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Messages - JohnR

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31
General Discussion / Re: Announcement on BSIP42 relevant actions
« on: October 14, 2018, 02:30:25 am »
Margin call is initiated by debt holders maintaining poor ratios; forced settlement is initiated by bitUSD equity holders.

The difference may be small to some but as I see it, if the ecosystem is well collateralized and there is no force settlement then it's possible that no user can get BTS autonomously.  The only option is to trade it for BTS.  Maybe that is the way of the future, but there will be a lot of old hodlers who will be suspicious that we are limiting choice.

Maybe this is just an unnecessary rabbit hole.. By "incentivize a run on bitUSD" I mean encourage a bank run where bitUSD is the bank.  In crisis deposit holders want their money out of banks.  When this happens at one time banks go bankrupt.  So by a run on bitUSD I mean a scenario when users trade en masse to BTS and turn around and sell to another crypto like BTC.  If BTS were to experience a chronic low price maybe it would not happen quite like this.  Still thinking about it.  To be honest I don't know exactly how it would play out.

32
General Discussion / Re: Announcement on BSIP42 relevant actions
« on: October 13, 2018, 02:46:47 pm »
I read the entire thread and of course it is possible I misunderstood you.

Quote from: abit on October 13, 2018, 12:08:39 pm
* A trader who really wants to convert his bitUSD to BTS doesn't care where he will get the BTS,
  1) the BTS can come from other traders who are selling BTS for bitUSD
  2) the BTS can come from bitUSD debt positions who has less than required collateral ratio (margin calls)
  3) the BTS can come from bitUSD debt positions who has least collateral ratio in the system (force settlements)

You very clearly laid out the three ways for bitUSD holders to get BTS today correct?  And disabling force settlement would eliminate option 3 correct?  What I am trying to point out is that both option 1 and 2 require something from another party (posting a limit order in 1 & holding an undercollateralized position in 2).  In this way it chips away at the trust-less nature of bitUSD.  Not entirely, but recognize it does injects a level of trust in another party.  The community can elect to go this route of course, I would be interested to see how a vote ended up on this front.  You changed your mind on this issue, so maybe my thinking is less evolved.  I'm definitely open to it but rather than disabling maybe it would be better to make it an advanced feature so newbies don't stumble into it.  This would allow us to still claim that bitUSD is 'trust-less'.

Quote from: abit on October 13, 2018, 12:08:39 pm

Your comment "margin call (which only happens in periods of stress/when the collateral is at its lowest value" is wrong, because, with BSIP42 or another MCR-based approach, margin calls can happen at any time as long as there is more demand of selling bitUSD for BTS than buying bitUSD with BTS.


You're right, this was too strong of a statement.  I did not mean to imply it is or would be a rare event.  But surely you agree that the situation you described in response is one where the value of BTS is lower and/or decreasing.  One concern is if the platform only allows bitUSD holders to get their BTS when price of BTS is decreasing this may incentivize a run on bitUSD.


33
General Discussion / Critical Review of bitUSD by an academic at LSE
« on: October 13, 2018, 02:27:29 am »
This was written by an academic economist after reviewing bitUSD as a stable coin.  Please join in as I consider how to eviscerate this criticism.  The Dismal Science be damned!

--Begin--

"Not a fan.

> Anyone with BitUSD can settle their position within an hour at the feed price.

I was assuming seconds at most. Is an hour at all competitive with other currencies?  I know that at most times there will be market-makers buying and selling much faster, but in volatile markets the prospect of being locked up for an hour should really scare traders, particularly shorts.

> In practice, the only way new BitUSD enters circulation is if there is someone willing to pay enough of a premium to convince a short to provide guaranteed liquidity at the price feed on demand, while also covering the cost of exchange rate risk.
...

> the only people to whom the premium matters are those who are looking to enter or exit the ecosystem.

This is correct, but the premium does provide a disincentive to adopt.  Historically premium seems to have typically been -2% to +10%, but as the economy grows I think it has to grow to compensate shorts for tieing up their collateral.  At first sight it is quite clever to have this margin set by a competitive market but it also means margin will be set too high for rapid growth, I think. Part of the Saga and Basis stories is raising pump-priming capital to get a nice, stable, solid-looking economy off the ground so trust can start to develop and we need to do the same.

The central problems though are that you can only get 1 BitUSD by paying $1 + margin for it and you are not even guaranteed to get $1 back because the collateral is not held in $.


The way this will all collapse is though a fall in crypto collateral values.  As this starts to happen some shorts will want to cover their BitUSD positions so they can sell the collateral and cut their losses, so BitUSD may even spike up, but the collateral sales will further depress prices.  Soon some short position will fall below $1 collateral triggering forced settlement on all contracts within an hour.  I assume collateral would fall further during that hour because this is how crises always work, so the end settlement price may be quite a lot lower than $1.  In theory this should be good for shorts but in practice they have lost too much on their collateral that they won't really notice, so nobody winds up happy."

34
General Discussion / Re: Announcement on BSIP42 relevant actions
« on: October 13, 2018, 02:08:06 am »
Disabling forced settlement seems like a strong response.  The value proposition of bitCNY/USD is that they are collateralized with assets.  If the user can only get the underlying collateral through margin call (which only happens in periods of stress/when the collateral is at its lowest value) what does that say about the original value proposition?

35
Stakeholder Proposals / Re: [Worker Proposal] On-chain smart contracts for Bitshares
« on: October 13, 2018, 12:22:50 am »
I take a broad view of 'smart contract' as any predefined digital agreement that executes autonomously without the need for an intermediary or other third party (besides an oracle).  BitShares has smart contracts of a very limited functionality - bitUSD/bitCNY.  These operate without the need for any agent to take action and serve an important role in financial services in a distributed environment.

This proposal deals with integrating general purpose operations (as opposed to specific financial contracts above) also known as "turing completeness".  Of course I welcome any time and effort being put into expanding the capability of the BitShares network.  Especially coming from one of the most respected firms operating on the chain. I would like to hear more about how BitShares can benefit from connecting to the EVM.  What sort of DAPPs do you think can be facilitated on the BTS blockchain with this development?

Ultimately I can see this as being a way to reinvigorate the perception of BitShares.  If you're reading this you are likely aware of the vast capability of the BTS blockchain.  However, it has become abundantly clear that the term 'smart contract' itself has a social currency all of its own and getting exposure to that may be rewarding for stakeholders.

36
General Discussion / Re: Announcement on BSIP42 relevant actions
« on: October 12, 2018, 11:13:50 am »
Quote from: bitcrab on October 12, 2018, 05:25:24 am
Quote from: JohnR on October 12, 2018, 03:43:31 am

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?


now I feel to reduce MSSR make sense even after the implementation of BSIP42, and I don't think setting MSSR=100% means the penalization is cancelled, forcing one user to sell it's collateral in market price is still one kind of penalization.

there is another BSIP for setting MSSR to 105% for bitCNY, https://github.com/bitshares/bsips/issues/97, however it is not moved forward when BSIP42 is on the way.

It may be true that collateral holders are 'penalized' in the sense they are forced to sell at what may be an opportune time.  At least this is a qualitative and not a quantitative disruption so far as price goes.  Forced margin calls are a feature of many well-functioning markets with credit risk.

Quote from: pc on October 12, 2018, 06:00:49 am
Quote from: JohnR on October 12, 2018, 03:43:31 am
1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

Yes. The current price feed modification is interfering with the MSSR in a bad way that renders the intended penalty moot and leads to a price feed that is further away from the real price than necessary.

We cannot aim for a tight peg *and* force margin calls to buy above the market price, at least not without a hard fork.

Thank you for expressing this very simply! 

*Note, in the first question I believe I meant to say 'an MSSR of 1' and not 0.

37
General Discussion / Re: Announcement on BSIP42 relevant actions
« on: October 12, 2018, 03:43:31 am »
This OP on bsip42 has veered wildly off the original subject.  Nice to see the creativity, althought there are some misconceptions floating. I would like to know people's opinion on the following.

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

2) Is a dynamic MCR feasible?  What parameters would you like to see for this?
2a) for the skeptics out there remember bitUSD is not quantitatively more sound by having 1.75x vs 2.8x collateral in the pool.  The key metric is a collateralization >= 1 x smartasset denomination.  If an asset can have a slightly lower collateralization (with sufficient safeguards) it may increase supply and robustness of the trading market.  This may lead to second order benefits and harden the economy/strength of bitUSD.

IMO the conversation surrounding bsip42 is an indication of the synthetic price setting mechanism overpowering the natural market price setting mechanism.  It is totally understandable that in a prolonged bear market fewer trading activity will happen and irrational spreads will occur.  Rather than solving this synthetically with price feeds perhaps the ecosystem would be better off focusing on driving fundamental growth and trading activity around smartassets.  Let us what the market thinks of bitUSD when we get more unique users. 

I think between the two options in Jerry's OP, a slight modification to MCR (done responsibly and transparently) is in better keeping with the implicit social contract that bitCNY/USD holders/shorters made when they engaged the platform.

38
General Discussion / Re: Announcement on BSIP42 relevant actions
« on: October 10, 2018, 04:17:02 am »
I think we should definitely try a MSSR of 0.  The orthodoxy around here seems to be that a high MSSR is good because it will incentivize people to buy up debt as BTS is falling.  This is flawed reasoning.  Once the secondary buyer takes on the previously undercollateralized debt position he is then in a position of facing adverse forced selling at the same penalty % if BTS continues to fall.  Best case scenario this will net to zero.  But psychologically it may discourage people from jumping into the breach as BTS falls.  The optimal strategy to employ with a MSSR above 0 is to wait for BTS to stop falling then buy up the distressed debt.  Apply that across a market and you have everyone waiting around and BTS languishes.

While I don't totally understand how a dynamic MCR would work technically, if we can pull it off I think it's great.  bitUSD/CNY face chronic shortages partially because it is expensive to hold the .75 x of surplus collateral.  Widgets that are expensive get supplied in lower quantity.  If we have the technology to implement a dynamic MCR we should absolutely proceed with it.  In my opinion, there is far more upside than downside.  It can still remain overcollateralized, so that bitCNY/USD don't become a 'house of cards' like other synthetic/fractional reserve systems.

Quote from: xeroc on October 09, 2018, 08:49:45 am
So, let me summarize my understanding. We basically have three parameters available that we can use
towards fulfilling our optimization criteria:

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

Essentially, we can apply a "feedback loop" on all of them, either by "derailing the price feed", tuning MSSR or MCR.
The main motivation for "detailing the price feed" is because the MSSR as well as the MCR are lower bounded by 100.1%
and thus cannot go lower. A "tuning" of the price feed could lead to reduction of the premium beyond what could be
possible by tuning MSSR or MCR.

Now, the question (at least to me) is, where is the "premium" and how can we lower it, best?

I would like to see how well this approach would work:

* Feed: price feed with a fixed 1% offset from the "fair price" (fixed tuning) - this way, we allow bitasset buyers to outcompete margin calls and have margin calls provide liquidity at 1% 'discount'
* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium
* MCR: dynamic MCR at     max(130, 170 - 40 * (premium/5%))% (feedback) - this way, we have a MCR of 170% in case of 0% premium which groes if the premium is <0% and shrinks towards 130% (linearily) in case of premium >0%

The only thing that I am not sure about is if this approach may not lead to more and more margin calls piling up at the settlement
price with not incentive provided to sell into them - unless the external "premium" is negative ...

Thoughts?

39
General Discussion / Re: Somebody might enlighten me why BSIP42 on BitUSD ?
« on: September 30, 2018, 05:58:48 pm »
The market price is independent of the feed price unless bitUSD is 1) being voluntarily settled or 2) in forced settlement (margin call).  There is not a problem with the market price being below the feed price (necessarily).  It's been the stance of the committee (acting on the broad sentiment of the community) that bitUSD should trade within a more narrow range (tighter to 1 USD).  The higher price feed reflects an effort to reach this outcome.   

If you disagree with this then it's a great opportunity to contact your proxy or change proxies if you don't agree with their stated positions.  To that effect, it's a new issue so it is an opportunity to invite proxies to discuss their positions on what's going on.

40
General Discussion / Re: Economic Abstraction and Network Fees
« on: September 25, 2018, 04:30:14 pm »
One of the best things about BitShares is the economic freedom it provides.  A user can freely transact in CNY/USD/EUR assets independent of their nationality.  Maybe we will agree to disagree on this point but I don't think most users feel an explicit allegiance to the fiat monetary system under which they were born.

41
General Discussion / Re: Economic Abstraction and Network Fees
« on: September 25, 2018, 01:42:38 pm »
Thanks @abit.  I would not go so far as to say it would devalue BTS.  bitCNY is at the end of the day a future claim on BTS, nothing more.

I don't think setting in USD vs CNY would ruffle too many feathers.  Speaking for myself, whether the fee was set at 0.01 USD of 0.06 CNY would not make much difference to me whether I paid fees in USD or EUR. 

Very concerned about unexecuted transactions though.  When you say fee schedule changes do you mean the regular fluctuation of bts:fiat?  If you mean fee schedule changes I suppose the solution is that we set fees once in fiat and could be satisfied enough not to change unless something major happens.  Many stakeholders are working and hoping for greater adoption and supply of bitassets.  If fees are fixed in fiat terms then it may incentivize the community to focus more on bitassets?  People holding bts is good, people holding bitassets is better.

Quote from: abit on September 25, 2018, 01:28:05 pm
Quote from: Customminer on September 24, 2018, 01:37:54 pm
I think fees should still be paid in BTS, however the fees should peg against USD|CNY to be a fixed FIAT value instead of being detached from their intended value when BTS price is volatile (until the committee manually adjusts them). If the committee could set the fee values once then forget about them (until economic policy changes are proposed) that'd be great.
Apparently, if we set a fixed fee schedule, it can only be in BTS, or one of the smart coins. Using BTS is the least bias solution. If we peg fee schedule to one currency, E.G. USD, why not use CNY or EUR? IMHO this will cause division of the community. Because, even if some people can pay fee in USD at a fixed value, other people who don't use USD will still need to pay fee at a float value. The worst thing is people who prefer to pay fee in BTS (read: most of existing users) need to calculate the rate when building transactions, which is not funny at all. The chance of failing to execute transactions would be much higher due to fee schedule changes. IMHO using any asset other than BTS as default fee will effectively devalue BTS the core token.

42
Stakeholder Proposals / Re: Proxy: xeroc
« on: September 24, 2018, 11:09:18 pm »
Xeroc, I hope you enjoy your vacation.

Thul3, in a DM to me as well you quoted an anonymous 'witness'.  For the benefit of everyone in the community I suggest you be more specific with your assertions.  Most on the committee are hard working people who want the best for BTS.  I give everyone the benefit of the doubt, and it's hard to get far without knowing more details.

43
General Discussion / Re: Economic Abstraction and Network Fees
« on: September 24, 2018, 11:00:18 pm »
Thank you for the thoughtful reply CM.  I think it's not the pegging that's the trouble.  This can be handled through the core exchange rate function of bitUSD/CNY 's respective fee pool.  I think the larger issue is do we want to tie fee revenue in fiat terms or stick with the bts denomination (it has pros/cons).  The more I think about it, one of the most important reasons for fees in the first place is to support the reserve pool from which workers draw upon.  Workers want bitUSD/CNY so there is a nice symmetry to charging network fees in these assets.  It minimizes volatility risk that workers won't get paid.

Quote from: Customminer on September 24, 2018, 09:44:28 pm
Quote from: armin on September 24, 2018, 08:56:20 pm
The pegging thing can be solved with a program all committee members run that adjusts the fees daily to peg to USD/CNY. Obviously there's hassle in running that program and key safety is a concern as well
After BSIP 40 (https://github.com/bitshares/bsips/blob/master/bsip-0040.md) is implemented, the committee members could potentially create a key for this purpose so as to not risk the rest of their committee account's permissions/functionality.

Such a program wouldn't require a powerful VPS, and perhaps it could be run by one committee member to propose the variable change operation & be manually approved by the committee at their discretion? It'd at least take half the effort out of proposing new fees.

44
General Discussion / Re: Economic Abstraction and Network Fees
« on: September 24, 2018, 09:34:33 pm »
Thanks Armin.  Do you know of any such program running now are you saying hypothetically CMs could run a program like this?

45
General Discussion / Re: Economic Abstraction and Network Fees
« on: September 24, 2018, 03:01:42 pm »
Quote from: Customminer on September 24, 2018, 01:37:54 pm
I think fees should still be paid in BTS, however the fees should peg against USD|CNY to be a fixed FIAT value instead of being detached from their intended value when BTS price is volatile (until the committee manually adjusts them). If the committee could set the fee values once then forget about them (until economic policy changes are proposed) that'd be great.

This is what I'm saying in the last.  Although you may have articulated it more clearly!

Quote from: JohnR on September 24, 2018, 12:57:56 pm

Also it does seem like network fees should be determined in USD/CNY terms and then have a floating BTS rate.  I see more upside than downside to that.


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