I hate to say it, but that's what XTS is there for. To keep BitUSD stable, XTS must suffer the whims of the market. From an economic perspective, there really is no choice but #3. And hopefully, the market is robust enough and the technology is strong enough that things will keep on moving without this sort of issue. It gives me more faith in BitShares every time I see a post like this, though. You are thinking through these issues, testing, and seeking community consensus. This is going to be a damn fine product.+5%
Fiduciary Dilution for Insufficient Collateral :-)
Would this mean price feeds would be permanent? I'm OK with that, just curious.
re: 3)
The rules on that, is something the community can chime in ,if you have thought about them already.
Or the system just gonna buy them right away anytime the collateral is not enough?
re: 3)
The rules on that, is something the community can chime in ,if you have thought about them already.
Or the system just gonna buy them right away anytime the collateral is not enough?
The system will buy right away at any price up to 33% below the median price feed.
re: 3)
The rules on that, is something the community can chime in ,if you have thought about them already.
Or the system just gonna buy them right away anytime the collateral is not enough?
The system will buy right away at any price up to 33% below the median price feed.
The analogy is almost perfect... the US prints new dollars to keep depositors whole when banks run out of collateral backing their loans.
US Bank creates USD backed by collateral of a house. Housing market collapses and loan defaults so there is insufficient collateral to "buy back the USD" to take it out of circulation. With FDIC they print new dollars to cover the loss... a bail out of the shareholders paid for by everyone. This would be like allowing unbacked BitUSD to circulate.
What should happen is that the banks owners (shareholders) should make good on its loans (those that lent the bank USD, ie: depositors). The only way for a real bank to do this is to sell shares in itself to raise the capital. If it is unable to raise enough capital by selling shares then it should give the depositors the shares. We are effectively building this bailout through share issuance into the system.
The shareholders are borrowing USD into circulation with a promise to pay 1 USD worth of shares in the future. When we borrow them into existence, we lend them to the short which then sells them. We lend to the short because the short has provided enough collateral that the shareholders consider it "low risk". When viewed from this perspective it makes everything perfectly clear and natural.
Where the bank issues new shares in itself to cover the loss.
I'm not sure people understand how monumental 3) is.
So, here is the design I had in mind, when contemplating an alternative to BitShares X.
Let's say the unit is U for simplicity.
BTC -> U cross-chain conversion is allowed in the chain itself through smart contracts. Not like XCP or MSC, but delegates/smart oracles would ensure proper conversion between BTC and U.
Then from U you have ability to convert to v.USD (which is your BitUSD). I'll just use BitUSD since it's more familiar with the audience.
Huge difference here is that, instead of expecting a market depth to get created, market feeds are used to let the DAC itself issue BitUSD by destroying U.
When user wants to liquidate BitUSD, it gets converted back to U, but that's done by the DAC itself, which provides LIQUIDITY!
It does it with 2% around the median market feed, so it still allows for people to bet within the spread, but if some heavy buy or sell comes in, it can not spook the market.
Value of unit U: Why hold it at all? Well it receives dividents from all the trades. (similar to BTSX)
Major difference between my design and 3) is that the DAC itself provides liquidity. While BTSX expects the market to provide that.
UPDATE: although 3) is a step in that direction (DAC providing liquidity)
One of the nagging issues we have been facing is what happens when the collateral behind a short position is not enough. Our options have been:
1) Freeze all markets until someone who holds BitUSD is willing to sell at a loss.
2) Debase BitUSD by allowing unbacked BitUSD to circulate
3) Debase XTS by issuing new XTS to cover the loss.
Test net 12 implemented Option #1... but this option depends upon someone being willing to "take one for the team" to restart the markets. This is a principle I don't like.
Debasing BitUSD everytime this happens would gradually break the peg and BitUSD would become an asset that is correlated to USD by some constant factor that changes slightly every time a short is blown out. This makes the system appear to be broken.
Option 3 was considered too risky because someone could manipulate the market to print up unbounded XTS. Fortunately we have introduced price feed / rate-of-movement restrictions that prevent this particular attack from yielding unlimited XTS. Without being able to attack in this manner Option 3 returns as the best overall approach.
What this means is that all XTS holders stand behind the "market peg" and that those who hold USD have a stronger peg.
Well, perhaps I'll end up being one of the lone dissenting voices on this, but it seems to me that it might be worthwhile to think twice about exclusive reliance on 3).
I really worry that 3) could be a significant drag on the value of BTSX and on buy-in into the network. It all goes back to the question of how BTSX holders and investors would feel about potentially open-ended debasement. In a real, live network with 3), how often would short positions get blown out, and how much dilution would need to occur to withstand multiple disruptions over time?
What if there is not just one BitAsset, but several correlated BitAssets, e.g., BitBTC, BitGold, BitCNY, etc., which could potentially increase rapidly in value and cause blown shorts? Would all of these need to be supported by BTSX holders under something like 3), and would that compound the potential problems?
I suspect not many people here have a good idea about how often and how large the triggering disruptions would be--I certainly don't. There seem to be significant unknowns here. But I feel pretty sure about one thing: in general, significant uncertainty + potentially large, open-ended future dilution = anathema to buy-and-hold investors.
BM et al. deserve props for thinking proactively about this issue, and I hate to complain, but I really do hope a better, more investor-friendly solution comes along. What about some mixture of (1), (2), and/or (3)? Are these three really the only alternatives?
3 is probably the best option, but why creating new tokens right away, when there are some unused "blockchain_accumulated_fees"?
If those fees are enough then no additional BTSX are created, so BTSX value stays untouched.
If there is more than fees can provide then option 3, and delegates work for free, but BTSX value is more stable.
I mean delegates are probably willing to sacrifice a days cut if this means everything the'yve earned so far doesn't loose value.
In case of new BTSX being created right away, BTSX price may fall faster, and value of everyone's (not only delegate's) stack might decrease compared to that before new BTSX creation.
+5%3 is probably the best option, but why creating new tokens right away, when there are some unused "blockchain_accumulated_fees"?
If those fees are enough then no additional BTSX are created, so BTSX value stays untouched.
If there is more than fees can provide then option 3, and delegates work for free, but BTSX value is more stable.
I mean delegates are probably willing to sacrifice a days cut if this means everything the'yve earned so far doesn't loose value.
In case of new BTSX being created right away, BTSX price may fall faster, and value of everyone's (not only delegate's) stack might decrease compared to that before new BTSX creation.
+5% +5% +5%
So far it seems delegates have flexibility.
1. They can take a pay cut and use that to provide the loan to secure the network.
2. They can increase the burn rate in the case of new XTS being created by option 3.
3 is probably the best option, but why creating new tokens right away, when there are some unused "blockchain_accumulated_fees"?+5% +5% +5% - Great idea
If those fees are enough then no additional BTSX are created, so BTSX value stays untouched.
If there is more than fees can provide then option 3, and delegates work for free, but BTSX value is more stable.
I mean delegates are probably willing to sacrifice a days cut if this means everything the'yve earned so far doesn't loose value.
In case of new BTSX being created right away, BTSX price may fall faster, and value of everyone's (not only delegate's) stack might decrease compared to that before new BTSX creation.
I agree that 1 and 2 are bad choices.
I would like a variant of 3 similar to what dxtr and luckybit propose.
When there are more than 2e9 BTSX around a certain part (some hardwired formula in the range of up to 10 % maybe?) of the delegates' pay should be channeled off and destroyed - until total outstanding is 2 billion again.
1) How likely is this to happen on a large scale? Only in times of huge volatility?
2) Can a certain percentage of fees be set aside as an FDIC fund? The larger this fund grows the more robust the market and over time supply may not have to be messed with.
3) The delegates can adjust fees to replenish the fund or they can increase burn rate (which is at their own expense) to compensate if minting is needed. If this happens we need a mechanism for delegates to either lower their burn rate or only raise the burn rate for a short time. Currently it's a one way street.
Internally we may think about it as a market correction tax or FDIC fund but we should refrain from using words like tax and FDIC. We should call it a market correction algorithm and volatility fund both in the official language and in the source code. On our forum discussions we can speak freely as the goal is to come up with the best possible algorithms we can.I agree that 1 and 2 are bad choices.
I would like a variant of 3 similar to what dxtr and luckybit propose.
When there are more than 2e9 BTSX around a certain part (some hardwired formula in the range of up to 10 % maybe?) of the delegates' pay should be channeled off and destroyed - until total outstanding is 2 billion again.
Makes sense. I agree on the fdic nomenclature. Fun but likely troublesome.
Would the fees diverted to fund the short collateral really be a loan? I thought it was just gone to wherever the rest of the collateral went.
Of course it's a loan. The profits in a DAC are the burned XTS. The burned XTS is what functions as our dividend but if you recreate new XTS you're taking it from the profits which were distributed via the burned XTS.
So what this means is that we should continue to promote a high enough burn rate to create a sort of buffer so that we have the profits stored up to bail ourselves out with a loan. When you create new XTS you're borrowing value from the previously burned XTS to pay off the short collateral. So you're using long term profits to pay off a short term debt is how I see it.
But once you took out the loan to create new XTS then if you increase the burn rate it's just as if you're buying back the XTS again. So everyone would be happy as far as I could tell and no one loses any value except temporarily. The only people who might be unhappy are short term speculator types but even they would be able to make some profit if they timed it to buy it during the event knowing the burn rate will be high.
This would be like buying stock knowing a massive stock buy back is about to happen. The stock buy back is how you repay the debt to shareholders for the dilution. Burning in our case is what functions as our stock buy back.
How likely is it to happen?
What if the BTSX gets created, but the creators account gets tagged in the event their collateral can't cover the shorts, and they have to pay an increased transaction fee for every transaction until the difference gets made up?
The above makes sense but what happens if we need to create more than $2 bil XTS? Although it might be necessary, this will be a dilution isn't it? Not sure I understand how we can avoid this but I believe we should avoid to create more than 2 bil at any time as this will create uncertainty about the future value and we can't afford that now.
Of course it's a loan.
I understand BitUSD is created as part of a loan process. I also understand that the burn process is the share buy back or dividend process.
It isn't a loan... creating the BitUSD in the first place was the LOAN. This is the shareholders PAYING OFF A LOAN by selling new shares to raise capital. After the loan is paid off the shareholders are good.
It is very important that all XTS holders understand that all BitUSD created by the system is a LIABILITY against their shares.
So after the dilution event all debts are paid even if there are now more shares than before. From this point on the company proceeds to attempt to make a profit.
If the company seems to make more losses than gains (ie, generally increasing share supply) then that means that delegates should raise the margin requirement on the shorts (or charge the shorts a fee proportional to the risk of default). In fact, having the delegates publish a "Short Fee" and using the median "Fee" may be the best way to regulate this.
I understand BitUSD is created as part of a loan process. I also understand that the burn process is the share buy back or dividend process.
It isn't a loan... creating the BitUSD in the first place was the LOAN. This is the shareholders PAYING OFF A LOAN by selling new shares to raise capital. After the loan is paid off the shareholders are good.
It is very important that all XTS holders understand that all BitUSD created by the system is a LIABILITY against their shares.
So after the dilution event all debts are paid even if there are now more shares than before. From this point on the company proceeds to attempt to make a profit.
So if we care about profitability then we should want the treadmill to be burning the XTS toward 1 billion rather than to be creating XTS. It doesn't make sense why new people would buy XTS if new XTS is being created without the promise of that new XTS to be destroyed again at some point.If the company seems to make more losses than gains (ie, generally increasing share supply) then that means that delegates should raise the margin requirement on the shorts (or charge the shorts a fee proportional to the risk of default). In fact, having the delegates publish a "Short Fee" and using the median "Fee" may be the best way to regulate this.
I agree with the idea of having fees but do we want to trust the delegates to do this? Can we hard code it?
Of course there are so many possibilities that we probably can't predict all possible outcomes. It might be possible to hedge against it like you mentioned but from the perception of people who aren't hedged if they see the network trending in the wrong direction it's not good.
The concept of using newly issued XTS to back a new short position.... is interesting.Actually with my approach you do not change the market (you do not crate downward pressure as you put it). You sell the same amount you just bought at the same price nevertheless.
The effect is the same as having "unbacked USD" in circulation. You "Created It" with so much collateral that another 66% fall in value would have to occur for BitUSD holders to actually receive the funds. It create downward pressure on BitUSD price breaking the peg with "artificial" shorting power when what the market needs is buying power.
I think it is just a "kick the can" approach. We need to take USD out of circulation not put more into circulation.
The concept of using newly issued XTS to back a new short position.... is interesting.Actually with my approach you do not change the market (you do not crate downward pressure as you put it). You sell the same amount you just bought at the same price nevertheless.
The effect is the same as having "unbacked USD" in circulation. You "Created It" with so much collateral that another 66% fall in value would have to occur for BitUSD holders to actually receive the funds. It create downward pressure on BitUSD price breaking the peg with "artificial" shorting power when what the market needs is buying power.
I think it is just a "kick the can" approach. We need to take USD out of circulation not put more into circulation.
The only thing it removes is the artificial buying pressure the purchase by the initial insurance provides (which it (the initial insurance) does by buying bitUSD with newly created BTSX!). Which is one of the worst things to do in rising bitUSD prices.
I guess this means there's some work to do before DR14? ???
lol. we could sit here having this whole discussion until most people agree then...+5% :D
***uncomments some code****
"alright guys lets give it a shot!"
Can you implement both 2) and 3) depending on market conditions?
Perhaps the most market friendly way of handling this is simply setting the margin-call fee to 100%.
This.
Unfortunately, non other than the +/-33% band around the feed price, IFAIK.
Aren't there market shut offs if the price moves too drastic as well?
3) Debase XTS by issuing new XTS to cover the loss.
3) Debase XTS by issuing new XTS to cover the loss.
Isnt it theoretically possible that issuing new XTS could further reduce the price of XTS, causing even more collateral to be required?
3) Debase XTS by issuing new XTS to cover the loss.
Isnt it theoretically possible that issuing new XTS could further reduce the price of XTS, causing even more collateral to be required?
3) Debase XTS by issuing new XTS to cover the loss.
Isnt it theoretically possible that issuing new XTS could further reduce the price of XTS, causing even more collateral to be required?
I think so. It seems on the other side that issuing bitUSD would raise the price of BTSX, right?
Wouldn't debasement happen by issuing new BTSX not bitUSD? bitUSD is defined by BTSX real world worth/value. The intrinsic value of bitUSD is BTSX. Lowering the value of a BTSX will debase bitUSD, right?
The key points are:+5%
1. There should never be more than 2 billion XTS for any reason or Bitshares will be thought of as broken.
2. The loan should be an IOU which is just enough to cover the shorts or the volatility event and bring it all back into equilibrium.
3. Delegates pay a price for this in that none of them get paid as 100% of fees get burned while users also pay a price because fees are temporarily higher than usual.
This way the incentives for everyone is for this not to happen. Also include the ability to execute option 1 as a fallback mechanism.
QuoteThe key points are:+5%
1. There should never be more than 2 billion XTS for any reason or Bitshares will be thought of as broken.
2. The loan should be an IOU which is just enough to cover the shorts or the volatility event and bring it all back into equilibrium.
3. Delegates pay a price for this in that none of them get paid as 100% of fees get burned while users also pay a price because fees are temporarily higher than usual.
This way the incentives for everyone is for this not to happen. Also include the ability to execute option 1 as a fallback mechanism.
I am very against the idea of having our shares be diluted (debasement = euphemism for dilution) based on possible market manipulation. These kinds of manipulations are not easy to "factor" for especially in these early stages when it is extremely vulnerable to attacks. I am strongly against a system where BTSX could realistically increase past the initial 2 billion distribution.
Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.
Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.
If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.
However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.
Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.
That said I really like the idea for its simplicity and clarity. It would not have been possible prior to DPOS, but now is potentially viable.
Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.
Bottom line is show wants to go short USD (create USD) while the BTSX network is in a bubble? No one..... when you rely on price feeds alone you create unlimited short supply.
QuoteBottom line is show wants to go short USD (create USD) while the BTSX network is in a bubble? No one..... when you rely on price feeds alone you create unlimited short supply.
What? Shorting bitUSD is the same directional sentiment as BTSX rising in price. If you think the bubble is going to pop, then yes, people will not want to short bitUSD. Fortunately, nobody knows when the bubble will pop. And there will always be the people who bought in at the top. That is the nature of free markets, no one knows jack. It sounds like you think that someone is going to know the markets crests and troughs. They will only know in hindsight. I guarantee it.
Release a GUI test run with windows and apple binaries. This will be good for everyone.
Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.
I do not get which BTSX (U in your example) will be destroyed to produce virtualUSD (vUSD)?
Shareholders? Or is it gonna be some asset on top of them?
In either case I have a hard time accepting that U is actually backing the vUSD. Put in other words vUSD price is controlled only by the buying/selling activity on the centralized exchange where U is traded for USD.
QuoteBottom line is show wants to go short USD (create USD) while the BTSX network is in a bubble? No one..... when you rely on price feeds alone you create unlimited short supply.
What? Shorting bitUSD is the same directional sentiment as BTSX rising in price. If you think the bubble is going to pop, then yes, people will not want to short bitUSD. Fortunately, nobody knows when the bubble will pop. And there will always be the people who bought in at the top. That is the nature of free markets, no one knows jack. It sounds like you think that someone is going to know the markets crests and troughs. They will only know in hindsight. I guarantee it.
Release a GUI test run with windows and apple binaries. This will be good for everyone.
Almost had a GUI out today... waiting on GUI team to fix a few last minute bugs.
I am not claiming that there won't be people shorting at the top... only that it is more likely that those selling at the top will be other USD longs rather than new USD shorts. I am also saying that it is fine for these shorts to take a loss because it was their call, but it wouldn't be fine for the network to be the greatest fool due to algorithmic ignorance.
If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.
However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.
Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.
That said I really like the idea for its simplicity and clarity. It would not have been possible prior to DPOS, but now is potentially viable.
QuoteBottom line is show wants to go short USD (create USD) while the BTSX network is in a bubble? No one..... when you rely on price feeds alone you create unlimited short supply.
What? Shorting bitUSD is the same directional sentiment as BTSX rising in price. If you think the bubble is going to pop, then yes, people will not want to short bitUSD. Fortunately, nobody knows when the bubble will pop. And there will always be the people who bought in at the top. That is the nature of free markets, no one knows jack. It sounds like you think that someone is going to know the markets crests and troughs. They will only know in hindsight. I guarantee it.
Release a GUI test run with windows and apple binaries. This will be good for everyone.
Almost had a GUI out today... waiting on GUI team to fix a few last minute bugs.
I am not claiming that there won't be people shorting at the top... only that it is more likely that those selling at the top will be other USD longs rather than new USD shorts. I am also saying that it is fine for these shorts to take a loss because it was their call, but it wouldn't be fine for the network to be the greatest fool due to algorithmic ignorance.
I hear you.
+5% on GUI test.
Will bitUSD be the vehicle or a vehicle to enter into the other bitAssets? Or are all of the assets to be pegged to BTSX? If bitUSD is the primary gateway for the other assets, like bitGold, then you will constantly have a demand to sell bitUSD. From above the problem was that no one would want to sell bitUSD when a bubble bursts. Well if bitGold or the assets are rising, then You would need to sell bitUSD to get them, no? This is assuming that the markets of some of the assets will not move In tandem with btsx/bitUSD and will most times be inversely related to the BTSX/bitUSD fluctuations. I'm not saying all or always.
What if the blockchain not only is a market maker but controls fee destruction such that within a year time it always caps to 2B BTSX supply? In order to prevent dilution.
Won't a small BTSX crash 25%+ cause an already extremely negative market to think a dilution event could be triggered soon? Thereby creating the flash crash you'd like to avoid as everybody rushes for the exits before a potential dilution event is triggered.
I don't think any market can offer participants 100% certainity that individual assets will be be redeemed at full value. Participants will already be evaluating the peg on risk of delegate compromise, technical bug & others things. The black swan trading event is just another risk that doesn't seem worth risking BTSX total issuance for. (Even though Bitcoin has inflation, a large part of it's value is derived from the certainity of Bitcoin issuance imo.)
You said participants can buy dilution event insurance/hedge, so I would let them buy it/offer it to them at purchase myself.
Won't a small BTSX crash 25%+ cause an already extremely negative market to think a dilution event could be triggered soon? Thereby creating the flash crash you'd like to avoid as everybody rushes for the exits before a potential dilution event is triggered.
I don't think any market can offer participants 100% certainity that individual assets will be be redeemed at full value. Participants will already be evaluating the peg on risk of delegate compromise, technical bug & others things. The black swan trading event is just another risk that doesn't seem worth risking BTSX total issuance for. (Even though Bitcoin has inflation, a large part of it's value is derived from the certainity of Bitcoin issuance imo.)
You said participants can buy dilution event insurance/hedge, so I would let them buy it/offer it to them at purchase myself.
Small crash will NOT create potential for dilution because all positions will have been covered and thus all "risk" consumed.
Won't a small BTSX crash 25%+ cause an already extremely negative market to think a dilution event could be triggered soon? Thereby creating the flash crash you'd like to avoid as everybody rushes for the exits before a potential dilution event is triggered.
I don't think any market can offer participants 100% certainity that individual assets will be be redeemed at full value. Participants will already be evaluating the peg on risk of delegate compromise, technical bug & others things. The black swan trading event is just another risk that doesn't seem worth risking BTSX total issuance for. (Even though Bitcoin has inflation, a large part of it's value is derived from the certainity of Bitcoin issuance imo.)
You said participants can buy dilution event insurance/hedge, so I would let them buy it/offer it to them at purchase myself.
Small crash will NOT create potential for dilution because all positions will have been covered and thus all "risk" consumed.
Thanks well I'm always happy to go with BM choice anyway just trying to see a different POV.
I realise a small crash will not create the potential for dilution. However a >50% flash crash could trigger up to a ~25% dilution was my understanding.
So it would be like watching Bitcoin fall rapidly from $600 to $420 and knowing that if it hits somewhere in the $300 range a ~25% dilution event could start kicking in that takes it to $240. (& probably more panic selling after that.)
So while at $600 there's only a 33% flash crash risk. At $400 in a flash crash there's a 33% crash risk + huge dilution event risk (relative to that price). So there's an intelligent rush for the exits after a rapid drop from $600-$420 which actually helps create the 50-65%+ drop which otherwise would be incredibly unlikely to happen.
So it seemed that we'd now included incentives for market participants to turn a small flash crash into a big one was my concern.
Won't a small BTSX crash 25%+ cause an already extremely negative market to think a dilution event could be triggered soon? Thereby creating the flash crash you'd like to avoid as everybody rushes for the exits before a potential dilution event is triggered.
I don't think any market can offer participants 100% certainity that individual assets will be be redeemed at full value. Participants will already be evaluating the peg on risk of delegate compromise, technical bug & others things. The black swan trading event is just another risk that doesn't seem worth risking BTSX total issuance for. (Even though Bitcoin has inflation, a large part of it's value is derived from the certainity of Bitcoin issuance imo.)
You said participants can buy dilution event insurance/hedge, so I would let them buy it/offer it to them at purchase myself.
Small crash will NOT create potential for dilution because all positions will have been covered and thus all "risk" consumed.
Thanks well I'm always happy to go with BM choice anyway just trying to see a different POV.
I realise a small crash will not create the potential for dilution. However a >50% flash crash could trigger up to a ~25% dilution was my understanding.
So it would be like watching Bitcoin fall rapidly from $600 to $420 and knowing that if it hits somewhere in the $300 range a ~25% dilution event could start kicking in that takes it to $240. (& probably more panic selling after that.)
So while at $600 there's only a 33% flash crash risk. At $400 in a flash crash there's a 33% crash risk + huge dilution event risk (relative to that price). So there's an intelligent rush for the exits after a rapid drop from $600-$420 which actually helps create the 50-65%+ drop which otherwise would be incredibly unlikely to happen.
So it seemed that we'd now included incentives for market participants to turn a small flash crash into a big one was my concern.
We could limit the maximum XTS held in collateral to limit the exposure of the network. After all it is all about relative market cap... if there is $1 BitUSD with a $100 Million XTS market cap then the potential dilution is very small (less than 1%). I don't think many people would fear that. It is only when $BitUSD as a percentage of the market cap approaches something like 33% that you risk such a huge dilution event. I think you would see a slow steady fall when USD demand is that high.
What if the blockchain not only is a market maker but controls fee destruction such that within a year time it always caps to 2B BTSX supply? In order to prevent dilution.
Blockchain cannot control total fees paid.
What if the blockchain not only is a market maker but controls fee destruction such that within a year time it always caps to 2B BTSX supply? In order to prevent dilution.
Blockchain cannot control total fees paid.
It can! based on estimates adjust a destroyed surcharge included in the fees every 1000 blocks or so, and only do that if total supply has expanded beyond cap or 2B. You don't change anything about delegate fees/etc. just an "anti-inflation" fee that only kicks in when conditions require it.
This will keep balance and faith in the system as it is self-correcting and continues to function as intended for both investors (BTSX holders) and hedgers (BitUSD and the like holders)
Could you incentivize bitUSD sellers in the event of a BTSX sell off? Like in fees. 1/10 the fees to to sell bitUSD and buying BTSX.
Who pays the fees in the two party transactions anyway?
What if the blockchain not only is a market maker but controls fee destruction such that within a year time it always caps to 2B BTSX supply? In order to prevent dilution.
Blockchain cannot control total fees paid.
It can! based on estimates adjust a destroyed surcharge included in the fees every 1000 blocks or so, and only do that if total supply has expanded beyond cap or 2B. You don't change anything about delegate fees/etc. just an "anti-inflation" fee that only kicks in when conditions require it.
This will keep balance and faith in the system as it is self-correcting and continues to function as intended for both investors (BTSX holders) and hedgers (BitUSD and the like holders)
option 3 is not reasonable, why bts owner need to take losses for the one who short bitu?
bts owner have already lose much for the price down.
the one who short bitu have already pay all backup bts. then can do nothing.
the one who owner bitu is the winner for the bitu price up, they should take the remaining losses.
There should be no more than 2 billion BTSX at any time for any reason otherwise the protocol is going to be perceived as broken.
It should be impossible to go beyond the cap. That should be a hard limit. If new BTSX get created then just increase the burn rate to destroy BTSX to make up for that. There is no reason to discuss going beyond 2 Billion BTSX unless you're trying to make people panic.
If there are more BTSX than 2 billion then everyone is going to know something is seriously wrong with the algorithm. If it never can surpass 2 billion then people have the same sort of certainty that they have with Bitcoin. Let the burnrate increase as the BTSX approaches the cap and if it hits the cap then resolve it using other mechanisms.
I think people will tolerate small corrections, adjustments, and similar volatility if and only if the trend is going in the right direction. We tolerate Bitcoin volatility because the price keeps going up in the long term otherwise who would invest?
QuoteThere should be no more than 2 billion BTSX at any time for any reason otherwise the protocol is going to be perceived as broken.
It should be impossible to go beyond the cap. That should be a hard limit. If new BTSX get created then just increase the burn rate to destroy BTSX to make up for that. There is no reason to discuss going beyond 2 Billion BTSX unless you're trying to make people panic.
If there are more BTSX than 2 billion then everyone is going to know something is seriously wrong with the algorithm. If it never can surpass 2 billion then people have the same sort of certainty that they have with Bitcoin. Let the burnrate increase as the BTSX approaches the cap and if it hits the cap then resolve it using other mechanisms.
I think people will tolerate small corrections, adjustments, and similar volatility if and only if the trend is going in the right direction. We tolerate Bitcoin volatility because the price keeps going up in the long term otherwise who would invest?
I agree with this. I think you will create unnecessary panic which will back fire in all of us. Although from an economic perspective it may be necessary i am not sure if it should be implemented as an option now.
In the end of the day if we come to this a new bitshare can be created which honors the previous one with the twist of increasing the supply or not?
Anyway, I don't have much experience in all these and how cryptotraders respond to these strategies so my opinion should not be considered much.
The challenge we face is that people can cancel their orders. Unless we prevent people from canceling orders if canceling the order would put the market with insufficient depth.
So many potential rules and they all have nasty consequences.
The challenge we face is that people can cancel their orders. Unless we prevent people from canceling orders if canceling the order would put the market with insufficient depth.
So many potential rules and they all have nasty consequences.
I will strongly advise against any rules preventing people from cancel-ling their orders.
0.02 BTSX
All of that said lets consider very carefully this flash crash event because the numbers being thrown around about potential dilution are FUD.
The MAXIMUM ratio is ~33% based upon current rules which means almost all XTS would be locked up as collateral and the remaining XTS held in reserve to buy back USD to cover the collateral. Under this situation a 65% flash crash would result in a $8.5 million short fall which would mean a 25% dilution event.
So the "worst case" is that all bids cancel at once and the new "high bid" is 25% of the old high bid (75% fall instantly). All margin positions get called at once and 66% of the USD is purchased back by the collateral. The remaining 33% of the USD is purchased back by issuing new shares. So if you started with 30% of the cap represented by USD then you are looking at a 10% dilution in a "worst case" 75% crash. In practice crashes will be slower, many of the positions will be covered without any dilution and less than 30% of the cap will be represented by USD. So I think what we are looking at here is a whole lot of fear about a "bad event" that you can "hedge against" and is "unlikely" to happen where the potential losses from "dilution" are less than the average daily volatility of Bitcoin.
BTSX description from detractor, NXT/Bitcoin supporters etc.
Unlike other digital currencies or DAC's that have either no inflation like NXT or defined limited inflation like Bitcoin. BTSX has the ability to print new money when required just like the Federal Reserve & the other central banks we all know and love! But unlike central banks which only create a little bit of inflation, BTSX can create a lot all at once! So in a 50% flash crash for example, where you've already lost 50% of the value of your BTSX, we could devalue you by up to a further 25%! Won't that be a fun few hours to remember! But don't worry about the smart money & professional traders because a minority can hedge themselves and the rest will just sell very early on in a crash leaving the regular guys like you holding the bag when there's a problem. It's just like a real economy! Welcome to BTSX - The future of money!
If Bitshares is to be a trading engine for forex, futures, commodity market, traders must be able to cancel their orders.I will strongly advise against any rules preventing people from cancel-ling their orders.
The challenge we face is that people can cancel their orders. Unless we prevent people from canceling orders if canceling the order would put the market with insufficient depth.
So many potential rules and they all have nasty consequences.
0.02 BTSX
On second thought BitUSD must be stable to be widely used for payment by customers, shops etc. Today payment in BTC is exchanged into USD by shops. BitUSD could be cheaper, hopefully and probably many user will not care about BTSX if 1their BitUSD = always 1USD.QuoteBTSX description from detractor, NXT/Bitcoin supporters etc.
Unlike other digital currencies or DAC's that have either no inflation like NXT or defined limited inflation like Bitcoin. BTSX has the ability to print new money when required just like the Federal Reserve & the other central banks we all know and love! But unlike central banks which only create a little bit of inflation, BTSX can create a lot all at once! So in a 50% flash crash for example, where you've already lost 50% of the value of your BTSX, we could devalue you by up to a further 25%! Won't that be a fun few hours to remember! But don't worry about the smart money & professional traders because a minority can hedge themselves and the rest will just sell very early on in a crash leaving the regular guys like you holding the bag when there's a problem. It's just like a real economy! Welcome to BTSX - The future of money!
I could see this being posted against nearly every positive sentiment for Bitshares on other forums, very bad for PR reasons along with the ideology.
On second thought BitUSD must be stable to be widely used for payment by customers, shops etc. Today payment in BTC is exchanged into USD by shops. BitUSD could be cheaper, hopefully and probably many user will not care about BTSX if 1their BitUSD = always 1USD.QuoteBTSX description from detractor, NXT/Bitcoin supporters etc.
Unlike other digital currencies or DAC's that have either no inflation like NXT or defined limited inflation like Bitcoin. BTSX has the ability to print new money when required just like the Federal Reserve & the other central banks we all know and love! But unlike central banks which only create a little bit of inflation, BTSX can create a lot all at once! So in a 50% flash crash for example, where you've already lost 50% of the value of your BTSX, we could devalue you by up to a further 25%! Won't that be a fun few hours to remember! But don't worry about the smart money & professional traders because a minority can hedge themselves and the rest will just sell very early on in a crash leaving the regular guys like you holding the bag when there's a problem. It's just like a real economy! Welcome to BTSX - The future of money!
I could see this being posted against nearly every positive sentiment for Bitshares on other forums, very bad for PR reasons along with the ideology.
Forex is for sure lucrative market. Forex traders count every pip in EUR/USD on some platforms even 1/2 pip.On second thought BitUSD must be stable to be widely used for payment by customers, shops etc. Today payment in BTC is exchanged into USD by shops. BitUSD could be cheaper, hopefully and probably many user will not care about BTSX if 1their BitUSD = always 1USD.QuoteBTSX description from detractor, NXT/Bitcoin supporters etc.
Unlike other digital currencies or DAC's that have either no inflation like NXT or defined limited inflation like Bitcoin. BTSX has the ability to print new money when required just like the Federal Reserve & the other central banks we all know and love! But unlike central banks which only create a little bit of inflation, BTSX can create a lot all at once! So in a 50% flash crash for example, where you've already lost 50% of the value of your BTSX, we could devalue you by up to a further 25%! Won't that be a fun few hours to remember! But don't worry about the smart money & professional traders because a minority can hedge themselves and the rest will just sell very early on in a crash leaving the regular guys like you holding the bag when there's a problem. It's just like a real economy! Welcome to BTSX - The future of money!
I could see this being posted against nearly every positive sentiment for Bitshares on other forums, very bad for PR reasons along with the ideology.
Forex is a bigger market. Focus on replacing Forex.
Forex is for sure lucrative market. Forex traders count every pip in EUR/USD on some platforms even 1/2 pip.On second thought BitUSD must be stable to be widely used for payment by customers, shops etc. Today payment in BTC is exchanged into USD by shops. BitUSD could be cheaper, hopefully and probably many user will not care about BTSX if 1their BitUSD = always 1USD.QuoteBTSX description from detractor, NXT/Bitcoin supporters etc.
Unlike other digital currencies or DAC's that have either no inflation like NXT or defined limited inflation like Bitcoin. BTSX has the ability to print new money when required just like the Federal Reserve & the other central banks we all know and love! But unlike central banks which only create a little bit of inflation, BTSX can create a lot all at once! So in a 50% flash crash for example, where you've already lost 50% of the value of your BTSX, we could devalue you by up to a further 25%! Won't that be a fun few hours to remember! But don't worry about the smart money & professional traders because a minority can hedge themselves and the rest will just sell very early on in a crash leaving the regular guys like you holding the bag when there's a problem. It's just like a real economy! Welcome to BTSX - The future of money!
I could see this being posted against nearly every positive sentiment for Bitshares on other forums, very bad for PR reasons along with the ideology.
Forex is a bigger market. Focus on replacing Forex.
If I am not badly wrong, the stability of BitUSD/USD is a key factor.
If issuance starts to get too high (diluting the shareholders beyond 2B XTS) then that means delegates need to burn more and charge higher transaction fees to cover the risk. The system can still earn a profit, the shareholders just have to choose to "save in advance" or "dilute as necessary".
I will strongly advise against any rules preventing people from cancel-ling their orders.
0.02 BTSX
Yes, I agree.QuoteBTSX description from detractor, NXT/Bitcoin supporters etc.
Unlike other digital currencies or DAC's that have either no inflation like NXT or defined limited inflation like Bitcoin. BTSX has the ability to print new money when required just like the Federal Reserve & the other central banks we all know and love! But unlike central banks which only create a little bit of inflation, BTSX can create a lot all at once! So in a 50% flash crash for example, where you've already lost 50% of the value of your BTSX, we could devalue you by up to a further 25%! Won't that be a fun few hours to remember! But don't worry about the smart money & professional traders because a minority can hedge themselves and the rest will just sell very early on in a crash leaving the regular guys like you holding the bag when there's a problem. It's just like a real economy! Welcome to BTSX - The future of money!
I could see this being posted against nearly every positive sentiment for Bitshares on other forums, very bad for PR reasons along with the ideology.
You mean #2, right?