Blockchain as a Liquidity Provider

[Empirical1.2]

BlockTrades is planning to add a market-maker soon to help jump-start some of the markets. Unfortunately, like all coding, this takes time (and we have to be especially careful when money is involved in what the software does). I'd guess we'll have a market maker up and running in about a week or so.

  That's good news.

[Thom]

I am not an expert or even very knowledgeable about derivatives but this is something that seems like an obvious problem with an obvious solution, that is if liquidity were only a matter of funding a bot to generate it.

I think the issue is more complex than that however.

The heart of the issue is generating peoples interest in trading which cannot be done without stimulating the perception that there are gains to be made. I don't think subsidizing traders to trade (i.e. the stimulus) is a sustainable approach to creating a liquid market. Is it useful to jump start a market the way your starter motor starts the engine in your car?

This is where an economist's perspective would be enlightening.

Bots were already mentioned too, but it seems it can't be done with the current API.

If this is indeed true it is a MAJOR oversight on the part of CNX. Seems hard to believe they would have left out the essential API elements that allow MM bots to function. Perhaps it's a matter of the API being difficult to use / learn? THAT wouldn't surprise me in the least. Either way, it falls on the shoulders of CNX to resolve.

[dannotestein]

BlockTrades is planning to add a market-maker soon to help jump-start some of the markets. Unfortunately, like all coding, this takes time (and we have to be especially careful when money is involved in what the software does). I'd guess we'll have a market maker up and running in about a week or so.

[Akado]

I am not an expert or even very knowledgeable about derivatives but this is something that seems like an obvious problem with an obvious solution, that is if liquidity were only a matter of funding a bot to generate it.

I think the issue is more complex than that however.

The heart of the issue is generating peoples interest in trading which cannot be done without stimulating the perception that there are gains to be made. I don't think subsidizing traders to trade (i.e. the stimulus) is a sustainable approach to creating a liquid market. Is it useful to jump start a market the way your starter motor starts the engine in your car?

This is where an economist's perspective would be enlightening.

Bots were already mentioned too, but it seems it can't be done with the current API.

[Thom]

I am not an expert or even very knowledgeable about derivatives but this is something that seems like an obvious problem with an obvious solution, that is if liquidity were only a matter of funding a bot to generate it.

I think the issue is more complex than that however.

The heart of the issue is generating peoples interest in trading which cannot be done without stimulating the perception that there are gains to be made. I don't think subsidizing traders to trade (i.e. the stimulus) is a sustainable approach to creating a liquid market. Is it useful to jump start a market the way your starter motor starts the engine in your car?

This is where an economist's perspective would be enlightening.

[Akado]

I leave town for one day and you all let the bottom fall out.   

If there is a market need for what BitShares solves then BTS has a future.  If there isn't a market need then it will remain small serving a niche.  The need for BTS is in times of crisis where decentralized exchanges are needed because all of the centralized exchanges fall down.

NBT has 600 BTC volume on Polo. Clearly there is a need, but somehow BTS is not the chosen one. I've been repeating the same thing for 2 years now. Unless there is liquidity and commitment from the stakeholders to provide such liquidity for BitUSD to track USD as closely as possible, BTS won't take off. Why can't we dedicate printed BTS to go to that, instead of delegates? i.e. have the blockchain provide some liquidity. This is the only reason NBT works and people trust it. Because it's always way less than 1% fluctuation from USD.

We can all agree there is lack of liquidity. We need it to get things rolling. Chicken and egg problem. Why not having the blockchain act as a liquidity provider using the reserve fund for this? Everyone could vote on the amount that would be used from the reserve pool so it shouldn't be a problem. We have liquidity, we dont need the whole 500M shares, people can pick a lower number. What's keeping us from doing this?

Would anyone care to share pros and cons?