD inside and BTSX/CNY on btc38 or bter maintaining constant exposure to BTSX and fiat (ignoring fluctuations in the USD/CNY ratio), but setting one up with my programming skills will consume more time than I have.
What we need most to tighten the peg:
Utility and trust. Both cannot be gained by market engine rule re-design.
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Market-making does not change the peg, it only tightens the spread. We do not need more complicated rules muffling short supply. Already BitUSD prices are not made by shorts but by asks (those on the same side of the orderbook as shorts). Accept that for now BitAssets will trade at around 95% and have a ±5% trading range. This will improve over time.
What is needed most to reduce volatility:
Arbitrage possibilities between inside BitShares and outside. The internal BTSX/BitUSD market alone is too one-sided for market-making to be viable and that is because the bid side (those buying BitUSD) is too shallow, not the short side too deep.
I am thinking of a bot that trades BTSX/BitUSD inside and BTSX/CNY on btc38 or bter maintaining constant exposure to BTSX and fiat (ignoring fluctuations in the USD/CNY ratio), but setting one up with my programming skills will consume more time than I have.
What we need most to tighten the peg:
Utility and trust. Both cannot be gained by market engine rule re-design.
+5%
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Market-making does not change the peg, it only tightens the spread. We do not need more complicated rules muffling short supply. Already BitUSD prices are not made by shorts but by asks (those on the same side of the orderbook as shorts). Accept that for now BitAssets will trade at around 95% and have a ±5% trading range. This will improve over time.
What is needed most to reduce volatility:
Arbitrage possibilities between inside BitShares and outside. The internal BTSX/BitUSD market alone is too one-sided for market-making to be viable and that is because the bid side (those buying BitUSD) is too shallow, not the short side too deep.
I am thinking of a bot that trades BTSX/BitUSD inside and BTSX/CNY on btc38 or bter maintaining constant exposure to BTSX and fiat (ignoring fluctuations in the USD/CNY ratio), but setting one up with my programming skills will consume more time than I have.
What we need most to tighten the peg:
Utility and trust. Both cannot be gained by market engine rule re-design.
Inside mechanism->Market peg->Utility->Merchant adoption. Not the other way around.
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gulu, I know you are trying to promote a variable interest rate. But do you think any trader with a time horizon below a month is going to care about any interest rate below 100 % p.a.? And those who would invest their savings in BitAssets for <10 % p.a. come after "Merchant adoption" in your timeline.
Not being allowed to short below the peg is enough "Inside mechanism" for my taste.
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I will try to understand this proposal more when I have time but personally I really liked BitYield. Converting shorting demand into incentives for longs in some optimal manner seems like the right approach.
Without that you have a market that will be made obsolete quickly by someone that maximises incentives for longs.
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Demand for BitUSD is not under control of bitshares and depend only on utility of BitUsd. If there is nothing productive you can do with bitusd why would anyone exchange real usd to bitusd? You can offer interest, but then why would anyone want to provide this interest?
Hi Aaaxn, welcome to the forum!
1) BitUSD has some utility. Namely:
- It earns a reward or dividend (see 2 below)
- It can't be seized or frozen by another party
- It can be used to buy other assets
2) The interest isn't minting funds like other Proof of Stake assets. It is profit sharing of the fees collected by the blockchain. Instead of the fees going to miners they go to asset holders. It's more dividend than anything else.
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Hi Aaaxn, welcome to the forum!
1) BitUSD has some utility. Namely:
- It earns a reward or dividend (see 2 below)
- It can't be seized or frozen by another party
- It can be used to buy other assets
2) The interest isn't minting funds like other Proof of Stake assets. It is profit sharing of the fees collected by the blockchain. Instead of the fees going to miners they go to asset holders. It's more dividend than anything else.
Thanks. Nice to be around. I still can't grasp how is bitusd any better than dollars in my hand if I can't use it in commerce. As for your list:
Dollars in my pocket can't be seized too and I can buy far more assets for them. BitUSD is also illiquid and does not follow peg all the time. As for reward it is somewhat circular, because there will only be reward if people do trade BitUSD, but they won't do it unless it has utility and/or pays reward :) And isn't paying people for holding bitUSD a form of admitting they have no utility, so you need to pay people for holding them?
I was working independently on another form of bitassets for quite a long time and arrived at different system - then I found bitsharesx. I believe you could adopt my system of issuing assets and get much better results in terms of maintaining 1:1 peg especially in first stages of adoption, where there is very limited liquidity. Are there any bounties for providing better peg enforcing mechanism?
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Dollars in my pocket can't be seized too
You plan to carry a suitcase stuffed with cash around? :) . True your walk-about cash is safe but the hundreds of thousands or millions in the bank...not so much.
I was working independently on another form of bitassets for quite a long time and arrived at different system - then I found bitsharesx. I believe you could adopt my system of issuing assets and get much better results in terms of maintaining 1:1 peg especially in first stages of adoption, where there is very limited liquidity. Are there any bounties for providing better peg enforcing mechanism?
That's a question for Bytemaster however he always seems open to discussing ideas about better ways to stabilize the peg.
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I haven't had a chance to post, but here is a shorthand for basic rules I was going to post earlier, the exact implementation may be slightly different, but this is the principle:
When orders are matched and there is a spread the order is executed giving the max BTSX per bUSD (the bUSD seller gets the advantage of any spread rather than the network). Standard sell orders are always prioritized above shorts and are matched by price priority. All eligible shorts are matched with buy orders prioritized by collateral rather than price (the bUSD buy order determines the price).
A short is eligible to be matched if
1) it offers the bitUSD for sale at a price lower than the buy bUSD order
2) buy order must be above the median price feed.
3) Short must contain at least 2x collateral at the order execution price
I don't think these rules are particularly complicated and most people buying/selling bitUSD will just see a standard order book they are familiar with.
Interest rates are not needed for the peg to hold. Interest rates are useful as a separate implementation in the form of a bond market. I'm confident we will be happy and see that it works and it can be demonstrated in practice.
Understanding the role of the price feed:
The price feed does not make anybody do anything. Any time someone places or executes an order to buy, sell, or short a bitAsset they do so at the price they have voluntarily agreed to. The price feed can't make you buy sell or short at a price you didn't agree to. None of the changes make the price feed into some ultra-critical thing that has to be super precise.
Generally the price feed's role is only to limit what people can do: You are not permitted to print undervalued bUSD.
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I got a little confused so I'll ask exactly what I'm interested in:
Will there be minimum required short collateral?
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I got a little confused so I'll ask exactly what I'm interested in:
Will there be minimum required short collateral?
I believe minimum required short collateral is 2x with margin call at 1.5x
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I still can't grasp how is bitusd any better than dollars in my hand if I can't use it in commerce.
I am pretty sure the same thing was said about credit cards, debit cards, BTC and every other alternative to fiat currency in the begining.
In hindsight, had you been with BTC in March 2009, would you be asking the same questions about merchants and commerce? Probably. Look at BTC now.
It has taken 5 years for BTC to begin to be accepted at a very limited number of places. BTSX and bitUSD are on a faster track than BTC was. Give it a couple years. Once merchants realize that the earned interest will offset transaction and clearing fees, bitUSD will be widely accepted.
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I haven't had a chance to post, but here is a shorthand for basic rules I was going to post earlier, the exact implementation may be slightly different, but this is the principle:
When orders are matched and there is a spread the order is executed giving the max BTSX per bUSD (the bUSD seller gets the advantage of any spread rather than the network). Standard sell orders are always prioritized above shorts and are matched by price priority. All eligible shorts are matched with buy orders prioritized by collateral rather than price (the bUSD buy order determines the price).
A short is eligible to be matched if
1) it offers the bitUSD for sale at a price lower than the buy bUSD order
2) buy order must be above the median price feed.
3) Short must contain at least 2x collateral at the order execution price
I don't think these rules are particularly complicated and most people buying/selling bitUSD will just see a standard order book they are familiar with.
Interest rates are not needed for the peg to hold. Interest rates are useful as a separate implementation in the form of a bond market. I'm confident we will be happy and see that it works and it can be demonstrated in practice.
Understanding the role of the price feed:
The price feed does not make anybody do anything. Any time someone places or executes an order to buy, sell, or short a bitAsset they do so at the price they have voluntarily agreed to. The price feed can't make you buy sell or short at a price you didn't agree to. None of the changes make the price feed into some ultra-critical thing that has to be super precise.
Generally the price feed's role is only to limit what people can do: You are not permitted to print undervalued bUSD.
Thanks, this is a bit easier explanation. I do hope that the gui will be updated so that it visually makes sense to user...what they see and/or don't see makes sense without having to review all the forum posts.
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It has taken 5 years for BTC to begin to be accepted at a very limited number of places. BTSX and bitUSD are on a faster track than BTC was. Give it a couple years. Once merchants realize that the earned interest will offset transaction and clearing fees, bitUSD will be widely accepted.
Not to mention the fact that it's almost trivial for BitPay and others to allow other cryptos. The infrastructure has already been laid by BTC. With a few modifications, BitUSD can be accepted everywhere Bitcoin is.
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I haven't had a chance to post, but here is a shorthand for basic rules I was going to post earlier, the exact implementation may be slightly different, but this is the principle:
When orders are matched and there is a spread the order is executed giving the max BTSX per bUSD (the bUSD seller gets the advantage of any spread rather than the network). Standard sell orders are always prioritized above shorts and are matched by price priority. All eligible shorts are matched with buy orders prioritized by collateral rather than price (the bUSD buy order determines the price).
A short is eligible to be matched if
1) it offers the bitUSD for sale at a price lower than the buy bUSD order
2) buy order must be above the median price feed.
3) Short must contain at least 2x collateral at the order execution price
I don't think these rules are particularly complicated and most people buying/selling bitUSD will just see a standard order book they are familiar with.
Interest rates are not needed for the peg to hold. Interest rates are useful as a separate implementation in the form of a bond market. I'm confident we will be happy and see that it works and it can be demonstrated in practice.
Understanding the role of the price feed:
The price feed does not make anybody do anything. Any time someone places or executes an order to buy, sell, or short a bitAsset they do so at the price they have voluntarily agreed to. The price feed can't make you buy sell or short at a price you didn't agree to. None of the changes make the price feed into some ultra-critical thing that has to be super precise.
Generally the price feed's role is only to limit what people can do: You are not permitted to print undervalued bUSD.
I do not agree with people here saying that is easy/comprehendible explanation or with A86 saying it is uncomplicated explanations....
Show me the order book for the following orders (all orders above the feed price):
Sell @ 100;
Short @ 101 2x collateral;
Sell @ 101.1;
Short 102 4x collateral;
Sell @ 103
This is also the order those will appear in normal order book... From your explanation at least 3 variant of ordering are possible.
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It has taken 5 years for BTC to begin to be accepted at a very limited number of places. BTSX and bitUSD are on a faster track than BTC was. Give it a couple years. Once merchants realize that the earned interest will offset transaction and clearing fees, bitUSD will be widely accepted.
This cannot be understated.
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the bUSD buy order determines the price
I do not agree with people here saying that is easy/comprehendible explanation or with A86 saying it is uncomplicated explanations....
Show me the order book for the following orders (all orders above the feed price):
Sell @ 100;
Short @ 101 2x collateral;
Sell @ 101.1;
Short 102 4x collateral;
Sell @ 103
This is also the order those will appear in normal order book... From your explanation at least 3 variant of ordering are possible.
They can show up just like this as in a normal order book. When you buy bitUSD you pay exactly the price you offered to buy at, therefore it really doesn't matter to you what specific sell or short you were matched with.
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the bUSD buy order determines the price
I do not agree with people here saying that is easy/comprehendible explanation or with A86 saying it is uncomplicated explanations....
Show me the order book for the following orders (all orders above the feed price):
Sell @ 100;
Short @ 101 2x collateral;
Sell @ 101.1;
Short 102 4x collateral;
Sell @ 103
This is also the order those will appear in normal order book... From your explanation at least 3 variant of ordering are possible.
They can show up just like this as in a normal order book. When you buy bitUSD you pay exactly the price you offered to buy at, therefore it really doesn't matter to you what specific sell or short you were matched with.
Assuming all of the above orders are for 1 bitUSD. If one places a buy order for 2 bitUSD @101 which will be the orders filled? What about if the buy order is @ 101.1?
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I do not agree with people here saying that is easy/comprehendible explanation or with A86 saying it is uncomplicated explanations....
Show me the order book for the following orders (all orders above the feed price):
Sell @ 100;
Short @ 101 2x collateral;
Sell @ 101.1;
Short 102 4x collateral;
Sell @ 103
This is also the order those will appear in normal order book... From your explanation at least 3 variant of ordering are possible.
First of all your order book is lacking units so I don't know what you are selling / buying / etc ... but I will add some units here:
Sell USD @ 100 BTSX per USD;
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 101.1 BTSX per USD;
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
FEED PRICE 102.5 BTSX per USD
Sell USD @ 103 BTSX per USD
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD
Given this ordering you have an effective order book of:
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 102.5 BTSX per USD
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 103 BTSX per USD
All short sell orders with the min limit below the feed execute *at the feed price* prioritized by collateral.
If the feed price were moved to 101.5 then the effective order book would be:
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 103 BTSX per USD
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Is this all backwards? Shouldn't the feed be below the shorts? Feed <= 100 BTSX per USD
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All short sell orders with the min limit below the feed execute *at the feed price* prioritized by collateral.
Got it!
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My original explanation states exactly how these are matched.
Without units there's no way to tell which direction is which in your hypothetical order book.
With that said, my explanation of the matching algorithm was my original vision for it. In the interest of simplifying the code I think BM may just match all orders above the feed solely by price and only shorts below the feed are prioritized by collateral. Either way I don't think it will make a lot of difference.
OK, OK I got the point stated 3 times that I did not include the units. I ALWAS THINK OF BTSX AS THE CURRENCY! Plus going Short BTSX is not possible anyway....
On the bolded part - I do not think the whole 'market enhancement' will make a ton of difference. Period.
Not much difference other than delaying the actual active marketing of the Bitshares X platform that is.
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My original explanation states exactly how these are matched.
Without units there's no way to tell which direction is which in your hypothetical order book.
With that said, my explanation of the matching algorithm was my original vision for it. In the interest of simplifying the code I think BM may just match all orders above the feed solely by price and only shorts below the feed are prioritized by collateral. Either way I don't think it will make a lot of difference.
OK, OK I got the point stated 3 times that I did not include the units. I ALWAS THINK OF BTSX AS THE CURRENCY! Plus going Short BTSX is not possible anyway....
On the bolded part - I do not think the whole 'market enhancement' will make a ton of difference. Period.
Not much difference other than delaying the actual active marketing of the Bitshares X platform that is.
Yea, I reconsidered my post, the units were probably pretty clear, sorry... I disagree that the market enhancement won't make much difference. I think prioritizing by collateral and allowing shorts to cover at a profit by buying back just below the feed (because they didn't have to pay a big transaction fee to go short) will make a big difference.
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Considering the now inevitable delay with another month or more,
BM can you include a 'feed price' order while enhancing the market. (AS in short/buy/sell bitAsset at the current feed price).
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maybe not all backwards but this line I don't understand
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD
why is a short only "valid" if its below the feed? I though it was the other way around.
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 102.5 BTSX per USD
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 103 BTSX per USD
so the 2 shorts would execute at the feed 102.5 This looks ok
but then in the next section when the feed drops to 101.5 the short at 102 is crossed out. I don't understand why.
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 103 BTSX per USD
The short at 101 would take priority and execute at the feed 101.5
the short at 102 should still be there yes? just further down the book.
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral); will execute at feed
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Sell USD @ 103 BTSX per USD[
Is this right?
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maybe not all backwards but this line I don't understand
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD
why is a short only "valid" if its below the feed? I though it was the other way around.
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 102.5 BTSX per USD
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 103 BTSX per USD
so the 2 shorts would execute at the feed 102.5 This looks ok
but then in the next section when the feed drops to 101.5 the short at 102 is crossed out. I don't understand why.
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral);
Sell USD @ 103 BTSX per USD
The short at 101 would take priority and execute at the feed 101.5
the short at 102 should still be there yes? just further down the book.
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
Short Sell USD @ 101 BTSX per USD (min) with 202 BTSX per USD collateral (2x collateral); will execute at feed
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Sell USD @ 103 BTSX per USD[
Is this right?
think of USD as 'pound of potatoes' and of BTSX as $ (or whichever is your local currency).
Hope this helps.
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think of USD as 'pound of potatoes' and of BTSX as $ (or whichever is your local currency).
Hope this helps.
No. I'm very acquainted with the $ per BTSX , BTSX per $ dilemma.
The following uses BTSX per $ as a reference.
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD
My understanding was that currently shorts below the feed (BTSX per $) are not valid. This statement seems to imply the opposite.
And my other question didn't pertain to this. I'm confused about what was meant by crossing out one of the shorts rather then reordering the book.
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Considering the now inevitable delay with another month or more,
BM can you include a 'feed price' order while enhancing the market. (AS in short/buy/sell bitAsset at the current feed price).
No month delay here... the code is done and just about ready to go.
No I cannot produce a 'feed price' order to enhance the market right now because it would leave me long USD and like every other actor in the market I do not make trades I expect to lose money on for charity or the cause.
Once this fix is made however, I will have a huge incentive to provide very highly collateralized shorts and then cover at very narrow spreads because I will remain net long BTSX.
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Maybe no one will ever have to hold bitUSD and we can all trade with ourselves. This will be great! I've got a bot that takes money from one pocket and puts it in the other and I earn the spread as profit.
No offense, but I'm either missing something crucial with this plan or its not going to have the desired effect. I don't see any increased incentive for anyone to buy bitUSD and from what your saying this was not the intention. We'll see I guess. I hope I'm just missing it.
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The goal isn't to get people to buy BitUSD. If bitUSD is undervalued it is not because "there is not enough bitUSD demand" and it is not fixed by getting more people to buy bitusd. The goal is to make a tight peg which does not depend on getting the right amount of demand for holding bitUSD because you can never get it right. This new incentive scheme lets people maintain a peg while staying long BTSX. If nobody buys bitUSD afterwards it means there shouldn't be any bitUSD and that is fine.
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Thanks toast, it makes sense that this would be the goal.
My trouble is, at some point, somewhere, somehow, someone is going to have to offer BTSX for sale for the makers(peggers) to cover their shorts to remain neutral.
Lets say there are only 2 market participants. the willing market maker(bot) who only wants BTSX and some individual(Al) who only wants bitUSD.
bot shorts 1MM bitUSD at 100 BTSX per $
Al buys 1MM bitUSD at 100 BTSX per $
Where is bot going to cover his short from if he intends to only be long BTSX?
There are no other participants. Is it another market maker (bot2) ?
Then where is bot2 going to cover his short from? bot3? and at what price is bot12 offering his bitUSD, is it at 101 BTSX per $ maybe more?
I don't understand how bytemaster can so easily guarantee that someone will be willing to provide him with bitUSD to cover at a profit.
I will have a huge incentive to provide very highly collateralized shorts and then cover at very narrow spreads because I will remain net long BTSX.
Or maybe this isn't the problem.
If no one is willing to buy from bot or any other short for that matter, then we continue with what we've got with a bid and ask market well below the peg. There's still no incentive to pay more for bitUSD. There's plenty of supply below the peg.
At any rate, I'll spend some more time with this. Its often slow to sink in.
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I think I see what you're saying: there exists undervalued bitUSD *right now* and the new mechanism's tight peg won't kick in until all existing bitUSD has been bought up to $1. In that sense, this mechanism doesn't provide "extra" incentive to correct for the result of the old one.
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I think I see what you're saying: there exists undervalued bitUSD *right now* and the new mechanism's tight peg won't kick in until all existing bitUSD has been bought up to $1. In that sense, this mechanism doesn't provide "extra" incentive to correct for the result of the old one.
Yes and the currant gap will continue to exist with the new Market Engine until there is actual demand/utility for bitUSD.
And I do not think the yield is actually attracting any interest as of this moment. Practically all BTSX holders believe (rightly so imo) that BTSX will grow in price more than the 5 or 10% interest that biitUSD offers. Nobody has bought BTSX so they can save in bitUSD, not yet, in other words.
[edit] The good part is if indeed the code is ready, already. As much as I have my share of doubts about the effectiveness of the proposal, the proposal will not directly hurt the market, imo. Delaying other important parts of the system, was my main concern with it.
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EDIT: I posted this answer a couple hours ago in a wrong thread. It supposed to belong here... I admit I wouldn't write it down after all replies I have allready read...
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It is getting to complicated !
Make it please simple!
Cut the Gordian knot!
In theory maybe it's ok, or maybe you will find even "better" solutions than the initial proposal but I think
it will not work! I feel allready I must go to a University to study bitsharesx before starting with trading!
Let the market free! Remove even the initial restrictions for shorting? What can go so wrong ? What are we afraid? Its normal on early days to have a peg even at -40% at some point because the volatility is huge now for BTSX, but that will change after some weeks/months.... Its different to have a 60 million market cap and different with 6 billion (and we get there).
What do you think will the average investor/speculator/supporter do when 1 bitUSD is 0.6 USD ? (Personally I will only watch because I would have gave all my money for bitUSD when it was at 0.75 USD).And what will I do when 1 bitUSD goes to 1.1 USD? Guess!.... I mean it doesn't need a rocket scientist to predict what will happen! The early days the peg will deviate from parity and every day it passes and the market matures it will come closer and closer... Am I missing something??? We must give more time to the market!
And yes it is more importand to have a stable platform right now with lots of new futures, tweaks, design improvements,bug free and more secure, and of course begin the marketing aggressively. Without happy users (market) the peg will never be established even if we have 10 Agents on our team.
PS After all it's a bitUSD, think about it! The most stable cryptocurrency that gives you interrest....
PS2 Try to accomplish your goals only with a free market and .... interest/dividends
PS3 I really think it will make a big difference when you let the users make orders (bid or asks) depended of the ratio... [(bitAsset price) / (median price of realAsset)]
For example : buy x bitUSD at ratio:85% nobody would be afraid to make orders !!!!!!!!!!!! for me that's the cut of the GORDIAN KNOT!!!!!!!!! That's the way to help the peg!!!!
Then we see on the charts BIG BIG WALLS.... ;)
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The goal isn't to get people to buy BitUSD. If bitUSD is undervalued it is not because "there is not enough bitUSD demand" and it is not fixed by getting more people to buy bitusd. The goal is to make a tight peg which does not depend on getting the right amount of demand for holding bitUSD because you can never get it right. This new incentive scheme lets people maintain a peg while staying long BTSX. If nobody buys bitUSD afterwards it means there shouldn't be any bitUSD and that is fine.
So can we use this same argument to say that having interest or yields on BitAssets is not necessary other than for marketing reasons? Meaning regardless of whether we have 10% or 5% or 0% interest on BitUSD, the market mechanisms will ensure a good peg to the US dollar and thus create demand for BitUSD for people who want price stability. Thus, the only reason for interest/yield is to incentivize more people to hold the BitAssets rather than holding the underlying assets or holding BTSX. Now I am not sure why we care much whether people hold BitAssets vs BTSX, but it is clear why we would want them to hold BitAssets rather than the real world underlying assets, because that puts value into BitShares X and thus BTSX. For that reason, I see value in providing moderate yields (if possible) that out-compete what people can get by holding the real world assets. So a 5% annual yield on BitCurrencies kicks the ass of any other bank out there. But why have higher yields than that and why do we need to spend that money on yields for BitAssets where people could not get that kind of interest by holding the underlying, such as gold, oil, or BTC? In my view it would be smarter to take the value that would have been spent on those yields and instead use them to either boost the yields of the BitCurrencies if necessary, or give them to the delegates so they can invest in growing the BitShares ecosystem faster. And yes, I know this complicates the code, but I think it is worth it to eventually build into the system.
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Why not just make the feed the end all? Don't let delegates publish feeds, let them decide which exchanges should be used to discover the median price. Then the median price feed from all third party exchanges along with their prices in real time should be displayed in the GUI. It should update as close to real time as possible. Then you just don't allow any order away from the median feed at that given moment to execute. It will always be true to the outside value of BTSX. Not sure if it's possible but sounds good. This of course should only be done with the currencies.
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For that reason, I see value in providing moderate yields (if possible) that out-compete what people can get by holding the real world assets. So a 5% annual yield on BitCurrencies kicks the ass of any other bank out there. But why do we higher yields than that and why do we need to spend that money on yields for BitAssets where people could not get that kind of interest by holding the underlying, such as gold, oil, or BTC?
Because we want to kick ass in as many markets as possible. You could invest in a gold ETF and get gold exposure, but the vault and management fees come out of investor funds. Or you could invest in BitGold, get the same financial exposure and earn interest. From BTSX investors' standpoint, the most likely path to wild success and great riches appears to be mass market adoption of BitUSD and/or BitCNY as a payment and deposit account product for ordinary consumers. But that doesn't mean we shouldn't court commodity and currency exchange investors and traders as well. Demand for BTSX as collateral, and transaction fees, is good for BTSX investors regardless of the source. So stimulating that demand with yield makes sense -- especially for investments that don't normally have yields.
As for why we would want higher yields -- in theory, we would always want our yield to be the smallest needed to out-compete our competitors, convert the rest to BTSX and burn the BTSX. In practice, hard-coding a yield now will make us brittle and inflexible if the real world sees a higher interest rate environment in the future. And letting humans control yields makes the system opaque and political. It would be an interesting experiment, but I think there are excellent marketing reasons to keep the more controversial aspects of the real-world financial system far from any blockchain we're going to advertise as part of the BitShares brand.
That being said, I would support selling some fixed fraction of BitAsset-denominated fees for BTSX which would be burned / given to delegates in the same way as other BTSX-denominated fees. (We don't want to give the BitAssets directly to delegates in order to ensure BTSX investors to get a return.)
In my view it would be smarter to take the value that would have been spent on those yields and instead use them to either boost the yields of the BitCurrencies if necessary, or give them to the delegates so they can invest in growing the BitShares ecosystem faster. And yes, I know this complicates the code, but I think it is worth it to eventually build into the system.
That gets into a debate on the proper role and place of delegates. I tend to view delegates as something that was a technical implementation decision undertaken mainly to have reliable ten-second block times, which (it may be argued) is a necessary precondition of having a liquid and dynamic on-chain market, which itself is a precondition to the whole BitAsset short/long system. So I would support less active delegates with lower payouts, especially if we're giving them income as well.
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Why not just make the feed the end all? Don't let delegates publish feeds, let them decide which exchanges should be used to discover the median price. Then the median price feed from all third party exchanges along with their prices in real time should be displayed in the GUI. It should update as close to real time as possible. Then you just don't allow any order away from the median feed at that given moment to execute. It will always be true to the outside value of BTSX. Not sure if it's possible but sounds good.
It sounds horrible. You'd be giving an immense amount of control to utterly un-accountable third-party exchanges.
Currently there's a delegate in the loop to decide which exchanges are reliable, what data to use, how to pull or combine data from multiple exchanges, etc. That delegate is accountable to BTSX shareholders because they can always be removed.
And this proposal is also basically technically impossible. Because everybody has to agree on what the exchange says -- which we can't do unless the exchange publishes signed timestamped price notifications. Of course we could have a "gateway" that takes raw data from the exchange and publishes a signed feed, but you're adding another un-accountable middleman with that approach -- we can only check what gateway said the price feed was. But, you say, we could have multiple gateways, all publishing their own feeds and cross-checking each other. But then you have a bunch of message spam for tiny price movements, so you have to impose transaction costs on the gateways so they don't publish trivial updates too often. And it would be nice to have a method to remove gateways if they're misbehaving.
So if you take your idea to its logical conclusion, taking into account real-world engineering constraints, what you end up building is...exactly the system that's already in place, where the "gateways" in the above description are the delegates.
Oh, and btw, having everyone's client continuously contact a single third-party site is problematic because it imposes a lot of bandwidth costs on that site without compensation, inviting them to ban us or even driving them out of business. Plus there's privacy implication -- if the site notices transactions to/from a certain address tend to appear on the blockchain when a BitShares client from a certain IP address is active, they've effectively de-anonymized someone.
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For that reason, I see value in providing moderate yields (if possible) that out-compete what people can get by holding the real world assets. So a 5% annual yield on BitCurrencies kicks the ass of any other bank out there. But why do we higher yields than that and why do we need to spend that money on yields for BitAssets where people could not get that kind of interest by holding the underlying, such as gold, oil, or BTC?
Because we want to kick ass in as many markets as possible. You could invest in a gold ETF and get gold exposure, but the vault and management fees come out of investor funds. Or you could invest in BitGold, get the same financial exposure and earn interest. From BTSX investors' standpoint, the most likely path to wild success and great riches appears to be mass market adoption of BitUSD and/or BitCNY as a payment and deposit account product for ordinary consumers. But that doesn't mean we shouldn't court commodity and currency exchange investors and traders as well. Demand for BTSX as collateral, and transaction fees, is good for BTSX investors regardless of the source. So stimulating that demand with yield makes sense -- especially for investments that don't normally have yields.
I understand that, but these are strategic decisions that I think ultimately the shareholders should have control over. If we can reduce the yield on BitGold for example, but now we have more money to spend on marketing or development, we might be able to grow BTSX value faster.
As for why we would want higher yields -- in theory, we would always want our yield to be the smallest needed to out-compete our competitors, convert the rest to BTSX and burn the BTSX. In practice, hard-coding a yield now will make us brittle and inflexible if the real world sees a higher interest rate environment in the future. And letting humans control yields makes the system opaque and political. It would be an interesting experiment, but I think there are excellent marketing reasons to keep the more controversial aspects of the real-world financial system far from any blockchain we're going to advertise as part of the BitShares brand.
That being said, I would support selling some fixed fraction of BitAsset-denominated fees for BTSX which would be burned / given to delegates in the same way as other BTSX-denominated fees. (We don't want to give the BitAssets directly to delegates in order to ensure BTSX investors to get a return.)
In my view we should let the shareholders vote on proposals adjusting the yield rate caps and the prioritization of BitAsset yields (for example, if we have limited funds available lets make sure we give BitUSD and BitCNY their full 5% before we use excess to provide yield to BitGold for example). I understand this makes the whole system more political and how that could be made to look bad by our competitors, but the alternative is to let the chaos of bid-ask overlap determine these (in my opinion) incredibly strategic business decisions that have an impact on the future success of this DAC. I think it is even more important now that the new market rules means the market fees from bid-ask overlap will be much lower (for good reason of course, although I still haven't been convinced it is better than the capital gains tax method (https://bitsharestalk.org/index.php?topic=8396.msg109907#msg109907) of prioritizing shorts). It will also be especially important if any clones pop up that decide to do smarter distributions of the DAC's revenue.
In my view it would be smarter to take the value that would have been spent on those yields and instead use them to either boost the yields of the BitCurrencies if necessary, or give them to the delegates so they can invest in growing the BitShares ecosystem faster. And yes, I know this complicates the code, but I think it is worth it to eventually build into the system.
That gets into a debate on the proper role and place of delegates. I tend to view delegates as something that was a technical implementation decision undertaken mainly to have reliable ten-second block times, which (it may be argued) is a necessary precondition of having a liquid and dynamic on-chain market, which itself is a precondition to the whole BitAsset short/long system. So I would support less active delegates with lower payouts, especially if we're giving them income as well.
I agree with that view actually. I just said "give them to the delegates" for simplicity. In reality, I would like to see a proposal system (https://bitsharestalk.org/index.php?topic=8630.msg112050#msg112050) used to allow the shareholders to decide how the DAC's revenue is distributed.
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Earlier I said that market makers do not help the market to move toward the peg. They are merely providers of liquidity around the market's equilibrium price, and only narrow the spread around that price wherever that is. They can only help to maintain the peg if that is indeed where the market wants to be. Nobody in this thread has noted or rebutted this comment. Is this important or not?
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It sounds horrible. You'd be giving an immense amount of control to utterly un-accountable third-party exchanges.
Where do you think the published price feeds come from now?
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I am still not sure about this. Say the price feed is 100btsx/1$ and the spread is 1btsx. If my short at 100btsx/$1 takes priority because it is highly collateralized and it gets filled, where is the guarantee that if I place a bid to cover at 99btsx/$1 that it will get filled? I presume that if my short gets filled then all asks up to 100btsx/1$ have been filled and new asks would have to come in at 99btsx/$1 for me to cover. What if the market shoots strait up to 105btsx/1$. I am having trouble seeing where the market maker has very little to no risk.
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What if the market shoots strait up to 105btsx/1$. I am having trouble seeing where the market maker has very little to no risk.
This is an important objection to consider. I think there are two good responses:
- If the price is steady at 100 BTSX / $1 for 8 hours, and each hour the market maker successfully shorts at 100 BTSX and buys at 99 BTSX, then they made 8 BTSX. If during the 9th hour the price then goes up to 105 BTSX in a sudden move after the market maker has shorted but before they can cover, then taking the 5 BTSX loss still leaves 3 BTSX profit.
- Sudden moves happen in both directions. They lose 5 BTSX when they're short and BitUSD rises to 105 BTSX, but they gain 5 BTSX when they're short and BitUSD falls to 95 BTSX. If you're bullish about BTSX in the long term, then you expect the downward BitUSD movements to outnumber upward BitUSD movements. bytemaster noted that this improvement is specifically targeted to making things more convenient for BTSX bulls.
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What if the market shoots strait up to 105btsx/1$. I am having trouble seeing where the market maker has very little to no risk.
This is an important objection to consider. I think there are two good responses:
- If the price is steady at 100 BTSX / $1 for 8 hours, and each hour the market maker successfully shorts at 100 BTSX and buys at 99 BTSX, then they made 8 BTSX. If during the 9th hour the price then goes up to 105 BTSX in a sudden move after the market maker has shorted but before they can cover, then taking the 5 BTSX loss still leaves 3 BTSX profit.
- Sudden moves happen in both directions. They lose 5 BTSX when they're short and BitUSD rises to 105 BTSX, but they gain 5 BTSX when they're short and BitUSD falls to 95 BTSX. If you're bullish about BTSX in the long term, then you expect the downward BitUSD movements to outnumber upward BitUSD movements. bytemaster noted that this improvement is specifically targeted to making things more convenient for BTSX bulls.
I think we are throwing "market maker" around to loosely. Rarely will a true market maker be one directional. A MM won't put trades on without hedging risk, or having a spread advantage before the trade is initiated. This is where options and "beta weighting" play big parts in trading. A good MM will stay near delta neutral. This means they will offset risk by selling premium with low probabilities or buy premium with high probabilities. We do not have that option right now. When the markets become more liquid we will. Rules will not bring liquidity quicker. Traders/people will. There is a reason the SPY and the QQQ are highly traded with a PENNY SPREAD!
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While not understanding this stuff, it seems the last solution price fixed collateral (Sub-optimal) but this one price fixes fee/interest. (Sub-optimal)
This solution makes it better for market makers but decreases genuine BitAsset demand as it offers interest rates that are 300%+ lower probably??
Isn't the best system one that encourages market makers and genuine BitAsset holders, Optimal interest + optimal collateral?
I don't know how to implement this & haven't shorted before, but thoughts..
1. Simplicity
Regardless of shorting system, perhaps the main BitUSD market page should maybe just show & allow buying and selling to keep it very simple for users.
Then have a separate tab - 'Short BitUSD (Advanced)'
2. For the long term shorts it should be made simple. They just choose short and compete on fee/interest. (The system automatically places/keeps their order at 1-1 whatever that rate happens to be.)
For the market makers they enter shorts as per this proposal.
50% of new BitUSD is awarded to highest collateral and 50% to highest fee/interest when demand is at or above feed.
Then we have a system with more collateral and attractive interest that encourages market makers and genuine BitAsset demand (who will also appreciate more collateral & tighter range)
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My two cents,
The people who provide liquidity are not gambling on a fair and balanced game, they are flossing sheep who graze on bitUSD. No sheep grazing on bitUSD, no liquidity.
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I think that now that the price of BTC, it will be a good idea to implement this
https://bitsharestalk.org/index.php?topic=9075.0
as discussed by emski and drltc.
If you can buy directly bitUSD with BTC it will allow day traders to close their positions at a minimal risk / expense.
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I think that now that the price of BTC, it will be a good idea to implement this
https://bitsharestalk.org/index.php?topic=9075.0
as discussed by emski and drltc.
If you can buy directly bitUSD with BTC it will allow day traders to close their positions at a minimal risk / expense.
Not trustless, not liquid, but trading:
https://bter.com/trade/BTC_BITUSD
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While not understanding this stuff, it seems the last solution price fixed collateral (Sub-optimal) but this one price fixes fee/interest. (Sub-optimal)
This solution makes it better for market makers but decreases genuine BitAsset demand as it offers interest rates that are 300%+ lower probably??
Isn't the best system one that encourages market makers and genuine BitAsset holders, Optimal interest + optimal collateral?
I don't know how to implement this & haven't shorted before, but thoughts..
1. Simplicity
Regardless of shorting system, perhaps the main BitUSD market page should maybe just show & allow buying and selling to keep it very simple for users.
Then have a separate tab - 'Short BitUSD (Advanced)'
2. For the long term shorts it should be made simple. They just choose short and compete on fee/interest. (The system automatically places/keeps their order at 1-1 whatever that rate happens to be.)
For the market makers they enter shorts as per this proposal.
50% of new BitUSD is awarded to highest collateral and 50% to highest fee/interest when demand is at or above feed.
Then we have a system with more collateral and attractive interest that encourages market makers and genuine BitAsset demand (who will also appreciate more collateral & tighter range)
+5% for #1
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Think of the shorts as usd issuers who cannot run off with your money and are competing to put the most on the line.
Right now few shorts want to cover because their losses are big and they don't think btsx can go much lower.
I hope they are right.
A market maker in my case is someone who doesn't mind a little short exposure because they are btsx bullish. BitUSD will never surge to more than $1 while there are so many bulls like myself looking for leverage.
The key is to allow shorts to cover with no fee as soon as possible to provide liquidity for usd holders.
If people have high confidence that they can sell their usd near a dollar then they will buy. The problem is that there is not any confidence in that and thus little demand.
Monday will change all of that. We will create a trading bot that will buy all the usd it can short at 99.5% of market price.
There will be huge buy and sell walls right near the peg.
Once those walls are proven then usd holders will consider the yield and utility and demand will come.
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Simplicity - add a checkbox "advanced mode" that will show all functionality.
Without it -> only simple buy/sell with a single click of a button.
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Simplicity - add a checkbox "advanced mode" that will show all functionality.
Without it -> only simple buy/sell with a single click of a button.
This will make a lot more sense one the spread is narrow.
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I think that now that the price of BTC, it will be a good idea to implement this
https://bitsharestalk.org/index.php?topic=9075.0
as discussed by emski and drltc.
If you can buy directly bitUSD with BTC it will allow day traders to close their positions at a minimal risk / expense.
Not trustless, not liquid, but trading:
https://bter.com/trade/BTC_BITUSD
Yes, a day trader is dealing at Bitstamp could just convert BTC to USD. The proposal here is that to avoid risks (Bitstamp, Bter going down, hacked, etc) is to convert your BTC to bitUsd and store it in your wallet. Next day the day trader can start dealing again here or Bitstamp, Bter ....
*Extra*
BTW I am happy with the idea of the market maker, I am just proposing simple solutions to increase the demand of bitUSD which was one of the issues here.
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Still blowing my mind that we can short bitUSD on a blockchain. 8)
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Think of the shorts as usd issuers who cannot run off with your money and are competing to put the most on the line.
Right now few shorts want to cover because their losses are big and they don't think btsx can go much lower.
I hope they are right.
A market maker in my case is someone who doesn't mind a little short exposure because they are btsx bullish. BitUSD will never surge to more than $1 while there are so many bulls like myself looking for leverage.
The key is to allow shorts to cover with no fee as soon as possible to provide liquidity for usd holders.
If people have high confidence that they can sell their usd near a dollar then they will buy. The problem is that there is not any confidence in that and thus little demand.
Monday will change all of that. We will create a trading bot that will buy all the usd it can short at 99.5% of market price.
There will be huge buy and sell walls right near the peg.
Once those walls are proven then usd holders will consider the yield and utility and demand will come.
Sounds good, this should work and have an incentivising effect for genuine longs too. I'm personally looking forward to a BitGold & BitSilver with more collateral as I was worried about a sudden upside revaluation due to Comex default or something.
However at some point increasing collateral won't create an additional incentive for genuine longs but converting competition from long term shorts who don't mind competing on fees, would. So it seems like there's money and BitAsset demand being left on the table here, though probably best not to over-complicate it.
Either way I won't judge this change by it's immediate effect as I think genuine long demand will build slowly, unless there's a real world financial event, as things like a very stable client, decentralisation of voting stake, as well as just a track record of a functioning BitAsset system may be required to create significant BitAsset demand.
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Monday will change all of that. We will create a trading bot that will buy all the usd it can short at 99.5% of market price.
There will be huge buy and sell walls right near the peg.
Once those walls are proven then usd holders will consider the yield and utility and demand will come.
Is this reference to the market making bot made freely available in another thread? Are the walls expected immediately (now Monday is ending) or to build over time as more people use the bot? Or is it something else?
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Monday will change all of that. We will create a trading bot that will buy all the usd it can short at 99.5% of market price.
The bot is live I guess...
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Monday will change all of that. We will create a trading bot that will buy all the usd it can short at 99.5% of market price.
The bot is live I guess...
Can the devs confirm status? Be interesting to know if the bot is running..
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@Devs.
I do not know if this is by design but the short-wall is following the 1h average it seems not the feed price... Re: check the bitBTC/BTSX market right now.
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@Devs.
I do not know if this is by design but the short-wall is following the 1h average it seems not the feed price... Re: check the bitBTC/BTSX market right now.
Insufficient feeds
Sent from my SCH-I535 using Tapatalk
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there is a proposal about enabling short of BTSX to enhance peg here:
https://bitsharestalk.org/index.php?topic=9053.0 (https://bitsharestalk.org/index.php?topic=9053.0)
And I translated it as the following:
I think we can consider implementing 'short BTSX', just like 'futures markets' in real world.
Short of BTSX can be implemented by collateralization of BitAssets; this will enable hedge of both sides, and prevent too many BitAsset short orders. In this way, the rules will be greatly simplified.
In the beginning of enabling BTSX short, some protections are still needed:
1、price feeding by delegates is still needed, and the extreme 10% of price feed should be removed from average price.
2、short of BTSX should be matched with minimal price, e.g.,100BTSX/BitCNY
3. order based on 1hr average price is still needed
with the short of BTSX, the process of pegging will be accelerated. If there is too many BTA in the market, short of BTSX can make extra profit.
and another rule should be added: all shorts needs to be covered in a year, or will be charged 5% of interest.
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@Devs.
I do not know if this is by design but the short-wall is following the 1h average it seems not the feed price... Re: check the bitBTC/BTSX market right now.
Insufficient feeds
Sent from my SCH-I535 using Tapatalk
I had to restart due to the 'fork bug', but it seemed as if enough feeds were present at the time. 'Old feeds' will be a good explanation for that ...
Anyway, nothing too alarming, just a possible bug report, is what that was.
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Great job. Really like the new system and the GUI - graphs, advanced mode and the way you enter shorts with collateral. It looks good and all seems much easier to use than the last time I tried trading a few weeks ago.
Will market makers not struggle to compete with long term shorts on collateral though?
What if there was a max collateral & after that you competed on fee per BTSX you were willing to pay to short, but that fee would only be deducted if you hadn't covered within a week/month.
I think something like this would actually benefit market makers as well as increase yield for BitAssets?
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Great job. Really like the new system and the GUI - graphs, advanced mode and the way you enter shorts with collateral. It looks good and all seems much easier to use than the last time I tried trading a few weeks ago.
Will market makers not struggle to compete with long term shorts on collateral though?
What if there was a max collateral & after that you competed on fee per BTSX you were willing to pay to short, but that fee would only be deducted if you hadn't covered within a week/month.
I think something like this would actually benefit market makers as well as increase yield for BitAssets?
I have been thinking about this and market makers can provide high collateral because they get their yield from the spread.... shorts wouldn't want to post that high of a collateral because their ROI would be far less.
The primary idea I have been contemplating is a "maximum short duration" on the order of a week to 1 month after which the short is required to cover at market price. This keeps people honest and prevents market makers from having to carry the float for all short interest for all time. A market maker can then count on all shorts having to cover and price their spreads accordingly. I think "churn" of short orders will be important to the peg.
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Great job. Really like the new system and the GUI - graphs, advanced mode and the way you enter shorts with collateral. It looks good and all seems much easier to use than the last time I tried trading a few weeks ago.
Will market makers not struggle to compete with long term shorts on collateral though?
What if there was a max collateral & after that you competed on fee per BTSX you were willing to pay to short, but that fee would only be deducted if you hadn't covered within a week/month.
I think something like this would actually benefit market makers as well as increase yield for BitAssets?
I have been thinking about this and market makers can provide high collateral because they get their yield from the spread.... shorts wouldn't want to post that high of a collateral because their ROI would be far less.
The primary idea I have been contemplating is a "maximum short duration" on the order of a week to 1 month after which the short is required to cover at market price. This keeps people honest and prevents market makers from having to carry the float for all short interest for all time. A market maker can then count on all shorts having to cover and price their spreads accordingly. I think "churn" of short orders will be important to the peg.
I know those that hold CFD contracts in the forex market through the brokers have an expiry where each month (or quarter, depending on CFD) you have to roll your contract over by rebuying the contract or simply letting it expire and taking the profit/loss. This only applies to CFD because maybe the broker is buying future contracts to hedge against your position internally. To the broker it ends up acting as a "short" position in a way.
So the daily rollover provides interest if holding in the right direction for all positions, and a montly rollover ends your contract ONLY if you are holding CFD positions. THis way the broker (market maker) is guaranteed to create fees from the spread because of the "churn".