Author Topic: Is it feasible to make a bitBTC backed by BTC?  (Read 9032 times)

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Offline ebit

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In my opinion
BTC and bitBTC could back starBTC , starBTC is a backed UIA's.
BTC and bitUSD could back starUSD , starUSD is a backed UIA's.
Then, the risk scope is limited.
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Offline starspirit

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monsterer, could you explain the mechanics here a bit further, as it could be the simplest starting point as a stepping stone to a more distributed trust system. My understanding is that a gateway only retains enough inventory to facilitate transactions. In this case, a potentially large backing reserve would need to be held for all the bitBTC issued. So for example:

Yes, this is true - you have to trust that the bridge will be able to satisfy any demand for redemption, which isn't usually designed into their business model because they need to keep 50/50 reserves to remain price risk neutral.

You'd need a custom bridge which would accept BTC and hand out bitBTC and guarantee to hold onto it. But such an endeavour would be very risky for the bridge owner because the bitBTC must come from somewhere, and it's price is not 1:1 with BTC.
The entity that maintains the reserve would issue all the bitBTC as receipts for BTC deposits made. And it would destroy bitBTC received in exchange for returning those BTC deposits back to users. In both cases it would enforce an exchange of 1:1. So there is no balance sheet risk. It always holds as much BTC as it owes.

The only risk is if the reserve is compromised through hacking, fraud, malfeasance etc. This is the counter-party risk that bitBTC owners bear, and the risk that would critically need to be minimised in time through the best practices and tools available.

There may also be a regulatory risk with this reserve approach, of that I'm not sure.

Offline monsterer

monsterer, could you explain the mechanics here a bit further, as it could be the simplest starting point as a stepping stone to a more distributed trust system. My understanding is that a gateway only retains enough inventory to facilitate transactions. In this case, a potentially large backing reserve would need to be held for all the bitBTC issued. So for example:

Yes, this is true - you have to trust that the bridge will be able to satisfy any demand for redemption, which isn't usually designed into their business model because they need to keep 50/50 reserves to remain price risk neutral.

You'd need a custom bridge which would accept BTC and hand out bitBTC and guarantee to hold onto it. But such an endeavour would be very risky for the bridge owner because the bitBTC must come from somewhere, and it's price is not 1:1 with BTC.
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Offline ebit

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A certain delegate provide a bitcoin multi-signature address , all bitcoins are used for backed bitBTC .
The delegate's  income can be transferred into" counterparty risk insurance".

由高级受托人来担任背书人。受托人接收比特币的地址由“比特股背书系统”管理,提供多重签名和背书管理。
此受托人的收入池建立对手交易风险保险金,也由“比特股背书系统”管理。

锚定币和背书币之间应该有区别,网关网桥可以在汇率上区别对待。

背书币是一种高级UIA's(用户资产),由高级受托人发行,有保险机制。

举个例子,btc38发行38bitCNY,他的受托人管理一个多重签名BTC地址提供背书(背书系统是其中一个签名者),他的受托人收入在去中心化保险系统里积累背书风险金。这样,38bitCNY就相当安全了。

哈哈,受托人也没必要砸盘了。

"Delegate backed BitAssets" are helpful for Bitshares system.
It can be used for VC (Paid Workers Proposal for Review  )
« Last Edit: May 12, 2015, 02:33:52 am by ebit »
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Offline starspirit

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monsterer, xeroc, are you saying we can't do this yet, or that the ideal way of doing it (ACCT) is not available yet? To get commercial product to market, there are always trade-offs to be made. A company can go broke waiting to achieve the ideal.

There is no trust free way of doing this currently. If you don't mind that compromise and if you could use a backing of bitBTC instead of BTS for other bitAssets, then you could simply use both metaexchange / blocktrades for redemption.
monsterer, could you explain the mechanics here a bit further, as it could be the simplest starting point as a stepping stone to a more distributed trust system. My understanding is that a gateway only retains enough inventory to facilitate transactions. In this case, a potentially large backing reserve would need to be held for all the bitBTC issued. So for example:

User sends real BTC to pool in return for a new bitBTC, real BTC retained in reserve
User sends bitBTC to pool to be destroyed, for a real BTC sent back from the reserve

The key would be to have strong controls on the integrity of the reserve.



Offline bitmarley

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Right on, the main point being the excellent reduced risk profile of 101 delegates vs 1 gateway/exchange. Its very true that we desperately need the existing gateways especially services like shapeshift and metaexchange in order to simplify access to the wider market. ACCT with bitshares is clearly a longer term goal but it will bring a great reward for whoever does it first because a distributed escrow is a great alternative to centralized exchanges so a lot of demand will flow in, especially whenever a central hub fails.   

Offline monsterer

So the trust profile is very different: a single gateway operator versus the 101 Top Delegates we are already trusting to maintain BitShares network security. That is centralized vs decentralized.

I'll rephrase :) A single delegate running this system, vs a single gateway is the same trust profile.

I don't want to get drawn into semantics, but 101 delegates running this system is distributed, not decentralised. In a decentralised system, the end user holds the private keys, in this system, the delegates do.

Quote
Further more gateways by their nature do not maintain bids and offers and so there is a limited qty per transaction. With integrated ACCT using the Top Delegates a bid/ask market can be setup so there are no qty limits. People could offer to exchange 1000BTC for BTS trusting only the Top Delegates to escrow the transaction.

This is still subject to liquidity limits in the same way any system is. In fact, this has the disadvantage that at first there will be very poor liquidity and very wide spreads.
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Offline bitmarley

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So the trust profile is very different: a single gateway operator versus the 101 Top Delegates we are already trusting to maintain BitShares network security. That is centralized vs decentralized.

Further more gateways by their nature do not maintain bids and offers and so there is a limited qty per transaction. With integrated ACCT using the Top Delegates a bid/ask market can be setup so there are no qty limits. People could offer to exchange 1000BTC for BTS trusting only the Top Delegates to escrow the transaction.   


Offline monsterer

But there is a trust free way possible with DPOS, that is the method described in my link, it just hasn't been implemented. Basically the Top Delegates act as escrow for ACC trades since they can run code to monitor the Bitcoin blockchain, verify that a bitcoin transaction has 6 confirmations, and then trigger a release of locked BTS that corresponds to the bitcoin transaction.

The trust profile isn't any different than using an existing gateway to do the same job.
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Offline bitmarley

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There is no trust free way of doing this currently. If you don't mind that compromise and if you could use a backing of bitBTC instead of BTS for other bitAssets, then you could simply use both metaexchange / blocktrades for redemption.

But there is a trust free way possible with DPOS, that is the method described in my link, it just hasn't been implemented. Basically the Top Delegates act as escrow for ACC trades since they can run code to monitor the Bitcoin blockchain, verify that a bitcoin transaction has 6 confirmations, and then trigger a release of locked BTS that corresponds to the bitcoin transaction.

Bytemaster mentions in the link I provided that this would be a lot of baggage I guess because the Bitshares Top Delegates would need to keep a local copy of the bitcoin blockchain as well as the bitshares blockchain, as well as running the escrow code. But wow this sure would be a huge feature to add to Bitshares! 
 


Offline xeroc

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It's not possible counterparty-risk free atm because of Bitcoin's lack of ACCT ..
you can have a counterparty-risk free ACCT from BitShares to BitSharesPlay or BitShares MUSIC .. but not to bitcoin ..
they lack the necessary 'tools'

There are approachs to minimize risk .. i.e. using a multi-sig address managed by the delegates .. but afaik noone is following this idea atm ..

edit:// woops .. double post with monsterer :) need to refresh pages from my tabs prior to posting in the future

Offline monsterer

monsterer, xeroc, are you saying we can't do this yet, or that the ideal way of doing it (ACCT) is not available yet? To get commercial product to market, there are always trade-offs to be made. A company can go broke waiting to achieve the ideal.

There is no trust free way of doing this currently. If you don't mind that compromise and if you could use a backing of bitBTC instead of BTS for other bitAssets, then you could simply use both metaexchange / blocktrades for redemption.
My opinions do not represent those of metaexchange unless explicitly stated.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline starspirit

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Its not a fairytale. BitShares is capable of it:
https://bitsharestalk.org/index.php/topic,13274.0.html

 :)
bitmarley, looking through your linked thread, such a decentralised market for real BTC:BTS, with enough liquidity, could be used as a substitute source for price feeds for other bitAssets such as bitUSD. All you require for this is one internal asset against one external asset. That would still not prevent manipulation of the feed by large players, but it would reduce reliance on centralised exchanges.

Yeah, but that's less controversial. That's just bitAsset backed by bitUSD backed by BTS. That's a good idea that I've also promoted for some time.
I'm suggesting the possibility of another class altogether: bitUSD backed by bitBTC backed by BTC.
I don't know if it technically can be done, just floating the idea, because I think the more immediate market potential might be far greater.

The difficult part is the bitBTC backed by BTC - that requires trust, unless you believe in the fairytale of atomic cross chain transactions :)
ACCT are just not working with btc the way it is required ..

monsterer, xeroc, are you saying we can't do this yet, or that the ideal way of doing it (ACCT) is not available yet? To get commercial product to market, there are always trade-offs to be made. A company can go broke waiting to achieve the ideal.

Offline bitmarley

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Offline xeroc

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Yeah, but that's less controversial. That's just bitAsset backed by bitUSD backed by BTS. That's a good idea that I've also promoted for some time.
I'm suggesting the possibility of another class altogether: bitUSD backed by bitBTC backed by BTC.
I don't know if it technically can be done, just floating the idea, because I think the more immediate market potential might be far greater.

The difficult part is the bitBTC backed by BTC - that requires trust, unless you believe in the fairytale of atomic cross chain transactions :)
ACCT are just not working with btc the way it is required ..