BitShares Forum
Main => General Discussion => Topic started by: bytemaster on November 14, 2014, 04:30:30 pm
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BitAsset markets can die slowly, never gain adoption, or suffer a black swan. In these events delegates would like to stop publishing feeds but this would prevent margin calls and new shorts from setting a price. In theory if delegates permanently stopped publishing feeds then the value of the BitAsset = BitAssetCollateral/BitAssetSupply "on average" and it comes down to game theory on shorts/longs settling voluntarily.
However, there is still the situation where some BitAsset holdouts refuse to sell (potentially lost their keys) which means that there are some Shorts that are unable to buy and then cover to free their collateral.
In the interest of having a robust system that can handle all of these situations gracefully I would like to propose that with delegate approval (majority vote) a BitAsset can be "reset" and all longs/shorts have their positions closed at the price feed. Some protections can be put in place such as requiring a 2 week waiting period during which delegates can be voted out before the close out becomes official.
With this in place the result of a blackswan would be all BitUSD is converted to BTS funded by the collateral at a price that allows all shorts to fully cover.
This will protect the BitAsset markets at all stages in their life cycle and allow the network to continue without hardforks.
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In the interest of having a robust system that can handle all of these situations gracefully I would like to propose that with delegate approval (majority vote) a BitAsset can be "reset" and all longs/shorts have their positions closed at the price feed. Some protections can be put in place such as requiring a 2 week waiting period during which delegates can be voted out before the close out becomes official.
I agree there needs to be a way to handle such situations cleanly.
HOWEVER, this is AFAIK so far the only case where delegates have the power to seriously mess with someone's possessions. (I. e. in a "normal" 51% attack you can modify history, but you cannot take away someone's money.) Therefore I suggest that more than a simple majority of delegates should be required.
Compare this to a squeeze-out in traditional companies. You can't do that with only 51% of the shares.
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Sounds awful, The delegates should not have any rights except feeding the price.You can't touch any people's assets if there is one person doesn't agree .THAT'S THE BASELINE.(sorry for my poor English)
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Sounds awful, The delegates should not have any rights except feeding the price.You can't touch any people's assets if there is one person doesn't agree .THAT'S THE BASELINE.(sorry for my poor English)
+5%
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How about a vote with all the shareholders to approve such a decision.
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How about a vote with all the shareholders to approve such a decision.
we touch the baseline, we lose everything.you can't vote to take other people’s assets.you just don't have the right.
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Sounds awful, The delegates should not have any rights except feeding the price.You can't touch any people's assets if there is one person doesn't agree .THAT'S THE BASELINE.(sorry for my poor English)
+5%
I agree with the principle.
We have a situation today where delegates can "stop publishing prices" at which point the market will automatically value all BitAssets in that market at about 50% of the collateral backing. So inaction of the delegates forces a slow unwind that ultimately leaves some shorts holding the bag for longs that lost their private key.
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However, there is still the situation where some BitAsset holdouts refuse to sell (potentially lost their keys) which means that there are some Shorts that are unable to buy and then cover to free their collateral.
This is an extreme case, which would hardly happen.
It's not a good idea to touch users asset, because someone might have reason to hold bitasset on hand, instead of put them in the market.
If the bitAsset in the market is insufficient for the shorts to cover, that means the market needs more bitasset, then people will issue more by new shorts.
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However, there is still the situation where some BitAsset holdouts refuse to sell (potentially lost their keys) which means that there are some Shorts that are unable to buy and then cover to free their collateral.
This is an extreme case, which would hardly happen.
It's not a good idea to touch users asset, because someone might have reason to hold bitasset on hand, instead of put them in the market.
If the bitAsset in the market is insufficient for the shorts to cover, that means the market needs more bitasset, then people will issue more by new shorts.
+5%, if it happens ,let it happen.is that hurt the system？
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To be fair the purpose of this discussion is to tie up loose ends that people can use to attack the foundations of BTSX.
All cases need to have a clean answer that is acceptable.
A short risks having his collateral tied up if a long loses their private key. In large markets this turns into infinite demand for some of that BitAsset and is not a problem. In thin markets it is a risk that shorts are exposed to.
People have long criticized our BitAsset system because it was "one sided" and BitUSD couldn't be called.
There are cases where BitUSD needs to be called in extreme events to rebalance everyone.
The question is only "who is the judge" and "how much harm" can that judge do and "how much freedom" does that judge have to act?
So the wind down process needs to have some steps to protect all parties:
1) Stop publishing feeds and let all parties settle voluntarily
2) Wait sufficient time passes without any trades in the market
3) Declare market dead and force settlement of remaining positions.
Under this process delegates would lack the power to harm traders... traders would have a high degree of confidence that the market will ultimately settle at a fair price set by the delegates and thus the voluntary trades will continue to track the real price given the conditions. Once all voluntary settlement is done then the delegates clean up.
This process would protect large mature markets from the delegates having arbitrary power to shut them down and force settlement.
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Eh, I guess if this event gets triggered the depositors are on the chopping block one way or the other and at least this way it's a controlled reboot rather than catastrophic failure.
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Eh, I guess if this even gets triggered the depositors are on the chopping block one way or the other and at least this way it's a controlled reboot rather than catastrophic failure.
Yes... exactly.
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In the interest of having a robust system that can handle all of these situations gracefully I would like to propose that with delegate approval (majority vote) a BitAsset can be "reset" and all longs/shorts have their positions closed at the price feed. Some protections can be put in place such as requiring a 2 week waiting period during which delegates can be voted out before the close out becomes official.
With this in place the result of a blackswan would be all BitUSD is converted to BTS funded by the collateral at a price that allows all shorts to fully cover.
I don't fully understand what this is saying. Assuming there is still a price feed, then in a black-swan event (under-collateralised bitUSD) any closing of longs and shorts at the price feed will result in early sellers getting full payment at the expense of remaining holders. Or are you saying that the delegates would lower the price feed below the peg to reflect the under-collateralisation in the pool?
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Wouldn't theoretically someone see opportunity and make a low risk low probability trade with potential high return trade in that situation? If everyone stops trading then there's a bigger problem because they are onto a different platform/app. Some of the best investors are opening positions when no one else is. You know how that famous Buffet quote goes.
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I still think the best way to avoid a black swan event may be to prioritize by collateral and not interest rate.
In the hopefully unlikely occurance of a black swan event I could see an argument to force bitUSD to sell for BTSX.
I think the most fair way would be to force close the bitUSDs in an order determined by how much BTSX was originally paid for them (least amount of BTSX originally paid for the bitUSD is forced to sell first and are matched with the undercollateralized blown shorts).
Maybe it's a little computationally expensive to track and you could argue it makes bitUSD technically not totally fungible but I think it would be the most fair. I also think it should be a very unlikely event.
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2) Wait sufficient time passes without any trades in the market
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I don't think this will ever happen. Anybody can do a riskless trade by opening and then covering a short position with himself thereby resetting the waiting period.
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If someone cares enough to do that is the market dead?
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2) Wait sufficient time passes without any trades in the market
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I don't think this will ever happen. Anybody can do a riskless trade by opening and then covering a short position with himself thereby resetting the waiting period.
Actually they can't. As soon as someone opens up an order to "trade with themselves" they will find they have opened the door for someone else to "exit" and then they will run out of capital.
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Pls forgive these newbie questions and my lack of knowledge about the markets. I am apparently still a bit foggy on some of the basics of BitAssets.
1) It is my understanding there's nothing very complicated about price feeds, and that most delegates use scripts to create the feeds they publish by aggregating commonly available public prices for assets like gold, silver, oil, dollars etc. If delegates simply stopped their scripts (and thus the feed), why can't the sources be used directly? Isn't the delegate feed just a trusted convenience?
If the script is functioning honestly and without manipulation and is open source, is it unreasonable to expect someone somewhere will be using it to publish an accurate feed, and in that case can't all such script outputs be used to check validity of a particular feed (script) output?
2) Is a "blackswan" event simply the halting of price feed data, and would that be due only b/c all sources being aggregated to produce the feed have stopped making that data available (for example the price of gold after the London fix is closed, like during the weekend)?
Not long ago I posted some questions about BitAssets, with special attention to what price feeds are and how they are set. But this thread leads me to believe the answers I got must have been more conceptual and missing important practical details.
Since BitAssets are extremely important in the BitShares ecosystem, it is imperative I understand them well, and this thread leads me to believe I don't.
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Wouldn't theoretically someone see opportunity and make a low risk low probability trade with potential high return trade in that situation? If everyone stops trading then there's a bigger problem because they are onto a different platform/app. Some of the best investors are opening positions when no one else is. You know how that famous Buffet quote goes.
This wouldn't be for the main markets, it would be for less popular markets such as BitBTC after BTC dies ;)
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Wouldn't theoretically someone see opportunity and make a low risk low probability trade with potential high return trade in that situation? If everyone stops trading then there's a bigger problem because they are onto a different platform/app. Some of the best investors are opening positions when no one else is. You know how that famous Buffet quote goes.
This wouldn't be for the main markets, it would be for less popular markets such as BitBTC after BTC dies ;)
+5%
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2) Wait sufficient time passes without any trades in the market
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I don't think this will ever happen. Anybody can do a riskless trade by opening and then covering a short position with himself thereby resetting the waiting period.
Actually they can't. As soon as someone opens up an order to "trade with themselves" they will find they have opened the door for someone else to "exit" and then they will run out of capital.
The dead state of the market is, I assume, lots of expired shorts waiting to buy at the feed and no supply, right?
(or if there is no feed anymore then there will still be one highest buy order)
An example:
highest buy order 1 BitBTC at 10000 BTS/BitBTC, no sell orders. It has been like this for more than a week.
Now I post an order to buy 0.0001 BitBTS at 10001 BTS/BitBTC.
Nobody will find this order very exciting so I can assume it will not be matched within the next minute.
I am also one of the last holders of a bag of BitBTS dust and I sell myself 0.0001 BitBTS at 10001 BTS/BitBTC.
A trade happened. The risk to myself and the size of the exit door are negligible.
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This is a great theoretical discussion. My opinion? This is a minor issue, aka just put in place some kind of solution.
Speaking of dead markets, I have a story and a question (personal preference - my question answered without a need do read 100K lines of code. code that can change tomorrow)
So the story first. I added a collateral to one of my short positions today, obviously my aim was to increase the call price ( for BM and A86 benefit - I/this means the price stated as BTS/BitAsset). Funny enough said price went down instead of up... very amusing experience....
The question is:
Is there still a 10% safety net... i.e. if my cover is triggered at 25,000 BTS/bitBTC is there an upper bond of the price my cover will be filled. And if yes how is this calculated. Thanks.
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Wouldn't theoretically someone see opportunity and make a low risk low probability trade with potential high return trade in that situation? If everyone stops trading then there's a bigger problem because they are onto a different platform/app. Some of the best investors are opening positions when no one else is. You know how that famous Buffet quote goes.
This wouldn't be for the main markets, it would be for less popular markets such as BitBTC after BTC dies ;)
lol :D
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I'm still unsure what is being proposed in this thread in the case of a black-swan, where a bitAsset becomes under-collateralised. In this case you cannot close everyone out at the price-feed. Would somebody mind spelling out the proposed steps of a wind-down for me?
Also, it may not be that a black-swan event necessarily means we want to wind down that bitAsset market. If we want to preserve it, what is the approach being proposed?
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At the end of the day all BitAssets represent a claim on a fraction of the collateral backing them.
Winding down a BitAsset means forced liquidation of the BitAsset for the collateral.
In the event of a "black swan" collapse of collateral value:
I would suggest that all BitAssets be settled at a price equal to the least collateralized position on the books. This would mean that all margin positions can be covered on equal terms. Considering all positions started at 3x and the "least collateralized positions" were the first to face normal margin calls we can assume that the margin positions that remain use to be relatively highly collateralized and now are not.
In the event of a market fails to attract sufficient demand then simply settle at the feed price because everyone is fully collateralized:
The question becomes "when" do we allow this to happen if at all?
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This is a great theoretical discussion. My opinion? This is a minor issue, aka just put in place some kind of solution.
Speaking of dead markets, I have a story and a question (personal preference - my question answered without a need do read 100K lines of code. code that can change tomorrow)
So the story first. I added a collateral to one of my short positions today, obviously my aim was to increase the call price ( for BM and A86 benefit - I/this means the price stated as BTS/BitAsset). Funny enough said price went down instead of up... very amusing experience....
The question is:
Is there still a 10% safety net... i.e. if my cover is triggered at 25,000 BTS/bitBTC is there an upper bond of the price my cover will be filled. And if yes how is this calculated. Thanks.
I've been watching margin calls closely, and I've never seen one execute above (in BTS/asset) the price feed. This is just from my observations; I'd also like to have clarification on this from BM.
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In the even of black swan, the Delegates should help cover/guarantee all losses by traders so the traders will have full confidence to the market bitAssets.
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In the event of a "black swan" collapse of collateral value:
I would suggest that all BitAssets be settled at a price equal to the least collateralized position on the books. This would mean that all margin positions can be covered on equal terms. Considering all positions started at 3x and the "least collateralized positions" were the first to face normal margin calls we can assume that the margin positions that remain use to be relatively highly collateralized and now are not.
Wouldn't this give BitAsset owners the minimum possible outcome, and favour the shorts who get out at a much more favourable BTS liquidation price?
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could we not handle it, if a black swan occured?
i don't like the idea to give the delegates more power.
in my understanding we want still remove the pricefeeds for the liquid markets?
in my opinion we should take the price feed as orientation and allow the shorts to make a trade below the feed. the difference to the feedprice pay as yield for the bitasset holders. maybe in the beginning we get not a perfect peg price, but the yield would be so much higher.
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This wouldn't be for the main markets, it would be for less popular markets such as BitBTC after BTC dies ;)
I dont want the BitBTC market to die, I wish it was more popular. Its a great way of winning over Bitcoin users.