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General Discussion / Re: Support BitUSD Price by Forced Covering at a Profit
« 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 :-)
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So this discussion is mostly focused on "how do we make a peg work in a thin market".
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.
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.
Relax, you're ok .
When you backup your wallet with the File->Export it creates a .json file that contains your wallet key and your account private key. Those two things combined with your passphrase can recreate your entire wallet/accounts. The new keys are deterministic as long as you have that .json file.
Each account is deterministic as well. For example I have dumped the private key to riverhead and imported it into a fresh wallet and after a rescan everything for that account repopulated.
The only time you need to refresh your .json backup is if you create a new account. The .json file is encrypted so you do also need to remember your passphrase.
This is closer to Electrum than the Bitcoin-QT wallet though unlike Electrum it's not completely deterministic from seed words.
... Seeing bitusd for usd on Bter for the first time was really a surreal moment for me. ...
No. When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral. In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.
So to get the collateral back the shorter must buy somebody else's short, right? Does it mean that the BitUSD cap will always grow?
The supply will grow if demand for BitUSD increases and shrink if demand for BitUSD decreases
No. When you bought someone's short both the btsx that they shorted with and the btsx you paid were put into a fund as collateral. In order to get that collateral back the shorter has to purchase bitusd and destroy it to cover the short.
That is correct.
1) All of the random selection techniques discussed here (and with Nxt) depend upon people putting their private keys at risk. So rather than trusting a trustee, everyone has to trust their computer not to get hacked.
I think they were shooting for the 15th, but that was an early guess. If I understand correctly there is no set date and it will be ready when it's ready. I would be surprised if it took longer than a month or two more but that's purely my speculation