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Main => General Discussion => Topic started by: kani on January 13, 2017, 04:34:37 pm

Title: Incentivize SmartCoin collateralization
Post by: kani on January 13, 2017, 04:34:37 pm
(originally posted in https://bitsharestalk.org/index.php/topic,23706.msg301759.html#msg30175, start new topic to avoid derailing that discussion and start a new one here).

* Committee-controlled SmartCoins add a 0.1% market fee.
* Every trade in that market generates a small bit of revenue FOR THAT MARKET...
* PAY IT BACK to shorters of that asset!
* Holders do not get dividend, only collateralized positions.
* Amount paid in dividend is based upon how much of the particular bitAsset a user has borrowed.
Title: Re: Incentivize SmartCoin collateralization
Post by: Chris4210 on January 14, 2017, 12:40:43 pm
So the idea is basically to charge a 0.1% fee for trading a bitAsset like BitUSD and pay that fee to those who shorted the asset. This would be an additional income stream for those who created a BitAsset.

I added it to the Roadmap list, so that we can vote for it once we have a clear plan how it should work. However, as stated in the original post I would like to discuss the Bitshares business plan with everybody first, and then adjust the dividend and referral program to that. BitShares has a good toolkit for financial services, and we should get the framework for it down now.
Title: Re: Incentivize SmartCoin collateralization
Post by: Chronos on January 14, 2017, 03:49:58 pm
Here's a problem:

1) I have some BTS
2) I short some BitUSD
3) I send it to my other account that I also control

Now my net position is the same, but I get a slice of the dividend. This means that everyone with BTS would want to short themselves whatever asset(s) had the most payout, diluting them significantly.
Title: Re: Incentivize SmartCoin collateralization
Post by: yvv on January 14, 2017, 04:28:56 pm
The best incentive for shorters is low collateral.
Title: Re: Incentivize SmartCoin collateralization
Post by: kani on January 14, 2017, 04:45:28 pm
Here's a problem:

1) I have some BTS
2) I short some BitUSD
3) I send it to my other account that I also control

Now my net position is the same, but I get a slice of the dividend. This means that everyone with BTS would want to short themselves whatever asset(s) had the most payout, diluting them significantly.

Yes, position is the same but so is the slice of dividend.  With this idea, sending BitUSD to another account (or selling it, etc) has no effect.  Payout is relative to the amount currently borrowed (only the first account in your example).  Idea is to incentivize collatoralization so more bitAssets are in circulation.

(I seem to remember seeing another idea for a flat percentage to shorters.  I prefer this idea instead, since it relies upon market activity and spreads the cost to those who buy the asset).

Maybe it has merit, maybe not.  I'll leave it to the greater Bitshares minds to decide the fate.
Title: Re: Incentivize SmartCoin collateralization
Post by: Geneko on January 14, 2017, 08:11:25 pm
This is great idea. Thank you for extracting it from the other topic and make it available for discussion.
It will solve low supply of community smart assets. (bitBTC, bitEUR ...).
It will provide what lacks. Incentive for shorters.
I think rasonable fee 0.1% would provide huge benefit. This is same as open.assets. There fee goes to Openledger.
BTWTY and all others to come use same business model.
Model is proven, it is working.

The thing that is brilliant is that Bitshares key feature smart coins will offer benefit to its shorter (the ones that locks collateral, and risk from market swings and margin call). That promise of "Bitshares" was missing all the time. I like idea very much.
Title: Re: Incentivize SmartCoin collateralization
Post by: JonnyB on January 15, 2017, 02:24:35 am
Here's a problem:

1) I have some BTS
2) I short some BitUSD
3) I send it to my other account that I also control

Now my net position is the same, but I get a slice of the dividend. This means that everyone with BTS would want to short themselves whatever asset(s) had the most payout, diluting them significantly.

Yes, position is the same but so is the slice of dividend.  With this idea, sending BitUSD to another account (or selling it, etc) has no effect.  Payout is relative to the amount currently borrowed (only the first account in your example).  Idea is to incentivize collatoralization so more bitAssets are in circulation.

(I seem to remember seeing another idea for a flat percentage to shorters.  I prefer this idea instead, since it relies upon market activity and spreads the cost to those who buy the asset).

Maybe it has merit, maybe not.  I'll leave it to the greater Bitshares minds to decide the fate.

I don't think it works because you can borrow bitassets and do nothing with them do. As chronos says your can't prove who's really short.
This doesn't improve liquidity .
Title: Re: Incentivize SmartCoin collateralization
Post by: 天籁 on January 15, 2017, 02:37:46 am
This is great idea. Thank you for extracting it from the other topic and make it available for discussion.
It will solve low supply of community smart assets. (bitBTC, bitEUR ...).
It will provide what lacks. Incentive for shorters.
I think rasonable fee 0.1% would provide huge benefit. This is same as open.assets. There fee goes to Openledger.
BTWTY and all others to come use same business model.
Model is proven, it is working.

The thing that is brilliant is that Bitshares key feature smart coins will offer benefit to its shorter (the ones that locks collateral, and risk from market swings and margin call). That promise of "Bitshares" was missing all the time. I like idea very much.
+5%
Title: Re: Incentivize SmartCoin collateralization
Post by: bitcrab on January 15, 2017, 02:48:48 am
this just add complex, no other sense.
Title: Re: Incentivize SmartCoin collateralization
Post by: Geneko on January 15, 2017, 05:23:35 pm
I don't think it works because you can borrow bitassets and do nothing with them do. As chronos says your can't prove who's really short.
This doesn't improve liquidity .

I am not famiiar with actual code, but I dont see why not, although I dont know, related to our platform, wether it is feasible.

So you introduce 0.1% fee to all send transactions. Buy/Sell has usual fee, borrow and update/close too, payed to the network in BTS.
Now, all short positions receives fee from its coins transactions including Buy/Sell. In Buy /Sell case, Seller pays smartcoin fee and buyer pays network fee in BTS. 
In case you have borrowed and send to another account. You have payed fee to your self. If another account receives and hold, then there is no another transaction and there is no fee. Every time, further account sends, it generates fee for its creator. So it doesn't matter if account that receives is in your possession or not. Eventually it is going to send those funds somewhere and pay fee, which will go to its creator account. All fees payed to its creator, decrease supply of coins, so there is no infinite dilution.

So there is only one question left. How we will know, which account created which coin. Solution is quite simple, every smartcoin sent is basically a record of all previous transactions like bitcoin. Like that they could be easily traced to its creator, the same way bitcoin use record of transactions to provide sum of account held.  Every time position is updated/closed, the amount of smartcoins supplied is burned and the record of transactions with it.

This is basic idea and logic behind and it and may be far away from actual technical solution.
Title: Re: Incentivize SmartCoin collateralization
Post by: Pheonike on January 15, 2017, 05:47:59 pm
This is why need a new shorting mechanism for this. Or have people buy asset like say a smartusd. People send bts to it and get smartusd. The bts is used to short for shorten that asset.

Sent from my SM-N920T using Tapatalk

Title: Re: Incentivize SmartCoin collateralization
Post by: adolf512 on January 18, 2017, 11:54:31 am
The best incentive for shorters is low collateral.
+5% yea, i see no need for having collateral requirement above 50%(initial requirement of maybe 100%).

Poloniex the requirement is initially 40% and liquidation at 20% and it works fine.
Title: Re: Incentivize SmartCoin collateralization
Post by: kani on January 18, 2017, 04:29:25 pm
I'd like to clear up some confusion regarding this idea.

The proposal is simply to add a 0.1% market fee (percentage debatable) to selected bitAssets (like bitCNY) and share as dividend to those with short positions in THAT ASSET (currently have debt).  That's it.  No extra transfer fees, no use for other purposes.

To those who say there is no way to know who is short: Well, of course there is!  The blockchain maintains debt to collateral ratio.  The dividend each shorter will receive is ratio of his/her current debt to the total debt in that asset.

The incentive is to increase the circulation of those bitAssets.  And yes, I believe this WILL improve liquidity -- inevitably some of the increased number of asset will be placed on DEX orderbooks.  Can somebody short without placing in the DEX?  Well, yeah.  Just as they can do now.  But, I believe, increased supply will lead to deeper books.

Will this somehow devalue the underlying bitAsset?  I don't believe so.  There would be a natural equilibrium discovered by market participants.  If the dividend returns are too high, more will short.  If it is too low, less will.

And since the dividend is based upon DEX activity, those who short will have a natural incentive to make markets.  Some will and some won't.

I guess with all the talk of taking fees for other purposes, I thought it best to propose this idea because it rewards those who create bitAssets, which is desperately needed for improved market depth.




Title: Re: Incentivize SmartCoin collateralization
Post by: Chronos on January 18, 2017, 04:47:46 pm
[member=42649]kani[/member] I think you may underestimate the power of shorting to self under this proposition. Imagine a whale with 50M BTS. This rule goes into effect. The whale uses the entire amount to short BitCNY to himself. Now, he gets a huge chunk of the reward, and the amount that goes to "legit shorts" is greatly diluted.

When other whales do this as well, the net effect from this new feature on "legit shorts" would be almost zero.
Title: Re: Incentivize SmartCoin collateralization
Post by: kani on January 18, 2017, 04:54:49 pm
Well then, that's an extra 50M BTS locked up in collateral.  I don't know what makes this less 'legit' than normal shorters...  And if this whale really wants to see higher returns for investment, than is in his best interest to make markets will all that bitCNY created.  I see no problem.
Title: Re: Incentivize SmartCoin collateralization
Post by: kani on January 18, 2017, 05:05:31 pm
But yeah, you may be right...  I might not have a full grasp on the complete picture.  Which is why I'm not going push the idea too much longer.

While I do think there is some merit here, perhaps someone else has something better.  Bottom line is that with all the talk of taking fees for other purposes, I really think it's best to use any new fees to improve markets.

(EDIT: And what better way to improve a market than by taking fees FROM that market FOR that market)
Title: Re: Incentivize SmartCoin collateralization
Post by: kani on January 18, 2017, 05:21:30 pm
Not to beat a dead horse, but there's one more point I meant to make and forgot.

This idea has a NET ZERO effect on Bitshares inflation -- it does not touch the reserve pool.
Title: Re: Incentivize SmartCoin collateralization
Post by: nmywn on January 19, 2017, 01:30:50 am
(http://i.imgur.com/DfmyF5I.png)

http://cryptofresh.com/fees

What about:
if order price sits between lowest ask and highest bid  AND  volume of order is higher than (some amount in BTS)
 THEN Limit Orders Create fee = 0 ( because this order provides usable liquidity and better peg).

Then what about:
  If order price is not between ask <->bid, but there is no matching orders and order volume is more than (some ammount in BTS)
  THEN Order Create fee = 0.050 BTS (order provides liquidity,  increasing market depth)
Next:
  if order pirce looks like above but order volume is higher than (some lower than above ammount in BTS)
  THEN Order Create fee = 0.100

  (Can be more steps if needed)
 

And final:
  If order price doesn't meet above criteria fee = 0.247 BTS ( Market taker should pay higher fees, as a compensation for destroying market depth... but no to high, we need him also)

For preventing abuse some other changes must be applied, for example:
Cancel of  100% unfilled order shouldn't be free.

Also i think this scheme should be limited only for committee Smartcoins and (step amounts in BTS) should be smartcoin option.
UIA's could be abused for cheap spam, so not good idea.


Is this to complex, impossible or can be abused? Zero or super low fees for big market makers would be nice feature also from marketing perspective.
(http://i.imgur.com/RbJkIME.png)
Title: Re: Incentivize SmartCoin collateralization
Post by: Pheonike on January 21, 2017, 01:20:20 am
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.
Title: Re: Incentivize SmartCoin collateralization
Post by: 天籁 on January 21, 2017, 02:00:40 am
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.

NO. This is just blockchain buying and selling passively, blockchain will lose all the token.
Title: Re: Incentivize SmartCoin collateralization
Post by: Stan on January 21, 2017, 02:34:46 am
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.


I'd like to see more discussion on the pros and cons of this approach.
Title: Re: Incentivize SmartCoin collateralization
Post by: yvv on January 21, 2017, 08:47:23 am
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.

Shorting is not buying, it is selling bitUSD which you don't own.
Title: Re: Incentivize SmartCoin collateralization
Post by: Pheonike on January 21, 2017, 08:00:10 pm
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.

How does blockchain loose tokens? They only exist on the blockchain.

NO. This is just blockchain buying and selling passively, blockchain will lose all the token.
Title: Re: Incentivize SmartCoin collateralization
Post by: Chronos on January 21, 2017, 11:31:28 pm
The current system guarantees a predictable supply growth rate of BTS. If the blockchain issued smartcoins, BTS supply could be vulnerable to hyperinflation.
Title: Re: Incentivize SmartCoin collateralization
Post by: 天籁 on January 22, 2017, 02:24:19 am
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.

How does blockchain loose tokens? They only exist on the blockchain.

NO. This is just blockchain buying and selling passively, blockchain will lose all the token.

Whales sell BTS to blockchain for bitUSD at high price & sell bitUSD to blockchain for BTS at low price through controling market.
Title: Re: Incentivize SmartCoin collateralization
Post by: pc on January 23, 2017, 04:41:29 pm
Why are users involved in creating smartcoins in the first place? Why shouldn't the blockchain produce them? Does it matter if all the collateral is put up by a user? What if creating a smartcoin was as simple as just buying it from the chain.  If I want 50 bitusd I send the equivalent value in BTS to the chain. The blockchain lockes 200% plus the 101% collateral given to it. The 1% is a fee for this instant conversion.  Same thing in reverse. I send the blockchain the 50 bitusd, it sends me 99% of the value in BTS and unlocks the other 200% it was holding. The 1% fee can be burned or used as dividend payment to bond holders.

This way shorting can work normally and not involve creating supply. The collateral used doesn't made any smartcoins. It is just used to measure position in terms of the smartcoin being shorted. Trader's can short for what they really want to do which is speculate.


I'd like to see more discussion on the pros and cons of this approach.

Con: Going short is dangerous. Therefore short positions must be managed actively. The blockchain can only do that in a deterministic, predictable way, which makes it vulnerable to manipulation.
Title: Re: Incentivize SmartCoin collateralization
Post by: Pheonike on January 23, 2017, 09:12:36 pm
What if they trade was one-way. You can only buy the coins from the blockchain. The 100% collateral from the buyer and 100% collateral from the blockchain were then burned. The only was to convert bitsud back to bts is to sell it on the exchange. Doing this increases the value of bts and increase the supply of bitusd.
Title: Re: Incentivize SmartCoin collateralization
Post by: Chronos on January 24, 2017, 12:20:02 am
What if they trade was one-way. You can only buy the coins from the blockchain. The 100% collateral from the buyer and 100% collateral from the blockchain were then burned. The only was to convert bitsud back to bts is to sell it on the exchange. Doing this increases the value of bts and increase the supply of bitusd.
But what happens if the value of BitUSD falls below $1?
Title: Re: Incentivize SmartCoin collateralization
Post by: Pheonike on January 24, 2017, 01:25:32 am
Then the blockchain stops selling bitusd. Just like there is a limited supply of bts produced each day, there will be a limited supply of bitusd available for purchase.

Sent from my SM-N920T using Tapatalk

Title: Re: Incentivize SmartCoin collateralization
Post by: kani on January 24, 2017, 02:51:59 pm
Hey guys,

Popping back in to bump the original idea for this thread: Pay dividends to those who collateralize a SmartCoin by raking a small market fee from DEX activity in that SmartCoin.

I like that other ideas have been presented here, but I do not think they are the right ones.

The original idea presented here is a comparatively small change which incentives the right behavior:
For a trustless solution this would require a change to blockchain protocol, as dividends should be automatic and made by the blockchain.

The biggest concern I have about this approach is that it will encourage shorters to chase minimum MCR to get the most SmartCoin for their BTS.  Can others comment on the impact of this?  Is this good or bad?

Remember the tagline:
“Your share in the Decentralized Exchange”

This idea brings that statement closer to reality.  For it rewards those who collateralize BTS for SmartCoins with proceeds generated by DEX activity.