61
General Discussion / Descriptions of each user-issued asset?
« on: December 05, 2014, 10:57:36 pm »
What's the easiest way or place to find these?
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62
General Discussion / BitUSD supply spike on Nov 26
« on: December 05, 2014, 12:02:02 am »
I only just noted from bitsharesblocks.com that on November 26 the supply for bitUSD appeared to jump significantly from around 1m units to over 1.6m units, and then since has dropped below 1m units again. Anyone know what drove this?
63
General Discussion / Any bitAssets without grandfathering?
« on: December 01, 2014, 12:09:07 am »
Are there any existing bitAsset markets without grand-fathered shorts? I'm interested to see if markets without grand-fathered shorts experience closer pegging, because in theory any discounts should be small. It would be useful to have at least one, to verify the impact.
64
General Discussion / Potential Market Manipulations on BitAssets
« on: November 29, 2014, 09:52:02 pm »
In thinking about arbitrage risks, I've come across a number of situations where bitAssets could potentially be manipulated. I say potentially, because there may be reasons why such attempts either don't make sense economically, or are prevented by a rule I've overlooked, or are just practically infeasible. Nevertheless, they might be worth discussing to ensure the resilience of bitAssets. Even though I was a bit reluctant to map out the crimes, Agent86 suggested to me that it would be better for an open discussion. This is not meant to be a comprehensive list, and others may present similar situations to be alert to.
(1) Front-running of expired shorts
We can see when shorts are about to be forced to cover in the market due to expiries. Its possible in this situation to buy bitAsset just prior to the cover at the lowest ask, then set a sell order a distance into the sell queue where it is guaranteed to be picked up by the volume of the short-cover. As the sell price will be higher, a risk-free profit results, at the expense of the short.
Some possible ways to mitigate this manipulation - (i) if enough market participants try to benefit from this, they will bunch their sells very close together, lowering the cost to the short (ii) it might be possible to randomise the timing of expired shorts over some window to make it riskier for front-runners, though this makes the rolls harder for shorts to manage
(2) Forced short-squeeze
If the BTS market is less liquid than the bitAsset market (which at some point in future could conceivably be the case with bitUSD), then a large enough player could force the BTS price down substantially, and conceivably trigger an amount of margin calls on shorts that overwhelms the ability of the current sell/short queue to absorb it. If this player sat in the market with an incredibly high sell bitUSD order (e.g. on $1 of bitUSD), knowing it must be hit, they would effectively win nearly all of the BTS of these shorts held in the pool for next to nothing. This in turn could leave remaining bitUSD holders significantly under-collateralised.
Some possible ways to mitigate this manipulation - (i) don't allow margin calls on shorts to force-buy at more than a limited premium above the peg, as any higher than this actually reduces the collateral protection for remaining bitUSD holders, defying the point of margin calls in the first place
(3) Bank run
If the bitAsset became suddenly under-collateralised (e.g. if BTS collapses substantially in a short period), then margin calls are forced on nearly all remaining shorts. Anybody sitting in the sell queue at that time gets paid full value on their bitAsset (or potentially much better), which means that the collateralisation ratio on the pool falls further for the remaining bitAsset holders. If it does not play out all at once, but as a succession of BTS falls forcing waves of short-covering, the process continues until the BTS pool is all consumed leaving the last bag-holders with nothing. The analogy I draw is a bank-run. During such an event, there is also much greater vulnerability to players trying to pull off the short-squeeze above, because the required push on the BTS price is less to trigger the margin calls.
Some possible ways to mitigate this risk - (i) don't allow margin calls on shorts to force-buy at a price beyond which the collateral pool is unfairly compromised for remaining bitAsset holders - this would be the fair settlement price if the market were settled up (ii) close the market in the event of an under-collateralisation event - settle/reset the market, or consider another mechanism for replenishing the pool (?)
(4) Collusion by free BTS holders
If bitAssets grew dramatically, but BTS market cap did not grow as fast, its possible the BTS inside the collateral pool increases to a large percentage of all BTS on issue. This BTS cannot be traded on exchanges. In this case the owners of the remaining free-float BTS have a greater chance of colluding. For example, they could buy the bitAsset, withhold their BTS from being used to create more bitAsset, force the bitAsset to a high premium over the peg and sell it. The BTS market on the exchanges would also be less liquid, so they might also attempt the short-squeeze above at an opportune time.
(1) Front-running of expired shorts
We can see when shorts are about to be forced to cover in the market due to expiries. Its possible in this situation to buy bitAsset just prior to the cover at the lowest ask, then set a sell order a distance into the sell queue where it is guaranteed to be picked up by the volume of the short-cover. As the sell price will be higher, a risk-free profit results, at the expense of the short.
Some possible ways to mitigate this manipulation - (i) if enough market participants try to benefit from this, they will bunch their sells very close together, lowering the cost to the short (ii) it might be possible to randomise the timing of expired shorts over some window to make it riskier for front-runners, though this makes the rolls harder for shorts to manage
(2) Forced short-squeeze
If the BTS market is less liquid than the bitAsset market (which at some point in future could conceivably be the case with bitUSD), then a large enough player could force the BTS price down substantially, and conceivably trigger an amount of margin calls on shorts that overwhelms the ability of the current sell/short queue to absorb it. If this player sat in the market with an incredibly high sell bitUSD order (e.g. on $1 of bitUSD), knowing it must be hit, they would effectively win nearly all of the BTS of these shorts held in the pool for next to nothing. This in turn could leave remaining bitUSD holders significantly under-collateralised.
Some possible ways to mitigate this manipulation - (i) don't allow margin calls on shorts to force-buy at more than a limited premium above the peg, as any higher than this actually reduces the collateral protection for remaining bitUSD holders, defying the point of margin calls in the first place
(3) Bank run
If the bitAsset became suddenly under-collateralised (e.g. if BTS collapses substantially in a short period), then margin calls are forced on nearly all remaining shorts. Anybody sitting in the sell queue at that time gets paid full value on their bitAsset (or potentially much better), which means that the collateralisation ratio on the pool falls further for the remaining bitAsset holders. If it does not play out all at once, but as a succession of BTS falls forcing waves of short-covering, the process continues until the BTS pool is all consumed leaving the last bag-holders with nothing. The analogy I draw is a bank-run. During such an event, there is also much greater vulnerability to players trying to pull off the short-squeeze above, because the required push on the BTS price is less to trigger the margin calls.
Some possible ways to mitigate this risk - (i) don't allow margin calls on shorts to force-buy at a price beyond which the collateral pool is unfairly compromised for remaining bitAsset holders - this would be the fair settlement price if the market were settled up (ii) close the market in the event of an under-collateralisation event - settle/reset the market, or consider another mechanism for replenishing the pool (?)
(4) Collusion by free BTS holders
If bitAssets grew dramatically, but BTS market cap did not grow as fast, its possible the BTS inside the collateral pool increases to a large percentage of all BTS on issue. This BTS cannot be traded on exchanges. In this case the owners of the remaining free-float BTS have a greater chance of colluding. For example, they could buy the bitAsset, withhold their BTS from being used to create more bitAsset, force the bitAsset to a high premium over the peg and sell it. The BTS market on the exchanges would also be less liquid, so they might also attempt the short-squeeze above at an opportune time.
65
General Discussion / What is the pitch for holding BTS?
« on: November 12, 2014, 03:11:05 am »
I'm thinking about this is the context of bitshares = the future of banking.
BTS owners are like shareholders in "the bank".
bitAsset owners are like the depositors.
bitAsset shorts are like the borrowers.
(It should be recognised that none of these things are actually true, because all parties simply have different stakes in a decentralised platform. There is no entity and the terms are only used for comparison.)
Total deposits to total shareholder capital can build to a maximum of 1/3 (each deposit requires 3x backing), whereas traditional banks can be massively leveraged to say 20-30x (fractional reserving is incredibly dangerous, I'm against it, but just making a point of comparison).
Depositors get all the interest from the borrowers, there is no margin for the bank (traditional banks take an interest spread)
Depositors only pay transaction fees on the movements in their funds (and we really want these to be as minimal as possible because they are an economic friction or waste)
So here we have a bank that is capital intensive (limited deposit base) and much lower in margin (low cost-based transaction-only fees) than any traditional bank. Income on shareholder capital, even at a point of huge market penetration, looks to be very small on the "deposit" business alone, unless we believe there will be enormous trading volume in bitAssets.
So although bitshares is fantastic for the customer, in its current form can it create enough value for the BTS holder?
Should we be looking at ways to improve profitability from bitAssets, cross-sell the user base into higher margin services with less fixed capital commitment, monetise the network value in other ways, or something else?
I am a BTS holder so obviously I believe in the value that will be made manifest somehow. But I am finding it hard to believe that bitAssets as a stand-alone source of value can deliver that return, unless others can suggest some better numbers. So what's the path, and what's the next profit source to look forward to?
[Edit 18 Nov 2014:
A number of people have made the argument that at least a certain set of BTS traders, being arbitragers, make money from the bitAsset premium that exists when demand outstrips supply, and that this income potential motivates arbitragers to bid up BTS. Apart from the fact that the trade envisioned is not strictly an arbitrage (i.e. there is no guarantee of profit), as I discuss deeper in this thread, there is also an economic argument for why the level of potential income to BTS holders from such a trade only marginally improves the attractiveness of BTS.
When bitAsset users pay a premium this is just another direct cost to them, in the same way that transaction fees are. If bitShares is promoted as the future of banking, and being more-cost efficient that traditional banking, how much are users going to be willing to pay away in transaction fees, entry/exit spreads etc, in a typical year, just for the convenience of using the currency? A few percent of their capital perhaps? Now distribute this income over the BTS capital base that is three times as large. Now even with the potential for "arbitrage" income, BTS holders are in the same boat as before. The income potential that bitAsset users will allow (as a transactional cost to them) is unlikely to be enough to justify arbitragers bidding up BTS to do the trade***. And indeed it should be our mission to reduce these basic transactional costs to users.
None of this is to say that traders won't bid up BTS if bitAssets grow. In fact, judging by all the responses I've had to this issue, the overwhelming meme is "bitAssets growing = great for BTS price". So I'm sure BTS will indeed rise as a result of this self-fulfilling perspective. That may indeed be good for a while if it helps fund development in other areas. But ultimately I believe that those prices will only be justified by additional income sources to bitAssets.
***[technical point: I also questioned whether arbitragers might increase demand because they get all the arbitrage income, not other BTS holders, justifying an increased price for at least those traders. However this must reduce the income opportunity for non-arbitrage BTS holders further, justifying a decreased price for all those other holders. Net, net, same price result as if everyone did arbitrage.]
BTS owners are like shareholders in "the bank".
bitAsset owners are like the depositors.
bitAsset shorts are like the borrowers.
(It should be recognised that none of these things are actually true, because all parties simply have different stakes in a decentralised platform. There is no entity and the terms are only used for comparison.)
Total deposits to total shareholder capital can build to a maximum of 1/3 (each deposit requires 3x backing), whereas traditional banks can be massively leveraged to say 20-30x (fractional reserving is incredibly dangerous, I'm against it, but just making a point of comparison).
Depositors get all the interest from the borrowers, there is no margin for the bank (traditional banks take an interest spread)
Depositors only pay transaction fees on the movements in their funds (and we really want these to be as minimal as possible because they are an economic friction or waste)
So here we have a bank that is capital intensive (limited deposit base) and much lower in margin (low cost-based transaction-only fees) than any traditional bank. Income on shareholder capital, even at a point of huge market penetration, looks to be very small on the "deposit" business alone, unless we believe there will be enormous trading volume in bitAssets.
So although bitshares is fantastic for the customer, in its current form can it create enough value for the BTS holder?
Should we be looking at ways to improve profitability from bitAssets, cross-sell the user base into higher margin services with less fixed capital commitment, monetise the network value in other ways, or something else?
I am a BTS holder so obviously I believe in the value that will be made manifest somehow. But I am finding it hard to believe that bitAssets as a stand-alone source of value can deliver that return, unless others can suggest some better numbers. So what's the path, and what's the next profit source to look forward to?
[Edit 18 Nov 2014:
A number of people have made the argument that at least a certain set of BTS traders, being arbitragers, make money from the bitAsset premium that exists when demand outstrips supply, and that this income potential motivates arbitragers to bid up BTS. Apart from the fact that the trade envisioned is not strictly an arbitrage (i.e. there is no guarantee of profit), as I discuss deeper in this thread, there is also an economic argument for why the level of potential income to BTS holders from such a trade only marginally improves the attractiveness of BTS.
When bitAsset users pay a premium this is just another direct cost to them, in the same way that transaction fees are. If bitShares is promoted as the future of banking, and being more-cost efficient that traditional banking, how much are users going to be willing to pay away in transaction fees, entry/exit spreads etc, in a typical year, just for the convenience of using the currency? A few percent of their capital perhaps? Now distribute this income over the BTS capital base that is three times as large. Now even with the potential for "arbitrage" income, BTS holders are in the same boat as before. The income potential that bitAsset users will allow (as a transactional cost to them) is unlikely to be enough to justify arbitragers bidding up BTS to do the trade***. And indeed it should be our mission to reduce these basic transactional costs to users.
None of this is to say that traders won't bid up BTS if bitAssets grow. In fact, judging by all the responses I've had to this issue, the overwhelming meme is "bitAssets growing = great for BTS price". So I'm sure BTS will indeed rise as a result of this self-fulfilling perspective. That may indeed be good for a while if it helps fund development in other areas. But ultimately I believe that those prices will only be justified by additional income sources to bitAssets.
***[technical point: I also questioned whether arbitragers might increase demand because they get all the arbitrage income, not other BTS holders, justifying an increased price for at least those traders. However this must reduce the income opportunity for non-arbitrage BTS holders further, justifying a decreased price for all those other holders. Net, net, same price result as if everyone did arbitrage.]
66
General Discussion / How can we tell which delegates have unique owners?
« on: November 12, 2014, 01:38:24 am »
Or where multiple delegates are owned by a single person. Is there a way to determine this?
67
General Discussion / Arbitrage on bitUSD discount/premium is not risk-free
« on: November 12, 2014, 01:11:07 am »
This thread is mainly for discussion by those interested in arbitrage.
It seems to me that a number of arbitrages around the bitUSD discount/premium are difficult or not risk-free. Maybe others have better solutions. Good strategies around these will be important for liquidity around the peg.
Discounts
If bitUSD is trading at a discount to fiat USD on an external exchange, but at the feed price on the internal exchange against BTS, an arbitrager can convert buy bitUSD with fiat USD on the external exchange, sell it on the internal exchange at a more favourable price, send BTS to the external exchange, sell for fiat USD and make a profit. If the converse were true, the reverse set of actions would ensure a profit. In this case, the arbitrage is fairly risk-free except for timings.
If bitUSD were at a discount on both exchanges, this is not possible. However, an arbitrager willing to wait for up to 30 days could buy bitUSD on either exchange, and in theory sit with a sell order at the feed price on the internal exchange until it is hit at the feed price (*which it must be due to short expiries, as shown in another thread here https://bitsharestalk.org/index.php?topic=9861.msg128218#msg128218), then sell the BTS again for fiat USD, making a profit. The technical problem with this is maintaining a sell order that moves with the feed price, which is costly and manual, and I'm not sure of the best solution here yet. So in practice, this does have risk of not getting hit when or where an arbitrager might want it to.
Premiums
If bitUSD is at a premium to the peg on the internal (v BTS) or external (v fiat) exchange, but not on the other, the arbitrage is similar to that of a discount only in reverse. For example, if its at a premium on the external exchange, not the internal, buy bitUSD on the internal with BTS, sell on the external, buy back BTS. This gives a risk-free profit.
If bitUSD is at a premium on both exchanges (which it should be very quickly once the first set of arbitragers act as just described), then the trader can short bitUSD (and hedge their increased BTS exposure by either simultaneously selling BTS or going long bitUSD), in the hope of covering the short at a lower or zero premium. However there is no guarantee this premium will reduce if bitUSD demand remains as strong. The short may be forced to cover at the same premium (zero profit), then roll to try the same play again in the next 30 day period. One would think that supply and demand would balance at some point, in which case a profit should be realised when the premium narrows, but the timing is unknown, and not guaranteed. So in this case, the trader is betting on a movement in the spread (or really, a change in future bitUSD demand), rather than being able to implement a risk-free arbitrage.
The situation in this latter case can be made even more risky if there are very little BTS left outside of the collateral pool (if BTS is not much larger than 3x the market cap of bitAssets). In that case, its possible a shortage of bitUSD could be prolonged or even grow to an extreme if bitUSD demand is persistent, leading to a rising premium. Also, on this borderline where the BTS market cap is barely sufficient to cover the pool of bitAssets, any decline in the BTS price could force shorts to cover at an even more unfavourable price.
[Edit: As an after-thought, interest rates will have some impact on restoring discounts and premiums, question is how much? This could take up to 30 days for all shorts to be replaced (ignoring current grand-fathering). In the case of a premium, the floor is at 0% interest, and people may still want to own bitUSD for other reasons.]
Any improved ideas welcome.
It seems to me that a number of arbitrages around the bitUSD discount/premium are difficult or not risk-free. Maybe others have better solutions. Good strategies around these will be important for liquidity around the peg.
Discounts
If bitUSD is trading at a discount to fiat USD on an external exchange, but at the feed price on the internal exchange against BTS, an arbitrager can convert buy bitUSD with fiat USD on the external exchange, sell it on the internal exchange at a more favourable price, send BTS to the external exchange, sell for fiat USD and make a profit. If the converse were true, the reverse set of actions would ensure a profit. In this case, the arbitrage is fairly risk-free except for timings.
If bitUSD were at a discount on both exchanges, this is not possible. However, an arbitrager willing to wait for up to 30 days could buy bitUSD on either exchange, and in theory sit with a sell order at the feed price on the internal exchange until it is hit at the feed price (*which it must be due to short expiries, as shown in another thread here https://bitsharestalk.org/index.php?topic=9861.msg128218#msg128218), then sell the BTS again for fiat USD, making a profit. The technical problem with this is maintaining a sell order that moves with the feed price, which is costly and manual, and I'm not sure of the best solution here yet. So in practice, this does have risk of not getting hit when or where an arbitrager might want it to.
Premiums
If bitUSD is at a premium to the peg on the internal (v BTS) or external (v fiat) exchange, but not on the other, the arbitrage is similar to that of a discount only in reverse. For example, if its at a premium on the external exchange, not the internal, buy bitUSD on the internal with BTS, sell on the external, buy back BTS. This gives a risk-free profit.
If bitUSD is at a premium on both exchanges (which it should be very quickly once the first set of arbitragers act as just described), then the trader can short bitUSD (and hedge their increased BTS exposure by either simultaneously selling BTS or going long bitUSD), in the hope of covering the short at a lower or zero premium. However there is no guarantee this premium will reduce if bitUSD demand remains as strong. The short may be forced to cover at the same premium (zero profit), then roll to try the same play again in the next 30 day period. One would think that supply and demand would balance at some point, in which case a profit should be realised when the premium narrows, but the timing is unknown, and not guaranteed. So in this case, the trader is betting on a movement in the spread (or really, a change in future bitUSD demand), rather than being able to implement a risk-free arbitrage.
The situation in this latter case can be made even more risky if there are very little BTS left outside of the collateral pool (if BTS is not much larger than 3x the market cap of bitAssets). In that case, its possible a shortage of bitUSD could be prolonged or even grow to an extreme if bitUSD demand is persistent, leading to a rising premium. Also, on this borderline where the BTS market cap is barely sufficient to cover the pool of bitAssets, any decline in the BTS price could force shorts to cover at an even more unfavourable price.
[Edit: As an after-thought, interest rates will have some impact on restoring discounts and premiums, question is how much? This could take up to 30 days for all shorts to be replaced (ignoring current grand-fathering). In the case of a premium, the floor is at 0% interest, and people may still want to own bitUSD for other reasons.]
Any improved ideas welcome.
68
General Discussion / If we are going to pay to acquire users, at least use bitAssets not BTS
« on: November 10, 2014, 10:55:56 am »
First I do not know what the prevailing views are on this topic, but on the back of recent ideas floated in the forum that dilution could be used to attract new users with gifts of BTS, as well as a delegate now airdropping BTS onto bitcointalk and bitshares forum members (and an embarrassing rush for free money) I just wanted to express why I think that's a bad idea.
As stakeholders, or BTS owners, we do not want to be giving away shares to random people unless they are building our internal capital (being the infrastructure, branding etc). The people earning these shares are likewise willing holders of BTS because they believe in the value of what they are building.
The reason we want new users is primarily as customers, to use bitAssets and build network effects. If they were to just sit on their hands and hold BTS, they are not creating value for us. If worse they decide they don't want to really keep the shares, the dilution has only added sell pressure to the BTS price. Of course those that do become bullish on BTS ownership after being introduced to the system always have the option of switching to BTS on the exchange.
I'm not yet sold on paying anything for new users at this stage - still forming an opinion on it to be honest. But if we did, it would be better to give them the correct incentive as a customer, and give them a product "coupon" in the bitAssets that we want them to use.
By creating a marketing account of new BTS shares, these could be used to buy the required bitAsset on the internal exchange. That allows the following parties first option to increase their BTS holdings:
1. BitAsset owners that want to sell back out to BTS
2. Shorts that are bullish
3. Buyers on other exchanges (because arbitragers transfer BTS selling pressure there also)
Each of these is a willing holder.
Then offer the bitAssets in the marketing account to the new users. A cheaper way to do this might be to offer them $20 free bitAsset on the condition they acquire more than $100 of bitAsset in their account and do at least X transactions in the first month.
This approach at least transfers the BTS into the hands of willing holders, and bitAssets into the hands of likely users.
As stakeholders, or BTS owners, we do not want to be giving away shares to random people unless they are building our internal capital (being the infrastructure, branding etc). The people earning these shares are likewise willing holders of BTS because they believe in the value of what they are building.
The reason we want new users is primarily as customers, to use bitAssets and build network effects. If they were to just sit on their hands and hold BTS, they are not creating value for us. If worse they decide they don't want to really keep the shares, the dilution has only added sell pressure to the BTS price. Of course those that do become bullish on BTS ownership after being introduced to the system always have the option of switching to BTS on the exchange.
I'm not yet sold on paying anything for new users at this stage - still forming an opinion on it to be honest. But if we did, it would be better to give them the correct incentive as a customer, and give them a product "coupon" in the bitAssets that we want them to use.
By creating a marketing account of new BTS shares, these could be used to buy the required bitAsset on the internal exchange. That allows the following parties first option to increase their BTS holdings:
1. BitAsset owners that want to sell back out to BTS
2. Shorts that are bullish
3. Buyers on other exchanges (because arbitragers transfer BTS selling pressure there also)
Each of these is a willing holder.
Then offer the bitAssets in the marketing account to the new users. A cheaper way to do this might be to offer them $20 free bitAsset on the condition they acquire more than $100 of bitAsset in their account and do at least X transactions in the first month.
This approach at least transfers the BTS into the hands of willing holders, and bitAssets into the hands of likely users.
69
General Discussion / Why bitAssets are like "keys" to a "vault"
« on: November 10, 2014, 04:31:25 am »
There are many different ways one can view bitAssets, and different analogies to draw. Some people may find this a useful analogy in the context of "the future of banking". I'd be interested to know if others find this useful, or in what way it could risk being misleading or inaccurate.
> start analogy
The collateral pools for each bitAsset can be thought of as separate vaults.
A bitAsset is a key that allows the holder to go to the vault, unlock it, and receive BTS to the value of a unit of the bitAsset. So for example, a bitUSD, or a key to the USD vault, allows you to unlock $1 worth of BTS from the vault, at which point that key is destroyed. A bitBTC, or a key to the BTC vault, allows you to unlock 1 BTC worth of BTS from the vault, at which point that key is destroyed.
You don't have immediate access to the vault however, and need to wait in a queue for a maximum of 30 days. People who choose to not demand their full entitlement are first in the queue, while those demanding their full entitlement are at the back and need to wait longest. In the meantime, if you wish to sell your key more urgently, you can do that. You will probably need to accept a discount, but hopefully not too deep a discount because people will be prepared to pay for a key that can access the contents of the vault within 30 days.
[Edit: I would probably add something about the keys being able to be traded in a free market and used in transactions]
> end analogy
That's the analogy, now let me explain how it works.
Whenever there is demand for a key (bitAsset) in excess of the supply (keys already available), the price for a key will push to a premium (price moves over the peg). This will encourage a key-maker (in reality a spread-trader) to create a new key. The way he technically does this is as follows. He creates the key by taking a simultaneous long bitAsset position and short bitAsset position, in the process placing 3x the value of the bitAsset in the form of BTS into the vault (collateral pool). Then he takes his key (the long bitAsset position) and sells it on the market at a premium to meet the demand.
Now there are several ways the key-maker can get his BTS back. At the end of 30 days, the vault automatically opens to the first key-bearer in the queue (the short position is closed against the bitAsset seller with lowest ask). The key-bearer receives the entitlement of BTS that they demanded with their key, the remaining vault contents placed by the key-maker go to him, and the key is automatically destroyed (the supply of bitAsset reduces because a long and short have been destroyed). The key-maker may also go to the market anytime within the 30 days and buy the key cheaper if they can (buy back a long position in the bitAsset), thus if they desire unlocking the contents of the vault for themselves (sell the bitAsset into the cover of their short position). If keys get too cheap, the key-maker is actually incentivised to open the vaults, take out the collateral and destroy the keys (i.e. reducing bitAsset supply).
Note that it has been shown in another thread that any key-bearer lined up in the vault queue awaiting their full entitlement (i.e. sitting with a bitAsset sell order at the feed price) can, in theory, be guaranteed to receive that within 30 days. See https://bitsharestalk.org/index.php?topic=9861.msg128211#msg128211.
In practice this can be difficult however, because it (currently) requires manually moving one's order with the feed price, which in turn has a cost attached, and may also mean it takes longer than 30 days to achieve the sale price at the peg.
> start analogy
The collateral pools for each bitAsset can be thought of as separate vaults.
A bitAsset is a key that allows the holder to go to the vault, unlock it, and receive BTS to the value of a unit of the bitAsset. So for example, a bitUSD, or a key to the USD vault, allows you to unlock $1 worth of BTS from the vault, at which point that key is destroyed. A bitBTC, or a key to the BTC vault, allows you to unlock 1 BTC worth of BTS from the vault, at which point that key is destroyed.
You don't have immediate access to the vault however, and need to wait in a queue for a maximum of 30 days. People who choose to not demand their full entitlement are first in the queue, while those demanding their full entitlement are at the back and need to wait longest. In the meantime, if you wish to sell your key more urgently, you can do that. You will probably need to accept a discount, but hopefully not too deep a discount because people will be prepared to pay for a key that can access the contents of the vault within 30 days.
[Edit: I would probably add something about the keys being able to be traded in a free market and used in transactions]
> end analogy
That's the analogy, now let me explain how it works.
Whenever there is demand for a key (bitAsset) in excess of the supply (keys already available), the price for a key will push to a premium (price moves over the peg). This will encourage a key-maker (in reality a spread-trader) to create a new key. The way he technically does this is as follows. He creates the key by taking a simultaneous long bitAsset position and short bitAsset position, in the process placing 3x the value of the bitAsset in the form of BTS into the vault (collateral pool). Then he takes his key (the long bitAsset position) and sells it on the market at a premium to meet the demand.
Now there are several ways the key-maker can get his BTS back. At the end of 30 days, the vault automatically opens to the first key-bearer in the queue (the short position is closed against the bitAsset seller with lowest ask). The key-bearer receives the entitlement of BTS that they demanded with their key, the remaining vault contents placed by the key-maker go to him, and the key is automatically destroyed (the supply of bitAsset reduces because a long and short have been destroyed). The key-maker may also go to the market anytime within the 30 days and buy the key cheaper if they can (buy back a long position in the bitAsset), thus if they desire unlocking the contents of the vault for themselves (sell the bitAsset into the cover of their short position). If keys get too cheap, the key-maker is actually incentivised to open the vaults, take out the collateral and destroy the keys (i.e. reducing bitAsset supply).
Note that it has been shown in another thread that any key-bearer lined up in the vault queue awaiting their full entitlement (i.e. sitting with a bitAsset sell order at the feed price) can, in theory, be guaranteed to receive that within 30 days. See https://bitsharestalk.org/index.php?topic=9861.msg128211#msg128211.
In practice this can be difficult however, because it (currently) requires manually moving one's order with the feed price, which in turn has a cost attached, and may also mean it takes longer than 30 days to achieve the sale price at the peg.
70
Technical Support / How can you see in the client what time of day shorts expire?
« on: November 08, 2014, 03:48:37 am »
The greatest precision shown seems to be in days. How can you see what time of day the cover is due to occur?
71
General Discussion / What can and can't be done by a DAC on a block-chain?
« on: November 07, 2014, 02:43:39 am »
I wish to improve my understanding of what a block-chain allows a DAC to do but also what it's constraints are, in the context of a belief that they could potentially replace and grow new industries. I'm not a programmer so just after some non-technical answers.
I'm unclear on the following:
1) As I understand it, anything internal to bitShares (or any other DAC) would have to share the same block chain, but I'm not really sure why. Is this ideological or a practical reason? Is it because human agents would be required to interact between multiple block-chains, and there are no algorithmic and trust-less ways to implement that? Or is it something else?
2) What is the dividing line between having many features/services on a single block-chain, and breaking an ecosystem into many block-chains where each serve separate functions with human actors operating between them? Could and should large enough "company"-like structures use multiple block-chains? (e.g. if bitShares were the size of a small country)
3) Is bitShares (or any other DAC) prevented from mobilising capital resources employed by traditional companies (e.g. fiat cash or cryptos, real property or assets) because such assets cannot be represented in the block-chain? Does this limit what a DAC can do (outside of software) compared to a traditional company? How could this be done, if at all?
4) (Apart from luckybit's idea of a cooperative...) Can DACs interact with the rest of the world to enter contractual agreements? If not, is this any constraint on how quickly they can grow and on their larger role in society?
Others may have bigger questions.
Thanks in advance of your responses.
I'm unclear on the following:
1) As I understand it, anything internal to bitShares (or any other DAC) would have to share the same block chain, but I'm not really sure why. Is this ideological or a practical reason? Is it because human agents would be required to interact between multiple block-chains, and there are no algorithmic and trust-less ways to implement that? Or is it something else?
2) What is the dividing line between having many features/services on a single block-chain, and breaking an ecosystem into many block-chains where each serve separate functions with human actors operating between them? Could and should large enough "company"-like structures use multiple block-chains? (e.g. if bitShares were the size of a small country)
3) Is bitShares (or any other DAC) prevented from mobilising capital resources employed by traditional companies (e.g. fiat cash or cryptos, real property or assets) because such assets cannot be represented in the block-chain? Does this limit what a DAC can do (outside of software) compared to a traditional company? How could this be done, if at all?
4) (Apart from luckybit's idea of a cooperative...) Can DACs interact with the rest of the world to enter contractual agreements? If not, is this any constraint on how quickly they can grow and on their larger role in society?
Others may have bigger questions.
Thanks in advance of your responses.
72
Technical Support / Using API for beginners
« on: November 06, 2014, 08:51:45 am »
I want to start experimenting with some automated trading and market-making in bitAssets, and I'm looking for simple documentation on how to connect to the BTSX client through API. Where is the best place to start?
I use Python a fair bit although I'm no expert, but I have set up API links with a number of external exchanges in the past to run automated trading.
But what I need is some instruction on how the API is set up for the client.
If there is existing Python code for doing this that I could easily start from, that would be useful.
I'm not a programmer by trade only by hobby, and Github confuses me! So please keep that in mind.
Thanks.
I use Python a fair bit although I'm no expert, but I have set up API links with a number of external exchanges in the past to run automated trading.
But what I need is some instruction on how the API is set up for the client.
If there is existing Python code for doing this that I could easily start from, that would be useful.
I'm not a programmer by trade only by hobby, and Github confuses me! So please keep that in mind.
Thanks.
73
Technical Support / Sorting margin call orders by expiry in the client
« on: November 06, 2014, 01:19:06 am »
When I try to sort margin call orders on BitUSD in the client v04.23.1 by expiration, by clicking the arrow next to the header "EXPIRATION", the table does not appear to order correctly for me. Some expirations are recorded as a date, while others are recorded as a number of days, but even despite that they do not appear to have any sort of ascending or descending order.
I would like to monitor this for upcoming expiries.
Thanks
I would like to monitor this for upcoming expiries.
Thanks
74
Technical Support / Blockchain Orders History in Client - What does Type field represent?
« on: November 06, 2014, 01:07:17 am »
In the bitUSD market interface in the client, the Blockchain Orders History shows all transactions (that I can see) as Type Bid. Does this mean the trade was initiated by the bitUSD buyer? Is there also a Type "Offer" and why can't I see any of these in the list (it goes back many days, all showing Bid)?
75
General Discussion / Could bitShares allow greater value exchange between users?
« on: November 04, 2014, 11:29:42 pm »
This is a loose idea rolling in my head, just throwing it out in case somebody can take it further.
Often it feels to me that because I am not in the category of a developer/marketer/delegate, my outlet to contribute development skills is limited. As a stakeholder I am providing support in that way, but I'd rather feel more actively involved, and I do have skills in other areas.
So I'm wondering if its possible to take advantage of the fact there are users/stakeholders in this network from all walks of life, who can potentially contribute to each other in a wide range of areas. That is, a DAC feature could be developed that promotes an internal economy of value exchange between users, paid for in BTS, bitUSD or other bitAssets. This could also be another revenue area for the bitShares platform (an internal DAC).
It might be in exchanging expertise on any matter of personal or community interest, or even services or products according to demand. And/or it could be targeted at DAC development. For instance, an insurance DAC will ultimately require expertise in legal, actuarial, underwriting, marketing, and other areas on top of any coding required. DAC developers or delegates might be able to build networks of value (like companies) to support their efforts.
It would require a large enough network to function properly, and it may still be too early. Conducting a poll of to see what areas of expertise we actually have in the network already, how deep and real it is (e.g. having traded stocks does not make you a professional stock trader), and whether people in general, delegates, or developers are willing to pay for such contributions, may be a useful first step for ongoing discussion.
Often it feels to me that because I am not in the category of a developer/marketer/delegate, my outlet to contribute development skills is limited. As a stakeholder I am providing support in that way, but I'd rather feel more actively involved, and I do have skills in other areas.
So I'm wondering if its possible to take advantage of the fact there are users/stakeholders in this network from all walks of life, who can potentially contribute to each other in a wide range of areas. That is, a DAC feature could be developed that promotes an internal economy of value exchange between users, paid for in BTS, bitUSD or other bitAssets. This could also be another revenue area for the bitShares platform (an internal DAC).
It might be in exchanging expertise on any matter of personal or community interest, or even services or products according to demand. And/or it could be targeted at DAC development. For instance, an insurance DAC will ultimately require expertise in legal, actuarial, underwriting, marketing, and other areas on top of any coding required. DAC developers or delegates might be able to build networks of value (like companies) to support their efforts.
It would require a large enough network to function properly, and it may still be too early. Conducting a poll of to see what areas of expertise we actually have in the network already, how deep and real it is (e.g. having traded stocks does not make you a professional stock trader), and whether people in general, delegates, or developers are willing to pay for such contributions, may be a useful first step for ongoing discussion.
