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Messages - Yui Xie

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1
General Discussion / Re: Introduction to BitShares - Video
« on: February 19, 2014, 07:11:28 pm »
Does the notion of termination enter into the stock market or for that matter the cryptocurrency markets.

Bitshares is not being explained as a de-centralized stock market, FOREX, or crypto-currency exchange, where real assets change hands.  We are being told to think of it as a non-terminating futures market. I (and others) are expressing concerns about the validity of this analogy.  In Bitshares, there is no causal link to a real asset, i.e. there is no method to quickly and efficiently convert a bitAsset into a real asset.  If there was, you'd have problems with centralization and trust, just like at the NYSE, CBOE, and Mt Gox.  Bitshares insists on being completely decentralized, eschewing even an external price feed as is proposed in Mastershares.  In Bitshares, one must have a belief/faith/trust that an appropriately named bitAsset -- with no causal connection to the real asset other than its name -- will track its price via a non-terminating prediction market.

I can't prove that it won't work.  It may.  But the notion that some sort of collective herd behavior will converge to the real-world price strikes me as significant a leap of faith.  The classic prediction market with an agreed settlement time is known to work.  Bitshares is extrapolating this concept by removing the settlement time.  But you don't need decentralization or a blockchain to implement a non-terminating prediction market.  Surely others must have considered this in the last half century.  Why are there no examples of it working elsewhere?

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General Discussion / Re: Introduction to BitShares - Video
« on: February 19, 2014, 04:35:44 pm »
Prediction markets have been around for 50 years and there are plenty of examples that show how effective they can be.  The crucial difference with Bitshares is the lack of a termination or settlement date when the winners and losers are known with certainty.  I (and Winslow Strong earlier in this thread) asked for an example of a successful non-terminating prediction market that had been implemented in the past.  Since there was no satisfactory response (opening and closing positions in a terminating futures market is not valid, in my opinion) I started researching it.  The only thing I could come up with was the simExchange:

http://en.wikipedia.org/wiki/The_simExchange

that used prediction markets for video game sales.  Players used virtual money and the exchange was composed of both terminating (futures) and non-terminating (stocks) trading entities.  Futures trading was shut down in 2010 leaving only the non-terminating component.  The site then fell into disuse (see Current Status in the above link).   

3
General Discussion / Re: Introduction to BitShares - Video
« on: February 19, 2014, 02:19:48 pm »
Agreed -- the overwhelming number of futures traders do not take delivery.  But somebody does.  There is a clearly defined settlement date and an actual product changes hands.  If not, there is absolutely no point in having a futures market.  For this reason, Bitshares is NOT the same thing.  It is an extrapolation of the futures market that lets time -> infinity, with no deliverable and no price pegs.  Relaxing these parameters is not trivial.  Since this has never been implemented before on either a de-centralized or centralized exchange, you are making some crucial assumptions about market behavior.  As such, it should be viewed as a risky and still unproven experiment.


4
General Discussion / Re: Introduction to BitShares - Video
« on: January 21, 2014, 11:38:00 pm »
I can't get my mind around the notion that a prediction market will converge to a correct value if there is no causal link to the delivery of a real commodity at some point in the equation.  Without it, it just looks like a collective herd mentality.  This sure seems like a system that could be manipulated, as indicated in earlier posts by Winslow Strong and by others in different threads.

I'm not saying it won't work, I'm just skeptical.  My skepticism would be greatly diminished if someone could point me (us) to an example of where this has worked successfully in the past.  It would be easy enough to implement in a centralized exchange, there's nothing special about it being decentralized in the BitShares model.  And no, I will not accept that successively opening and closing positions in the futures market is the same thing.  I need an example of a predictive market that is non-terminating with no deliverables.  If you insist that this is just an extrapolation of the futures market, we'll just have to agree to disagree.

5
General Discussion / Re: Introduction to BitShares - Video
« on: January 21, 2014, 09:24:18 pm »
Why would it be an advantage to have terminal dates?

Because at that point some party has to deliver a real asset.  The market must converge to a true price since a physical commodity is changing hands.

6
General Discussion / Re: Introduction to BitShares - Video
« on: January 21, 2014, 09:08:11 pm »
i) But all futures/options markets have a terminal date. 

ii) Even though the overwhelming majority of derivative traders don't take physical possession of the commodity, there's still the fact that some sort of tangible commodity/cash is delivered to somebody at the time of termination. 

BitShares don't have these two points and they may indeed be critical.  Not saying the idea won't work and you've already conceded it's an experiment.  We are simply asking if it (a prediction market with infinite time and no deliverable) has been tried on a centralized exchange.

7
General Discussion / Re: Introduction to BitShares - Video
« on: January 21, 2014, 07:20:39 pm »
I'd also like to pose a question:  Have you stopped to consider why financial markets don't offer products like BitUSD?  I.e. a derivative without a terminal horizon, designed to track an underlying via a yield mechanism as the tracking incentivization?

I asked for an example of a financial derivative traded on a market that tracks an underlying merely via a mechanism of yield-adjustment, without lump-cash settlements that compensate directly and linearly for price changes of the underlying.  I've never heard of such a product, and it's premise seems to me to be ill-founded.

Winslow Strong raises a compelling question here.  The concept of a predictive market has been around for over half a century.  BitShares, however, adds key new components: temporally unlimited with no commodity delivery required.  But this is not a difficult extrapolation.  Surely financial entrepreneurs would have considered such a construction at some point in the past.  I can't imagine why it wouldn't have been implemented on a conventional exchange.  Is there any example of this being done before?  If not, it suggests that the idea has not held up to market scrutiny.  And I don't see why having it de-centralized is the crucial missing piece.

8

BitShares X removes the price discovery and volatility from the exchange process which leaves only an 'escrow' function which is much easier to resolve than a full up bid/ask market.

OK, I see that escrow is discussed at various points in the white paper.  Getting a crypto-currency like BTC in and out of the system (BTC <-> BitBTC) is clean and easy by its very nature, ie. for the same reason the Bitcoin transfer works.

Converting other assets like gold, dollars, or Apple stock to an equivalent bit entity is more complicated, eg. how would I arrange the sale of my fiat $USD for BitUSD?  One way is a face-to-face meeting in the same way as localbitcoins.  Since that won't work well in a global market, the white paper describes anonymous escrow agents, who register into the block chain.  The two interested parties (buyer and seller of the asset) perform wire transfers, presumably using a service like Western Union.  This means the buyer and seller are not anonymous to each other and would also incur wire transfer fees, which are a function of geographic location.  Note that some people have little to no access to such services. 

The BitShare escrow agent has no legal obligation to deliver.  Instead, the agent is incentivized to earn the trust of the network to earn future fees.  The assumption here is that the agent would be smarter to perform the service, maintain a reputation, and collect ongoing fees rather than doing a one-time asset ripoff in collusion with one of the parties.  This is the same incentive that MtGox has, but still brings third-party trust into the BitShare-X system.  Buyer and seller must also trust the decision of the agent to divide funds in the event of a dispute, with no legal recourse (by design).  The agent is the judge and jury in this situation.

Do I understand this correctly?

9
i) It seems to me that for this concept to work well, there has to be a reliable, efficient, and trustworthy mechanism to convert fiat to BTS and back.  That means the system is going to be fundamentally reliant on 3rd party exchanges like MtGox, btc-e, bitstamp, etc.  We all know the risks these present due to the history of cyber attacks, server failures, and governmental pressure.  Lack of liquidity on MtGox is keeping BTC prices higher there.  Yes, you've removed the need to trust the central bank, but you're still exposed to the exchanges.  Is that the weak link?

ii) A futures contract with no expiration is simply equity like a stock, an ETF, or an ETN.


10
Meta / Missing thread?
« on: January 19, 2014, 01:50:31 am »
There was an ongoing discussion on the Newbies board about installing the client under Ubuntu.  The most recent posts were made in the last 12 hours.  The thread has disappeared.  Can't imagine that it violated any forum rules.  Just an FYI.

11
You might want to consider images from the board game Monopoly.  The copyright issued in 1935 has expired and they are now in public domain, for example:

http://redkiteprayer.com/wp-content/uploads/2012/04/1333794576_bankrupt-monopoly.jpg

http://freethoughtblogs.com/pharyngula/files/2013/12/monopoly_banker.png

12
BitShares PTS / Re: Exchanges
« on: January 17, 2014, 07:17:22 pm »
I just made my first PTS purchase at bter.com and found it to be fast and efficient.  Moving BTC in, purchasing PTS, then withdrawing them to my wallet was accomplished in under an hour.  My buy order was just below the market rate.  The transaction fee at bter.com is slightly less than coins-e (0.18% compared to 0.2%) although the PTS withdrawal fee is the same (0.1 PTS).  The interface at coins-e is cleaner and easier to navigate in my opinion, but the liquidity there is just too low to be very useful for me at this time.  I'll keep watching it and hope they can build up a sufficiently large user base.

13
I think resources should be directed to producing a slick, professionally-built video similar to "What are Bitcoins?".  I suspect this contributed enormously to its growing success.  This is certainly going to be orders of magnitude more effective than a one-page brochure, albeit commensurately more expensive.  But it is an absolute necessity.

14
It's a tough problem, especially if you are trying to condense the FAQ into a single page info-graphic.  I don't think you can reasonably proceed until it's defined better.  For example:

Do we assume the audience knows what a DAC is?  The advantages of a decentralized entity?  Do we assume they even understand that Bitcoin is more than a crypto-currency?

Do we assume the audience understands how BitShares works, especially the trade commissions generated?

Do we assume the audience understands the build-up of a social consensus and open source?

Without this minimal level of understanding and perhaps even more, there is no point in pushing ProtoShares or AngelShares.

If you are trying to convey a large amount of information, the graphic could be self defeating because it will be very complicated.  What percentage of Bitcoin owners have even heard of the DAC concept, let alone understand it?  Warren Buffet won't invest in anything he doesn't thoroughly understand and I think this represents most sophisticated investors.  Getting even a tech-savvy neophyte educated in just one page may not be possible.

15
You are getting dangerously close to some of the Anaheim Angels baseball logo designs: tilted halo over the "A".

Also, there are a lot of lines that don't provide much useful information.  Maybe you need to think more like a system diagram with some labeled arrows.  I'm not seeing the benefits this structure provides to any of the parties, only that they're somehow connected.  It's a visualization...you don't want the target audience slogging through a bunch of text.  Lots of text gives the feeling of complexity that you're trying to ameliorate.

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