Author Topic: BitAssets Article  (Read 3007 times)

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Offline Pheonike

Re: BitAssets Article
« Reply #30 on: May 07, 2015, 10:35:09 pm »
« Last Edit: May 07, 2015, 10:37:21 pm by Pheonike »

Offline carpet ride

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Re: BitAssets Article
« Reply #31 on: May 07, 2015, 10:36:03 pm »


But the problem was described in the Preston Byrne article.  BitShares collateralizes BitAssets, and if BitShares (which I have heard is volatile) craters in value, then it will create margin calls in BitAssets.  Has this happened yet?  One must own BitShares to get involved in BitAssets.  So, in a certain sense, BitAssets can offload its volatility onto BitShares.  If Alice were to hold Bitcoin, but seek the price stability of the USD through BitAssets, she must enter the volatile BitShares market to gain access to BitUSD.  If BitShares were to crater against the dollar, would Bob, the counterparty to the BitUSD, get a margin call, thereby canceling the contract, thereby leaving Alice exposed to the volatility of BitShares?  There is an old expression that says something like, “If you owe a bank thousands, you have a problem; owe a bank millions, the bank has a problem.”

I don't know how stable these markets are in general.  Perhaps you know.  Are people trading and redeeming BitAssets?  Are people getting margin calls?  Where can I observe BitAssets market data?  Thanks.

See: Black Swan Protection; Coinmarketcap.com


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Offline Ander

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Re: BitAssets Article
« Reply #32 on: May 07, 2015, 10:44:57 pm »
I have a sense that BitShares are volatile, and I think that I have heard that the BitAssets are tracking their underlying assets quite well.  Is that reasonably accurate information?

Yes that is very accurate.


Quote
But the problem was described in the Preston Byrne article.  BitShares collateralizes BitAssets, and if BitShares (which I have heard is volatile) craters in value, then it will create margin calls in BitAssets.  Has this happened yet?

Yes this has happened.  BTS has dropped over 90% from its peak.  BitAsset holders havent lost anything at all, their bitAssets are just as valuable as ever.  (They can get 10x as much BTS from them now as at the peak).  Those who shorted bitAssets got margin called and lost, of course. That is exactly what is supposed to happen when you make a margin bet and you were wrong.

BTS holders are the ones exposed to risk (and potential reward, if Bitshares is successful).  BitAsset holders are not exposed to much risk at all (well, for bitUSD/bitCNY at least.  If you hold bitGold, you can gain or lose based on the gold price, for example). 

Oh yeah, also the Preston Byrne article was terrible and he got everything backwards.  His scenario about trying to use Bitshares to get a mortgage was ridiculous.  If you have BTS then you have equity.  you dont need to get a loan from yourself in order to get a mortgage, you just use your money to buy the house.  His use case example was not at all what Bitshares was intended for.   Also, Bond markets in Bitshares are a planned future feature than Bytemaster has discussed, not something currently developed yet.  But hopefully when those are developed, use cases like this would be possible.

Quote
If Alice were to hold Bitcoin, but seek the price stability of the USD through BitAssets, she must enter the volatile BitShares market to gain access to BitUSD.

You only have to access the volatile Bitshares market for the short time between when you buy BTS, and when you use it to buy a bitAsset.  Alternately you can just buy the bitAssets directly, through a service such as blocktrades or metaexchange that lets you go straight from BTC to bitAssets. 

Bitassets are not very risky at all.  There is some systemic risk in that if the bitshares network suddenly went down, and did not recover, you could lose.  This is a risk inherent in any crypto.  You must compare it to the risk of your bank going under, or your cash being stolen.  When you hold bitUSD you are not subject to much volatility at all. 


Quote
If BitShares were to crater against the dollar, would Bob, the counterparty to the BitUSD, get a margin call, thereby canceling the contract, thereby leaving Alice exposed to the volatility of BitShares?

Bob would get a margin call.  He would have to buy SOMEONE'S bitUSD (but it wouldnt have to be Alice's).  Alice could just hold hers however, and Bob would have to find someone else to buy from.  Alice can sit in bitUSD as long as she wants.  Or she can convert to BTS and then sell the BTS right away and get her fair value in regular USD (subject to liquidity concerns if she is trading a large amount of course). 

Quote
I don't know how stable these markets are in general.  Perhaps you know.  Are people trading and redeeming BitAssets?  Are people getting margin calls?  Where can I observe BitAssets market data?  Thanks.

Yes people are trading and redeeming bitAssets.  Yes people (who shorted bitAssets) are getting margin calls.  BitUSD holders have done great.  They made money off yield.    You can see info here:
http://www.bitsharesblocks.com/assets/market


Hope that helps!  If you have any more questions I'll try to answer them.
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Offline mhr

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Re: BitAssets Article
« Reply #33 on: May 08, 2015, 04:12:21 am »
Thank you, Pheonike, Carpet Ride, and Ander.  That is good information.  I will list some of my current assumptions, based on my interactions on this forum, and maybe the community can confirm or deny my assumptions.

1.  Contrary to my initial thought, BitAssets is not a debt instrument.  Instead, BitAssets is a betting instrument similar to a Contract for Difference.

2.  When people participate in the BitAssets market, BitShares, the DAC (or the house, or the bucket shop, or the exchange, or whatever), takes the other side of the trade.  BitShares is the counterparty to the bet.  If Alice buys 1 BitUSD, and Bob sells one BitUSD, Alice and Bob are not trading with each other.  Instead, they are trading, separately, with BitShares.  As BitShares is a digital counterparty, it does not suffer from the human foibles of greed or caprice.

3.  The house (BitShares) likes to stay neutral.  Therefore, the BitShares protocol will only exercise pairs of trades.  If Alice, alone, wants to trade in BitUSD, she cannot do so until someone else, such as Bob, wants to take the opposite position in a trade in BitUSD.  The house will not trade with either position in isolation.  This is true when opening and closing positions, meaning that someone in a BitAssets bet who wants to close out the position may not be able to do so if there is no one in the market wanting to take the opposite position.  If someone (Bob) is stuck in a BitAssets position and gets a margin call, but cannot find an offsetting offer in the marketplace, Bob will have to put up additional collateral until such time that he can find another trader willing to offset his position.

4.  There are “gateways” in the BitAssets economy, such as CryptoSmith.  The gateways will trade physical, tangible assets such as gold, silver, and US dollars for BitAssets.  These gateways, however, are not part of BitShares (the DAC), and therefore are not under any contractual obligation to honor a BitAsset.  They do so as a business, on a for-profit basis.  They pay some amount for BitAssets which may or may not be at parity with the nominal value of the BitAssets.  These gateways, because they have no contractual obligation to honor BitAssets cannot be short squeezed.

5.  BitShares (the DAC) is also not under any contractual obligation to convert a BitAsset to its physical, tangible equivalent.  BitShares, being a digital protocol, is not in any position to deliver anything physical, as it has no fingers with which to package physical assets for shipping.  BitAssets, being betting arrangements, do not provide any mechanism for delivery of the assets underlying the bet.  Any delivery of physical assets in exchange for BitAssets are performed by ancillary businesses, and conducted according to the discretion of the ancillary businesses.  Any deliveries of physical assets by ancillary businesses do not close out BitAsset positions.  They simply transfer the BitAsset positions to the gateways which can then transfer them on from there in separate trades, or close them out with offsetting BitAssets (digital) trades.

OK, let's work with this first, and the confirmations or denials of these points will fuel more questions.  Thank you all.

Offline bytemaster

Re: BitAssets Article
« Reply #34 on: May 08, 2015, 03:51:28 pm »
Thank you, Pheonike, Carpet Ride, and Ander.  That is good information.  I will list some of my current assumptions, based on my interactions on this forum, and maybe the community can confirm or deny my assumptions.

1.  Contrary to my initial thought, BitAssets is not a debt instrument.  Instead, BitAssets is a betting instrument similar to a Contract for Difference.

2.  When people participate in the BitAssets market, BitShares, the DAC (or the house, or the bucket shop, or the exchange, or whatever), takes the other side of the trade.  BitShares is the counterparty to the bet.  If Alice buys 1 BitUSD, and Bob sells one BitUSD, Alice and Bob are not trading with each other.  Instead, they are trading, separately, with BitShares.  As BitShares is a digital counterparty, it does not suffer from the human foibles of greed or caprice.

3.  The house (BitShares) likes to stay neutral.  Therefore, the BitShares protocol will only exercise pairs of trades.  If Alice, alone, wants to trade in BitUSD, she cannot do so until someone else, such as Bob, wants to take the opposite position in a trade in BitUSD.  The house will not trade with either position in isolation.  This is true when opening and closing positions, meaning that someone in a BitAssets bet who wants to close out the position may not be able to do so if there is no one in the market wanting to take the opposite position.  If someone (Bob) is stuck in a BitAssets position and gets a margin call, but cannot find an offsetting offer in the marketplace, Bob will have to put up additional collateral until such time that he can find another trader willing to offset his position.

4.  There are “gateways” in the BitAssets economy, such as CryptoSmith.  The gateways will trade physical, tangible assets such as gold, silver, and US dollars for BitAssets.  These gateways, however, are not part of BitShares (the DAC), and therefore are not under any contractual obligation to honor a BitAsset.  They do so as a business, on a for-profit basis.  They pay some amount for BitAssets which may or may not be at parity with the nominal value of the BitAssets.  These gateways, because they have no contractual obligation to honor BitAssets cannot be short squeezed.

5.  BitShares (the DAC) is also not under any contractual obligation to convert a BitAsset to its physical, tangible equivalent.  BitShares, being a digital protocol, is not in any position to deliver anything physical, as it has no fingers with which to package physical assets for shipping.  BitAssets, being betting arrangements, do not provide any mechanism for delivery of the assets underlying the bet.  Any delivery of physical assets in exchange for BitAssets are performed by ancillary businesses, and conducted according to the discretion of the ancillary businesses.  Any deliveries of physical assets by ancillary businesses do not close out BitAsset positions.  They simply transfer the BitAsset positions to the gateways which can then transfer them on from there in separate trades, or close them out with offsetting BitAssets (digital) trades.

OK, let's work with this first, and the confirmations or denials of these points will fuel more questions.  Thank you all.

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Offline gamey

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Re: BitAssets Article
« Reply #35 on: May 08, 2015, 07:16:59 pm »
Gamey, you stated, “I do not agree bitassets are near as volatile as bitcoin. I wonder where you get this premise?  Have you researched it empirically in any fashion?”

You make a valid point.  I have not researched the prices of the various BitAssets, and I have not even researched the price of BitShares.  I have a sense that BitShares are volatile, and I think that I have heard that the BitAssets are tracking their underlying assets quite well.  Is that reasonably accurate information?

But the problem was described in the Preston Byrne article.  BitShares collateralizes BitAssets, and if BitShares (which I have heard is volatile) craters in value, then it will create margin calls in BitAssets.  Has this happened yet?  One must own BitShares to get involved in BitAssets.  So, in a certain sense, BitAssets can offload its volatility onto BitShares.  If Alice were to hold Bitcoin, but seek the price stability of the USD through BitAssets, she must enter the volatile BitShares market to gain access to BitUSD.  If BitShares were to crater against the dollar, would Bob, the counterparty to the BitUSD, get a margin call, thereby canceling the contract, thereby leaving Alice exposed to the volatility of BitShares?  There is an old expression that says something like, “If you owe a bank thousands, you have a problem; owe a bank millions, the bank has a problem.”

I don't know how stable these markets are in general.  Perhaps you know.  Are people trading and redeeming BitAssets?  Are people getting margin calls?  Where can I observe BitAssets market data?  Thanks.

One does not need to own BitShares to receive BitAssets. That is one of the points of BitAssets. They are sold directly for BTC etc on exchanges.  They're fully fungible.  You can buy them on the BTS blockchain with BTS or go somewhere like yunbi. I don't need to be involved in the prediction market that backs bitAssets, I can buy the bitassets themselves.

I don't care about Preston Byrne's article. I read the first 3 points and it seems like hack writing and my patience can never get me past that.  True story.

You can see BItAsset market data on coinmarketcap.com or internal (on blockchain market data) @ bitsharesblocks .org? .com?

It seems that you are answering yourself though in that you believe that the stability of BitAssets has in fact been relatively stable. Which kinda contradicts what you said earlier where you said it was ironic that BitShares is trying to solve volatility.  Your argument is confusing to me because with all their faults etc, BitAssets have served their purpose relatively well.  Yes, liquidity problems, but as you said that is the symptom of a small market.
« Last Edit: May 08, 2015, 07:22:56 pm by gamey »
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