Author Topic: Project: BitUSD Liquidity  (Read 9400 times)

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Offline liondani

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JordanLee

This is a great idea that should be evaluated more closely. The most important question is what is the cost of this insurance? Perhaps historical charts of BTC and contract pricing can give us a good idea of that. Once that is understood, we would be in a position to discuss doing this on a pilot basis, which if successful, could expand to being used for all BTC held by Jamie And KTm. Whether LPCs providing their own funds use this type of insurance is really up to them individually. They just need to decide if they wish to speculate on the price of BTC. We should avoid speculation with shareholder funds where practical, however.

Whether such an action requires shareholder approval as an amendment to existing contracts is a grey area. I would say if it doesn't seem to create controversy here in the forum, formal shareholder approval is not needed. Whether it creates controversy will largely depend on the cost of this insurance.

@pennybreaker, if you are interested in taking on the task of assessing the cost of this insurance, I would encourage you to do so and bill for it.

Edit: It would also make sense to consider hedging the BTC that comes from NuShare sales, which currently is about 350 BTC. We need to keep some of the NuShare sale proceeds as BTC so that they can function as tier 4 buy side liquidity, which has been used on several occasions to make raising interest rates unnecessary.

Offline Rune

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With 5% spread it should be easy enough. In the future we could actually run nubot style "BitBots" that can enforce a much tighter peg and be guaranteed to be profitable, using the method the nubitters described here after they realized that they've become insolvent and their peg is doomed: https://discuss.nubits.com/t/possible-solution-to-custodian-loss-of-value-due-to-btc-exposure/1099/3

Increasing spread size helps compensate for losses due to adverse selection, but you can price yourself out of the market like that.

Agree, but right now nubits are offering a 5% spread too so as long as we offer the same it should be competetive.

Offline monsterer

With 5% spread it should be easy enough. In the future we could actually run nubot style "BitBots" that can enforce a much tighter peg and be guaranteed to be profitable, using the method the nubitters described here after they realized that they've become insolvent and their peg is doomed: https://discuss.nubits.com/t/possible-solution-to-custodian-loss-of-value-due-to-btc-exposure/1099/3

Increasing spread size helps compensate for losses due to adverse selection, but you can price yourself out of the market like that.
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Offline Rune

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Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!
Do you have a link to the market maker bot post?

No, I don't think there is any post about it. I gave 5k bitUSD to riverhead to fund his bot with. If you want to help with liquidity but don't want to run the bot yourself you can do the same, he's a trusted community member and won't mess up.

If you want to run the bot yourself then get in touch with toast.

Offline vlight

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Actually hedging their BTC is a viable strategy and if they had used that one from the start things would have looked much better for them. But at this point they are already insolvent and are operating as a fractional reserve that should soon go down in flames.

A bitshares market maker could copy the hedging strategy and make a bot that could be guaranteed to be profitable as long as it operated on a 1-2% spread.

They have to use external services which means increased risk. They have to use high leverage, which adds to the overall risk even more. High leverage is bad. Just look what swiss central bank did to largest forex brokers and their clients. imho

Offline Rune

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https://bitcointalk.org/index.php?topic=926934.0 :)

lololol, they want to use 10x leverage..... hahaha this is game over ... that disqualifies Nubits as a competition to BitUSD.

Actually hedging their BTC is a viable strategy and if they had used that one from the start things would have looked much better for them. But at this point they are already insolvent and are operating as a fractional reserve that should soon go down in flames.

A bitshares market maker could copy the hedging strategy and make a bot that could be guaranteed to be profitable as long as it operated on a 1-2% spread.

Offline Rune

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I'll be interest to know if you manage to break even with this strategy - market making is very hard to get right.

With 5% spread it should be easy enough. In the future we could actually run nubot style "BitBots" that can enforce a much tighter peg and be guaranteed to be profitable, using the method the nubitters described here after they realized that they've become insolvent and their peg is doomed: https://discuss.nubits.com/t/possible-solution-to-custodian-loss-of-value-due-to-btc-exposure/1099/3

Offline vlight

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https://bitcointalk.org/index.php?topic=926934.0 :)

lololol, they want to use 10x leverage..... hahaha this is game over ... that disqualifies Nubits as a competition to BitUSD.

Offline monsterer

I'll be interest to know if you manage to break even with this strategy - market making is very hard to get right.
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Offline nomoreheroes7

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lol rune, are you shuai?

Nice post whoever wrote that. Just controversial enough to stir up some shit and get people thinking.


Offline lafona

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Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!
Do you have a link to the market maker bot post?
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Offline liondani

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We will know they are in trouble when they start offering interest to park.

I think they are already in trouble....http://coinmarketcap.com/assets/nushares/#charts

NuShares 35% decline, the biggest from all** cryptos right now!
Lee is probably selling before his supporters have the change to do it...  :P

edit:
** the biggest decline from the 100 major crypto-currencies
« Last Edit: January 16, 2015, 02:50:30 pm by liondani »

Offline Empirical1.1

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We will know they are in trouble when they start offering interest to park.

I expect that their system could collapse quickly at that point.

I didn't understand any of the equations Nubits used, I can only do A+B=C. But it seemed they gave both systems a similar failure risk, even though BitUSD is a heavily collateralised system and theirs has very little collateral and relies on a parking premium to incentivise demand. I expect their system will collapse with a significant rise in interest rates, because that signifies a significant fall in demand to the market and only then, do you have to worry about how much interest they can afford to pay and for how long they'll do it before giving up if the system is getting away from them.

Hmm. Well my description is wrong in that the interest rate incentivises parking which removes supply but I guess it also incentivises demand in that new demand might buy NuBits just to park and earn interest. I think.
« Last Edit: January 16, 2015, 03:01:14 pm by Empirical1.1 »