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Messages - Helikopterben

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16
General Discussion / Re: Proposal for Having Alternate Smartcoin Designs
« on: December 07, 2015, 04:12:51 pm »

First, we need to understand the roll of the short seller.  The short seller is a lender that provides a service to the network by lending bts to borrowers in the form of smartcoins.  Lenders do not lend money for free so they will either charge interest or charge a premium.  Otherwise, the risk/reward doesn't work.  For example, if I lend 1 usd into existence at a rate of 300 bts/usd with 2x collateral of 600bts, then my risk of loss is 100% of outlay (with a 50% drop in price) while my potential gains are only 50% of outlay.  It just does not make sense to enter this agreement unless I charge a fee to compensate for the added risk.


The short seller is a borrower, not a lender. You borrow bitUSD to provide them to the market. Those who buy these bitUSD are the lenders.

If that is correct, then why do short sellers not PAY premium to smartcoin buyers?  Borrowers almost always pay either premium or interest to lenders.  By your logic, the short seller should pay premium to the buyer.

17
General Discussion / Re: Proposal for Having Alternate Smartcoin Designs
« on: December 07, 2015, 03:23:12 am »
I don't think we will be able to get smartcoins to trade at parity with the current design, which is perfectly fine because I think the current design is the best design, possibly with a few tweaks and feature adds.   

You are bullish on parity if the right tweaks are made or it's okay to not be at parity?

It's ok to not be at parity with the current design of premium being paid up front.  The only way to trade at parity is for the smartcoin buyer to pay interest payments to the smartcoin creator instead of paying a premium.  So you can either have premium or interest payments.  From what I understand, interest payments would be more difficult with a blockchain.

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General Discussion / Re: Proposal for Having Alternate Smartcoin Designs
« on: December 07, 2015, 02:53:14 am »
I don't think we will be able to get smartcoins to trade at parity with the current design, which is perfectly fine because I think the current design is the best design, possibly with a few tweaks and feature adds. 

First, we need to understand the roll of the short seller.  The short seller is a lender that provides a service to the network by lending bts to borrowers in the form of smartcoins.  Lenders do not lend money for free so they will either charge interest or charge a premium.  Otherwise, the risk/reward doesn't work.  For example, if I lend 1 usd into existence at a rate of 300 bts/usd with 2x collateral of 600bts, then my risk of loss is 100% of outlay (with a 50% drop in price) while my potential gains are only 50% of outlay.  It just does not make sense to enter this agreement unless I charge a fee to compensate for the added risk.

So the question becomes:  Why would anyone pay $1.10 for $1.00?  First of all, I outline why this may be the case when trading physical commodities vs digital assets such as bitcoin, usd, ect.  Second of all, this is why I think we need some sort of leveraged trading, if possible.  Traditional options and futures markets are highly leveraged.  If I ask someone to deposit $1,100 and he gets credited in the system for $1,000, then he will be reluctant to do it and say that he would rather use a centralized exchange where he can deposit $1,000 and get credited for $1,000.  However, if I tell someone they can deposit $1,100 and get credited in the system for $2000, then he may be more willing to do it because leveraged traders are comfortable with paying a premium to borrow money.  In this situation, the trader would pay $100 to the lender to borrow $1,000 and put in $1,000 of his own money at 2x leverage.  Obviously he will have to be aware of margin call requirements and the loan may have to have a contract end date.  This would also work out well for the lender as he could earn a return on his bts and not be exposed to exchange rate risk as long as he maintains proper collateral.  For instance, if the smartcoin creator creates 1,000 usd and lends it out vs selling it, then all that is required is for the borrower to repay the loan in full, at which point the lender can adjust collateral back to 0 without having to buy any usd on the open market.  Because of this, I imagine premiums would be much lower to borrow smartcoins than to buy smartcoins. 

I agree that forced settlement is questionable as to whether it is needed or not, but I don't think removing it will affect premium that much.  As someone else suggested, maybe parameters can be changed for cny vs usd vs euro to determine which design works best.  I think it would get confusing to have multiple designs of usd and I'm not sure how beneficial it would be, but it is definitely worth a shot at this stage. 

19
What do you feel about trading in an illiquid market and do you have concerns about that?   

Liquidity in a market is relative.  There are opportunities in any market.  For instance, in this illiquid market, premiums are naturally higher, giving a potentially higher profit margin for the added risk.  Total profit/loss is lower in an illiquid market, but capital requirements are lower also.  In a liquid market, premiums may be thin but less risky and you may be able to play with larger amounts of money but margins will be lower. 

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Is your order for .23 or .25 gold?  I see the .23 gold order at 400k.
My order was for .23 but I have debt of .25.

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So you are comparing the cost of physical gold to bitShares as a store of value?  Interesting way to look at it.  I always thought there would be a consistent float of bitUSD & bitGold for payments and as a store of value, but if it was just strictly for a store of value, the value of the BTS DAC would not generate transaction fee revenue so you are valuing it more like Bitcoin and the value that the ecosystem has in securing itself.  However without payment transaction fees that validate the value of a company or DAC, where would the DAC derive it's value?  Bitcoin has the same issue because if people don't use it for payments, how can it be used as a store of value?  I have an answer to this and there are a few potential answers, but curious to know what others think.   

Bitgold can be used as a store of value, trading instrument, payment vehicle, or potentially many other uses, just like bitcoin.  It will provide value to the DAC through transaction fees.

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Also a hypothetical question re: SQP.  I was curious what your thoughts were about the SQP.  If there were no SQP in the initial design of 50% (now around 10%) even if you had executed your order with plenty of collateral I assume if someone had walked the book down to zero by buying all the bids, you and the rest of the 6.3 oz shorts would be forced out.   Is that your understanding or am I missing something?   (I understand there will be fork to make use of the feed price as protection and I'm not sure what will be of the SQP, but this is just a hypothetical question about how the system worked before and the dangers of illiquidity)

SQP can only help out the short seller by not forcing them to sell near 0.  10% below feed seems ideal to me.  It should be enough to avoid a black swan by giving buyers a 10% discount on margin called orders.  It is the short seller's responsibility to maintain collateral.


Update:  The trade was executed for a small portion at 400,000 and then I rebought the gold at 350,000. 



Profit of about 560 bts after fees.  Not much but I just wanted to demonstrate what is possible with a real example.  Shorts can make money and if maker/taker and/or rebates are implemented then it will provide more incentive for shorts and likely reduce spreads.  Note the entire round-trip trade was done above spot(feed). 

20
General Discussion / Re: Incentivising Liquidity
« on: December 04, 2015, 01:22:24 am »
I'm thinking give the incentive only to the short-seller-maker to reduce the premium and compensate for the added risk inherent with the short side in bitshares.
Clever idea, but how do you identify whether a maker is also a short seller? Any short position may be unrelated to a given trade.

Good point.  Maybe require the account to have 100% of the asset collateralized to qualify for the rebate.  In other words, if you put an order on the books to sell $1, then you need to have at least $1 in debt to qualify. Obviously this wouldnt be perfect because users would only need debt relative to their ask size but i'm sure there may be other ways to do this.

21
General Discussion / Re: Incentivising Liquidity
« on: December 03, 2015, 11:13:09 pm »
The way market makers work in regular markets is that they are obligated to sell/buy at a certain price and usually it is a minimum of 1000 shares.

If they choose to sell 1000 shares as 25.50 they must keep those on the order books until their 1000 shares are gone.  What they will do is put a bid in just above the current bid, say at 25.46.  If someone sells them 1000 shares at their bid, they pocket the 4 cent spread because they will be immediately able to sell into their 1000 share sell order.

Why would someone do this you ask?  Why would they obligate themselves to sell at a certain price?  The reason is that they get commissions from the brokers that use them to fill their orders.  This is why if BTS has market makers, they should be compensated by the trading fees.  Hence we should use option 1.

Yes market makers in traditional markets often get rebates. 

http://www.investopedia.com/articles/active-trading/042414/what-makertaker-fees-mean-you.asp
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The maker-taker plan harks back to 1997, when Island Electronic Communications Network creator Joshua Levine designed a pricing model aimed to give providers an incentive to trade in markets with narrow spreads. Under this scenario, makers would receive a $0.002/share rebate and takers would pay a $0.003/share fee, and the exchange would keep the $0.001/share difference. By the mid-2000s, rebate capture strategies had emerged as a staple of market incentive features, with payments ranging from 20 to 30 cents for every 100 shares traded.

I'm thinking give the incentive only to the short-seller-maker to reduce the premium and compensate for the added risk inherent with the short side in bitshares.

22
General Discussion / Re: Discussing the problems with bitUSD (smart coins)
« on: December 03, 2015, 11:46:22 am »
Options buyers is traditional markets pay for premium only.  That is why we need some form of leveraged trading, if possible.

23
General Discussion / Re: Liquidity has a Price -> Adding Maker / Taker
« on: December 02, 2015, 03:22:31 pm »
Coinbase uses maker/taker model.  It works well.  You can see the bots dance around when you place an order. 

I also like the relative orders idea.

24
No one said you will always make money force settling so your offer doesn't prove anything, but maybe your main point is that you have done your due diligence and that you are shorting.   That gives me a good opportunity for me to learn something. Why did you short the illiquid gold market?  What price feeds does this market use? Is this roughly $75 order a test case?  Are you looking to make money?  Seriously curious.

Where did I say the money was guaranteed.  Sometimes I feel like I'm the only one with trading experience around here.  Its about a $243 order, not $75.  Here is my logic.  I believe bts is at or near an all-time low.  The absolute most I can lose is 0.25 gold (~$262 or 80,000 bts at current prices).  I am highly collateralized and my call price is 1,204,868 bts/gold.  My asking price of 400,000 is ~ 15% above settlement.  You would pay about 400,000 bts (~$1280) in a round trip trade for 1 ounce of physical gold, which is also comparable in security or at least potential security of bitshares.  This goes along with my theory that smartcoins will be more popular for physical commodities than fiat.  In other words, if you believe security of the bitshares system to be comparable to the security of owning physical gold directly, then generally any price below a 15% premium in bitgold is a better deal than physical gold.

Yes this is mostly a test case, but I will gladly accept the peanuts if I make them.  This trade seems like a no-brainer to me.  I will keep you posted. 

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You'd be adding another force settlement feature just like Alt suggested and that will balance the market more, but like I said in the other thread that will introduce unpredictability to long term bitAsset holders in addition to shorts so you'll have less liquidity on both sides.  You'll probably have a real powerful manipulation tool as well.  The ideal scenario is that you have long term bitAsset holders and long term bitAsset shorters that don't have to be forced out of their positions unless undercollateralized.

I'm not sure what other forced settlement feature you are talking about other than the current forced settlement feature. 

25
Maybe someone should create a video 'How to lose money shorting in the long run:  A how to guide"?

Do you think this one way so-called 'arbitrage' is good?   You're just getting unsuspecting users who think a bitUSD is pegged to $1.00 instead of $1.20 give you money until they are broke and learn they don't want to trade in this asset whose name is confusing and misleading....... and you'll get fewer and fewer who even understand how to trade even want to take the other side... until you have a ghost town market.... but perhaps you might get lucky and there might finally be a bull market for whatever random reason and get even more unsuspecting users go short, until you can 'arbitrage' them from their money on the downswings? 

 I would not object as much if these assets were called bitUSD-Premium or bitCNY-Premium.., but they sure ain't bitUSD or bitCNY...

Users who trade should perform their own due diligence.

Users who perform their own due diligence probably won't go short in this market.

Yes they will.  You are more than welcome to buy my gold short at 400,000 bts/gold and then you are more than welcome to force settle my position at the settlement price of 319,213 bts/gold. 

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I mean I'll join you guys force settling shorts all day long.  We can all sing kumbaya waiting for shorts to come... let's get the entire forum long on bitUSD waiting for shorts that don't do their 'own due diligence'...  we'll out number shorts 100 to 1 .. then 1,000 to 1 ... then 10,000 to 1 all just waiting to pounce... we actually might eventually outnumber them 100,000 to zero....  who would really be wanting to short that badly?  Might as well go to Poloniex for leverage even if people don't trust them.


I think Johnny B's logic is correct.  Bots should eventually enter the system and create walls that float just below settlement price to force settle any shorts below settlement for instant profit.  That will solve the buy side of the liquidity equation.  I also like the idea of having a feature where shorts can enter positions that float at a certain percentage above settlement.  This will aid liquidity on the short side by giving shorts a way to better manage their positions and draw as much premium as possible from longs.

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General Discussion / Re: Liquidity has a Price -> Adding Maker / Taker
« on: December 02, 2015, 02:20:49 am »
...the interest is a cost, but it is short term. Eventually...

I'm highly skeptical of this, and like Tony believe the worst thing you could do is penalize holders of BitUSD or BitWhatever.

From "The greatest thing on the face of the crypto-loving planet - interest bearing BitUSD"  --- experiment BitShares 0.X - 0.9 RIP

to "Our BitUSD is so worthless it has build-in inflation - the longer you hold it the less value it has" --- Gee, where can I buy some of that?


This is why I have said all along that the real innovation is not bit-fiat but bit-physical commodity as I described here.  For some reason you guys are hung up on bit-fiat, whereas bit-physical commodity is a completely vertical market with no competition in the crypto space.  I have shown that people are willing to pay a premium for physical commodity derivatives in legacy markets.  Its a hard sell to tell someone they need to pay a premium to own a completely flawed and inherently inflationary digital currency such as bitusd.  However, people will pay a premium to own things of real value such as physical commodities in a digital (derivative) format. 

Smartcoins are a radically new concept and there is a huge learning curve in understanding these things.  For example, if you buy bitusd, then you will pay a premium, but you are guranteed a price floor.   Most users will say that is reduculous and they do not want to pay a premium for usd.  However, they need to understand that they will be able to sell that usd back at a premium close to or at the original premium that they paid (in a conveniently liquid market of course).  There is no difference in buying nubits at $1.00 and selling it back at $1.00 as there is in buying 1 bitusd at $1.10 and selling it back at $1.10.   With bitusd you are guranteed a price floor, with nubits you are not. 

The design is probably very close to being accurate and I don't foresee any real progress being made by tweaking parameters with separate smartcoin assets.  Liquidity is the hurdle that needs to be crossed to achieve mass adoption and its only been a little over a month since 2.0 was launched, so we need to have a little patience.  What is needed is a profitable market-making bot that can take advantage of spreads and premiums in markets that provide the best opportunities, although getting this right would be much easier said than done.  This bot could be funded by a UIA that could distribute profits back to investors or possibly it could be done through a worker proposal.  Nubits has so far gotten this to work, so it can be done.  The only difference is if there bots fail, it causes systemic failure.  If SmartCoin bots fail, no systemic damage is caused.  I think this is the route to take. 

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General Discussion / Re: Smart Coins & Forced Settlement
« on: November 30, 2015, 08:19:39 pm »
So it was a problem with the price feed and not forced stllement?

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General Discussion / Re: Converting gold & silver into bitGOLD & bitSILVER
« on: November 30, 2015, 04:59:00 pm »
Physical commodity smartcoins may be the ticket to mass adoption, but as others have stated the system is just not ready yet.  PMs are a good start, but there is absolutely no competition in crypto for assets pegged to physical commodities such as oil, natural gas, corn, wheat, cotton, copper, iron ore, ect.  These assets are all generally good stores of value and IMO are good buys right now.  Gateways for PMs are a good start, but we need to get the pegs working first and we need to get at least some liquidity into the system first.  A bond market allowing for leveraged trading and a (nearly) risk-free return (probably low) on bts could be the catalyst to bootstrap liquidity.

29

Talking to a guy recently who is very knowledgable about crypto projects in general... he knew of my past interest in Bitshares and asked me if it is true ...   Is BitShares controlled by a small number of Chinese whales?

I told him I do not know, but such a thing could very well be true...

After reading this thread I really do wonder.

Some Chinese guy(including some so-called whales )  have asked me if BitShares is an ATM and controlled by a few western developers in I3 . why they can keep bleeding dilution on Chinese , Why the developers can put up a proposal that could grant them more BTS just in 2 month than any single whale in the Chinese community .

Sometimes I just don't know what to tell them .
Guess we all have our troubles .

Tell them they control bitshares proportionally to their stake and ask them if they have voted.

As far as forced settlement, MPAs are still highly experimental and its difficult (nearly impossible) to tell how things such as forced settlement will work until put into practice in a live environment.  We have found that this parameter can be exploited in illiquid markets and will have to be tweaked, along with other MPA parameters.  You can't blame someone for not understanding the implications.

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General Discussion / Re: Price of BitShares on Dec 25th?
« on: November 30, 2015, 04:20:00 pm »
Well, we're going to be somewhere between "a lump of coal" and 1250 it appears.

Until everyone finds out about the BIG DECEMBER NEWS.
;)

So whats the big december news?

Is it: 

1) Bitcoin goes back to $1000, resulting in BTS to 300 sat.
2) NSR passes BTS in market cap, while continuing to increase in satoshi price.
3) Feed prices are removed from all smartcoins, not just bitCNY, resulting in every one of them becoming unusable.

or 4) All of the above

5) Ander Continues Public Display of Butthurt.  :P



Yea some of these guys are impatient and lack vision.  @Ander @tonyk.  They let price rule their emotions and fail to look at the big picture.  Here is what I said in August before 2.0 came out:

As investors, do we really think this next iteration will be the final version?  I have my doubts.  I have a feeling MPA's will be difficult to get right, but eventually the correct formula will be found.  Bitshares has been rebooted twice now.  First with the "merger" and now with 2.0.  I could foresee another reboot being necessary if this next version doesn't go exactly according to plan, but at least the dev team is willing to take on that task if necessary and not just try to patch things up if it doesn't work.

Ethereum has done a better job at underpromising and overdelivering, marketing 101.  They basically have told average users to stay far, far away with the frontier release.  In hindsight, bitshares should have done the same with their first release.  Realistically, both projects are probably near the same stage of development.  Ethereum has said it would be another year before a fairly stable user version is available.  I would expect bitshares to follow the same trajectory.  In 5 years we should have stable platforms for which to conduct all things finance, but it is just unrealistic to expect it anytime soon.  Who knows, maybe 2.0 will overdeliver, but it will be hard to overcome the hype yet again.

Pretty much spot on so far, although I don't think the whole thing will have to be rebooted again... just tweaks and feature adds here and there, which looks like a lot of work and will take time.  If you have paid attention to crypto development cycles so far, you could have seen this coming as I did and not believed all the hype.  I'm sure you guys have sold all here near the bottom. 

Here is another prediction for you.  Nushares will fail and become insolvent sometime over the next 5 years when bitcoin reaches the meat of its exponential rise during what I believe to be a developing primary 3rd wave in terms of elliott wave theory.  Volatility will destroy the peg.  As for now, I will admit I am also playing a further rise short term in Nushares as a small side bet.  The charts look poised for another rise.


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