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Main => General Discussion => Topic started by: bytemaster on August 31, 2014, 07:32:06 pm

Title: Support BitUSD Price by Forced Covering at a Profit
Post by: bytemaster on August 31, 2014, 07:32:06 pm
This idea has been discussed in other threads, but the more I think about it the more critical I think it will be.  To describe what I am talking about lets start out with a simple example.

Alice and Bob decide to take opposite bets and one ends up with BitUSD the other is Short BitUSD. 
Immediately after this trade occurs Alice decides she wants out of her position, but Bob doesn't.
Alice has to shop around looking for someone else to take her BitUSD position... no takers.
Alice drops the price to 95%, 90%, 50% of the dollar .... still no takers. 

The value of the dollar hasn't changed during this time, there is just no BitUSD liquidity.  Bob hasn't actually made any money, he is just refusing to give up his position. 

So we have a situation where people are looking to exit their BitUSD position and they are willing to pay a fee to do so.   If the network knows the price then it is easy to implement this.  We simply change the terms of the short "contract".

Bob agrees that Alice has the option to exit her position at  $.90 per BitUSD at any time.  Bob makes money even though the dollar did not fall against BTSX and Alice is assured some liquidity should she need it.   

If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01. 
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: graffenwalder on August 31, 2014, 07:50:03 pm
Isn't the problem, that we don't have enough players, and other markets aren't opened yet?

And will the higher collateral affect your margin call?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: CoinHoarder on August 31, 2014, 07:51:46 pm
I like this idea. Forcing someone to take a profit on their short position shouldn't be seen as a bad thing IMO.. as they are in the black and it benefits the greater good of BitsharesX in multiple ways. They can just reclaim their position if they are forced to cover, the market peg is more accurate, bitassets have higher liquidity, and thus it brings more value to BitsharesX as a whole.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on August 31, 2014, 08:06:47 pm

Having in mind that I suggested this action (in the opposite price movement direction), about 5 mo. ago...

What can I say...

'ugly but probably working solution'.

well... as the shorts are force closed in this case, it is even less ugly...
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: vlight on August 31, 2014, 08:22:16 pm
Seems fair.

But how exactly does "BitUSD is always worth at least $0.90 the value" ? Sounds like price fixing :D

Edit: nvm  :)

Edit2: can the market halt at $0.9 ?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Agent86 on August 31, 2014, 08:28:49 pm
My first impression is this is totally unnecessary.  Bob knows he has to buy back that dollar sometime, and there will be a lot of Bobs.  Alice knows if bob runs out of collateral he is forced to buy it back at fair price.

It also gives too much power to the price feed.  I wouldn't use the price feed for anything other than eliminating new shorts below the feed price.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: okidoki on August 31, 2014, 08:39:41 pm
My first impression is this is totally unnecessary.  Bob knows he has to buy back that dollar sometime, and there will be a lot of Bobs.  Alice knows if bob runs out of collateral he is forced to buy it back at fair price.

It also gives too much power to the price feed.  I wouldn't use the price feed for anything other than eliminating new shorts below the feed price.

Agreed... this is too much power for the price feed. Also one has to take into mind that the price feed will not be updated each second... so if there is a sudden drop n the price of bitsharesx the whole market gets screwed up.

Please let the market move freely. Let people allow to make money with arbitrage. If there is no money to be made with arbitrage than people will not look at that market.

Government solutions and regulation never work. Even if it sounds reasonable at first sight.

What would be great is having an BTSX:bitUSD market at bter.com. This way arbitrage would get a lot easier. One can buy bitUSD in the bitasharesx client and then sell it on bter for more bitshares and repeat this until prices are the same. The people who buy the bitUSD at bter can sell them for USD. Other people could arbitrage selling bitsharesX for USD and buying the bitUSD necessary for buying shares if the bitUSD price for the shares is lower...
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: mf-tzo on August 31, 2014, 08:43:48 pm
I think that what BM describes is necessary at least in the beginning until we stabilse for a couple of months the peg. Otherwise I believe that people will start panicking whenever there is an exchange hacked, or a huge problem with the client or something really bad happens to bitcoin etc.. and start selling their BITUSDs at huge discounts...

Personally I think that Bitcoin will be soon go down...I don't have much experience as you guys do but I have a bad feeling it is going to $200 for whatever reason... If that happens within the next couple of months it will drive BTSX price down with it... Bitusd holders should have the security that whatever happens to bitcoin or any crypto their bitusd's will always be worth at least 0.9$. Otherwise no one will care to have bitsusd's and will just keep speculating about BTSX price on the external exchanges.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on August 31, 2014, 08:45:20 pm
My first impression is this is totally unnecessary.  Bob knows he has to buy back that dollar sometime, and there will be a lot of Bobs.  Alice knows if bob runs out of collateral he is forced to buy it back at fair price.

It also gives too much power to the price feed.  I wouldn't use the price feed for anything other than eliminating new shorts below the feed price.

I think the idea is that in Alice's mind she would be absolutely secure that she can sell at 90%, at all times. Just like the system bot proposal but without a bot.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: graffenwalder on August 31, 2014, 08:48:59 pm
My first impression is this is totally unnecessary.  Bob knows he has to buy back that dollar sometime, and there will be a lot of Bobs.  Alice knows if bob runs out of collateral he is forced to buy it back at fair price.

It also gives too much power to the price feed.  I wouldn't use the price feed for anything other than eliminating new shorts below the feed price.

I think the idea is that in Alice's mind she would be absolutely secure that she can sell at 90%, at all times. Just like the system bot proposal but without a bot.

That's nice an all for Alice. But Bob is screwed, going short is all about risk reward, and now we're cutting the reward for bob.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: mf-tzo on August 31, 2014, 08:49:59 pm
Quote
What would be great is having an BTSX:bitUSD market at bter.com. This way arbitrage would get a lot easier. One can buy bitUSD in the bitasharesx client and then sell it on bter for more bitshares and repeat this until prices are the same.

I Agree.

Quote
The people who buy the bitUSD at bter can sell them for USD.

In theory yes but have you tried that? There is just no liquidity for bitusd currently...
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Agent86 on August 31, 2014, 08:53:54 pm
This idea has been discussed in other threads, but the more I think about it the more critical I think it will be.  To describe what I am talking about lets start out with a simple example.

Alice and Bob decide to take opposite bets and one ends up with BitUSD the other is Short BitUSD. 
Immediately after this trade occurs Alice decides she wants out of her position, but Bob doesn't.
Alice has to shop around looking for someone else to take her BitUSD position... no takers.
Alice drops the price to 95%, 90%, 50% of the dollar .... still no takers. 

The value of the dollar hasn't changed during this time, there is just no BitUSD liquidity.  Bob hasn't actually made any money, he is just refusing to give up his position. 

So we have a situation where people are looking to exit their BitUSD position and they are willing to pay a fee to do so.   If the network knows the price then it is easy to implement this.  We simply change the terms of the short "contract".

Bob agrees that Alice has the option to exit her position at  $.90 per BitUSD at any time.  Bob makes money even though the dollar did not fall against BTSX and Alice is assured some liquidity should she need it.   

If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

To expand on your simplified negotiation...  In addition to selling Alice the one bitUSD that Bob wanted to short, Bob must also place additional short/sell orders at slightly above the price feed (proposed rule is can't be below feed).  This is to stop Alice from just posting it for sale at a real high price and triggering Bob's margin call.  Alice then posts the dollar for sale just below the price feed.

Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

1) bitUSD rises and bob gets a margin call giving alice $1 worth of BTSX...
2) BTSX rises to the point that Alice's measly dollar is tying up a huge amount of valuable BTSX that Bob now can't use until he closes the position and he isn't getting enough leverage to be worth not closing.  So he will buy it back for $1.

-notice how the rule "no short selling below feed" immediately makes the market center around feed price.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on August 31, 2014, 08:56:15 pm
What would be great is having an BTSX:bitUSD market at bter.com. This way arbitrage would get a lot easier. One can buy bitUSD in the bitasharesx client and then sell it on bter for more bitshares and repeat this until prices are the same.
Quote
I Agree.

[/quote]

The usefulness of that will last exactly 5 second, I will personally will take care of that, and will not be alone...
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: liondani on August 31, 2014, 09:00:32 pm


Please let the market move freely. Let people allow to make money with arbitrage. If there is no money to be made with arbitrage than people will not look at that market.

+5

Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: davidpbrown on August 31, 2014, 09:05:04 pm
Surely bitUSD is a safe haven for any perceived future drop in BTSX. While BTSX rises perhaps it'll be tempting not to buy bitUSD but to short it? So, between those two, you have a draw into bitUSD.

I'm not sure whether you need to control the market as much as sell the idea of it. I wonder there needs to be some ELI5 descriptions for those of us with less experience of financial markets; and those of us who've drunk too much beer :p

If ever there is a prospect of bitUSD being widely available on exchanges and used in the real world, it seems very likely it'll find its market. USD is an imposed consensus; bitUSD is a distributed consensus and as such it's not bitUSD==USD but the peg and the utility and the idea of bitXYZ acknowledging real world assets is a powerful one. Just add time.. not rules.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: mf-tzo on August 31, 2014, 09:08:50 pm
It is not good arbitrage to exist for a long time, only in the beginning! This means inefficient and iliquid market, no serious investor will ever invest huge amounts of money and a bank run might happen and make all the bitassets move completely away from the peg and make them worthless

Crypto's can make huge profits but the reason bitcoin will eventually fail as well as all others altcoins is because it is a speculative bubble. BitsharesX should become the decentralized bank that brings stability to the cryptos and the same time one can use bitusd, biteur etc and have the cryptocurencies benefits by holding the stability of the dollar.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: puvar on August 31, 2014, 09:17:35 pm
My first impression is this is totally unnecessary.  Bob knows he has to buy back that dollar sometime, and there will be a lot of Bobs.  Alice knows if bob runs out of collateral he is forced to buy it back at fair price.

It also gives too much power to the price feed.  I wouldn't use the price feed for anything other than eliminating new shorts below the feed price.

I think the idea is that in Alice's mind she would be absolutely secure that she can sell at 90%, at all times. Just like the system bot proposal but without a bot.

That's nice an all for Alice. But Bob is screwed, going short is all about risk reward, and now we're cutting the reward for bob.

I agree. Suppose the market has equal chances to go in both directions (you don't really assume that it will always grow, do you?;). Bob bets on BTSX, Alice bets on BitUSD. If BTSX goes down, nobody is forcing Alice to sell her BitUSD, so she gets more profit on average.

Also, don't forget about Bob, he can get into the same situation, suppose he wants to exit his short immediately, but there are no BitUSD sellers (or other shorters).

So it looks like a double punishment for shorters. The imminent consequence of this is fewer people willing to short, and as a result slower growth of BitUSD supply.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on August 31, 2014, 09:29:25 pm
This idea has been discussed in other threads, but the more I think about it the more critical I think it will be.  To describe what I am talking about lets start out with a simple example.

Alice and Bob decide to take opposite bets and one ends up with BitUSD the other is Short BitUSD. 
Immediately after this trade occurs Alice decides she wants out of her position, but Bob doesn't.
Alice has to shop around looking for someone else to take her BitUSD position... no takers.
Alice drops the price to 95%, 90%, 50% of the dollar .... still no takers. 

The value of the dollar hasn't changed during this time, there is just no BitUSD liquidity.  Bob hasn't actually made any money, he is just refusing to give up his position. 

So we have a situation where people are looking to exit their BitUSD position and they are willing to pay a fee to do so.   If the network knows the price then it is easy to implement this.  We simply change the terms of the short "contract".

Bob agrees that Alice has the option to exit her position at  $.90 per BitUSD at any time.  Bob makes money even though the dollar did not fall against BTSX and Alice is assured some liquidity should she need it.   

If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

To expand on your simplified negotiation...  In addition to selling Alice the one bitUSD that Bob wanted to short, Bob must also place additional short/sell orders at slightly above the price feed (proposed rule is can't be below feed).  This is to stop Alice from just posting it for sale at a real high price and triggering Bob's margin call.  Alice then posts the dollar for sale just below the price feed.

Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

1) bitUSD rises and bob gets a margin call giving alice $1 worth of BTSX...
2) BTSX rises to the point that Alice's measly dollar is tying up a huge amount of valuable BTSX that Bob now can't use until he closes the position and he isn't getting enough leverage to be worth not closing.  So he will buy it back for $1.

-notice how the rule "no short selling below feed" immediately makes the market center around feed price.

A86, this does not explain how Alice gets $0.90, 10 seconds after she purchased the dollar.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Empirical1 on August 31, 2014, 09:32:54 pm
Quote
Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

But what if she doesn't want to wait and what if she has a large volume that the market can't support in times of low liquidity. We want those kind of buyers to enter the market no?

So it looks like a double punishment for shorters. The imminent consequence of this is fewer people willing to short, and as a result slower growth of BitUSD supply.

There seem to be long queues of people willing to short. The growth of BitAssets in the short to medium term seems like it will be determined  by how appealing it is to the people going long BitAssets.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Agent86 on August 31, 2014, 09:37:32 pm
A86, this does not explain how Alice gets $0.90, 10 seconds after she purchased the dollar.
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: puvar on August 31, 2014, 09:40:49 pm
This idea has been discussed in other threads, but the more I think about it the more critical I think it will be.  To describe what I am talking about lets start out with a simple example.

Alice and Bob decide to take opposite bets and one ends up with BitUSD the other is Short BitUSD. 
Immediately after this trade occurs Alice decides she wants out of her position, but Bob doesn't.
Alice has to shop around looking for someone else to take her BitUSD position... no takers.
Alice drops the price to 95%, 90%, 50% of the dollar .... still no takers. 

The value of the dollar hasn't changed during this time, there is just no BitUSD liquidity.  Bob hasn't actually made any money, he is just refusing to give up his position. 

So we have a situation where people are looking to exit their BitUSD position and they are willing to pay a fee to do so.   If the network knows the price then it is easy to implement this.  We simply change the terms of the short "contract".

Bob agrees that Alice has the option to exit her position at  $.90 per BitUSD at any time.  Bob makes money even though the dollar did not fall against BTSX and Alice is assured some liquidity should she need it.   

If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

I think the problem of overshorting comes from the fact that market is asymmetrical: everybody can sell BitUSD (either by shorting or selling), but only BTSX owners can buy BitUSD.

It would be more natural to make it symmetrical: allow BitUSD owners to short BTSX (effectively create extra BitUSD buy pressure). In this case Alice will have a chance to sell her BitUSD to a pessimist who bought BitUSD, and is so strong about his position that is willing to short BTSX with BitUSD collateral.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: cygnify on August 31, 2014, 09:42:10 pm
 
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

That's right. All markets will move to equilibrium (price parity) given enough time and liquidity.

The only reasons the peg is slightly off presently is the wallet software (could be more stable and also needs to help the user know when opportunities arise), not enough traders and few abritage opportunities at the moment.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on August 31, 2014, 09:45:55 pm
A86, this does not explain how Alice gets $0.90, 10 seconds after she purchased the dollar.
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

It is actually not Alice that wants to buy them, it is us  wanting her to buy them  :)
My response stays the same, regarding the not-bold text:

I think the idea is that in Alice's mind she would be absolutely secure that she can sell at 90%, at all times. Just like the system bot proposal but without a bot.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: bytemaster on August 31, 2014, 09:47:09 pm
On the whole the network is stronger with fewer shorts and more guarantees for BitUSD holders.   
On the whole the network is stronger with fewer rules and more free market action.

Allowing someone to Short BTSX backed by BitUSD would be an interesting experiment for a future chain.  It would certainly create buying pressure on cheap BitUSD. 

Price feeds are something I would prefer to avoid all together.   Average prices are something I would prefer to remove all together.

So this discussion is mostly focused on "how do we make a peg work in a thin market".

Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on August 31, 2014, 09:49:59 pm

Allowing someone to Short BTSX backed by BitUSD would be an interesting experiment for a future chain.  It would certainly create buying pressure on cheap BitUSD. 


... is something I was thinking about 2 nights ago, even in my sleep.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Agent86 on August 31, 2014, 09:57:24 pm
On the whole the network is stronger with fewer shorts and more guarantees for BitUSD holders.   
On the whole the network is stronger with fewer rules and more free market action.

Allowing someone to Short BTSX backed by BitUSD would be an interesting experiment for a future chain.  It would certainly create buying pressure on cheap BitUSD. 

Price feeds are something I would prefer to avoid all together.   Average prices are something I would prefer to remove all together.

So this discussion is mostly focused on "how do we make a peg work in a thin market".
It doesn't work in a thin market without feed, or any market for that matter IMO...  I think we will be happy with the feed.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: James212 on August 31, 2014, 10:04:49 pm
On the whole the network is stronger with fewer shorts and more guarantees for BitUSD holders.   
On the whole the network is stronger with fewer rules and more free market action.

Allowing someone to Short BTSX backed by BitUSD would be an interesting experiment for a future chain.  It would certainly create buying pressure on cheap BitUSD. 

Price feeds are something I would prefer to avoid all together.   Average prices are something I would prefer to remove all together.

So this discussion is mostly focused on "how do we make a peg work in a thin market".


I am no expert on financial markets, but I think that the big benefit of BITUSD is that is closely mimics US Dollars (which is not exactly a totally free market instrument)   on the block chain and thus allows big players.....(corporations and the like) to have the option to leave funds (profits) in the system without risk.  This avoids them rushing to cash out as in the current process using Bitpay.  That being the case,  whatever the solution,  it should allow for a very tight correlation to the US Dollar.   I think a 90% guarantee is still too much of a variance assuming we are talking about hundreds of thousands/ millions of USD in value.    I don't know, but maybe separate assets should be created to achive the various objectives of BitUSD(?)

Just my 2 cents.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: puvar on August 31, 2014, 10:16:50 pm
So this discussion is mostly focused on "how do we make a peg work in a thin market".

...without thinning the market more :-)
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: bitcoinerS on August 31, 2014, 10:39:11 pm
Better not to increase reliance on feeds, but work to eliminate them..
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: liondani on August 31, 2014, 10:53:47 pm



Allowing someone to Short BTSX backed by BitUSD would be an interesting experiment for a future chain.  It would certainly create buying pressure on cheap BitUSD. 


... is something I was thinking about 2 nights ago, even in my sleep.

why future chain?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: luckybit on August 31, 2014, 11:45:47 pm
Surely bitUSD is a safe haven for any perceived future drop in BTSX. While BTSX rises perhaps it'll be tempting not to buy bitUSD but to short it? So, between those two, you have a draw into bitUSD.

I'm not sure whether you need to control the market as much as sell the idea of it. I wonder there needs to be some ELI5 descriptions for those of us with less experience of financial markets; and those of us who've drunk too much beer :p

If ever there is a prospect of bitUSD being widely available on exchanges and used in the real world, it seems very likely it'll find its market. USD is an imposed consensus; bitUSD is a distributed consensus and as such it's not bitUSD==USD but the peg and the utility and the idea of bitXYZ acknowledging real world assets is a powerful one. Just add time.. not rules.

Quote this:

The only way BitUSD will be used as a safe haven is if information flow and market signalling is improved. People make rational decisions only when they receive timely information otherwise it's just gambling.

BitUSD is best used when you have accurate pertinent information about a market disrupting event which is about to occur. A spike in the purchasing of BitUSD may be a statistical indicator that something has happened which will result in a crash in the price. If Mt Gox gets hacked, if the Bitcoin ETF is about to open, if big whale investors are about to enter the market, all of that influences whether or not people should buy BitUSD because it's a prediction market.

Information right now doesn't flow very well. It's hidden in the forums, in the Mumble meetings, etc. This lack of information flow causes a delay in people purchasing BitUSD, and it is partially why people don't value BitUSD yet. It's going to take a dramatically more interconnected and efficient information flow to create a true information market.

Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: luckybit on August 31, 2014, 11:54:13 pm
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

That's right. All markets will move to equilibrium (price parity) given enough time and liquidity.

The only reasons the peg is slightly off presently is the wallet software (could be more stable and also needs to help the user know when opportunities arise), not enough traders and few abritage opportunities at the moment.

Everyone is forgetting the key element of an information market. Information flow is a key element and we have very poor information flow. If information is like the oxygen in our blood flowing through our bloodstream then if we have poor circulation we can't survive.

BitUSD/BTSX is an information market. It's a prediction market where you're trying to guess whether BTSX is going up or down in price. Since most people have been convinced that it's going up in price not many people decided to buy BitUSD. The other problem is not many people even knew what BitUSD is or how to use it (myself among them).

So you have to consider the amount of time it takes to master the UI of Bitshares X along with figuring out all the advanced features. As expertise begins to increase, along with automation, there will be people who can capitalize quickly, if and only if information circulates.

So we need to build information feeds into the GUI so that information can flow efficiently to eyeballs. The GUI could be like the heart of the whole ecosystem where all information flows through so that everyone using Bitshares X software receives a live stream on their dashboard. This would increase situation awareness and information flow so that speculators can make rational informed decisions quickly.

Right now the Bitshares interface and bugs in the software prevent anyone from using it properly.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: sumantso on August 31, 2014, 11:57:30 pm
Frankly I understand nothing of this, so I have stayed away, but was wondering something (might be stupid).

Is one of the issues is that there are not enough longs or shorts; means at some point one look more attractive than the other and so its skewing it? In that case, can you introduce some kind of 'odds'? In betting, if you are taking less risk, you will receive  a less return; but higher risk nets higher profits.

In the same way if it feels like majority is against, say, short, but you do anyway, shouldn't there be a more incentive? Might balance up both sides this way.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: bytemaster on September 01, 2014, 12:02:09 am
Surely bitUSD is a safe haven for any perceived future drop in BTSX. While BTSX rises perhaps it'll be tempting not to buy bitUSD but to short it? So, between those two, you have a draw into bitUSD.

I'm not sure whether you need to control the market as much as sell the idea of it. I wonder there needs to be some ELI5 descriptions for those of us with less experience of financial markets; and those of us who've drunk too much beer :p

If ever there is a prospect of bitUSD being widely available on exchanges and used in the real world, it seems very likely it'll find its market. USD is an imposed consensus; bitUSD is a distributed consensus and as such it's not bitUSD==USD but the peg and the utility and the idea of bitXYZ acknowledging real world assets is a powerful one. Just add time.. not rules.

Quote this:

The only way BitUSD will be used as a safe haven is if information flow and market signalling is improved. People make rational decisions only when they receive timely information otherwise it's just gambling.

BitUSD is best used when you have accurate pertinent information about a market disrupting event which is about to occur. A spike in the purchasing of BitUSD may be a statistical indicator that something has happened which will result in a crash in the price. If Mt Gox gets hacked, if the Bitcoin ETF is about to open, if big whale investors are about to enter the market, all of that influences whether or not people should buy BitUSD because it's a prediction market.

Information right now doesn't flow very well. It's hidden in the forums, in the Mumble meetings, etc. This lack of information flow causes a delay in people purchasing BitUSD, and it is partially why people don't value BitUSD yet. It's going to take a dramatically more interconnected and efficient information flow to create a true information market.

+5!
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Blahbleuhbleuh on September 01, 2014, 12:21:00 am
This is history in the making.

I love that you guys are taking the time to dissect every idea and try to implement something that works.

You are operating well outside of the dogmatic belief systems that some people have on here, and you can only be cheered for it.

I think considering to implement multiple, different solutions might be more productive than to just try to get the one way that will work out of the box, because who knows what happens when it gets out of the box?

Good job guys, keep an open mind.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: okidoki on September 01, 2014, 12:47:45 am
So this discussion is mostly focused on "how do we make a peg work in a thin market".

...without thinning the market more :-)

Yes, please do not complicate this market with lots of regulations and profit limits for arbitrages, and strange policies like only people who are long bitUSD can short for the same amount... If I had a position and saw it forcefully closed I would say: "What shit is [email protected]!" Also if I have to be long and short at the same time, I do not enter the market at all. You eliminate all the profit!!

Also market feeds do not reflect sudden -50% to +90% price moves of the value of BitShares X!!

Let the people make their bets and introduce another market on Bter in order to increment the transparency of the market and let the arbitrage work. PLEASE!!! This will help the market to be attractive for traders and give it more and more liquidity. You have to give it some time....
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: liondani on September 01, 2014, 01:11:38 am
So this discussion is mostly focused on "how do we make a peg work in a thin market".

...without thinning the market more :-)

Yes, please do not complicate this market with lots of regulations and profit limits for arbitrages, and strange policies like only people who are long bitUSD can short for the same amount... If I had a position and saw it forcefully closed I would say: "What shit is [email protected]!" Also if I have to be long and short at the same time, I do not enter the market at all. You eliminate all the profit!!

Also market feeds do not reflect sudden -50% to +90% price moves of the value of BitShares X!!

Let the people make their bets and introduce another market on Bter in order to increment the transparency of the market and let the arbitrage work. PLEASE!!! This will help the market to be attractive for traders and give it more and more liquidity. You have to give it some time....

I tend to agree with that... my only concerns are that we have many "newbies" that express the same thing, and less  "older" members they do...(?)  ::)


PS Don't take it personal  ;)
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on September 01, 2014, 01:15:27 am
So this discussion is mostly focused on "how do we make a peg work in a thin market".

...without thinning the market more :-)

Yes, please do not complicate this market with lots of regulations and profit limits for arbitrages, and strange policies like only people who are long bitUSD can short for the same amount... If I had a position and saw it forcefully closed I would say: "What shit is [email protected]!" Also if I have to be long and short at the same time, I do not enter the market at all. You eliminate all the profit!!

Also market feeds do not reflect sudden -50% to +90% price moves of the value of BitShares X!!

Let the people make their bets and introduce another market on Bter in order to increment the transparency of the market and let the arbitrage work. PLEASE!!! This will help the market to be attractive for traders and give it more and more liquidity. You have to give it some time....

I tend to agree with that... my only concerns are that we have many "newbies" that express the same thing, and less  "older" members they do...(?)  ::)


PS Don't take it personal  ;)


I personally do not like text in red... although in this case it is in the correct color for wrong.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yellowecho on September 01, 2014, 01:31:02 am
This is history in the making.

I love that you guys are taking the time to dissect every idea and try to implement something that works.

You are operating well outside of the dogmatic belief systems that some people have on here, and you can only be cheered for it.

I think considering to implement multiple, different solutions might be more productive than to just try to get the one way that will work out of the box, because who knows what happens when it gets out of the box?

Good job guys, keep an open mind.

There's continuous dialogue about systematic improvements  in order to increase efficiency and reduce costs like a company (DA) should do. A beautiful aspect of the Bitshares platform is that it incentivizes R&D! 
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yellowecho on September 01, 2014, 01:49:37 am
If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Could price feeds reduce price security?  Could there be DDOS attacks on feed sources to could make the network less stable?  Just wondering..


Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

I don't mind this approach but I'm glad we're discussing it.  I have been Alice and run into a couple liquidity problems so far trading BTSX and I think what you're proposing would be fair and increase liquidity.  With that said, is it the best way?  Will liquidity not increase as other currencies/options are added to the platform?  In your example Alice is stuck because there is one exit from her USD position and it's blocked.  But what if there were more exits?  What if Alice could buy CNY from Zhang Li?  ;)  Or Bitcoins from Stan?   More exits = more liquidity. 
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yiminh on September 01, 2014, 02:13:36 am
I have a perfect solution to this pegging problem, only need one little change to the current system, no price feeds, no 90% stuff, if you post a 10 M BTSX bounty, I'll post it.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on September 01, 2014, 02:19:15 am
Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yellowecho on September 01, 2014, 02:20:02 am
FTFY
if you post....... 1 M BTSX

(http://audiosex.pro/uploads/profile/photo-6577.jpg)

Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: James212 on September 01, 2014, 02:23:05 am
Surely bitUSD is a safe haven for any perceived future drop in BTSX. While BTSX rises perhaps it'll be tempting not to buy bitUSD but to short it? So, between those two, you have a draw into bitUSD.

I'm not sure whether you need to control the market as much as sell the idea of it. I wonder there needs to be some ELI5 descriptions for those of us with less experience of financial markets; and those of us who've drunk too much beer :p

If ever there is a prospect of bitUSD being widely available on exchanges and used in the real world, it seems very likely it'll find its market. USD is an imposed consensus; bitUSD is a distributed consensus and as such it's not bitUSD==USD but the peg and the utility and the idea of bitXYZ acknowledging real world assets is a powerful one. Just add time.. not rules.

Quote this:

The only way BitUSD will be used as a safe haven is if information flow and market signalling is improved. People make rational decisions only when they receive timely information otherwise it's just gambling.

BitUSD is best used when you have accurate pertinent information about a market disrupting event which is about to occur. A spike in the purchasing of BitUSD may be a statistical indicator that something has happened which will result in a crash in the price. If Mt Gox gets hacked, if the Bitcoin ETF is about to open, if big whale investors are about to enter the market, all of that influences whether or not people should buy BitUSD because it's a prediction market.

Information right now doesn't flow very well. It's hidden in the forums, in the Mumble meetings, etc. This lack of information flow causes a delay in people purchasing BitUSD, and it is partially why people don't value BitUSD yet. It's going to take a dramatically more interconnected and efficient information flow to create a true information market.

 +5%
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yiminh on September 01, 2014, 02:30:11 am
Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yiminh on September 01, 2014, 02:31:55 am
not just me, everyone can compete in the bounty hehe
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: liondani on September 01, 2014, 02:32:17 am
I have a perfect solution to this pegging problem, only need one little change to the current system, no price feeds, no 90% stuff, if you post a 10 M BTSX bounty, I'll post it.

If you are so sure, buy cheap BTSX now by yourself and post your solution after that.
In no time you will profit even more that 10 M of current BTSX prices...

PS if you own allready BTSX, even better...
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Riverhead on September 01, 2014, 02:35:25 am
Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?

Perhaps. But it's just your idea versus everyone else's that are posting up and everyone else thinks they have the solution too. Difference being of course they're collectively trying to solve a problem and you're...I'm not sure what you're doing lol. Buy a lot of BTSX, throw your golden screwdriver out there, and if it works your shares make you rich. If it doesn't you're no further behind.

Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yiminh on September 01, 2014, 02:42:57 am
Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?


Perhaps. But it's just your idea versus everyone else's that are posting up and everyone else thinks they have the solution too. Difference being of course they're collectively trying to solve a problem and you're...I'm not sure what you're doing lol. Buy a lot of BTSX, throw your golden screwdriver out there, and if it works your shares make you rich. If it doesn't you're no further behind.

hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: tonyk on September 01, 2014, 02:44:46 am
Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?

It might be.
I know a person who's idea is worth several trillion dollars (in my estimation)... He did not get the money for posting his idea and expecting someone to pay him for it. In fact most of us here try to help him get most of that value out of this idea.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Riverhead on September 01, 2014, 03:16:18 am
Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?

It might be.
I know a person who's idea is worth several trillion dollars (in my estimation)... He did not get the money for posting his idea and expecting someone to pay him for it. In fact most of us here try to help him get most of that value out of this idea.


 +5%
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Riverhead on September 01, 2014, 03:19:16 am
hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)


Even if you have the right answer and we come up with the same one we'll never know. Of course you'll jump up and down saying, "Yes! This was my idea!" Frankly it just comes across as looking for attention. So, on that note I'm done responding to your attention bate posts.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: yiminh on September 01, 2014, 06:56:14 am
hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)


Even if you have the right answer and we come up with the same one we'll never know. Of course you'll jump up and down saying, "Yes! This was my idea!" Frankly it just comes across as looking for attention. So, on that note I'm done responding to your attention bate posts.

Only when you have a solution can you realize the current peg needs work, ByteMaster kind of suspected that, but most of you don't even think there is a problem, I need BTSX, not attention, nobody knows who I am.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: vegolino on September 01, 2014, 10:58:07 am
Dear yiminih,

Working together and helping each other is very rewarding experience and I would recommend it that you should give it a go. You will be pleasantly surprised.   

Peace and Love  :)
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: James212 on September 01, 2014, 11:32:52 am
Dear yiminih,

Working together and helping each other is very rewarding experience and I would recommend it that you should give it a go. You will be pleasantly surprised.   

Peace and Love  :)

 +5%  :)
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: jamesc on September 02, 2014, 10:56:49 am
I think the people who care the most about the price feeds are the investors.  The delegates don't have any liability; a delegate can claim hey "the platform made me do it!" 

So use the wallet as the testing grounds for these great ideas.  Lets see two simple options become available to wallet uses / investors.   The investor will be highly motivated to monitor and tweak for profitability.  They will decide how much to risk and how tight the stops can operate.  The best methods should spread and stabilize the peg (very quick, and perhaps automated)..

This gives the option to send a notice and: approve, deny, or auto-approve.

Finally, I don't think the platform can do this for Bob, it does not have Bob's private key.  Even if Bob pre-signed transactions, the delegate could misbehave by broadcasting it out too early, late, or not at all.  Best if we only trust delegates to include transactions and be reliable but not to issue transactions.  It would be nice to put the auto-approve in the delegate, but I can't see how to do that.

Finally, platform and delegates can claim "the investor made me do it."
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Shentist on September 02, 2014, 04:45:19 pm
my idea with my knowledge of english  ;)

what we need:
1. liquidity - the new rules around the median price killed the whole bitUSD market. 1 trade per hour is nothing!
2. we want more stability in direction to the peg

i am against all this 10% of something to cover etc. it makes everything complicated and at most, if we see this in the future on the other side, how do we react?

so we need a solution for every situation.

1. what does it mean to peg the USD?

it will oszillate around it, so if we start not 1:1 it is absolute fine, because in extreme situation the peg will not hold, because the buyers and sellers will struggle for the savesed bet.
so in the moment more people, or extreme more people want to short bitUSD and drive the price away from market peg.

my solution

1. we just count the volume the last say 1.000 trades

- 5000 BTSX are traded on the bid side
- 50.0000 BTSX are traded on the short side

its 5.000 : 50.000 = 1:50

we are in an extreme enviroment, who everyone looks to short bitUSD

so we will do this

1 : 50 = 50 -1 = 49
49 is translatet do 49% interest

bid side is 30 with 1.000 bitUSD
short side is 32 with 30.000 bitUSD

if you want to short and buy the bid side away you have not to pay 1.000 BTSX + colleteral, but the new counting will look like this
30.000 BTSX + 49% interest for the buyer of bit USD or 14.700 BTSX == 44.700 BTSX to buy the bid side away with a short from the buyer (extreme expensive)

now it is extreme expensive to do this.

this interest will adjust after a couple of trades.

advantages?

1. the market can trade freely and will decide which price is worth to pay
2. in an extreme situation it will much more intesting to take the other side, so more liquidity for the unfavorde side
3. the rules are for both sides, so if in the future the conditions are in favore of bitUSD we don't need to worry because the short will get a premium to take the position

i hope you could follow my idea.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Empirical1.1 on September 02, 2014, 05:01:12 pm
@ Shentist I don't understand your solution, I will try understand later, but yes the market is there waiting to explode.

There are a queue of people wanting to short BitAssets at fair market price around the peg. (Shorts want to support the peg.) We need to find a very simple mechanism to find that fair market price that supports the peg too.


Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: jsidhu on September 02, 2014, 05:01:37 pm
I have a perfect solution to this pegging problem, only need one little change to the current system, no price feeds, no 90% stuff, if you post a 10 M BTSX bounty, I'll post it.

Post your academic background and qualifications and maybe someone will take you up on that offer. But I doubt anyone will take you seriously.

Usually this kind of thing means we structure some sort of incentive to be long bitusd and punish short bitusd.. however this may adversely affect the market in a few ways mainly speculative attacks/hacks and might actually dry up shorts altogether and will undermine confidence in the system.

Main thing is if you're coming up with a solution then what is the incentive to hold long and not hold short? Some are throwing the up idea of interest rates.. some are saying other things, each have their pro's and con's if we weigh each idea with pro's and con's we can find which ones are a better fit in as objective manor as possible.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:13:14 pm
Quote
Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

But what if she doesn't want to wait and what if she has a large volume that the market can't support in times of low liquidity. We want those kind of buyers to enter the market no?

So it looks like a double punishment for shorters. The imminent consequence of this is fewer people willing to short, and as a result slower growth of BitUSD supply.

There seem to be long queues of people willing to short. The growth of BitAssets in the short to medium term seems like it will be determined  by how appealing it is to the people going long BitAssets.

In the bitsharesx platform is there a part of the Interface that shows people wanting to want to go short?  Or do we have no one wanting to do this yet?  I cant see it in yet but I could be blind (please laugh).
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: bytemaster on September 02, 2014, 05:18:01 pm
Short orders appear with Bids/asks in the GUI
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:18:41 pm
This idea has been discussed in other threads, but the more I think about it the more critical I think it will be.  To describe what I am talking about lets start out with a simple example.

Alice and Bob decide to take opposite bets and one ends up with BitUSD the other is Short BitUSD. 
Immediately after this trade occurs Alice decides she wants out of her position, but Bob doesn't.
Alice has to shop around looking for someone else to take her BitUSD position... no takers.
Alice drops the price to 95%, 90%, 50% of the dollar .... still no takers. 

The value of the dollar hasn't changed during this time, there is just no BitUSD liquidity.  Bob hasn't actually made any money, he is just refusing to give up his position. 

So we have a situation where people are looking to exit their BitUSD position and they are willing to pay a fee to do so.   If the network knows the price then it is easy to implement this.  We simply change the terms of the short "contract".

Bob agrees that Alice has the option to exit her position at  $.90 per BitUSD at any time.  Bob makes money even though the dollar did not fall against BTSX and Alice is assured some liquidity should she need it.   

If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

I think the problem of overshorting comes from the fact that market is asymmetrical: everybody can sell BitUSD (either by shorting or selling), but only BTSX owners can buy BitUSD.

It would be more natural to make it symmetrical: allow BitUSD owners to short BTSX (effectively create extra BitUSD buy pressure). In this case Alice will have a chance to sell her BitUSD to a pessimist who bought BitUSD, and is so strong about his position that is willing to short BTSX with BitUSD collateral.

How should we accomplish this in bitsharesx or the user interface?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Empirical1.1 on September 02, 2014, 05:21:19 pm
Quote
Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

But what if she doesn't want to wait and what if she has a large volume that the market can't support in times of low liquidity. We want those kind of buyers to enter the market no?

So it looks like a double punishment for shorters. The imminent consequence of this is fewer people willing to short, and as a result slower growth of BitUSD supply.

There seem to be long queues of people willing to short. The growth of BitAssets in the short to medium term seems like it will be determined  by how appealing it is to the people going long BitAssets.

In the bitsharesx platform is there a part of the Interface that shows people wanting to want to go short?  Or do we have no one wanting to do this yet?  I cant see it in yet but I could be blind (please laugh).

I'm on my phone but if you have a BTSX wallet and click on the 'markets' and choose say BitUSD you will see an image on the left is people wanting to buy on the right is people wanting to short or sell.

The right side is very big. They are saying 'please let me short, I will pay money' then there is a very small green side on the left. They are saying 'it is too risky to go long, if you pay me, maybe'

I think we are going to make no-one short below 1-1 this will work but there will be very little demand on the long side. We need to find a way for the people on the right to pay the people on the left at 1-1
then you have a big market.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:33:28 pm
Short orders appear with Bids/asks in the GUI

Im having some errors in the GUI (im probably on an old version, I have to uninstall it and reinstall new one? This is what I believe)

Anyways will later versions of bitsharesx platform update when you login?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:35:04 pm
A86, this does not explain how Alice gets $0.90, 10 seconds after she purchased the dollar.
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

It is actually not Alice that wants to buy them, it is us  wanting her to buy them  :)
My response stays the same, regarding the not-bold text:

I think the idea is that in Alice's mind she would be absolutely secure that she can sell at 90%, at all times. Just like the system bot proposal but without a bot.

So how do we make/encourage/convince Alice to buy them?  Them being bitUSD?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:43:12 pm
Surely bitUSD is a safe haven for any perceived future drop in BTSX. While BTSX rises perhaps it'll be tempting not to buy bitUSD but to short it? So, between those two, you have a draw into bitUSD.

I'm not sure whether you need to control the market as much as sell the idea of it. I wonder there needs to be some ELI5 descriptions for those of us with less experience of financial markets; and those of us who've drunk too much beer :p

If ever there is a prospect of bitUSD being widely available on exchanges and used in the real world, it seems very likely it'll find its market. USD is an imposed consensus; bitUSD is a distributed consensus and as such it's not bitUSD==USD but the peg and the utility and the idea of bitXYZ acknowledging real world assets is a powerful one. Just add time.. not rules.

Quote this:

The only way BitUSD will be used as a safe haven is if information flow and market signalling is improved. People make rational decisions only when they receive timely information otherwise it's just gambling.

BitUSD is best used when you have accurate pertinent information about a market disrupting event which is about to occur. A spike in the purchasing of BitUSD may be a statistical indicator that something has happened which will result in a crash in the price. If Mt Gox gets hacked, if the Bitcoin ETF is about to open, if big whale investors are about to enter the market, all of that influences whether or not people should buy BitUSD because it's a prediction market.

Information right now doesn't flow very well. It's hidden in the forums, in the Mumble meetings, etc. This lack of information flow causes a delay in people purchasing BitUSD, and it is partially why people don't value BitUSD yet. It's going to take a dramatically more interconnected and efficient information flow to create a true information market.

What do you mean about information flow and market signaling?

How do you think information should flow better?  (Looking for ideas)

It is the GUI or User Interface of bitsharesx "Market" that needs to be worked on we need to change it to a system of "The market should be categorized simply like

Name           Market Value               Daily Volume               Todays percent change"

bitUSD               xxxxx                           xxxxx                           %xx.xx
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:56:04 pm
Frankly I understand nothing of this, so I have stayed away, but was wondering something (might be stupid).

Is one of the issues is that there are not enough longs or shorts; means at some point one look more attractive than the other and so its skewing it? In that case, can you introduce some kind of 'odds'? In betting, if you are taking less risk, you will receive  a less return; but higher risk nets higher profits.

In the same way if it feels like majority is against, say, short, but you do anyway, shouldn't there be a more incentive? Might balance up both sides this way.

Yes Sir Sumantso.  We need market makers, we need activity, we need adoption.  There are 3 big questions behind that

(1 market makers, (convince them that we have no fees (I dont understand how will we adjust the fees when the price of bitcoin goes up, so market makers stay competitive))
2) we need activity, tell your friends about this post https://bitsharestalk.org/index.php?topic=8072.0 so we get activity.  Be choosey who you tell, we do not want the government thinking we are going to destroy the world (I do believe they think technology is good.
3) We need adoption.  of bitUSD How is the question?

Even basic questions are good questions, or questions that you think are stupid.  You are a valued member Sumantso.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 05:58:14 pm
This is history in the making.

I love that you guys are taking the time to dissect every idea and try to implement something that works.

You are operating well outside of the dogmatic belief systems that some people have on here, and you can only be cheered for it.

I think considering to implement multiple, different solutions might be more productive than to just try to get the one way that will work out of the box, because who knows what happens when it gets out of the box?

Good job guys, keep an open mind.

*A tear comes off his eye*
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 06:00:02 pm
If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Could price feeds reduce price security?  Could there be DDOS attacks on feed sources to could make the network less stable?  Just wondering..


Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

I don't mind this approach but I'm glad we're discussing it.  I have been Alice and run into a couple liquidity problems so far trading BTSX and I think what you're proposing would be fair and increase liquidity.  With that said, is it the best way?  Will liquidity not increase as other currencies/options are added to the platform?  In your example Alice is stuck because there is one exit from her USD position and it's blocked.  But what if there were more exits?  What if Alice could buy CNY from Zhang Li?  ;)  Or Bitcoins from Stan?   More exits = more liquidity.

Very important question about the DDOS attack.  We need more delegates we need more processing power, we need more ram, more speed!
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 06:01:04 pm
I have a perfect solution to this pegging problem, only need one little change to the current system, no price feeds, no 90% stuff, if you post a 10 M BTSX bounty, I'll post it.

yiminh we are here for free.  You tell us the solution, you will make 1000x your money,
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 06:06:05 pm
hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)


Even if you have the right answer and we come up with the same one we'll never know. Of course you'll jump up and down saying, "Yes! This was my idea!" Frankly it just comes across as looking for attention. So, on that note I'm done responding to your attention bate posts.

Only when you have a solution can you realize the current peg needs work, ByteMaster kind of suspected that, but most of you don't even think there is a problem, I need BTSX, not attention, nobody knows who I am.

yiminh a bounty is no different than a ransom, you are trying to mentally, or perhaps for your own quick game take us hostage.  In Colombia they kill the hostage takers.  (This is not Colombia this is the Internet, this si a free board, free software, be nice)
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 06:08:01 pm
my idea with my knowledge of english  ;)

what we need:
1. liquidity - the new rules around the median price killed the whole bitUSD market. 1 trade per hour is nothing!
2. we want more stability in direction to the peg

i am against all this 10% of something to cover etc. it makes everything complicated and at most, if we see this in the future on the other side, how do we react?

so we need a solution for every situation.

1. what does it mean to peg the USD?

it will oszillate around it, so if we start not 1:1 it is absolute fine, because in extreme situation the peg will not hold, because the buyers and sellers will struggle for the savesed bet.
so in the moment more people, or extreme more people want to short bitUSD and drive the price away from market peg.

my solution

1. we just count the volume the last say 1.000 trades

- 5000 BTSX are traded on the bid side
- 50.0000 BTSX are traded on the short side

its 5.000 : 50.000 = 1:50

we are in an extreme enviroment, who everyone looks to short bitUSD

so we will do this

1 : 50 = 50 -1 = 49
49 is translatet do 49% interest

bid side is 30 with 1.000 bitUSD
short side is 32 with 30.000 bitUSD

if you want to short and buy the bid side away you have not to pay 1.000 BTSX + colleteral, but the new counting will look like this
30.000 BTSX + 49% interest for the buyer of bit USD or 14.700 BTSX == 44.700 BTSX to buy the bid side away with a short from the buyer (extreme expensive)

now it is extreme expensive to do this.

this interest will adjust after a couple of trades.

advantages?

1. the market can trade freely and will decide which price is worth to pay
2. in an extreme situation it will much more intesting to take the other side, so more liquidity for the unfavorde side
3. the rules are for both sides, so if in the future the conditions are in favore of bitUSD we don't need to worry because the short will get a premium to take the position

i hope you could follow my idea.


 +5% +5% +5%

Possible WINNER WINNER CHICKEN DINNER.  How do change the GUI of bitsharesx platform for this?
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 06:09:16 pm
Short orders appear with Bids/asks in the GUI

Please post a screenshot.  (I am sorry I am a dummby I can not get there on the platform).
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 06:20:29 pm
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

That's right. All markets will move to equilibrium (price parity) given enough time and liquidity.

The only reasons the peg is slightly off presently is the wallet software (could be more stable and also needs to help the user know when opportunities arise), not enough traders and few abritage opportunities at the moment.

Everyone is forgetting the key element of an information market. Information flow is a key element and we have very poor information flow. If information is like the oxygen in our blood flowing through our bloodstream then if we have poor circulation we can't survive.

BitUSD/BTSX is an information market. It's a prediction market where you're trying to guess whether BTSX is going up or down in price. Since most people have been convinced that it's going up in price not many people decided to buy BitUSD. The other problem is not many people even knew what BitUSD is or how to use it (myself among them).

So you have to consider the amount of time it takes to master the UI of Bitshares X along with figuring out all the advanced features. As expertise begins to increase, along with automation, there will be people who can capitalize quickly, if and only if information circulates.

So we need to build information feeds into the GUI so that information can flow efficiently to eyeballs. The GUI could be like the heart of the whole ecosystem where all information flows through so that everyone using Bitshares X software receives a live stream on their dashboard. This would increase situation awareness and information flow so that speculators can make rational informed decisions quickly.

Right now the Bitshares interface and bugs in the software prevent anyone from using it properly.

This point needs to be seriously addressed.  Like imgur.com (5 billion pageviews a month).  Look at how there comment system is, maybe have a "Categorize" button on the forum posts.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 07:02:03 pm
I just came up with an idea.  Why not people just put $1 dollar bitUSD shorts, to make it seem like thereis a market.  Its like making a forum, first there are some fake user accounts but then people start adopting because they believe there is activity.  It is not just like an empty forum.
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: bytemaster on September 02, 2014, 07:25:12 pm
When the value of BTSX is falling, the peg is enforced by margin calls buying BitUSD as well as those looking to hedge against falling BTSX
When the value of BTSX is rising, the peg is enforced by shorts taking their profits and re-shorting.   

We don't want to prevent shorts from shorting at prices below market if there is someone willing to buy ABOVE market.  What does this mean?  It means that anytime there is demand for BitUSD then which ever short is willing to pay the highest price gets matched first.  The difference between the short's price and the ask price has always been captured as fees.

This means that USD holders now benefit from added "insurance" in the event of a crash and BTSX holders benefit as well. Meanwhile "shorts" can set a price and get their order executed rather than "skipped". 

I believe that these rules are both simple and easy to understand and that once the "glut" of BitUSD on the market catches up to the demand the peg will hold just fine and transaction volume will be increasing.

I think "forced covering at a profit" will be unnecessary.   
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: Riverhead on September 02, 2014, 07:27:35 pm

I think "forced covering at a profit" will be unnecessary.   


 +5% +5% +5%
Title: Re: Support BitUSD Price by Forced Covering at a Profit
Post by: eagleeye on September 02, 2014, 07:29:50 pm
When the value of BTSX is falling, the peg is enforced by margin calls buying BitUSD as well as those looking to hedge against falling BTSX
When the value of BTSX is rising, the peg is enforced by shorts taking their profits and re-shorting.   

We don't want to prevent shorts from shorting at prices below market if there is someone willing to buy ABOVE market.  What does this mean?  It means that anytime there is demand for BitUSD then which ever short is willing to pay the highest price gets matched first.  The difference between the short's price and the ask price has always been captured as fees.

This means that USD holders now benefit from added "insurance" in the event of a crash and BTSX holders benefit as well. Meanwhile "shorts" can set a price and get their order executed rather than "skipped". 

I believe that these rules are both simple and easy to understand and that once the "glut" of BitUSD on the market catches up to the demand the peg will hold just fine and transaction volume will be increasing.

I think "forced covering at a profit" will be unnecessary.   

You have convinced me bytemaster.