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Messages - Empirical1.2

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General Discussion / Re: What bitshares should learn from steem
« on: July 11, 2016, 11:14:06 am »
I haven't followed Steem, but there valuation is up & buy support is up.

This is the opposite of what I thought would happen when hundreds of thousands of dollars were made available for redemption on Jul 4th. So well done.

If one of the key USP's as Erlich says above is that they are offering interest payments (on Steem USD?)

Then this is something I've been advocating for BitUSD for ages and think it will be self-funding during the SmartCoin growth stage.

General Discussion / Re: Forget Smartcoins, how about Dreamcoins?
« on: June 24, 2016, 08:27:34 pm »
There is no corporation. This will work like a casino with 5% house edge, except there is no house. Shorters will gamble on day-to-day volatility and in long term lose 5% per year. These 5% will be payed to holders.

It is also possible that BTS price will grow in long term. In this case shorters will share 5% of their yearly profit with holders.

Thanks. That actually makes some sense.

I still think that it is (long-term) inevitable that the system will end up in a black swan. You promise exponential payouts, and nothing can keep up with that, long-term.

At some point (possibly many years in the future) SmartCoin or DreamCoin products will mature and growth may stagnate.

At that point a SmartCoin interest payment will cost more BTS than the BTS (for SmartCoin) demand it incentivizes, (Either for BTS or a whale) so at that point I think the payment would have to be curtailed and ultimately ended.

While I don't know about a combo DreamCoin, I don't think this will cause a black swan if it's applied to SmartCoins like BitUSD because customers should be quite sticky... 

Customers are fairly sticky & first year bonuses are very successful at creating long term account holders for a very low cost.  In the UK it is/was controversial but very successful...

The Fair Banking Foundation reckons that 3.78 million savers over the past five years had money in accounts paying attractive short-term bonuses, but who failed to move their cash once the deal ended.

Hopefully we could keep ours going for many years during the growth phase and once it's fully tapered traditional banks will be well into negative territory and zero yield would actually be attractive especially once SmartCoins had greater utility and combined with all their other great features as well.

Once the system has been bootstrapped though, BTS growth/value will hopefully come from a range of products servicing the SmartCoin market & possibly trading fees etc.

General Discussion / Re: Forget Smartcoins, how about Dreamcoins?
« on: June 23, 2016, 03:22:50 pm »
This idea could bring new eyeballs to Bitshares, but some of the "benevolent whale" reasoning in this thread seems illogical to me.

It's not that illogical for a whale. Imagine a whale with $2.5 million.

He has purchased a 20% stake in BTS for circa $2 million. He has $500 000 in fiat.
He offers 5% p.a yield on 'BitSumo DreamCoin' & uses some of his stake to help short Dreamcoins into existence when there is demand.
His $500 000 in fiat will cover 5% yield on up to $10 million worth of DreamCoin in year 1 regardless of BTS price.

But $10 million of BitSumo couldn't be created unless there was MANY millions of dollars worth of new demand for BTS which would drive the price of BTS and it's value MUCH higher.

The result is that his leveraged 20% stake in BTS (Currently worth $2 million) should dramatically increase in value.

I would like to see the BTS blockchain itself support yield during the SmartCoin growth stage but this probably works too. (I would also consider reducing forced settlement and have some mechanism that allocates some of the yield to shorts when SmartCoin or Dreamcoin demand in this case, is above the peg.)

General Discussion / Re: Forget Smartcoins, how about Dreamcoins?
« on: June 22, 2016, 03:08:48 pm »
Is there something about making it a basket that would make it more attractive to shorters/whales to create?
(Specific currencies that offered yield would be infinitely more popular than any sort of combo product imo.)

Other - BTS itself could also play the whale of sorts. If BTS was diluted at X% a year for SmartCoin yield. The yield would increase as BTS's value increased thereby incentivizing more and more SmartCoin demand. The yield could also dynamically adjust so that it would predominantly incentivize shorting in bear markets & vice versa based on trading above/below peg. (Yield harvesting in both scenarios would be positive as it removes BTS from CEX's, incentivizes shareholders to become familiar with the DEX & raises the SmartCoin CAP to potentially a market leader position which among other things would also make it the most lucrative for third parties to offer SmartCoin related products and services in and therefore most likely to bootstrap.)

General Discussion / Re: Ethereum price discussion
« on: June 17, 2016, 10:27:19 am »
I was short ETH and losing on that trade, thanks to this managed to close with a nice profit.

Where I do see upcoming short potential is in ETH. Since being added to Bitfinex or for some other reason, it seems to be a lot more correlated to BTC however when the increased volumes and current tailwinds die down I think it will struggle to maintain that inflated price with it's much higher level of inflation.

Hopefully ETH will recover just so I can short it again. I will be a buyer of ETH once it switches to POS (Lower inflation)

This could all change if people started thinking about how to make bts a profitable company... because right now its a charity.  Maybe it starts performing better after the merger ends, but other than that I don't see any reason for the BTS token to have substantial value. 

Can someone please explain to me why it should have a high market cap (we can already see increased network usage != higher market cap)?

You don't have to be profitable, you just have to attract more demand for the BTS token that you are spending. This can be achieved multiple ways...

- Attracting users the market believes you can credibly monetize in future thereby raising your valuation.
- SmartCoin adoption causing more BTS demand than is spent on liquidity and possibly a yield promotion.
- (If there's no more mergers or supply changes) BTS could be adopted as a limited money similar to gold or Bitcoin.
- Popular third party products & services we don't earn fees from but use BTS as the underlying currency thereby creating BTS demand.

Ethereum, Bitcoin, Snapchat, Twitter, Instagram, Weibo etc. are all worth billions but are not profitable yet.

My answer...

BTS changed the supply rules and stopped focusing on developing the optimal SmartCoin product in favour of a range of other features.

This was the vision that created a speculative $100 million + valuation at one point for BTSX by itself...

BitShares is a revolutionary new bank and exchange that could rival the value of the largest banks in the world such as JP Morgan and Bank of America in just a few years. How could this new upstart grow so quickly?  BitShares offers a bank account that earns 5% interest where funds can be transferred in minutes anywhere in the world with more privacy and security than a Swiss bank account.  Your account can never be frozen, your funds cannot be seized, and the bank can never face collapse due to loan defaults or fraud.  All of this is made possible without requiring any employees, lawyers, regulatory compliance, vaults, buildings, and other infrastructure required by traditional banks.  Unlike existing banks, you can hold your balance denominated in gold, silver, oil, or other commodities in additional to national currencies.,12.msg18927.html#msg18927

Now that the merger is coming to an end and the current supply rules have been firmly in place, the market may once again start to view BTS as a crypto-currency that won't be diluted/merged at the whims of CNX/Other. By adding liquidity subsidies, potentially tweaking some parameters and even having a yield promotion, BTS can still rapidly deliver that vision.

A good case study is ING Direct, which started in 1997, doing away with traditional branches & which rapidly attracted millions of customers and billions in deposits.

Kuhlmann founded ING Direct Canada in 1996.[4] ... and led its growth to become the largest savings bank and number one direct bank in the United States, with more than $90B in deposits and 7.8M customers

That same entrepreneur started Zenbanx in 2015, , which I referenced in another thread which has a lot of features & approaches BTS could potentially emulate,22656.msg294661.html#msg294661

Hold your cash... I think we see BTS sub 7 million market cap much sooner than we see 14 million.

The trend of lower highs and lower lows will most likely continue.  Especially if the bottom falls out of bitcoin when people realize that the halving was baked into the price.

BTC can support $800 with the same level of average new demand it supported $400. So while there will likely be corrections and volatility, I don't see BTC having a problem stabilizing in the $700-800 range.

Most people realise the halving is being priced in currently and aren't expecting a dramatic increase in price at the actual halving or shortly thereafter.

There's also great tailwinds for BTC currently in the form of a much higher likelihood of Brexit, which is causing GBP and EUR to slide as well as European banking stocks. HSBC is forecasting a potential rise in Gold of up to 10% on a Brexit outcome, this bodes very well for BTC and other safe haven currencies.

(Where I do see upcoming short potential is in ETH. Since being added to Bitfinex or for some other reason, it seems to be a lot more correlated to BTC however when the increased volumes and current tailwinds die down I think it will struggle to maintain that inflated price with it's much higher level of inflation.)

General Discussion / Re: Bitshares Bank UI
« on: June 15, 2016, 02:51:45 am »

A businessman has heard about currency stable accounts that are better than having a Swiss Bank account. Do you want to send him to the exchange? Will he go with us or a competitor that has branded themselves similar to a bank?

The first step would be to introduce liquidity subsidies. You would need key SmartCoins trading in a tight range around the peg imo. Once that is in place by some mechanism, then third parties could come in and make a front end that doesn't require most customers to ever see the exchange.

Imagine if basic SmartCoin customers rarely had to see a complicated exchange again...

Mr. Anonymous

BTS Balance            750 000
BitUSD Balance:     $ 1780                 Buy BitUSD $1:01         Sell BitUSD $0.99
BitCNY Balance:     ¥ 4560                 Buy BitCNY ¥1:01        Sell BitCNY ¥0.99
Buy/Sell Smartcoins with Bitcoin/Bank/Card/Other via our trusted partners.

Visit Exchange (Advanced)

So If we are going to market BitShares successfully to people that want to use it as a bank account we want to have a really easy and intuitive interface. Personally, I don't have much understanding of derivatives and investing along with the terminology often used.

Zenbanx seem to have a pretty intuitive, simple mobile layout. Their entire approach is one that could be worth emulating to some degree.

Then if we add a yield subsidy (Which I believe is self funding during the SmartCoin growth stage)  SmartCoins could be a lot more appealing than traditional accounts.

General Discussion / Re: At least BTS outlasted NuShares
« on: June 14, 2016, 04:56:14 pm »
[I'm watching the same wrong thinking play out in Steem. Paying for users by share-dropping and hoping your highly illiquid start-up DAC will absorb the cost, (A strategy that has failed a hundred times + in crypto) to compound their error they're share-dropping/awarding stable currency so the size of that burden in dollar terms they've paid to acquire users stays the same even as the share price craters.   

I think the Steem experiment is trying to find out, if value in content-creation is enough to make the Steem social network valuable enough, that the general public will want to support and become part of steem.

This is why there is a delay until July 4th.  We have to fill steem with good quality (and valuable) content, that makes it into Google's search results.

Unlike other places like Yahoo answers and, which are full of ads and annoying to read, this is a completely different business model than can serve a similar benefit.

The annoying ads you see on other sites are a form of content which advertisers create and pay the site to display.

In Steem the advertisers can create the content and then pay themselves to upvote it?

If so, the Steem front page could in theory become a wall of annoying adverts and politically or other sponsored content.

If this self paying is possible, besides an increase in demand for Steem the users will derive little benefit from an already low revenue business model (Reddit forecasts $20 million revenue 2016) & the user experience should be even worse than the sites you describe.

I think there are ways to turn a lot of the work they've done into a more viable business model but I wouldn't hold my breath.

General Discussion / Re: At least BTS outlasted NuShares
« on: June 10, 2016, 03:45:36 pm »
Smartcoins have potentially wide uses, but I don't think that fiat-pegged stable currency is the killer app, not least because the mainstream seems unlikely to trust their savings to "stable" pegged currencies backed by inherently volatile collateral (which Nubits has demonstrated so poignantly).

Nubits didn't poignantly demonstrate the problems of inherently volatile collateral. Their product had extremely low collateral that wouldn't have been nearly sufficient even it had been completely stable.

On the contrary as well, I think it shows people are likely to trust a portion of their savings to stable pegged currencies especially if centralized risk factors worsen, considering NBT managed to do 5 figure volumes for years on end with a farcical low/no collateral system and only experienced a mass exodus when people tried to move into the BTC surge.

In parallel as these pegged currencies flounder with poor demand, any non-pegged crypto that sees enough network effect build over time and wins the race toward mainstream usage will also see declining volatility as a result, in turn promoting increased usage, in a self-reinforcing cycle. Therefore the volatility that most people today see as a problem to be fixed ends up fixing itself as adoption grows.

I agree to an extent. The popularity and network effect created by a successful crypto-currency can be phenomenal and doesn't need a lot of development, this is why I was against losing BTSX. The notion that we could lose crypto-currency status and buy more users as the 'what is a new user worth' suggested was absurd. I'm watching the same wrong thinking play out in Steem. Paying for users by share-dropping and hoping your highly illiquid start-up DAC will absorb the cost, (A strategy that has failed a hundred times + in crypto) to compound their error they're share-dropping/awarding stable currency so the size of that burden in dollar terms they've paid to acquire users stays the same even as the share price craters.   

(The strategy of paying for users is valid in some business models, not that they have a business model for that matter, but requires funds set aside so that redemptions don't eat directly into the share price.)

Therefore the volatility that most people today see as a problem to be fixed ends up fixing itself as adoption grows. Bitcoin for example continues down that path and is now at new lows in rolling 1 year price volatility, and still probably heading up the early part of its S-curve of adoption. I'm not claiming that Bitcoin is the ultimate victor in the crypto-money competition, only that whatever the victor is will inevitably see volatility fall to levels on par with fiat currencies (and possibly less), although this may take a couple of decades.

I think bitUSD has been an amazing experiment, leading to other cool developments, but unfortunately is probably not the killer app people want it to be. At best it is a stepping stone whose window of opportunity is closing. The crypto creations of central banks when they come in the next few years will directly compete but with a stamp of authority that gives many people comfort. But then eventually pure decentralised global crypto-money will gain enough confidence to make all of these variations obsolete.

I feel the focus ought to be on realising the fuller potential of the Bitshares platform, and defining how the Bitshares technology can be made flexible and useful enough to masses of developers and entrepreneurs to do the job of building killer apps we can't yet imagine. This is Ethereum's promise and I hope Bitshares can carve its own niche in this landscape.

From a merchant POV, Even with volatility at historical lows I believe the vast majority of merchants offering Bitcoin payment options still use BitPay/other to immediately convert to fiat. Their margins are so low that any trade not in their national currency probably needs to be immediately converted or hedged.  As a result there is a large market for stable national pegged crypto-currencies like USD or CNY. Given black market trade accounts for 20% of global GDP there's also many businesses that wouldn't want to go through the traditional financial system either but still have their expenses priced in their respective national currencies. (So couldn't stay in a crypto-currency either even if their products are sold in it.)

From a saving POV people still want Gold, Silver and national currency options. SmartCoins have the potential to offer a Swiss Bank on the blockchain type solution. (If centralized risk factors worsen, escalation of war on cash,  increased capital controls, negative interest rates, crazy taxes, precious metals ban etc. then the potential for SmartCoins becomes even greater.)

I also see a bright future for crytpo-currencies and see their volatility decreasing over time but for the forseeable future the major national currency and gold markets will make up 99%+ of international business and the first to offer a solution that is effectively decentralized, private, liquid and effectively backed will be extremely successful and BTS is close to being able to offer that.


General Discussion / Re: At least BTS outlasted NuShares
« on: June 09, 2016, 06:29:25 pm »
it will fail in the sense that you can only redeem your SBD at 0.1% a day or some other non viable amount.

We have different definitions of failure. Let's say a huge BitUSD holder force settled into BTS and then dumped it all in a low liquidity BTC/BTS market. How much (in dollar value of BTC) would they receive compared to the nominal dollar value of their original BitUSD holdings? Obviously, when liquidity is low you can't just exit quickly. So you convert and then sell small portions at a time to maximize the value you are able to convert to fiat starting from your smartcoins.

Now, because such a huge lump sum will be rewarded on July 4th, I do think there will likely be some craziness in the markets on July 11th. But going forward, the rate of daily SD issuance will be far more sane.

I agree, but I believe they could be world's apart in terms of viability. Any existing SmartCoin whale could probably cash out over a few days or a week whereas I would imagine for SBD even people with relatively small amounts will likely be looking at much longer?

In the case of BTS, a whale would have initially created BTS demand in order to purchase BitUSD and made a judgement call as to whether BTS would be liquid enough to support redeeming it in future. Whereas with Steem a high $ amount of SBD seems to have been created out of thin air without corresponding Steem demand at any stage in the process, made available at the same time and with no evidence of available liquidity to support it. So I think the redemption process will be so slow as to make it non viable.

Assuming it gets passed that craziness, I'm not sure how sane future SBD issuance will be?

If after July 4th/11th, the SBD awarded is somehow based on Steem demand/liquidity then it would likely be extremely low, a few cents per user assuming current market conditions. In which case their users will hardly be incentivized and new users/content other will significantly drop.

If on the other hand they intend to continue award new users a few dollars and be fairly generous in their rewards then the same problem will persist that more SBD is being awarded than the market can rapidly redeem/support at a time when people are struggling to redeem the large amount of SBD already awarded.

General Discussion / Re: At least BTS outlasted NuShares
« on: June 09, 2016, 05:03:03 pm »
So this comes with the disadvantage that there may potentially be a much smaller supply of SD than the demand for it. If this is still true despite dropping interest rates to 0%, then SD will have a large premium over the dollar. This is nothing new to the BitShares community. Even with the shorting-to-existence ability, BitUSD has experienced premiums over the USD as well. But with stronger limits to the supply of SD, I wonder how it will manifest in SD's ability to maintain the peg.

I've hardly looked at it but I would guess Steem & SBD should fail faster than any stable currency to date imo.

Either it will fail in the sense that Steem can't support the redemption of the SBD that's been awarded prior to July 4th & Steem will become fairly worthless or if there's some limiting mechanism which I believe there is, it will fail in the sense that you can only redeem your SBD at 0.1% a day or some other non viable amount. (In which case Steem will seem like a soon to be bankrupt bank no-one would want to have dollars in and shareholders would be racing for the exits too.)

General Discussion / Re: At least BTS outlasted NuShares
« on: June 09, 2016, 04:40:08 pm »
Thought they were struggling.

Competitors like NBT have no guaranteed redeem-ability at all (& I think they're struggling in this BTC surge) I think merivercap's BitCash has zero as well. I disagree with both those strategies..

Looks to me like the perfect opportunity to sell bitUSD .. erm.. not selling the token .. but selling the message/tech, of course :)

There were some threads on Bitcointalk back in the day that a lot of BTSers contributed too,

Possibly the most relevant started by Toast...

'BTSX+BitUSD vs NuShares+NuBits - which will win the USD peg war?'

Also... 'Nubits are operating as a fractional reserve'

Technical Support / Re: depressing...
« on: June 08, 2016, 04:58:07 pm »
Just because the bitshares network gets popular and is useful... doesn't mean the bitshares token will get any more valuable.

Holding the token doesn't do anything except give you voting rights.  Plus the network is operating at a huge loss right now because of witness pay and worker proposals.  Until fee's are brought back into the fold and the network becomes profitable, there's not really a point to holding the token.  In fact many of the projects using the BTS exchange for their UIA's accept funding outside of the DEX and distribute their token after they receive actual bitcoin or cash... this means there is literally no reason to buy bts to enter the ecosystem.

Once the merger is over, the downward pressure on price will be much less.

If BTS backed SmartCoins grow in popularity as a product they will create net BTS demand for many years to come and as a result increase the value of BTS. As the product matures, the SmartCoin market can then be monetized via trading fees.   

However the primary business model for BTS continues to be SmartCoins imo but they do require BTS to introduce liquidity subsidies and continue to make the DEX as user friendly as possible. (I'm also in favour of Yield subsidies for the period of time SmartCoin growth outpaces it.)

If demand for Smartcoins (Backed by BTS) grow over time then demand for BTS will grow with it until such time as the SmartCoin market reaches maturity. (Possibly many years in the future.) At that stage you would monetize your customer base through transaction fees in order to generate a return for shareholders like a more a traditional business. (As well as sell them other related products and services on BTS.)

Another business model on BTS is also a pure DEX model with trading fees for a range of user issued assets. While less lucrative imo, with CEX's like Coinbase valued at >$500 million there's also some potential there by growing that market to become the leading DEX & monetizing that customer base.

(We also don't need to add trading fees for the DEX model immediately either, user numbers increasing will increase the value of BTS because the market will price in their future monetization value provided they believe it's credible we can charge and still retain them in the future.)

I don't believe that an increase in demand for smart coins will ultimately lead to an increase demand and price for the BTS token...

Aside from the lack of acceptance and fungibility of smart coins the key problem is that there is no reason to create coins.

The only reason to create smart coins is if you think that the value of BTS will increase relative to the value of the smart coin.  Since the network (workers and witness's) are currently being paid in inflating BTS there is constant negative pressure on the BTS price.  If I'm a rational investor, there is no way I'm going to short with a naturally depreciating asset as collateral.  The only reason I would consider using BTS as collateral would be if I could somehow discount getting future profits from the BTS token.  The network needs to figure out a way to make money to sustain itself...  if it does, then the BTS token will rise significantly in value.  Just having an active network does not mean it's profitable or valuable.

Basically the bitshares holders are paying all the transaction costs for UIA and smart coin traders.  It's the strategy now to attempt to gain users, but it will need to change in order for the network to survive. 

Personally I think focusing on a few smart coin markets to add ample liquidity and then adding higher trading fee's to those markets.  Promote those markets to forex traders (I am a forex trader).  Forex traders would have no problem paying say a 5 or 10 cent transaction cost as long as there is liquidity and security.  This creates revenue for BTS, which will increase the value of the token, which will increase speculation that bts will rise vs smart coins, which will increase smart coin supply, which will increase liquidity, which will attract more traders, which will increase network revenue.... virtuous circle

I would be reluctant to short Smartcoins currently too, given the forced settlement requirements and as you say there is a lot of downward price pressure and low user and SmartCoin growth. 

However if the merger was over, SmartCoins were liquid and subisidzing yield. Then I would want to have a small portion of my fiat/gold in SmartCoins. Even a small portion would require me to purchase a lot of BTS, if others felt the same way that would be a lot of demand for BTS.

That trend, popularity and growth of SmartCoins would incentivize me to short SmartCoins too so I could take a leveraged position on BTS.

2. Subsidizing Yield and Exchange liquidity

Centralized Companies: If Coinbase offered their customers a bit of yield on their balance & subsidized liquidity that promotion would represent a massive loss to them for an extended period of time with no near term benefit. (For example if they had obligations of 3% on exchange balances annually they would be losing $300 000 a year per $10 million on their exchange with no income coming in.) The more successful that promotion was, the more money would be flowing out of their business every month over the next 1-3 years. This would not be a good way for them to bootstrap their exchange.

DACs/Alt-Coins: If a DAC/Alt offered their customers a bit of yield on their balance & subsidized liquidity that promotion would need to be funded via BTS sales which would represent a loss in value (Due to BTS being sold to fund it) unless those sales were offset by equal/greater BTS demand as the result of the same promotion.   


Lets say the obligations amounted to 3% per year. For every $30 000 of BTS put up for sale to fund the obligation over the next 12 months ($2500 a month) there would have been $1 000 000 in new BTS demand (To purchase the BitUSD to be entitled to that obligation) So rather than the short term valuation loss experienced with Sharedrops/Bonuses, BTS would experience very large BTS demand growth & so the promotion would rapidly increase the value of BTS in the near term.

In fact until such time as annual new BTS demand attracted by that specific promotion was less than 3% of BitAssets currently in circulation it would be a net gain to BTS.

So during the bootstrapping phase of the DEX's product life-cycle you can actually offer yield and some conservative liquidity subsidies which a centralized exchange never could.

As the product matures you decrease and ultimately remove the incentives (yield and liquidity subsidies) so your monthly obligation goes down to zero.

While that example isn't entirely accurate (because a yield promotion will also create yield harvesting) During the growth phase I would probably be both a holder of SmartCoins and a shorter.

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