Quote from: Helikopterben on May 22, 2015, 03:44:10 am

Quote from: bytemaster on May 21, 2015, 09:55:24 pm

Bottom line, when you look at the BitUSD price, the quantity available over $1.00 is VERY SMALL and thus meaningless.   That means that right now BitUSD is "perfectly pegged" and the premium for creating new BitUSD is VERY HIGH.   This is a good and healthy position and indicates what it will look like with force settlement enabled.    Everything else just depends upon trading volume and market making.   

Right now there is over 70,000 bitusd in bids at the feed price, which represents almost half of all bitusd in existence.  If this were force settled right now at the feed price and all else remaining constant, then nearly half of all short sellers would be forced into a transaction that they did not agree to, or at least a transaction that they did not initiate.  IMO, this would further shake the confidence of short sellers and the market in general.

How should we solve this?

I think a KISS method similar to the original design would work because the original design wasn't given enough time to work IMHO.  Force all trades to occur within 1% of the price feed.  Allow users to place orders outside of that 1% range but the order wont be activated until their price comes within 1% of the feed.  Don't force short sellers to cover at any time.  Give sell orders priority over short sell orders when being filled.    Allow users to place market orders that float at the price feed.  No one is forced into a trade unless margin called.  I don't see any reason why it wouldn't work. 

Adoption and liquidity are a function of time.  Everyone wants to try all these complex approaches when the simplest approach may be best.  Now that the bts market has settled down, it may be worth a try.

How do you know what price to use to create the bitasset without a counterparty?  Price feed I suppose?

To help understand this, when you self-create the bitAsset loan, you are at that point equally long and short, which is a neutral position. You are not exposed to price movement one way or the other, and you can cancel the two positions at any time.

Would it not be possible to still get margin called if the amount of collateral falls below the amount needed to redeem the bitasset?

- longs are willing to pay a bit more but demand liquidity in return

Yes but longs are not going to pay 20% more because worst case - they may have to settle at a 20% loss when they redeem their dollars.

No one wants to short.  Without shorting there is no bitUSD supply.  Unfortunately I think with the new design we will have the same result.

Balance is the key.  Not favoring one side or the other.  Modern CFD contracts are balanced.  Parties agree on settlement days and price feeds.  The current system is unbalanced in favor of bitUSD longs.

This is the problem that needs to be solved one way or the other.  Lots of demand and very little supply:



I believe the problem is a bit more complex than this.  Markets largely move based on human emotion and can trend in one direction or the other for long periods of time.  During a bts bear market, which we are having now, there is more demand to be long USD and less demand to be short USD, and we are seeing this right now.  During a bull market, like what was seen last summer, there is more demand to short USD and less demand to buy USD.  I believe this is where rules favoring longs were erroneously put into place.  Once the market turned from bull to bear, then demand to buy USD increased and demand to short USD decreased.  Consequently, USD buyers could not find sellers.  During the bull market, short sellers could not find USD buyers. 

IMO, too much emphasis is put on a 'stable' cryptocurrency.  All assets, including fiat currencies, are not stable by their very nature.  They fluctuate in value relative to other assets, but some assets such as bitcoin fluctuate much more violently than other assets such as the USD.  However, this can change over time.  In fact, there may become a time where assets such as bts or bitcoin fluctuate less violently than the USD, if faith is lost in the USD. 

Guaranteeing liquidity at the expense of the shorts will not fix the problem.  Shorts simply will not short if they are unfairly disadvantaged and you cannot have a 'stable' cryptocurrency if no one is willing to short it into existence.  Perhaps a floating market order at the price feed could be used for longs who want to redeem USD as close as possible to USD.  In other words, if there are no sellers at the price feed, then the order will track the price feed until someone places a sell order exactly at the price feed, and then the order will be matched.  In a highly liquid market, this should only take seconds, even for a whale, but even in a very illiquid market the order should be filled within a few hours.  The same can be done for shorts.  Liquidity will come from traders and market makers, who will not require instant redemption of USD.

I know many solutions have been proposed including the use of interest rates.  Also, interest rates that float between positive and negative have been proposed and this could potentially be the solution.  However, I am a bit skeptical because many legacy markets, especially futures markets which bitshares seems to be more like, don't use interest rates for most assets.  Also, I don't think time constraints such as forced covering should be used because that would prevent the function of currency for these assets.  The market should be as free as possible with the only requirement being that orders have to be executed within X% of the price feed.  Orders can be placed outside of that X%, but they won't be activated until the price feed comes within that X%.  If buyers want to buy, they buy.  If sellers want to sell, they sell.  If short sellers want to short, they short.  If not, then no trades take place.  To 'nearly' guarantee liquidity for asset holders, a floating market order at the feed price can be used.  In this scenario, I believe the risk of systemic failure would be greater than the risk of no liquidity.  Eventually liquidity will enter the system as users become more comfortable and believe it will work, but this will take time.

Bottom line:  Any time you force someone into a transaction they do not agree to, you are limiting the free market.  Obviously, some forced transactions such as margin calls are necessary to protect the integrity of the system.

I never really saw the problem with the original design.  I know liquidity was a concern, but liquidity entering the system is a function of time.  In other words, people will gradually move assets into the system over time as they become comfortable with the reliability, usability, and security of the system.

If you must guarantee liquidity to USD holders, then I believe the current 3.0 proposal is a good one.  Perhaps allow 5% of supply to be redeemed per day instead of the 1% as someone else suggested.  Make forced liquidation an option that the user has to enable and make the user accept a warning that they will only recieve 99% of a dollar's value 24 hrs into the future, to deter users from exercising this function.  Hopefully this will be an option that rarely gets used if ever.  Once significant liquidity enters the system, the vast majority of users should have no problem redeeming well within 99% of the feed, except possibly on rare occations during extremely volatile times.

Freeze all vesting. Resume in 24 months conditional on market cap and at much slower pace.

This is rediculous.  Central banks freeze assets.  We do not.  I say release all shares and be done with it.  Maybe the price will suffer... or maybe not, but we could get that level of uncertainty out of the way.

Extending expiries would mean that when bitAsset demand is relatively low compared to short demand, bitAssets would trade at larger discounts to the feed price. Its important to have the right balance for both longs and shorts.

Right now bitusd is trading at an 8.5% premium to the feed price.  It goes both ways.  I'm sure the right formula can be found but shorts are dis advantaged with the 30 day rule.