Author Topic: Introduction to BitShares - Video  (Read 24662 times)

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Offline bytemaster

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. 


Why will the value of bitusd in terms of bitshares rise rather than go down when someone comes to redeem a note and is unable to sell it on the market directly?

Will the Bitshares system freeze 2 usd value of BTS as collateral or 2 bitusd value of BTS as collateral when i borrow 1 bitusd from the system?

Yes the collateral is frozen, and if the price rises in terms of BTS then a margin call is executed and forces the liquidation of the collateral to buy your BitUSD back.
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Offline dddddre

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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. 


Why will the value of bitusd in terms of bitshares rise rather than go down when someone comes to redeem a note and is unable to sell it on the market directly?

Will the Bitshares system freeze 2 usd value of BTS as collateral or 2 bitusd value of BTS as collateral when i borrow 1 bitusd from the system?
pts:PZHNXHZaytYUfoYtHqDWV2TgaB2bwxSJDx

Offline yellowecho

I should generate a chain of shares in "pariah99's pity/beer fund" and hope for the best... speaking of which, I have to go to a bar now :D

Sure glad I have PTS and AGS so I can get 20% of that action!
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Offline pariah99

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Okay, I guess we're splitting hairs here, but tracking would imply that somebody would value it relative to the other assets on the market.  I understand you could theoretically generate a chain for ANYTHING, but I'd wager that unobtainium's value in BTS-X would remain precisely zero (unless you were referring to the cryptocurrency)

That's an interesting experiment.  I should generate a chain of shares in "pariah99's pity/beer fund" and hope for the best... speaking of which, I have to go to a bar now :D

Offline bytemaster

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.

I'm sure that they will be very specific, since the creators of the chain will have to create some mechanism by which shareholders can redeem their shares for physical assets.  In the case of perfectly fungible assets like stocks and currency, the specificity will already be built in.

e;fb

No, creators of the chain do not have to create any kind of redemption because a BitAsset could track Unobtainum just fine:
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Offline pariah99

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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.

I'm sure that they will be very specific, since the creators of the chain will have to create some mechanism by which shareholders can redeem their shares for physical assets.  In the case of perfectly fungible assets like stocks and currency, the specificity will already be built in.

e;fb

Offline bytemaster

The unit and seed 'idea' behind each asset is in the hands of the individuals who create and launch a chain.  I highly recommend they be a specific as possible so the market can operate as efficiently as possible.
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Offline Markus

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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?

Offline pariah99

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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 vikram

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 santaclause102

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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 bytemaster

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.

For the latest updates checkout my blog: http://bytemaster.bitshares.org
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Offline santaclause102

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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 toast

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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 Yui Xie

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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?