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Quote from: Agent86 on August 28, 2014, 12:36:55 pmI want to give clarity about the difference between BitUSD and interest bearing bonds and how market based interest rates can be established. I also want to emphasize what is needed to fix the BitUSD peg.A couple comments from bytemaster have motivated this post:Quote from: bytemaster on August 27, 2014, 03:09:19 pmBitUSD is a market between those who want leverage and those who want stability. The "price" in this market will depend upon the interest rate people are willing to borrow at to get the leverage they desire.Quote from: bytemaster on August 27, 2014, 04:07:03 pm Bottom line, you cannot get rid of "interest rates" or "premiums" by resorting to price feeds or price fixing. BitUSD is not supposed to have an associated interest rate. It's just supposed to track the dollar. People will buy a bitUSD that reliably tracks the dollar for the purpose of facilitating trade, not for getting interest.The current BitUSD market implementation is flawed and the peg is not working. The notion that the difference between USD and bitUSD price is an "interest rate" is inaccurate. There is nothing stopping the bitUSD price from falling further without intervention.The method to fix the peg is to use the price feed to limit the creation of new bitUSD by preventing shorts from shorting below the USD price.Interest bearing bonds require a separate market and implementation from the core BitUSD market. A BTSX holder can sell a collateralized promise to pay a certain amount of bitUSD at a certain date in the future. There can then be a "bond market" for these promissory notes. The present day value of these future promises to pay BitUSD will determine short term and long term interest rates.The first step however is to get the bitUSD implementation to accurately track the dollar. And for this we must use the price feeds as I've described.There are points in this post that I totally agree with, I could not agree more with.(BLUE)But most of it is something that hopefully will never happen. (RED)All in all, I HOPE we break the pattern of BM agreeing with each suggestion A86 makes.
I want to give clarity about the difference between BitUSD and interest bearing bonds and how market based interest rates can be established. I also want to emphasize what is needed to fix the BitUSD peg.A couple comments from bytemaster have motivated this post:Quote from: bytemaster on August 27, 2014, 03:09:19 pmBitUSD is a market between those who want leverage and those who want stability. The "price" in this market will depend upon the interest rate people are willing to borrow at to get the leverage they desire.Quote from: bytemaster on August 27, 2014, 04:07:03 pm Bottom line, you cannot get rid of "interest rates" or "premiums" by resorting to price feeds or price fixing. BitUSD is not supposed to have an associated interest rate. It's just supposed to track the dollar. People will buy a bitUSD that reliably tracks the dollar for the purpose of facilitating trade, not for getting interest.The current BitUSD market implementation is flawed and the peg is not working. The notion that the difference between USD and bitUSD price is an "interest rate" is inaccurate. There is nothing stopping the bitUSD price from falling further without intervention.The method to fix the peg is to use the price feed to limit the creation of new bitUSD by preventing shorts from shorting below the USD price.Interest bearing bonds require a separate market and implementation from the core BitUSD market. A BTSX holder can sell a collateralized promise to pay a certain amount of bitUSD at a certain date in the future. There can then be a "bond market" for these promissory notes. The present day value of these future promises to pay BitUSD will determine short term and long term interest rates.The first step however is to get the bitUSD implementation to accurately track the dollar. And for this we must use the price feeds as I've described.
BitUSD is a market between those who want leverage and those who want stability. The "price" in this market will depend upon the interest rate people are willing to borrow at to get the leverage they desire.
Bottom line, you cannot get rid of "interest rates" or "premiums" by resorting to price feeds or price fixing.
Quote from: liondani on August 29, 2014, 07:31:48 amQuote from: liondani on August 29, 2014, 04:38:25 amIn the mean time BTSX crashes.... let's analyze it:BTSX drops because they are selling BTSX...the problem is they don't sell it for bitUSD (if that was the case it would rise near the USD prize).They sell outside the BTSX platform on centralized exchanges.Why they don't sell for bitUSD on our platform? 1.Because they are not confident that the peg will hold due the difference between bitUSD vs USD getting bigger and bigger...2.The conversation here help not so much to build the needed confidence at least for the outsiders.3.Because they can not access our platform due several bugs and several updates each day (the most have not enough time to care about, except they are delegates...)4.Because they "bet" btsx will rise again. (shorting bitUSD)Thoughts?It is quite unique way of thinking - 'they sell BTSX because they think it will rise again.'Unfortunately, it is the perception that similar logic might be the logic taking over here... so naturally they sell. Not because they like centralized exchanges, but just because they sell where they can actually sell
Quote from: liondani on August 29, 2014, 04:38:25 amIn the mean time BTSX crashes.... let's analyze it:BTSX drops because they are selling BTSX...the problem is they don't sell it for bitUSD (if that was the case it would rise near the USD prize).They sell outside the BTSX platform on centralized exchanges.Why they don't sell for bitUSD on our platform? 1.Because they are not confident that the peg will hold due the difference between bitUSD vs USD getting bigger and bigger...2.The conversation here help not so much to build the needed confidence at least for the outsiders.3.Because they can not access our platform due several bugs and several updates each day (the most have not enough time to care about, except they are delegates...)4.Because they "bet" btsx will rise again. (shorting bitUSD)Thoughts?
In the mean time BTSX crashes....
Quote from: toast on August 29, 2014, 01:23:34 amQuote from: delulo on August 29, 2014, 01:20:34 amThe price feed (as suggested by Agent86) means that BitUSD could only be sold at exactly the BTSX/USD rate defined by the median price feed?only *shorted* (can still be sold), at a rate defined by median or moving average when there is no feedSo, the suggestion by Agent and what BM has apparently agreed *2 to only affects a shorters price? A normal *1 buyer/seller can choose any price?
Quote from: delulo on August 29, 2014, 01:20:34 amThe price feed (as suggested by Agent86) means that BitUSD could only be sold at exactly the BTSX/USD rate defined by the median price feed?only *shorted* (can still be sold), at a rate defined by median or moving average when there is no feed
The price feed (as suggested by Agent86) means that BitUSD could only be sold at exactly the BTSX/USD rate defined by the median price feed?
Quote from: Agent86 on August 28, 2014, 05:47:20 pmI think implementing the price feed will stabilize the price at $1 pretty quickly as long as it is done reasonably soon. I appreciate the necessity to maintain an accurate peg, both quickly and to term. I am failing to make the connection between the influence the price feed has on the creation/issuance of the bond you reference. -Respectfully
I think implementing the price feed will stabilize the price at $1 pretty quickly as long as it is done reasonably soon.
@Agent86Does the current discrepancy in the peg (purported to be ~5-15%) represent anything beyond bitUSD market risk? Are you proposing to convert this risk into a new bond instrument (perhaps bitUSDbond) to stabilize the peg? How does (re)implementing a bitUSD price feed impact the bond instrument pricing movement over time?
I also think it is a little early to give up on this.
Quote from: Empire on August 28, 2014, 04:12:42 pmQuote from: Agent86 on August 28, 2014, 04:01:00 pmQuote from: Empire on August 28, 2014, 03:51:10 pmAgent86, In your system, lets say I have BitUSD to sell but there are currently no buyers at 0.9 vs. the dollar. Who do I sell to?You'll generally have no problem finding buyers if you are selling BitUSD under the value of a dollar. The shorts have to close out their position to get their shares back sometime and they'll see bitUSD selling for less than the price of USD as a great opportunity to close out their position profitably. Also, no more bitUSD will come into existence until the market has corrected and people have scooped up the bitUSD.We currently do have a problem finding buyers for BitUSD under the value of a dollar?Yes, we currently have a problem of not enough buyers because we are allowing shorts to sell newly minted USD onto the market under the value of a dollar.
Quote from: Agent86 on August 28, 2014, 04:01:00 pmQuote from: Empire on August 28, 2014, 03:51:10 pmAgent86, In your system, lets say I have BitUSD to sell but there are currently no buyers at 0.9 vs. the dollar. Who do I sell to?You'll generally have no problem finding buyers if you are selling BitUSD under the value of a dollar. The shorts have to close out their position to get their shares back sometime and they'll see bitUSD selling for less than the price of USD as a great opportunity to close out their position profitably. Also, no more bitUSD will come into existence until the market has corrected and people have scooped up the bitUSD.We currently do have a problem finding buyers for BitUSD under the value of a dollar?
Quote from: Empire on August 28, 2014, 03:51:10 pmAgent86, In your system, lets say I have BitUSD to sell but there are currently no buyers at 0.9 vs. the dollar. Who do I sell to?You'll generally have no problem finding buyers if you are selling BitUSD under the value of a dollar. The shorts have to close out their position to get their shares back sometime and they'll see bitUSD selling for less than the price of USD as a great opportunity to close out their position profitably. Also, no more bitUSD will come into existence until the market has corrected and people have scooped up the bitUSD.
Agent86, In your system, lets say I have BitUSD to sell but there are currently no buyers at 0.9 vs. the dollar. Who do I sell to?
Quote from: Empire on August 28, 2014, 04:34:42 pmOk so you would move the current market into a separate vehicle on BTSX as an 'interest bearing bond'QuoteInterest bearing bonds require a separate market and implementation from the core BitUSD market. I think you are confused about what I'm proposing…
Ok so you would move the current market into a separate vehicle on BTSX as an 'interest bearing bond'QuoteInterest bearing bonds require a separate market and implementation from the core BitUSD market.
Interest bearing bonds require a separate market and implementation from the core BitUSD market.
The method to fix the peg is to use the price feed to limit the creation of new bitUSD by preventing shorts from shorting below the USD price.
Another way to look at it is this: People who want to short USD really bad to get the more upside exposure to BTSX will either have to compete to short at $1 or they will have to pay interest via issuing a bond. They can't just screw up the peg.
However if I'm a BitUSD buyer. Will I prefer to buy at 0.9 on your price fixed market, where I may not be able to find a seller at times because the price is fixed and people may at times not want to buy within that range.
Or would I prefer to buy my BitUSD on the other market at a better rate or interest rate, where I also know I can always find a buyer. It seems BitUSD buyers would gravitate to the free market which is also paying them a better price to buy.
(I don't know if this makes sense, but for me, another way of looking at the current price is that if you price fixed at exactly 1-1 via price feed. BitUSD Shorts today would be willing to short at 1-1 and give the person going long a few BTSX per dollar as bonus to take the other side because they want to leverage their BTSX position that much. Longs would always choose the biggest bonus. Hence any other market on the same system wouldn't attract the longs.)
BitUSD is not supposed to have an associated interest rate. It's just supposed to track the dollar. People will buy a bitUSD that reliably tracks the dollar for the purpose of facilitating trade, not for getting interest.
What I would prefer instead is to have the blockchain provide liquidity 5-10% around the feed price. (It can be adjusted based on the liquidity insurance balance)Effectively turn the blockchain into a never-lose market maker, that will widen the spread if it is low on insurance money.
If we limit shorts then you are resorting to price fixing. The peg is supposed to have some variance based upon supply and demand
In your limit scenario I can see some benefits... you reduce selling pressure below the price feed. This would give USD sellers a priority over shorts
But right now USD is liquid at a price that is correlated to USD.
But this introduces a requirement for a price feed and the purpose of this experiment is to attempt something without a price feed.
I like the idea of the feed being used for checks and balances. I don't like it having the direct effect like the one described.What I would prefer instead is to have the blockchain provide liquidity 5-10% around the feed price. (It can be adjusted based on the liquidity insurance balance)Effectively turn the blockchain into a never-lose market maker, that will widen the spread if it is low on insurance money.