Author Topic: Introduction to BitShares - Video  (Read 13882 times)

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Offline santaclause102

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Re: Introduction to BitShares - Video
« Reply #30 on: January 21, 2014, 09:46:54 pm »
Why would it be an advantage to have terminal dates?

Because at that point some party has to deliver a real asset.  The market must converge to a true price since a physical commodity is changing hands.

Are you sure you are getting oil or gold when you are betting on it with a centralized system? :)

I think changing physical things is not necessary and not done in existing betting markets. But what they have is an index that represents the market where the real physical assets are exchanged. 

Correct me if I am wrong: In a system without an index given by a central authority you rely on everyone's assumption that everyone will follow the price of the underlying asset (must be precisely defined) so that it makes sense to bet on where the asset's price will be in the near future. Near future here is defined for short positions as up to the point where their asset looses 50% and for long positions there is no termination (I dont see a problem in the latter).
There are two assumptions/implications for this to work:
(1) The asset is exactly defined (for example 1 barrel of WTI brand; or whatever is traded physically).
(2) It is habitual behavior where the shared understanding to follow the price of the underlying asset is reinforced the more people do it. And you win when you predict the future price that deviates from the current price right as long as no short squeeze takes place (when you are short and your asset looses 50%) -> What is therefore needed or at least helpful is reputation which creates mass / herd behavior. If a big bank puts out such a system the mass would easily rely on that everyone is following the underlying asset price

*I used the word "underlying asset price" as the price that is actually paid for a good when it is physically exchanged.
« Last Edit: January 21, 2014, 10:25:14 pm by delulo »

Offline Yui Xie

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Re: Introduction to BitShares - Video
« Reply #31 on: January 21, 2014, 11:38:00 pm »
I can't get my mind around the notion that a prediction market will converge to a correct value if there is no causal link to the delivery of a real commodity at some point in the equation.  Without it, it just looks like a collective herd mentality.  This sure seems like a system that could be manipulated, as indicated in earlier posts by Winslow Strong and by others in different threads.

I'm not saying it won't work, I'm just skeptical.  My skepticism would be greatly diminished if someone could point me (us) to an example of where this has worked successfully in the past.  It would be easy enough to implement in a centralized exchange, there's nothing special about it being decentralized in the BitShares model.  And no, I will not accept that successively opening and closing positions in the futures market is the same thing.  I need an example of a predictive market that is non-terminating with no deliverables.  If you insist that this is just an extrapolation of the futures market, we'll just have to agree to disagree.

Offline bytemaster

Re: Introduction to BitShares - Video
« Reply #32 on: January 21, 2014, 11:55:27 pm »
I can't get my mind around the notion that a prediction market will converge to a correct value if there is no causal link to the delivery of a real commodity at some point in the equation.  Without it, it just looks like a collective herd mentality.  This sure seems like a system that could be manipulated, as indicated in earlier posts by Winslow Strong and by others in different threads.

I'm not saying it won't work, I'm just skeptical.  My skepticism would be greatly diminished if someone could point me (us) to an example of where this has worked successfully in the past.  It would be easy enough to implement in a centralized exchange, there's nothing special about it being decentralized in the BitShares model.  And no, I will not accept that successively opening and closing positions in the futures market is the same thing.  I need an example of a predictive market that is non-terminating with no deliverables.  If you insist that this is just an extrapolation of the futures market, we'll just have to agree to disagree.

This price of PTS and AGS is reflective of the markets current assessment of the likely success.  We have no need to convince you, the market will prove it one way or another soon enough.
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Offline Yui Xie

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Re: Introduction to BitShares - Video
« Reply #33 on: February 19, 2014, 02:19:48 pm »
Agreed -- the overwhelming number of futures traders do not take delivery.  But somebody does.  There is a clearly defined settlement date and an actual product changes hands.  If not, there is absolutely no point in having a futures market.  For this reason, Bitshares is NOT the same thing.  It is an extrapolation of the futures market that lets time -> infinity, with no deliverable and no price pegs.  Relaxing these parameters is not trivial.  Since this has never been implemented before on either a de-centralized or centralized exchange, you are making some crucial assumptions about market behavior.  As such, it should be viewed as a risky and still unproven experiment.


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Re: Introduction to BitShares - Video
« Reply #34 on: February 19, 2014, 03:42:04 pm »
If you simply do research on prediction markets you will see why this works. All markets are driven by psychology more than underlying "value" and fundamentals, particularly in the short term. Prediction markets don't require and underlying asset, but their efficacy is not experimental, it is academically proven, which is why you have professors at Princeton attempting to create prediction market using bitcoin. Bitshares X essentially does this on the network and through the block-chain in order to cut out any potential intermediaries. 

Offline Yui Xie

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Re: Introduction to BitShares - Video
« Reply #35 on: February 19, 2014, 04:35:44 pm »
Prediction markets have been around for 50 years and there are plenty of examples that show how effective they can be.  The crucial difference with Bitshares is the lack of a termination or settlement date when the winners and losers are known with certainty.  I (and Winslow Strong earlier in this thread) asked for an example of a successful non-terminating prediction market that had been implemented in the past.  Since there was no satisfactory response (opening and closing positions in a terminating futures market is not valid, in my opinion) I started researching it.  The only thing I could come up with was the simExchange:

http://en.wikipedia.org/wiki/The_simExchange

that used prediction markets for video game sales.  Players used virtual money and the exchange was composed of both terminating (futures) and non-terminating (stocks) trading entities.  Futures trading was shut down in 2010 leaving only the non-terminating component.  The site then fell into disuse (see Current Status in the above link).   

clout

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Re: Introduction to BitShares - Video
« Reply #36 on: February 19, 2014, 05:58:32 pm »
The price within a market represents the current public consensus on the value of a given asset. Does the notion of termination enter into the stock market or for that matter the cryptocurrency markets. The price of these assets are reflective of both fundamental value as well as the prediction of increases or decreases in value. Its the same idea within bitshares. As long as any of the assets from which bitAssets are derived remain in existence there will not be a termination of that market for a given bitAsset, as participants in the market will always be altering and adjusting their positions based on newly formed predictions for the market given changing information pertaining to the market. The notion that markets need to have a termination date is inherently illogical.

You say that "the crucial difference with Bitshares" and prediction markets "is the lack of a termination or settlement date when the winners and losers are know with certainty." The assumption that winners and losers are know with certainty is probably where you are confused. In a fluid market such as the stock market there are not certain winners and losers, as the price on a given day can change direction on following days. The losers on one day can become the winners on another.

Offline Yui Xie

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Re: Introduction to BitShares - Video
« Reply #37 on: February 19, 2014, 07:11:28 pm »
Does the notion of termination enter into the stock market or for that matter the cryptocurrency markets.

Bitshares is not being explained as a de-centralized stock market, FOREX, or crypto-currency exchange, where real assets change hands.  We are being told to think of it as a non-terminating futures market. I (and others) are expressing concerns about the validity of this analogy.  In Bitshares, there is no causal link to a real asset, i.e. there is no method to quickly and efficiently convert a bitAsset into a real asset.  If there was, you'd have problems with centralization and trust, just like at the NYSE, CBOE, and Mt Gox.  Bitshares insists on being completely decentralized, eschewing even an external price feed as is proposed in Mastershares.  In Bitshares, one must have a belief/faith/trust that an appropriately named bitAsset -- with no causal connection to the real asset other than its name -- will track its price via a non-terminating prediction market.

I can't prove that it won't work.  It may.  But the notion that some sort of collective herd behavior will converge to the real-world price strikes me as significant a leap of faith.  The classic prediction market with an agreed settlement time is known to work.  Bitshares is extrapolating this concept by removing the settlement time.  But you don't need decentralization or a blockchain to implement a non-terminating prediction market.  Surely others must have considered this in the last half century.  Why are there no examples of it working elsewhere?

Offline toast

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Re: Introduction to BitShares - Video
« Reply #38 on: February 19, 2014, 07:24:12 pm »
I think it's just that only crypto-equity makes the cut for an asset collateral that can be called arbitrarily far in the future
Technically bitcoin also just provides an information service that could easily be centralized...
What's the best centralized implementation of this? Would you be ok loaning dollars against future stock in JPM on NYSE's ticker? That's two trust points, then you have the jurisdiction it's in and the fact that humans are running it
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Offline santaclause102

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Re: Introduction to BitShares - Video
« Reply #39 on: February 19, 2014, 07:29:16 pm »
The only necessity from my point of view in this respect is that any BitAsset is based on a clearly defined unit of account. You would have to define the exact Oil brand and how much a barell is etc. if you issue BitOil/BitBrentOil to peg the price that is actually traded somewhere physically. My assumption is that anything can be peged that is somewhere and sometimes actually/physically and publicly traded.

Self doubt: What about the fact that you get a different price, in real world physical exchange, if you are a bulk seller/buyer?

Bytemaster sometimes talked about the possibility of betting on the value of an idea. That would make sense to me if the bet is on an exactly defined outcome of the idea (for example betting on the market cap of the next company that is created by person xy who is having the respective idea). Any other way to bet on things without a unit of account like ideas?
« Last Edit: February 19, 2014, 07:41:58 pm by delulo »

Offline bytemaster

Re: Introduction to BitShares - Video
« Reply #40 on: February 19, 2014, 09:10:51 pm »
It doesn't really matter how fuzzy the idea is... the resulting price will be the mean interpretation of the concept.   So if you say BitOil... without specifying a type of Oil it will probably track an average of all types of Oil unless most people come to the consensus that it should track Brent.

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Offline santaclause102

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Re: Introduction to BitShares - Video
« Reply #41 on: February 19, 2014, 09:31:35 pm »
It doesn't really matter how fuzzy the idea is... the resulting price will be the mean interpretation of the concept.   So if you say BitOil... without specifying a type of Oil it will probably track an average of all types of Oil unless most people come to the consensus that it should track Brent.

Ok. So you also suggest that there is no unit of account? For example: BitOil would give a ratio between one barell of oil and 1 bts? 

Offline vikram

Re: Introduction to BitShares - Video
« Reply #42 on: February 20, 2014, 11:23:22 pm »
It doesn't really matter how fuzzy the idea is... the resulting price will be the mean interpretation of the concept.   So if you say BitOil... without specifying a type of Oil it will probably track an average of all types of Oil unless most people come to the consensus that it should track Brent.

Ok. So you also suggest that there is no unit of account? For example: BitOil would give a ratio between one barell of oil and 1 bts?

Curious about this also!

Offline pariah99

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Re: Introduction to BitShares - Video
« Reply #43 on: February 27, 2014, 12:29:09 am »
Under the current paradigm, the dollar (or any currency) serves as an intermediary to determine the relative price of goods.  It's like asking how much gold you could get for a barrel of oil.

Say you want to exchange 1 barrel of oil for a certain amount of gold.   You know how much gold you can get because oil is valued at a certain amount of dollars per barrel, and gold is valued at a certain amount of dollars per ounce.  The dollar doesn't have any inherent value (it used to until we went to a fiat money system) - it just serves as a common denomination.

This might be an oversimplification, but this is how I think about it: Think of BTS-X as a currency like the dollar.  Now think of a dollar as a commodity (just like Oil)

1 BitUSD will be equivalent to a certain amount of BTS-X
1 BitOil will be equivalent to a certain amount of BTS-X
It won't be set in stone to begin with, but by the action of many parties trading both BitUSD to BTS-X and BitOil to BTS-X, there will be an equilbrium reached between BitUSD and BitOil via BTS-X.

If there's a difference between the (PRICE OF OIL) and the (BitUSD to BitOil ratio), that would present an arbitrage gap which traders could take advantage of to make a profit.  Eventually, the gap would close as more trades were made; hence, the price would tend towards the real-world equilibrium.

Edit: This was in response to both delulo and unlimited_power.  I just realized that what they were asking was regarding what the unit of BitOil was, which I'm guessing is in barrels.
« Last Edit: February 27, 2014, 12:32:21 am by pariah99 »

Offline Markus

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Re: Introduction to BitShares - Video
« Reply #44 on: February 27, 2014, 01:47:41 am »
If there's a difference between the (PRICE OF OIL) and the (BitUSD to BitOil ratio), that would present an arbitrage gap which traders could take advantage of to make a profit.  Eventually, the gap would close as more trades were made; hence, the price would tend towards the real-world equilibrium.
If the kind of asset the BitAsset is to track is defined fuzzy ("Oil" instead of "Brent Crude as traded on the IntercontinentalExchange") then arbitrageurs and other market participants can not provide a narrow tracking as they don't always know if it is over- or undervalued. Spreads will widen and the BitAsset market will be less liquid.


Quote
Edit: This was in response to both delulo and unlimited_power.  I just realized that what they were asking was regarding what the unit of BitOil was, which I'm guessing is in barrels.
Of course it will have to be exactly defined how much of the asset one BitAsset equals. I don't think it will be any good to let the market agree on a consensus whether BitOil is one barrel, one tonne or one litre of oil.

Which leads to the question, will BitShares use American (troy ounces, blue barrels, bushels, short tons, US gallons, British thermal units etc.) or International (grammes, kilogrammes, tonnes, cubic metres, joules) units?