Author Topic: BitShares - Decentralized Autonomous Bank & Exchange  (Read 16430 times)

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Offline hasher

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Could the BTS being considered as "analog" to TARGET2-Securities
Or they simply in different weight categories /have different purpose?

http://en.wikipedia.org/wiki/TARGET2
http://en.wikipedia.org/wiki/TARGET2_Securities
PS Target is clearing system, centralised Ripple
Q is closed )
« Last Edit: June 03, 2014, 04:16:48 pm by hasher »

Offline tonyk

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bytemaster, It is all well and good, as long as the people willing to take the extra risk of going short for the extra profit (*1), as opposed to simply staying long BTS X, will equal the demand for bitUSD by people preferring bitUSD to USD. It might be the case, but if one envision huge interest in bitUSD this might not be true at all.
In other words relying on enough risk tolerant players to essentially ‘print’ all the bitUSD needed/required by everyone seeing the benefit of using bitUSD (instead of USD) is something I am not totally comfortable with…

*1 It is pretty straightforward but someone buying a BTSX at @ $100/BTSX will profit $100 if the price goes up to $200/BTSX and $200 if buys at the same price and shorts bitUSD (assuming 2x margin and USD~~bitUSD). Going short unfortunately proportionally increase the loses in case of unfavorable price movement.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline bytemaster

There is no limit on bitusd supply.   Demand for bitusd will drive it to rise in value above paper usd. People will the make money shorting it. 

Demand for bitusd will drive up the values of bts.


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sumantso

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The benefits of the existence of such transaction can be possibly huge! – I would venture to say it makes possible the bitUSD to become the de facto crypto dollar of the world. AS it stands now bitshare x(t) will be ,if successful, great prediction market. But if bitUSD is to be crypto USD replacement in all possible transaction, the demand for bitUSD will simply could not be met by only the parties speculating that the price of bitUSD will go down (i.e. people taking short positions). And while I am not saying this will make the price move/ be distorted, the demand for bitUSDs for ‘everyday use’ will very likely not be met. In other words there will not be enough bitUSD to facilitate its use as crypto USD (USD crypto replacement)

I was actually wondering how we can make BitUSD act as the Crypto USD since there wouldn't be enough. If the price tracks closely with the real USD and is used by a lot of payment processors etc, benefits of using BitUSD is obvious.

Your suggestion sounds like a good one. Waiting to see Bytemaster's response on this.

Offline tonyk

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While I have no official proof that my actions/posts have led to/contributed to the outcome, I am more than happy to see  2 features/changes that I argued for, now being on their way to be seriously considered/or being implemented.  Those 2 being - dropping the idea of 10x margin and - setting a cap on price movement (in the 1% range)…
See here: http://107.170.30.182/banking/ under ‘Market Security’ and ‘Trading Halt Conditions’ respectively.

What I argue for in this post is – before the ‘bitshares toolkit’ is finalized, an addition to the basic functionality to be made -namely to be added a possibility (reserved function with no implementation if you want) for claim by market bid – as well as adding such transactions as one of the deterministic transactions.
What will the ‘market bid’/ ‘market buy order’ do:
-It will allow the party placing such bid to buy a bitAsset at the last established market price, from ‘the market’ i.e. with no physical counter-party for the transaction. It will result in a long position in the bitAsset and destruction of the appropriate amount of BTS X/bips. (I foresee certain conditions to have to be met – like the market price to be established with certain minimum market depth, imposing additional transaction fee, in probably the 1% range, for such transactions)

The benefits of the existence of such transaction can be possibly huge! – I would venture to say it makes possible the bitUSD to become the de facto crypto dollar of the world. AS it stands now bitshare x(t) will be ,if successful, great prediction market. But if bitUSD is to be crypto USD replacement in all possible transaction, the demand for bitUSD will simply could not be met by only the parties speculating that the price of bitUSD will go down (i.e. people taking short positions). And while I am not saying this will make the price move/ be distorted, the demand for bitUSDs for ‘everyday use’ will very likely not be met. In other words there will not be enough bitUSD to facilitate its use as crypto USD (USD crypto replacement)

P.S. If the above stated goal is not in the plans for bitUSD, and you are happy as limiting bitUSD to its prediction role only, while truly unhappy to hear that, please disregard this post of mine.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Empirical1

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I don't know what exactly it is


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BitShares is a revolutionary new bank and exchange that could rival the value of the largest banks in the world such as JP Morgan and Bank of America in just a few years. How could this new upstart grow so quickly?  BitShares offers a bank account that earns 5% interest where funds can be transferred in minutes anywhere in the world with more privacy and security than a Swiss bank account.  Your account can never be frozen, your funds cannot be seized, and the bank can never face collapse due to loan defaults or fraud.  All of this is made possible without requiring any employees, lawyers, regulatory compliance, vaults, buildings, and other infrastructure required by traditional banks.  Unlike existing banks, you can hold your balance denominated in gold, silver, oil, or other commodities in additional to national currencies while earning 5% interest. 

In addition to acting as a bank, BitShares also serves as an exchange where currencies, commodities, and stock derivatives can be traded with most of the features used by professional traders including shorts and options.   The Bank takes a cut on every transaction and pays 100% of these transaction fees as dividends to the shareholders.  BitShares can achieve this feat using the same technology that makes Bitcoin possible, irrevocable decentralized automated consensus forming.     

For a quick comparison of BitShares to Bitcoin you can view Bitcoin as stock in a company that earns no profits, pays 100% of its revenue to security guards, and then debases shareholders by 12% per year to fund security.  Despite the inefficiencies and costs, Bitcoin has grown to be worth over $12 billion dollars in less than 5 years.   How much more valuable would Bitcoin be if it could turn a profit while offering far more powerful services?    The value of owning shares in this new Bank will exceed two times the value of all balances of in gold, silver, oil, and currency accounts.  If the largest banks can achieve deposits of over $1 trillion dollars with no meaningful interest, how many deposits could BitShares attract and what would that mean for the value of the bank?

 +5%

That is some great stuff! I imagine you guys are doing a Bitshares X video to explain how it works.
I would also consider doing a Bitshares X advert, where the advert includes pretty much exactly what you've written there! Even just the first paragraph, if that first paragraph was a short advert we could send to friends, colleagues with a click-through at the end 'want to learn more' I think that would spread quickly!

Offline etherbroker

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Recent attacks have shown that 10x collateral requirement may be too much... so assume it is down to 3x which means that you can go short using 50% of your collateral.   You still earn dividends from transaction fees with your collateral.  So this means you get a solid yield and can leverage it up to some extent but not to the point of causing too much risk.

 +5%
wow this will be so attractive to the market

honestly this thing could go institutional

Offline bytemaster

You could make much more than 5%, but only only on 1/10th of your capital.

But if its true that your collateral will earn 5% because you are lending into the system, then I see that there is a strong incentive for financial speculators to use BitX.

Is that correct?  Or when collateral is pledged to a short position, it no longer earns the 5%?

Further, is there any problem with using this collateral to go long other bitassets because credit has not really left the system, it will just make a lot more work for the developers

:)

Recent attacks have shown that 10x collateral requirement may be too much... so assume it is down to 3x which means that you can go short using 50% of your collateral.   You still earn dividends from transaction fees with your collateral.  So this means you get a solid yield and can leverage it up to some extent but not to the point of causing too much risk.
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Offline etherbroker

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You could make much more than 5%, but only only on 1/10th of your capital.

But if its true that your collateral will earn 5% because you are lending into the system, then I see that there is a strong incentive for financial speculators to use BitX.

Is that correct?  Or when collateral is pledged to a short position, it no longer earns the 5%?

Further, is there any problem with using this collateral to go long other bitassets because credit has not really left the system, it will just make a lot more work for the developers

:)

Offline bytemaster

Ahh I see so shorts should still be attracted BitX because they will be earning 5% on their reserves,

So instead of borrowing money.. shorts BECOME lenders,

and that entails the benefits of doing so..

Is that correct?

EDIT:  Is there a way a short's collateral could still be attached (long) to other bitassets (the collateral would still be in BTS afterall)

Obviously this would get complicated, I am just wondering if its a future possibility.

Eventually you will be able to go short / long anything.   Shorts are lenders, they earn a percentage equal to the amount something falls in price.  Could be much more than 5%. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline etherbroker

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Ahh I see so shorts should still be attracted BitX because they will be earning 5% on their reserves,

So instead of borrowing money.. shorts BECOME lenders,

and that entails the benefits of doing so..

Is that correct?

EDIT:  Is there a way a short's collateral could still be attached (long) to other bitassets (the collateral would still be in BTS afterall)

Obviously this would get complicated, I am just wondering if its a future possibility.
« Last Edit: March 22, 2014, 06:09:59 pm by etherbroker »

Offline bytemaster

I was wondering that now that we know that shorts will be required to have 10x leverage,

is there any problem with creating bitassets as shorting a small portion of your capital may not be totally attractive,

compared to a traditional stockbroker, who will actually give you money to short stocks..

They don't give you money... they lend you money.   Lending money is backed by their ability to seize your your house, car, and garnish your paycheck.   A DAC cannot do those things.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline etherbroker

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I was wondering that now that we know that shorts will be required to have 10x leverage,

is there any problem with creating bitassets as shorting a small portion of your capital may not be totally attractive,

compared to a traditional stockbroker, who will actually give you money to short stocks..

Offline toast

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Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline hellyeahent

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Hi could you clarify some thing for me, please ?

1. " Someone wishing to borrow $100 dollars from the BitShares DAC must find $200 worth of equity (bitshares) to back the loan " - if I have 100 PTS worth now 7$ I can borrow 350$ from you for free ? If yes and I understand well you just hold 100PTS as insurance, but

a ) what if 1 PTS goes lower than 3,5$ and I don't want them back ? you lose money (?)
b) Where do you get 350$ from ? (if u just hold mine 100 PTS)

2. How this "bank" going to earn money ? And for now PTS are worth 11 000 000 so you need at least 22 000 000 USD ???
a) "BitShares offers a bank account that earns 5% interest" - daily/monthly those interests ?

3. How to buy a share (became shareholder). Is PTS this ? Or something new ? (I can't find, sorry)
a) How many shares will be issued (not sure if used good word :) ) and that amount is final ?


If you think I should read someting (FAQ would nice) link me please.

Offline bytemaster

  The new chains are likely to honor PTS and AGS similar to 1.0, but we want to keep things flexible.

Good to hear :)
So, if one, with say 200pts and 200ags at the time of the release of bts 1.0, does nothing to increase his holdings of pts or ags, his share in the the following bts chains and subsequent DACs will decrease.

Each chain will trade different asset classes and may incorporate lessons learned from 1.0.

then probably u can name them differently rather than just btc1 bts2 etc...btw, cant 1 single btc chain handle all asset classes? I am not following msc but isnt it that they have only 1 platform for all ?

MSC has not fully appreciated the scalability issues they will have.   And of course we will name each chain something distinctive and not rely on version numbers.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
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Offline voldemort628

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  The new chains are likely to honor PTS and AGS similar to 1.0, but we want to keep things flexible.

Good to hear :)
So, if one, with say 200pts and 200ags at the time of the release of bts 1.0, does nothing to increase his holdings of pts or ags, his share in the the following bts chains and subsequent DACs will decrease.

Each chain will trade different asset classes and may incorporate lessons learned from 1.0.

then probably u can name them differently rather than just btc1 bts2 etc...btw, cant 1 single btc chain handle all asset classes? I am not following msc but isnt it that they have only 1 platform for all ?

Offline niclelin

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Offline bytemaster

U said bts 1.0 will be up and running within next year.
So what about bts 2.0, 3.0...? How will they be different from 1.0 ?

Each chain will trade different asset classes and may incorporate lessons learned from 1.0.   The new chains are likely to honor PTS and AGS similar to 1.0, but we want to keep things flexible.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline voldemort628

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U said bts 1.0 will be up and running within next year.
So what about bts 2.0, 3.0...? How will they be different from 1.0 ?

Offline bytemaster

I don't know what exactly it is


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BitShares is a revolutionary new bank and exchange that could rival the value of the largest banks in the world such as JP Morgan and Bank of America in just a few years. How could this new upstart grow so quickly?  BitShares offers a bank account that earns 5% interest where funds can be transferred in minutes anywhere in the world with more privacy and security than a Swiss bank account.  Your account can never be frozen, your funds cannot be seized, and the bank can never face collapse due to loan defaults or fraud.  All of this is made possible without requiring any employees, lawyers, regulatory compliance, vaults, buildings, and other infrastructure required by traditional banks.  Unlike existing banks, you can hold your balance denominated in gold, silver, oil, or other commodities in additional to national currencies while earning 5% interest. 

In addition to acting as a bank, BitShares also serves as an exchange where currencies, commodities, and stock derivatives can be traded with most of the features used by professional traders including shorts and options.   The Bank takes a cut on every transaction and pays 100% of these transaction fees as dividends to the shareholders.  BitShares can achieve this feat using the same technology that makes Bitcoin possible, irrevocable decentralized automated consensus forming.     

For a quick comparison of BitShares to Bitcoin you can view Bitcoin as stock in a company that earns no profits, pays 100% of its revenue to security guards, and then debases shareholders by 12% per year to fund security.  Despite the inefficiencies and costs, Bitcoin has grown to be worth over $12 billion dollars in less than 5 years.   How much more valuable would Bitcoin be if it could turn a profit while offering far more powerful services?    The value of owning shares in this new Bank will exceed two times the value of all balances of in gold, silver, oil, and currency accounts.  If the largest banks can achieve deposits of over $1 trillion dollars with no meaningful interest, how many deposits could BitShares attract and what would that mean for the value of the bank?
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline niclelin

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I don't know what exactly it is


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Offline boshen1011

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http://news.goldseek.com/GoldSeek/1387807320.php

(1913-2013) One Hundred Years of Darkness Ends: Bitcoin Breaks the Ban


Offline boshen1011

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http://themisescircle.org/blog/2013/12/15/the-bitcoin-central-banks-perfect-monetary-policy/

The Bitcoin Central Bank’s Perfect Monetary Policy
THE BITCOIN CENTRAL BANK’S PERFECT MONETARY POLICY

by Pierre · in Article, Bitcoin, Capital & Interest, Money & Banking, The Business Cycle
The following post provides an analytical framework so that critics and proponents of Bitcoin’s monetary policy can engage in a constructive debate.

Bitcoin has a central bank called the “Bitcoin network,” which we will refer to as the Bitcoin Central Bank (BCB). This central bank issues a currency called “bitcoins” and processes the transfer of bitcoins between accounts. The BCB’s rule-based monetary policy was set at its creation and its independence is secured by the distributed nature of the underlying network. This non-discretionary monetary policy can best be described as asymptotic money supply targeting (AMST).

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Offline hasher

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i wonder how and where people should store large amount of fiat money to receive bitassets in a system, in Banks like MtGox do?

No one needs to store USD in banks to receive BitAssets.   In fact, the system works even if no one ever trades BitUSD for USD or BitShares for USD.
hmm thats interesting, i should check bitshares white paper more closely ::)

Offline bytemaster

i wonder how and where people should store large amount of fiat money to receive bitassets in a system, in Banks like MtGox do?

No one needs to store USD in banks to receive BitAssets.   In fact, the system works even if no one ever trades BitUSD for USD or BitShares for USD. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline hasher

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i wonder how and where people should store large amount of fiat money to receive bitassets in a system, in Banks like MtGox do?

Offline bytemaster

BitShares as a Decentralized Autonomous Bank
by Daniel Larimer, CEO, Invictus Innovations Incorporated
http://invictus-innovations.com/bitshares-as-dac-bank

Stan and I were discussing BitShares one evening and I was trying to describe how BitShares is different from an altcoin.   I used an analogy that described bitshares as a crypto-equity in a decentralized bank and exchange called BitShares.  The shareholders of the bank are those who own bitshares.   I then went on to explain how this decentralized bank can lend dollars into existence just like their centralized counterparts.   I will review this analogy here for the benefit of others who would like to engineer their own Distributed Autonomous Corporations (DACs).



All banks these days operate on what I like to call a fictional reserve basis.  When you approach the bank for a loan to buy a house, the bank creates new dollars from thin air backed by your collateralized promise to pay back the loan.  In this case, your house is the collateral and the bank may call your loan and foreclose if you stop making the required payments or if the value of the house falls too much.   When you pay off your loan the dollars are destroyed and the bank keeps the interest payments and the lean is removed from your house.   The key thing to remember here is that these dollars are nothing more than an IOU from the bank.   People trust the value of the IOUs because they trust the bank to honor their promise to pay a dollars worth of value.

Lets step back one step further and consider that a dollar use to be defined as  412.5 grains of 99.9% pure silver.   When you received a bank note it was a promise to pay  one dollar worth of gold and the law defined the fixed ratio of gold to silver required to give the bank note a tie to the real world.

As you can see the promise to pay is denominated in dollars which are defined as a weight in silver, and yet what is paid out upon redemption is gold.   This example demonstrates that a dollar is just an arbitrary label assigned to a certain amount of value.  Just like you could have a dollar of silver or a dollar of gold, you could also have a dollar of corn, a dollar of oil, or a dollar of anything including a dollar of bitcoin!   When the United States left the gold standard entirely the dollar began to float against all other goods and services and now has value for its own sake even though it is no longer price-fixed against gold or silver.  The dollar is nothing more than an arbitrary measure of value and is still redeemable for $1 worth of silver at the current market price (not the price fixed 412.5 grains of silver).

Lets go back to the world of DACs and consider how a decentralized bank can lend dollars into existence just like their centralized counterparts.   First the bank must identify someone who would like to borrow dollars as it is the collateral behind the borrowers promise to repay that backs the value of the dollars.    Just like real banks,  BitShares requires collateral for the loan and the only collateral BitShares has the ability to foreclose upon is its own equity.    When you borrow money for a house the bank usually requires at least 20% down to protect the bank in the event your house loses value.   In the case of the BitShares DAC the bank requires a 50% downpayment.
Someone wishing to borrow $100 dollars from the BitShares DAC must find $200 worth of equity (bitshares) to back the loan.  Lets assume they have mined $200 worth of equity, they can mortgage this equity and receive 100 BitUSD in exchange for a lean on their equity that can only be cleared by paying back 100 BitUSD.   

BitUSD is the equivalent of the old bank notes that promised to pay $1 worth of value on demand.  In the case of the old bank notes, this value was denominated in gold or silver.  In the case of the BitShares DAC this value is $1 worth of equity, aka bitshares.   The BitShares DAC can almost always make good on this promise because when someone comes to redeem a note and is unable to sell it on the market directly the value of the BitUSD in terms of bitshares will rise until the decentralized bank has the authority to call a loan and repurchase the BitUSD. 

Most people understand why someone would borrow money to buy a house, but why would someone mortgage their BitShares for BitUSD?   The reason someone would borrow BitUSD is so they could sell it and take what is called a short position.  A short position is a speculative bet that BitUSD will go down in value relative to bitshares.  If the value does go down then the speculator can repurchase the BitUSD for fewer bitshares in the future and then pay off the loan while pocketing a nice profit.  This is how speculators on Wall Street make money when stocks go down: they borrow the stock, sell it for $100, and then repurchase it later for $50 and return the stock while making a $50 profit.

Dividends & Interest Payments
All banks attempt to operate for a profit and therefore charge interest on loans along with transaction fees and inactivity fees.  The bank profits are the distributed to the shareholders as dividends.  In the case of the BitShares DAC there are also transaction fees, inactivity fees, and margin-call fees and the profits that result from charging these fees are paid to the shareholders.

When someone wishes to borrow BitUSD from the bank they do not get to borrow this money interest-free.  Instead they pay interest equal to the dividends they would have received on their collateral.    Anyone holding a bank note is effectively lending value to the bank by not redeeming it and anyone holding a balance at a bank is traditionally paid interest.  Likewise, those who hold BitUSD are effectively lending the value of a dollar to the decentralized bank by not redeeming it.  In exchange for lending this dollar the bank pays them interest.  In the case of the BitShares DAC the bank does not take a cut of the spread between the interest paid by the borrower and interest paid to the lender.

It is through this explanation of BitShares that the concept of a DAC was born and a new take on the nature of Bitcoin as a decentralized autonomous corporation rather than just a crypto-currency came to be.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.