Author Topic: BitAsset 3.0 Concerns  (Read 12248 times)

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Offline merivercap

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....
The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.

[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]

BTW You can use the average ratio in various markets when the dollar for bitUSD and dollar for BTS markets develop on the same exchanges and platforms.  Right now there aren't any direct bitUSD/BTS for dollar exchanges.

In the future, you can look at the dollar price for bitUSD and BTS in the real world at a LocalBTS.  You can look at the dollar price of bitUSD & BTS and ratio at various exchanges like CoinbaseBTS & BitfinexBTS.  Also the Euro price of BTS & bitUSD and ratio at KrakenBTS as well as the Yuan price of BTS & bitUSD at BTC38 and the ratio.   The pricing will all be different, but the ratios should be very similar.   You can compare all of those ratios to the internal bitUSD/BTS market and as Bytemaster mentions in his old intro video at 6:36 the market will manage supply and generally get the ratios to converge: https://www.youtube.com/watch?v=5BV55IrZi7g
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Offline BunkerChainLabs-DataSecurityNode

The least you could do is spell check it for me BunkerBoy ;)

congrats again on the Delegate of the Month award!

I didn't get it media.bitscape did! I just added 10,000 Delegate Tip to their award. I went into detail on it here:

https://bitsharestalk.org/index.php/topic,14109.msg206200.html#msg206200

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Offline BunkerChainLabs-DataSecurityNode

It's OK if you have no clue as to what is going on:

Let's assume for a second that Bitassets 3.0 are implemented.
And I'm a new user interested in using them.

Can you ELI5 bitassets in 10 sentences? (more I would probably walk away)

We've all been there.  It's not easy to master the mechanics of the BitShares (political/economic) process.  But all we humbly ask of you is to ask for help. 

Opening your mouth when you have no idea what you are talking about and making it sould like you do does not help anybody learn.  graffenwalder asks politely for someone to ELI5, and here is the next response:

1) letting all the current shorters bleed to death is not nice at all (and that's what announcing 3.0 does, nobody want to shorts anymore)
2) Cohabitation will cause so much trouble. Nobody will ever have enough patience to understand the difference between bitUSD1 and bitUSD2.

What is bitUSD1 or bitUSD2 ?

There is only and will only be one "BitUSD" (and multiple ways (markets) to buy and sell it)

Buy some on Metaexchange and cover your short, but some on BTER and cover, buy some on the blockchain and cover your position.

You want ELI5?

I'll do you one better, here's the ELI4 (straight from the horse's mouth):

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor). 

By structuring our economic monetary printing press to allow BitUSD redemptions at essentially $1 , we are effectively making BitUSD extremely simple to learn and intuitive to use.  What we give up in exchange for having a simple and intuitive learning curve for bitUSD "buyers" is a "complicated trafing structure for the shorts who create the BitUSD. 

This "simple for BitUSD buyers" and "complicated for bitUSD shorters" is how I vote to structure our BitAsset creation scheme, becasue as a BitShares shareholder, I want our products to me more easily understood by our customers, and I can handle responsibility of shorting the BitAssets into existance without crying when the market moves in the opposite direction.

Bytemaster obviously sees the merit in making BitAssets:


ELI4 = BitASsets - Always redeemable for face value even if it hurts the specualtive highest leveraged shorts

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Offline merivercap

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I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.

Some of this reasoning is backwards. USD has a floating value. Checkbook money, travellers checks, credit cards share the same value precisely because they are settled in USD. It's not that USD is magically pegged to those things by some form of consensus.

The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.

[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]

No problem.  It's not so much an ideology rather than just theories on the nature of money that generally makes sense to me. 

When you take into consideration the commodity nature of money, in a free market all various forms of money would have different value.  Just like redeemable gold certificates will have premiums or discounts based on the risks and costs of the issuer.  Hence if you view Bitcoin as money there are various prices based on risk and costs.  A MtGox bitcoin was worth much less than a Bitstamp bitcoin.  What is a BTC38 BitShare or BitUSD worth?  Should a BTC38 BitUSD be worth $1 or maybe 75 cents? 

In a free market, federal reserve notes (ie. cash or base money) would have a premium over checkbook money.  This was especially true when federal reserve notes were redeemable in gold.  Imagine having $1 million dollars in a checking account at a high-risk bank with $250k FDIC insurance compared to $1 million in federal reserve notes.  Your $1 million in checkbook money could be worth as little as $250k. The banks, government & people just collectivize all the counterparty and operational costs of the different forms of 'money' and deem them to be worth the same and settled as such. 

I think the first question to ask is:  What is a dollar worth and why?  Some may say it's a piece of paper with ink.  Would you beg to differ and if so what is a dollar to you and why?  Do you think that a dollar is worth the same to another person and why?  Is there an objective value you think everyone has of this dollar?  So why does a haircut cost around $10 and not $10,000?

von Mises asked himself similar questions about fiat money and theorized that people value a fiat currency for what it was worth the day before.  When you go back in time, the dollar or fiat first represented a certain amount of gold that was redeemable.  Hence people had a reference of gold to compare any good or service they could exchange for.  Gold's value was first determined in the free market of barter.  Nick Szabo may argue even before barter, beads, seashells and jewelry had collectible value.  Gold can fulfill the regression theorem because it was borne out of use, barter, or collectibility.   Since fiat currencies have very little intrinsic value in barter, von Mises suggests it could never become money on its own.   

If you were transported to some other alien planet with the same resources as Earth, but started with no memory of the past value of a dollar, will the new society use the dollar and will a haircut be worth around $10?  I would argue the dollar will neither be used for money nor will a piece of paper w/ ink that says $10 get you a haircut. 

In regards to the internal asset exchange market you can peg to whatever you want, but I believe the trade will be dicated by the real world exchange of bitUSD for a one dollar federal reserve note on the street.  The internal market engine may show it worth around $.97 due to exit/entry costs, +/- $0.95 for a trusted exchange like Coinbase,  +/-$0.85 at BTC38 & BTER :P... hey I don't know how trusted these exchanges are so it's just a hypothetical.  Our current price feed is based on centralized exchanges with counterparty risk.   And remember I'm throwing out all these hypothetical numbers when the value of bitUSD vs BTS will be constantly changing every second and in flux! 
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Offline starspirit

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I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.

Some of this reasoning is backwards. USD has a floating value. Checkbook money, travellers checks, credit cards share the same value precisely because they are settled in USD. It's not that USD is magically pegged to those things by some form of consensus.

The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.

[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]
« Last Edit: April 30, 2015, 10:31:31 pm by starspirit »

Offline Ander

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There was no mention of a limit of the amount of bitUSD that the bitUSD longs can force settlement on in the recent post.  Is there still a plan for a 1% daily limit?  5% daily limit? 

I dont know if this is needed but if it is I think it should be at least 5%.
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Offline bytemaster

I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.

+1
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Offline merivercap

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I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS. 
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Offline bytemaster

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  :P)

Original BitUSD slipped to $0.85 because no one was buying it and lots of people were selling it.   Forced settling merely keeps the peg closer than without it.   I don't think we need to have it balanced both ways.   If you go short you essentially sign a contract to "buy it back from the market" and that is your only exit route.   When you buy BitUSD you are buying a guarantee that you can sell it for about $1.  Without forced settlement then you don't have the guarantee.  Shorts don't need a "guarantee to buy at $1".   

So if you set your expectations right: 
  - shorts can sell at any price but may be forced to buy at $1 at any time.
  - longs can buy at any price, can sell at any price, and always have the option to sell for $1

So you can view a short position as a hybrid-contract:  half loan, half option.   When you short you are also SELLING AN OPTION.   When you lend you are also BUYING AN OPTION to settle.   What this means is that to increase the supply you must pay a high enough price to cover the cost of the OPTION.   

With this pricing model/view we can see that the market is balanced and that new USD will only be created when demand is high enough to cover the cost of the option contract.   All "Forced Settlement" is doing is "exercising an option".

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor).  The presence of a floor means that people can trade USD for BitUSD and purchase things with BitUSD without having to think about whether it is worth $1.    The only people that actually have to think about whether to buy at $1.05 or not are traders... they take the risk that short demand will increase and push the price back down toward $1.00.  On the other hand, in a bear market short demand may decrease and push BitUSD up to $1.10.    Thus when you go short you are not just speculating on the value of USD vs BTS but on the future SHORT demand.   

All that we need for the system to be successful is a means of quantifying the trades and guaranteeing a floor. Once you have a floor it is effectively pegged for everyone who doesn't look at the markets or care to speculate in the markets.

ah ? Isn't 1.05USD for 1 BitUSD will also be the reality for the consumers ? In the end they need to buy 1 BitUSD somewhere , and that somewhere has 1 BitUSD with the cost of 1.05 USD , then the customer would have to buy it at 1.05 USD too unless that somewhere are willing to pay for the extra cost to please the customers .

There will be arb opportunities.   Bottom line the cost for increasing the USD supply will be 5% per USD in that event.    Many people that are only dealing in USD <--> BitUSD transactions will simple use parity.  This means that merchants will not change their prices and a customer that pays with BitUSD does so at an opportunity cost of 5%.  But that 5% cost is meaningless if they never wanted to own BTS in the first place.    It just means that the USD/BTS market is 5% arb opportunity.   Everyone else who simply wants to use it as a currency can SAFELY accept it at $1 and in most cases turn around and sell it for slightly more than $1.   

When there is heavy demand to sell BitUSD then USD holders may have to wait in line to get out at $1 or accept 0.99 or 0.98 to get out immediately.   On the other hand the GOAL is that people don't sell into BTS to EXIT their USD position, they sell BitUSD for USD and they will always find a healthy market at $1.   

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Offline Ander

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#1 No explicit short sell price limit
#2 No pre-set expiration on short positions.
#3 Any time someone with USD is unhappy with the current internal market price, they can request settlement at the 99% of feed (a 1% fee) in X days, where X is more than 24 hours.
#4 On settlement day the least collateralized short position is forced to settle at 99% of feed (a 1% profit)
#5 At any time entire market can be settled at the feed price given 30 day notice to be executed only in the event that all USD holders are unwilling to sell anywhere near a fair price. (black swan protection), this settlement can be canceled if the market returns to normal voluntarily.
#6 200% collateral

In effect a short position is a "loan" that is callable based upon price or X day notice.

I think this is all excelelnt, but I dont understand the details of #5.    How would the black swan protection be triggered?  Would this be an automatic event based on some mathematical computation?  Or would it be triggered by some community or delegate vote or something.


A question on the 1% fee:  I think that how this will work is that the blockchain will take the bitUSD of the person demanding conversion, and take the BTS of the short, at the feed price, and then it will burn 1% of the BTS, and give 99% to the bitUSD holder.  The burned BTS would thus be deflationary and represent a profit for Bitshares.  Is this correct?  This sounds great, we need more ways to make bitshares profitable.
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Offline btswildpig

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You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  :P)

Original BitUSD slipped to $0.85 because no one was buying it and lots of people were selling it.   Forced settling merely keeps the peg closer than without it.   I don't think we need to have it balanced both ways.   If you go short you essentially sign a contract to "buy it back from the market" and that is your only exit route.   When you buy BitUSD you are buying a guarantee that you can sell it for about $1.  Without forced settlement then you don't have the guarantee.  Shorts don't need a "guarantee to buy at $1".   

So if you set your expectations right: 
  - shorts can sell at any price but may be forced to buy at $1 at any time.
  - longs can buy at any price, can sell at any price, and always have the option to sell for $1

So you can view a short position as a hybrid-contract:  half loan, half option.   When you short you are also SELLING AN OPTION.   When you lend you are also BUYING AN OPTION to settle.   What this means is that to increase the supply you must pay a high enough price to cover the cost of the OPTION.   

With this pricing model/view we can see that the market is balanced and that new USD will only be created when demand is high enough to cover the cost of the option contract.   All "Forced Settlement" is doing is "exercising an option".

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor).  The presence of a floor means that people can trade USD for BitUSD and purchase things with BitUSD without having to think about whether it is worth $1.    The only people that actually have to think about whether to buy at $1.05 or not are traders... they take the risk that short demand will increase and push the price back down toward $1.00.  On the other hand, in a bear market short demand may decrease and push BitUSD up to $1.10.    Thus when you go short you are not just speculating on the value of USD vs BTS but on the future SHORT demand.   

All that we need for the system to be successful is a means of quantifying the trades and guaranteeing a floor. Once you have a floor it is effectively pegged for everyone who doesn't look at the markets or care to speculate in the markets.

ah ? Isn't 1.05USD for 1 BitUSD will also be the reality for the consumers ? In the end they need to buy 1 BitUSD somewhere , and that somewhere has 1 BitUSD with the cost of 1.05 USD , then the customer would have to buy it at 1.05 USD too unless that somewhere are willing to pay for the extra cost to please the customers .
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Offline bytemaster

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  :P)

Original BitUSD slipped to $0.85 because no one was buying it and lots of people were selling it.   Forced settling merely keeps the peg closer than without it.   I don't think we need to have it balanced both ways.   If you go short you essentially sign a contract to "buy it back from the market" and that is your only exit route.   When you buy BitUSD you are buying a guarantee that you can sell it for about $1.  Without forced settlement then you don't have the guarantee.  Shorts don't need a "guarantee to buy at $1".   

So if you set your expectations right: 
  - shorts can sell at any price but may be forced to buy at $1 at any time.
  - longs can buy at any price, can sell at any price, and always have the option to sell for $1

So you can view a short position as a hybrid-contract:  half loan, half option.   When you short you are also SELLING AN OPTION.   When you lend you are also BUYING AN OPTION to settle.   What this means is that to increase the supply you must pay a high enough price to cover the cost of the OPTION.   

With this pricing model/view we can see that the market is balanced and that new USD will only be created when demand is high enough to cover the cost of the option contract.   All "Forced Settlement" is doing is "exercising an option".

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor).  The presence of a floor means that people can trade USD for BitUSD and purchase things with BitUSD without having to think about whether it is worth $1.    The only people that actually have to think about whether to buy at $1.05 or not are traders... they take the risk that short demand will increase and push the price back down toward $1.00.  On the other hand, in a bear market short demand may decrease and push BitUSD up to $1.10.    Thus when you go short you are not just speculating on the value of USD vs BTS but on the future SHORT demand.   

All that we need for the system to be successful is a means of quantifying the trades and guaranteeing a floor. Once you have a floor it is effectively pegged for everyone who doesn't look at the markets or care to speculate in the markets.   


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Offline merivercap

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You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  :P)
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Offline bytemaster

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.
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Offline merivercap

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#1 No explicit short sell price limit
#2 No pre-set expiration on short positions.
#3 Any time someone with USD is unhappy with the current internal market price, they can request settlement at the 99% of feed (a 1% fee) in X days, where X is more than 24 hours.
#4 On settlement day the least collateralized short position is forced to settle at 99% of feed (a 1% profit)
#5 At any time entire market can be settled at the feed price given 30 day notice to be executed only in the event that all USD holders are unwilling to sell anywhere near a fair price. (black swan protection), this settlement can be canceled if the market returns to normal voluntarily.
#6 200% collateral

In effect a short position is a "loan" that is callable based upon price or X day notice.

Expected Outcome:
1) The price feed should be irrelevant unless the current market price is below 99% the expected price feed in X days
2) No shorts would dare sell down the price much below the expected feed for long because longs can force settlement to call their bluff.
3) The market has a graceful escape valve where all parties have ample time to voluntarily settle to avoid being forced settled. 
4) Well collateralized shorts never have to cover
5) USD holders are guaranteed liquidity at 99% of the feed within X days (potentially as little as 24 hours).

All that is required is the threat of forced settlement to keep the market fair, by charging a fee for forced settlement longs that demand liquidity compensate the shorts who were forced out.  Over all the market rules are simpler, liquidity is much greater, and all parties are far more protected than they are today.

Thoughts?

I agree with:
#1 Great
#2 Great
#6 Awesome to have equal collateral (100%) on each side.

All the above balances the longs & shorts.  I think this will have a very positive effect.

I disagree with the rest:
#3 & #4 - Why are we allowing the bitUSD holder to force settlement & not vice versa?  It reintroduces imbalance.  Shorts & longs should be equal.  Is manipulation a concern if both sides are equal?
#5  - Force settling the entire market?   Is this necessary and what is the purpose?  It's probably unlikely, but it just seems ripe for a huge manipulation payday.

I don't trust the current price feeds.  Hypothetically, BTC38 and BTER can collude.  The exchanges can create a fake market.  They can buy/sell BTS they don't have.  In the future when there are more trusted and diverse sources of price feeds forced settlement of any kind probably won't be a problem, but why even risk it?

Anyways I like simple and balanced and I believe traders will too.  #3,#4,#5 create unnecessary complications.

There have been several concerns regarding the 3.0 proposal that I would like to acknowledge and address.
... The only other way to "balance" this is to remove the option of forced settlement and have no expiration on shorts either.  This was the original design but has other issues.

Can you explain these other issues?

I also feel that forcing USD holders to lock up their funds for too long while they wait for settlement is also a BAD idea.  Having a cost too far from the feed is also a problem that would break the peg.     

Why is this so bad?  Mainstream bitUSD holders and merchants will just use it like a currency and won't care about going in and out.  A lot of people may not even care to know what Bitshares or Bitcoin is and may not even know there is anything to settle in the first place.  Also once there is more liquidity from creating a balance of longs & shorts, bitUSD holders will have no problem going in and out. 
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