Author Topic: BitAssets 2.0 (formally 3.0)  (Read 11402 times)

0 Members and 1 Guest are viewing this topic.

Offline Musewhale

  • Hero Member
  • *****
  • Posts: 2881
  • 丑,实在是太丑了 !
    • View Profile
MUSE witness:mygoodfriend     vote for me

Offline maqifrnswa

  • Hero Member
  • *****
  • Posts: 661
    • View Profile
Rather than thinking of floors, I've been thinking in terms of supply and demand: bitassets can control supply but not demand. There must be a reward for those that work to maintain the peg. Thinking of this from the game theory perspective:

The Goals:
When demand for an bit asset (BTS/BTA) exceeds the feed, BTA must be created.
When demand for an bit asset (BTS/BTA) is less than the feed, BTA must be destroyed.

Who should profit:
The player triggering destruction/creation should profit from these rules to "reward" them for maintaining the peg. The spread is thus a function of liquidity and cost of extracting this profit as the reward for maintaining the peg

The Rules:
Current system:
The current system doesn't give market rewards and incentives for following the "musts" above.
When demand for a bit asset is less than the feed +10%, assets are destroyed based on when they expire (or manually in the right condition). Current BTA holders (and shorters) have to provide BTA for clearing and have no incentive to maintain the peg, in fact they have an incentive to drive the peg to the best value for them. That value is feed+10%. (I'm one of those players at the moment, sorry :( )
Shorters are in the same boat, why short at the feed when I can short at feed+10% - especially since I'll only be able to cover at feed +10%. I should short at feed>10% and I'll be rewarded by selling to those clearing at feed+10%, thus rewarded for maintaining a peg at feed+10%.
There is no profit for maintaining peg.

BTA2.0 (or 3.0):
When demand for an bit asset (BTS/BTA) is less than 99% of the feed, BTA are destroyed by the new manual forced clearing due to an arbitrage opportunity. (Remember he primary rules that tokens must be destroyed when demand is not equal to the feed. 99% is ok - if you can think of it destroying bitUSD at 100% feed minus a 1% fee. The fee is arbitrary, but something that can be changed to remain competitive with other payment processors.) The one triggering the clearing profits by "correcting" the peg, or pays a premium for convenience if the market is below the peg. This is excellent, there is profit for maintaining the peg.

If demand (BTS/BTA) exceeds peg, why should I short? Where is the market-enforced arbitrage opportunity to reward me for maintaining peg? I know BM was saying that he wants to ensure a minimum value, but now there runs the risk of hyper-deflation. Why should I short today when I can short for even more tomorrow? To protect merchants, the system puts consumers at risk. BM's argument is that shorters will short because they will charge a premium. That only works if they can convert that premium into profit instantly (or at least a quick arbitrage), I don't see the mechanism by which they can do that. BM says that they could post bts sell orders right above the feed and make money on the spread. However, there is no feedback pushing the ask/bid median back to the feed - we'll end up like the first BTA (before short selling rules) where the price will just drift away. Once it drifts away, no merchant will execute the market clearing (since they'll lose money), and no short will want to short since there is no upper bound to where price is going - and supply will not equal demand at the feed.

Conclusion
I don't see the incentive for short sellers (BTA creators) to profit from creating BTA to keep supply=demand. Yes, short sellers will need to sell at a premium, thus driving the price away from the peg. What market force is driving it back towards the peg?
« Last Edit: May 04, 2015, 03:47:37 pm by maqifrnswa »
maintains an Ubuntu PPA: https://launchpad.net/~showard314/+archive/ubuntu/bitshares [15% delegate] wallet_account_set_approval maqifrnswa true [50% delegate] wallet_account_set_approval delegate1.maqifrnswa true

Offline bitmarley

  • Full Member
  • ***
  • Posts: 135
    • View Profile
Conclusion
The rules of BitAssets need to guarantee a floor on the value of BitUSD of $1.00 and the cost of providing this floor is certainly greater than 0.


Therefore the shorter should be receiving interest and not paying interest.

Offline Stan

  • Hero Member
  • *****
  • Posts: 2908
  • You need to think BIGGER, Pinky...
    • View Profile
    • Cryptonomex
  • BitShares: Stan
In my opinion the existence of bitUSD-USD gateways is the crucial assumption here and it needs to be fulfilled before we consider anything that is based on this assumption. In other words, there is no point in discussing the upgrade to BitAssets 2.0 (which I generally like) if we keep avoiding the subject of gateways.

The funny thing is that BM seems to realize this:
...

BM, before we discuss BitAssets 2.0 please let us know what your road-map regarding bitUSD-USD gateways is? How realistic is it that this fundamental issue will ever be solved? Would you agree that without the gateways there is no real future for BitShares, no matter if we have BitAssets 1.0 or 2.0? If you don't agree please explain your way of thinking.

I am asking this not because I have anything against BitAssets 2.0 but because I do care about BitShares and I would like to make sure that our priorities are defined correctly.

Bytemaster has been occasionally known to walk and chew gum at the same time...  :)

Gateways involve partners with the appropriate licenses. 
Partners have their own agendas and timetables and NDA agreements.
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

jakub

  • Guest
Ive observed that BM announces technical changes, he does not generally announce gateway/integration progress. Its too market sensitive.
If that's the case I'd like to know which of the following is "more true":
1. The upgrade to BitAssets 2.0 is going to improve the liquidity of the BTS/bitUSD market and this improvement will prepare ground for bitUSD/USD gateway (as it will make it more profitable to run such business)
or
2. We assume that bitUSD/USD gateway will somehow come into existence one day and only when it does BitAssets 2.0 will be able to function as intended.

Offline speedy

  • Hero Member
  • *****
  • Posts: 1160
    • View Profile
  • BitShares: speedy
In my opinion the existence of bitUSD-USD gateways is the crucial assumption here and it needs to be fulfilled before we consider anything that is based on this assumption. In other words, there is no point in discussing the upgrade to BitAssets 2.0 (which I generally like) if we keep avoiding the subject of gateways.

The funny thing is that BM seems to realize this:
but fails to address what the plan to make it happen is.

Ive observed that BM announces technical changes, he does not generally announce gateway/integration progress. Its too market sensitive.

jakub

  • Guest
In my opinion the existence of bitUSD-USD gateways is the crucial assumption here and it needs to be fulfilled before we consider anything that is based on this assumption. In other words, there is no point in discussing the upgrade to BitAssets 2.0 (which I generally like) if we keep avoiding the subject of gateways.

The funny thing is that BM seems to realize this:
Instead BitUSD to USD becomes the market that matters and it should develop a very narrow spread as USD flows from users bank accounts to BitUSD to merchants which then sell the BitUSD back to other users. The spreads in BitUSD to USD would be so insignificant that everyone would consider them equal. 
but fails to address what the plan to make it happen is.

This reminds me of discussing the construction of a great ship but forgetting that our shipyard is located 1000 miles from the sea.
Are we having the bike-shedding syndrome?
http://en.wikipedia.org/wiki/Parkinson%27s_law_of_triviality

Fortunately, others seem to share my concerns:
The model seems to rely heavily on there being BitAsset to real asset gateways which we don't have yet.
Merchants can settle into USD in 24hrs for less than 3% with other digital currencies (credit cards/paypal/etc) and there are an endless supply of gateways begging for their business.
Since you already know this, I'm going to assume (due to the above mention of bitUSD to USD conversion being very key) that you already have a third party lined up to be this bitUSD/USD gateway, is that correct?
Otherwise, this entire proposal is merely speculation for many years down the road while someone is located that is willing to handle that business, get all KYC'd up, regulated and more. It seems highly illogical, that you would be making this proposal on the "hope" that someone would come along one day and be that gateway, correct? 

BM, before we discuss BitAssets 2.0 please let us know what your road-map regarding bitUSD-USD gateways is? How realistic is it that this fundamental issue will ever be solved? Would you agree that without the gateways there is no real future for BitShares, no matter if we have BitAssets 1.0 or 2.0? If you don't agree please explain your way of thinking.

I am asking this not because I have anything against BitAssets 2.0 but because I do care about BitShares and I would like to make sure that our priorities are defined correctly.

zerosum

  • Guest
My writing skills (not spelling mind you... my spelling and grammar are laughable at best and non existent at werst) are good enough...

Good enough? For what, a 2nd grade essay in a Spanish elementary school? (No offense to Shakira, who has an excellent mastery of English, not to mention other things :-* ).

Ha!

OK Tom...I will try something simpler for your benefit  the next chance I get. We already established that the sentence "Your collection of antique cars" puts you in a perplexed and uneasy state of mind... So I promise, I will try working on something for your comprehension level.

Offline Thom

My writing skills (not spelling mind you... my spelling and grammar are laughable at best and non existent at werst) are good enough...

Good enough? For what, a 2nd grade essay in a Spanish elementary school? (No offense to Shakira, who has an excellent mastery of English, not to mention other things :-* ).

Ha!
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline Thom

I do not follow the logic or your conclusions? Where did I say those are your thoughts or statements?  I said collection (as in something produced by others and gathered by you in one way or another).  I was just more or less admiring how you managed to collect and extract the parts with said qualities....  :)

As per your own opinions and thoughts I left them on their own...not because I find them right or wrong in general, but because they were on a more or less different subject imo.

Your skill with the English language is terrible Tony. You said the collection was "...purposeless, nonsensical, controversial and..." Since I was the author of the collection, not to mention that you strongly implied there was no rhyme or reason to it, I considered it a slam on me not BM who you didn't mention in your reply. If your issue was not with me but BM you had a very strange way of expressing it, and I doubt anyone would consider what you wrote (if it were a reply to their post) to be complimentary

As for the opinions I expressed, yes they weren't directed at the technical aspects of the OP, but were related to it and to things others posted. So they weren't off in left field. BM was soliciting comments and he didn't restrict them to be only technical or economic in nature.

Good thing I know you have a rather, shall we say, "caustic" style of communication, so even if you were trying to be offensive towards me I doubt it would have an impact.

The two issues I have with you Tony are:
1) how your style puts people off, especially newbies in the community
2) that it's difficult to hear the merits of your position through the layer of inflammatory language you so often use.

Other than that I appreciate your contributions, especially to the opportunities you present me to chk my defensiveness :)

Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline Troglodactyl

  • Hero Member
  • *****
  • Posts: 960
    • View Profile
...
The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral.  Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement.  With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.

If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think.  In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour.  If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours.  Again, I think forced settling is less than ideal anyway.  The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.

While your main point might be correct you are just declaring how this should be rather than suggesting way to do it so!

That and I have no Idea what you  mean by:
"The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral."
Clarification would be appreciated!
Let me point why I ask - The value of recovering the collateral for 'Would be shorter" is 0, so in this regard the value of the bitAsset is also 0?

To create 1 BitUSD currently at the feed, a shorter must lock up at least 2USD worth of BTS collateral, plus 1 USD worth of BTS from the buyer.  To retrieve that collateral, the shorter must provide 1 BitUSD.  The break even position is for the shorter to buy back 1 BitUSD for 1 USD (or 1 USD worth of something) and use it to claim all 3 USD worth of BTS.  The more liquid the market, the lower the margins, and the nearer to break even you can expect to find trades happening at any given moment.  This establishes the price floor: 1 BitUSD is worth 1 USD to shorters because that's what they can pay for it and break even.

Given that such a price floor exists, we can expect price of BitUSD to follow that floor with spread determined by liquidity unless a higher floor supersedes it.  Currently this higher floor is created by the knowledge that shorters are required to cover at feed + 10% when shorts expire, which they've been doing with some regularity.  As long as BitUSD holders expect regular expirations, we should have a peg at about $1.10 instead of $1.

Given that the lower floor should track the peg we actually want, either eliminating expirations completely or forcing them to cover at the feed rather than at feed + 10% should solve this problem.

Offline Thom

Right back at ya TonyK, i.e. the part about "a collection of doubtful, purposeless, nonsensical, controversial and... straight wrong statements!" you have made, so very typical of you dude!

These were pulled straight out of the OP, so apparently you didn't read it very carefully. Sure I paraphrased it a bit, but the meaning is preserved.
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

zerosum

  • Guest
  • Buying 1 BitUSD should always be the most cost effective means to purchase BTS
  • USD : BitUSD market price + BitUSD : BTS market price should be factored into the BTS : USD price feed
  • It is far better for price feeds to error in the favor of BitUSD holders than in the favor of shorts
  • Cashing out of BTS is done more efficiently (for USD through other channels) than using BitUSD
  • Creating BitUSD will always cost more than $1.00
  • BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.


I have no idea how did you come up with those.... but this a collection of doubtful, purposeless, nonsensical, controversial and... straight wrong statements!





The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral.  Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement.  With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.

If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think.  In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour.  If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours.  Again, I think forced settling is less than ideal anyway.  The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.

While your main point might be correct you are just declaring how this should be rather than suggesting way to do it so!

That and I have no Idea what you  mean by:
"The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral."
Clarification would be appreciated!
Let me point why I ask - The value of recovering the collateral for 'Would be shorter" is 0, so in this regard the value of the bitAsset is also 0?
« Last Edit: May 04, 2015, 12:23:19 pm by bytemaster »

Tuck Fheman

  • Guest
Note:  What we have been calling BitAssets 3.0 I am renaming to BitAssets 2.0 for this paper because otherwise everyone outside this forum would be confused if we started talking about 3.0 when 2.0 never existed.     

hah! this totally screws up Buck Fankers's comic strip, although I'm not sure anyone caught the "BitAssets 2.0" jab or not.

maintain a minimum value for the asset but do not attempt to control the maximum value.
+5%

The model seems to rely heavily on there being BitAsset to real asset gateways which we don't have yet.

 +5%

BM,

Merchants can settle into USD in 24hrs for less than 3% with other digital currencies (credit cards/paypal/etc) and there are an endless supply of gateways begging for their business.

Since you already know this, I'm going to assume (due to the above mention of bitUSD to USD conversion being very key) that you already have a third party lined up to be this bitUSD/USD gateway, is that correct?
(please don't say bter is the solution).

Otherwise, this entire proposal is merely speculation for many years down the road while someone is located that is willing to handle that business, get all KYC'd up, regulated and more. It seems highly illogical, that you would be making this proposal on the "hope" that someone would come along one day and be that gateway, correct? 
(yes, it's the same question rephrased =b )

« Last Edit: May 03, 2015, 09:02:50 pm by Tuck Fheman »

Offline Agent86

  • Sr. Member
  • ****
  • Posts: 471
  • BTSX: agent86
    • View Profile
Yea, forced conversion at 99% seems random to me, may as well just make it convertible at 100% if you are going to do it, although I'm generally not a big fan of bitAssets 2.0 formally (formerly?) 3.0.

Should we let people who are force settling at the feed place a limit on what price feed they would accept at the time of settlement?  i.e.  Some news is announced and someone with bitUSD decides BTS is cheap and they request force settlement but by the time 24hrs is over the price has moved so much they don't want to settle at that price.  Or maybe just preventing someone from being completely screwed by a momentary price feed error like a script goes awry.

The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral.  Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement.  With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.

If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think.  In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour.  If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours.  Again, I think forced settling is less than ideal anyway.  The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.
Sure, but Dan is essentially doing away with the main floor on the value of BitAssets by doing away with the rule: no shorting below the feed.  So the only floor left in bitAssets 3.0 is the forced settling.  I also wasn't suggesting allowing longs to cancel settlement; only allow them to specify a floor to the settlement up front at the time they request settlement.  Anyway, I think I'm generally on the same page as you here and I didn't say this is my preferred way of doing things.