Author Topic: Bitmeat's proposal deserves consideration; Providing liquidity to Bitassets  (Read 3011 times)

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Offline bitmeat

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Isn't that how supply gets destroyed in the case of USD? When a loan gets paid off with the interest? I'm not claiming anything, I said as far as I know. Can you point me to detailed explanation of how supply gets destroyed in a central bank? In any case I don't see it as an argument against the proposal.

The central banks sells Treasuries to the banks, effectively taking the money received out of circulation.

Right and that's the loan repayment I was talking about. But how often does it happen? And they can't force it, if no one wants to buy treasuries.

Offline jsidhu

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Isn't that how supply gets destroyed in the case of USD? When a loan gets paid off with the interest? I'm not claiming anything, I said as far as I know. Can you point me to detailed explanation of how supply gets destroyed in a central bank? In any case I don't see it as an argument against the proposal.

The central banks sells Treasuries to the banks, effectively taking the money received out of circulation.
I always wondered about this. Where will the money come from when those bondd expire? They buy some more bonds to expand?
« Last Edit: October 19, 2014, 02:45:50 am by jsidhu »
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zerosum

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Isn't that how supply gets destroyed in the case of USD? When a loan gets paid off with the interest? I'm not claiming anything, I said as far as I know. Can you point me to detailed explanation of how supply gets destroyed in a central bank? In any case I don't see it as an argument against the proposal.

The central banks sells Treasuries to the banks, effectively taking the money received out of circulation.

Offline bitmeat

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Isn't that how supply gets destroyed in the case of USD? When a loan gets paid off with the interest? I'm not claiming anything, I said as far as I know. Can you point me to detailed explanation of how supply gets destroyed in a central bank? In any case I don't see it as an argument against the proposal.

zerosum

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Bitmeat's proposal is buried in two threads and I think it deserves more attention. Nubit's only advantage at the moment is that it has higher liquidity, and his proposal seems to solve that.. at least it provides liquidity on the decentralized exchange.

Would there be a way to make the spreads wide enough in his proposal and not dilute BTSX... that way market makers could provide liquidity on centralized exchanges then sell on the decentralized exchange at a slight profit? This would somewhat model Nubit's liquidity model of market makers on centralized exchanges, and there one and only benefit would go bye bye. ;)

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

Can you give me a link to your proposal?

I don't have a whitepaper, if that's what you are asking for, but the idea is very simple. Bytemaster actually liked the idea for its simplicity. Some interesting issues were brought, but I think you can have the blockchain adjust the spread such that it is always profitable (i.e. avoid diluting stakeholders):

Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.

If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.   

However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.

Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.

That said I really like the idea for its simplicity and clarity.   It would not have been possible prior to DPOS, but now is potentially viable.

But they could make the market maker algorithm adjust the spread such that it is always profitable for all shareholders. i.e. - never exceed the initial supply of BTSX.

In effect the DAC would operate like a true bank. I want to see that done just to prove my point, even if it is a hard fork of BTSX into a BTSY :)

It works for the government so why not the blockchain?
Just don't mess up Bitshares X with it. Save it for Bitshares Y and do it a year from now.

As far as I know the government only creates doesn't really destroy supply, other than through expected interest to be paid.

You'd better check that before claiming it... cause it is not true.

Offline bitmeat

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Bitmeat's proposal is buried in two threads and I think it deserves more attention. Nubit's only advantage at the moment is that it has higher liquidity, and his proposal seems to solve that.. at least it provides liquidity on the decentralized exchange.

Would there be a way to make the spreads wide enough in his proposal and not dilute BTSX... that way market makers could provide liquidity on centralized exchanges then sell on the decentralized exchange at a slight profit? This would somewhat model Nubit's liquidity model of market makers on centralized exchanges, and there one and only benefit would go bye bye. ;)

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

Can you give me a link to your proposal?

I don't have a whitepaper, if that's what you are asking for, but the idea is very simple. Bytemaster actually liked the idea for its simplicity. Some interesting issues were brought, but I think you can have the blockchain adjust the spread such that it is always profitable (i.e. avoid diluting stakeholders):

Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.

If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.   

However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.

Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.

That said I really like the idea for its simplicity and clarity.   It would not have been possible prior to DPOS, but now is potentially viable.

But they could make the market maker algorithm adjust the spread such that it is always profitable for all shareholders. i.e. - never exceed the initial supply of BTSX.

In effect the DAC would operate like a true bank. I want to see that done just to prove my point, even if it is a hard fork of BTSX into a BTSY :)

It works for the government so why not the blockchain?
Just don't mess up Bitshares X with it. Save it for Bitshares Y and do it a year from now.

As far as I know the government only creates doesn't really destroy supply, other than through expected interest to be paid.

Offline luckybit

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Bitmeat's proposal is buried in two threads and I think it deserves more attention. Nubit's only advantage at the moment is that it has higher liquidity, and his proposal seems to solve that.. at least it provides liquidity on the decentralized exchange.

Would there be a way to make the spreads wide enough in his proposal and not dilute BTSX... that way market makers could provide liquidity on centralized exchanges then sell on the decentralized exchange at a slight profit? This would somewhat model Nubit's liquidity model of market makers on centralized exchanges, and there one and only benefit would go bye bye. ;)

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

Can you give me a link to your proposal?

I don't have a whitepaper, if that's what you are asking for, but the idea is very simple. Bytemaster actually liked the idea for its simplicity. Some interesting issues were brought, but I think you can have the blockchain adjust the spread such that it is always profitable (i.e. avoid diluting stakeholders):

Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.

If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.   

However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.

Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.

That said I really like the idea for its simplicity and clarity.   It would not have been possible prior to DPOS, but now is potentially viable.

But they could make the market maker algorithm adjust the spread such that it is always profitable for all shareholders. i.e. - never exceed the initial supply of BTSX.

In effect the DAC would operate like a true bank. I want to see that done just to prove my point, even if it is a hard fork of BTSX into a BTSY :)

It works for the government so why not the blockchain?
Just don't mess up Bitshares X with it. Save it for Bitshares Y and do it a year from now.
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Offline CoinHoarder

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I don't think "fake" liquidity will help much. Plus I think the best thing for the future rise in the price of BTSX is the ability to create the assets through collateralized shorting.

Maybe your second point is OK, but I think "fake" volume is better than low or no volume.
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Ggozzo

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I don't think "fake" liquidity will help much. Plus I think the best thing for the future rise in the price of BTSX is the ability to create the assets through collateralized shorting.

Offline CoinHoarder

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Well I think it's good to have competing solutions. I don't want to go against BTSX, but am really curious to see how this solution would play out.

That said - I can see it as a fork of BTSX, and if it works better, then it will be the new BTSX (or BTSY or whatever it's called).

I don't get why no one seems to be the least bit interested in it. The volume and liquidity are two of the weaknesses Bitassets have as they exist today. If this has the potential to solve those weaknesses, then it should be considered. If we can increase liquidity then we will likely see increased volume. The added market fees, volume, and adoption this has the potential to bring could possibly make up for the slight dilution (if that is what BM means by "eating shareholders lunch").

Sure, it would work completely different from the way Bitassets work today, but is that necessarily a bad thing? The pros and the cons need be laid out in an easy to understand fashion so everyone can make an informed decision on the proposal and so far the cons are not really that clear. Some of the economics and technical stuff are a bit over my head, this being one of those cases, and I need it explained in plain English to make an informed decision... and I know I am not alone.
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Offline bitmeat

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Well I think it's good to have competing solutions. I don't want to go against BTSX, but am really curious to see how this solution would play out.

That said - I can see it as a fork of BTSX, and if it works better, then it will be the new BTSX (or BTSY or whatever it's called).

Offline CoinHoarder

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The issue is one of risk... having the DAC buy and sell on the price feed would have arb traders eating the BTSX holders lunch.

Is that necessarily a bad thing? They way I look at it if people can profit off of that, then possibly we could get "market makers" of our own on centralized exchanges just like Nubits. Providing much better liquidity for end users, and perhaps more adoption for the use of bitUSD. What specifically do mean as to eat BTSX holders lunch, what would be the end result? BTSX dilution.. Orr? Just so I can understand it better..

This is the only thing Nubits can say that it's better than us at, I want to see the liquidity problem solved so they can't say that anymore. This is the only solution I've seen thus far that can possibly solve that without simply waiting for adoption to happen.
« Last Edit: October 18, 2014, 02:55:22 pm by CoinHoarder »
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Offline bitmeat

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The issue is one of risk... having the DAC buy and sell on the price feed would have arb traders eating the BTSX holders lunch.

That's an opinion based on what? The blockchain will aim to always be profitable, so value of BTSX would only go higher due to reduced supply. Spread will be adjusted such that BTSX is never diluted from original supply.

Offline bitmeat

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The blockchain would have a spread to allow a free market to flow inside it. Also I would publish price on every block, there is no reason not to. So the argument that a whale could take the market is not exactly a problem. Unless they can control the exchanges too. But ultimately would be a risk for them. Moreover they would actually NOT move the market if they dump a huge amount, since the blockchain would absorb it. Later if they want to undo their move, they will have to reenter at a loss. So it is really useful for what people want to use it for - ability to hedge and know they could convert when needed no matter how big the amount is. I would still like to see this model implemented side by side.

Offline bytemaster

The issue is one of risk... having the DAC buy and sell on the price feed would have arb traders eating the BTSX holders lunch. 
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