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Keyhotee / Re: Connecting Keyhotee and Protoshares
« on: January 02, 2014, 06:32:36 am »How would a non-invictus DAC benefit from protoshares? Unless they're mining now, they won't have any substantial number so what advantage is there issuing to holders of protoshares besides giving them their new coin for free instantly? I don't understand the value to a company not already owning lots of Protoshares
Scenario; and I am not a trade expert, so the amounts and terms I give might not be necessarily realistic:
Investor Sam expects the price of BitBTC to go up, so he makes a long bet. He gives a broker, Alice, 10 BitShares in exchange for 10 BitBTC.
If the value of BitBTC goes up (meaning, for example, that Sam can get more of something else than before, by exchanging his BitBTC for that something), Sam sells the BitBTC to someone else (for a profit), and Sam also returns the borrowed BitBTC to Alice (possibly also with a small BitBTC "commission" payment), and Sam keeps the difference, which is his profit from the trade.
However, if the value of BitBTC drops enough that the borrowed BTC is in danger of being lost (because it can no longer be exchanged for as much), Sam must give Alice the 10 BitShares (which were collateral for the trade), and Sam must also sell the BitBTC which he borrowed, at a loss! Sam has suffered a "margin call."
A detail which very much piqued my interest, which I read somewhere, is that with BitShares and BitBTC, margin call fees will go to miners. In other words, in the scenario I've described, the whole trade contract is encoded in a blockchain (probably the BitBTC blockchain), and verified by a miner (the same way that miners verify Bitcoin transactions).
Apparently, when a miner verifies a BitShares/BitBTC trade, if that trade includes a margin call, the miner gets the money from that margin call.
Do you know what kind of money Forex brokers make from trades gone wrong (margin calls)? Scads of it. Why? Because markets can be very difficult to predict. A lot of the time it simply looks like a coin toss. And here, when traders guess wrong, the miners will win where the traders lose.
Mining transactions of BitShare/BitAsset exchanges will probably be extremely lucrative.
Or, on the other hand, what about when traders win? What about the commissions from winning trades? What if DAC operators get a portion of commissions--so that Sam, Alice, and the operators of the DAC all get profit from the trade?
I have no idea whether that kind of setup is feasible in real-life exchange trading (maybe someone would warn me that this would be very wrong in real life). But we aren't talking about real-life exchange trading.
BitShare/BitAsset exchanges will transform ordinary people (in this example, Alice) into brokers, which can easily be done because the whole contract is encoded in the blockchain and enforced by the global peer-to-peer network (effectively, the DAC). Well, if an ordinary person-turned broker (via a DAC) is going to pay margin call fees to other folks connected to the DAC (the miners), why wouldn't they also pay commission fees to still other folks connected to the DAC (the DAC operators)?
For that matter, what if Alice keeps part of the margin call fee (by splitting it with the miner--the miner keeps some, and Alice keeps some)?
Have I guessed correctly, bytemaster?
