BitAsset 2.0 Requirements & Implied Design

[merivercap]

I agree with most of the theory in the other new 2.0 thread, but I'm still hesitant about the design, especially the forced settlement.
It may be good to look at the perspectives of various parties and stress test various scenarios.

Parties:
1) Consumers/Merchants - design is good for them, but couldn't they sell bitUSD for USD directly without having to force settle? The price feed floor should guide the general bitUSD:USD trade above $1 even without any force settling.

2) Traders/Speculators/Investors - are shorts going to have to manage collateral too much?  Are they too vulnerable?  In an extreme bear market, there may be massive forced settlement and a short squeeze?  Will there be a lack of bitUSD creation?

3) Large trade manipulators - can large manipulators influence the market pricing enough to disrupt the possibly broader internal market.  If we have low average volume days in the external markets of let's say $50k, but let's say $10 million worth of bitUSD outstanding.   Can someone accumulate massive bitUSD positions and then bear raid BTS to knock out a large majority of shorts.  (Whale would accumulate large BTS & bitUSD positions.. let's say $200k BTS and $1million bitUSD.  Sell BTS on a low liquidity bear raid (along with FUD on the forums and on media like regular stocks are manipulated).  Short squeeze long BTS holders and force settle $1 million worth of bitUSD. 

Scenarios:
1) Extreme bull markets & bubbles - this market is about leverage for bitUSD creators.  Leverage cuts both ways... and a growth company usually has big swings up and down based on market psychology, greed etc...
 
2) Extreme bear markets - will there be enough shorts to create bitUSD?

Anyways I have to sit down and think deeper about the various scenarios more, but throwing this out there to get thoughts and see if I might be misunderstanding some of these issues.  Thanks! 

[maqifrnswa]

I think the difference here (in contrast to the 'driving the price of bitUSD to 0' in the yearly design) is that in order for this never ending price increase of bitUSD (in X*peg price) to happen, we should have - People paying more and more  for something that is not working (has lost its main characteristic - tracking the USD). And people still paying more and more for this not-working product?!  At the end, all those bitAsset buyers are guaranteed is settling at the feed (i.e. increasingly less than what they paid). This makse this endlessly increasing overpayment quite illogical. And prevents sooner or later of becoming never.

Interesting issue btw. I do enjoy thinking about it.

Thank for thinking about this too, I appreciate the conversation!

My concern isn't that people are still paying more for a non-working product, it's that the system breaks down if everyone expects trends to continue. With no pressure to restore the price back to the feed, it is just as likely to drift from the feed as it is towards - so you can make as much money speculating on drifting away from the median. When does that drifting stop? Since there is no arbitrage, there is no reason for it to stop and there is no reason for it to continue. Once it drifts away you know have your new value with equal chance going towards the median or away. It's the "random walk" of wall street, just with no reason for it to go one way or the other.

Using programming terminology, undersupply of bitUSD is "undefined behavior" while oversupply is handled gracefully with forced calls at 99%.

[Agent86]

Remember this thread? https://bitsharestalk.org/index.php/topic,12724.msg167490.html#msg167490

Bitshares are slowly moving in right direction. I could provide you few months ago with design even better than bitasset 2.0. You might have avoided loosing over $20 mil in market cap.
BTW: With current proposal bts is still overpriced imo.

aaaxn,
Dan has tended to take a pretty hard line against the value of an idea/design in the past.  I disagree with this view and I think it is totally reasonable to compensate you for a unique/unobvious and useful idea that's implemented.  I'm far from convinced that you had / have thought of anything really interesting as there are lots of ideas tossed around and that's why people react with skepticism but I would 110% support you to be well compensated for a good idea that's implemented.  I think if we claim to promote innovation and reward community contribution it should be backed by precedent, and results should be rewarded.  I'm not in a position to personally offer a bounty but I would support you being compensated via delegates who often contribute to things that bring value.  Let us know if you'd like to share.

Ideas have NO MARKET VALUE without ability to execute. 

[Ander]

Remember this thread? https://bitsharestalk.org/index.php/topic,12724.msg167490.html#msg167490

Bitshares are slowly moving in right direction. I could provide you few months ago with design even better than bitasset 2.0. You might have avoided loosing over $20 mil in market cap.
BTW: With current proposal bts is still overpriced imo.

What are your suggestions for improving them further?  What more is needed?

[Ander]

1. An assumption that BitAssets 2.0 depends upon USD/BitUSD gateways  (false assumption)
...
From the perspective of merchants and everyone else you want them to know that 1 BitUSD to USD is the floor and ALWAYS a safe price to exchange at.

Sorry but I don't think you fully understand the "perspective of merchants" or I don't fully understand what the hell you're saying above when it comes to why a merchant would want to accept bitUSD. I can tell a merchant 1 bitUSD = 1 USD all day long, but what good does it do that merchant if they can't get out of bitUSD and into USD quickly (within 24 hours) and easily (without transferring funds to an exchange that is unregulated)? Why should that merchant leave the comfort of a merchant bank who (for 3% or less) handles all of the financials for the merchant and conveniently deposits the funds into their account the next morning?  How will BitShares possibly compete, much less get a foothold with U.S. merchants when there is no regulated gateway (even though you say it's not required, you've offered no solution for the merchants that I can see) to convert to USD? I can even throw in, "hey you're making 3% more!" and it would do no good. 3% more of what? The merchant can't easily convert bitUSD, no one else accepts it, what good is this 3% I've earned if I can't easily convert it to USD?

Dan, I'm down with your plan and all but I can't look at this with rose colored glasses thinking, "one day everyone will just realize how great this is and things will change!". You and I both know that's not going to happen.

• How will the merchant get their USD within 24 hours without a regulated exchange converting bitUSD to USD?
• How much of a hassle will this be for the merchant? They have enough to do without having to handle these conversions themselves.

The only way this makes sense is if you already have a deal lined up with someone like CoinBase and you simply can't say at this time.  Otherwise, as you've explained it in this thread and the original, the idea of merchants accepting bitUSD is a pipe dream IMHO. There's simply no way I could possibly convince a merchant to accept bitUSD with the terms you've outlined in both post, regardless of 1:1.03. And since you're much smarter than I will ever be, I'm going to watch you shoot down my entire post piece by piece and gently explain to me how this will work, so that I can easily explain it to merchants, because what you are reading right now is the "perspective of merchants".  "How am I going to get my money Dan?"

I agree that the regulated exchange (aka, the Gateway between fiat and bitassets) is a key part of the plan.  Without it we cannot have merchant adoption. 

[aaaxn]

Remember this thread? https://bitsharestalk.org/index.php/topic,12724.msg167490.html#msg167490

Bitshares are slowly moving in right direction. I could provide you few months ago with design even better than bitasset 2.0. You might have avoided loosing over $20 mil in market cap.
BTW: With current proposal bts is still overpriced imo.

[carpet ride]

Will 2.0 face the same liquidity challenges as 1.0?


Sent from my iPhone using Tapatalk

[Buck Fankers]

1. An assumption that BitAssets 2.0 depends upon USD/BitUSD gateways  (false assumption)
...
From the perspective of merchants and everyone else you want them to know that 1 BitUSD to USD is the floor and ALWAYS a safe price to exchange at.

Sorry but I don't think you fully understand the "perspective of merchants" or I don't fully understand what the hell you're saying above when it comes to why a merchant would want to accept bitUSD. I can tell a merchant 1 bitUSD = 1 USD all day long, but what good does it do that merchant if they can't get out of bitUSD and into USD quickly (within 24 hours) and easily (without transferring funds to an exchange that is unregulated)? Why should that merchant leave the comfort of a merchant bank who (for 3% or less) handles all of the financials for the merchant and conveniently deposits the funds into their account the next morning?  How will BitShares possibly compete, much less get a foothold with U.S. merchants when there is no regulated gateway (even though you say it's not required, you've offered no solution for the merchants that I can see) to convert to USD? I can even throw in, "hey you're making 3% more!" and it would do no good. 3% more of what? The merchant can't easily convert bitUSD, no one else accepts it, what good is this 3% I've earned if I can't easily convert it to USD?

Dan, I'm down with your plan and all but I can't look at this with rose colored glasses thinking, "one day everyone will just realize how great this is and things will change!". You and I both know that's not going to happen.

• How will the merchant get their USD within 24 hours without a regulated exchange converting bitUSD to USD?
• How much of a hassle will this be for the merchant? They have enough to do without having to handle these conversions themselves.

The only way this makes sense is if you already have a deal lined up with someone like CoinBase and you simply can't say at this time.  Otherwise, as you've explained it in this thread and the original, the idea of merchants accepting bitUSD is a pipe dream IMHO. There's simply no way I could possibly convince a merchant to accept bitUSD with the terms you've outlined in both post, regardless of 1:1.03. And since you're much smarter than I will ever be, I'm going to watch you shoot down my entire post piece by piece and gently explain to me how this will work, so that I can easily explain it to merchants, because what you are reading right now is the "perspective of merchants".  "How am I going to get my money Dan?"

[jsidhu]

 

[Ander]

Another point for Merchants:

1) Offer to accept BitUSD at face value and you get to keep the premium (a couple of percent).   Hence, rather than Credit Cards which the merchant pays 3% with BitUSD they can earn up to 3%.   
2) Offer a 3% discount for paying in BitUSD and thus generate more business. 

Either way, merchants now have incentive to accept BitUSD at face value *AND* to promote it as the preferred means of payment.

A bitUSD generally being worth at least $1.00, and often a bit more, is a nice system for encouraging merchant adoption. 

[Empirical1.2]

The changes you propose for BitAssets, although an improvement, aren't likely to have much if any impact on the BitShares marketcap or adoption.

http://www.zerohedge.com/news/2015-04-25/war-cash-migrates-switzerland
http://www.zerohedge.com/news/2015-04-30/war-cash-transparently-totalitarian
http://www.zerohedge.com/news/2015-04-23/largest-bank-america-joins-war-cash
http://www.zerohedge.com/news/2015-05-04/war-cash-australia-leads-new-age-economic-totalitarianism


Whoever gets BitAssets right, (private, liquid, decentralized) wins big.

[cube]

The changes you propose for BitAssets, although an improvement, aren't likely to have much if any impact on the BitShares marketcap or adoption.

I beg to differ on this. If BitAssets (core product) has the right incentive for the traders, the shorters, the bitUSD holders and the merchants to use it, it would create a big pull for adoption. 

[zerosum]

I gave it a little bit of thought after responding to you in the other thread - the answer is arbitrage opportunity do exist => short bitUSD on the BTS exchange and go long real USD...it should make you about 10% sooner or later. BTW in this regard 100% collateral as apposed to the current 200% helps a lot!

I don't think that helps since we already know USD and bitUSD are decoupled. This was tried before feeds were introduced, the peg failed because sooner or later never happened (and would never happen). The only winning move is not to short out of fear of market ovetcaptilization leading to decoupling from USD.

I think the difference here (in contrast to the 'driving the price of bitUSD to 0' in the yearly design) is that in order for this never ending price increase of bitUSD (in X*peg price) to happen, we should have - People paying more and more  for something that is not working (has lost its main characteristic - tracking the USD). And people still paying more and more for this not-working product?!  At the end, all those bitAsset buyers are guaranteed is settling at the feed (i.e. increasingly less than what they paid). This makse this endlessly increasing overpayment quite illogical. And prevents sooner or later of becoming never.

Interesting issue btw. I do enjoy thinking about it.

[maqifrnswa]

I gave it a little bit of thought after responding to you in the other thread - the answer is arbitrage opportunity do exist => short bitUSD on the BTS exchange and go long real USD...it should make you about 10% sooner or later. BTW in this regard 100% collateral as apposed to the current 200% helps a lot!

I don't think that helps since we already know USD and bitUSD are decoupled. This was tried before feeds were introduced, the peg failed because sooner or later never happened (and would never happen). The only winning move is not to short out of fear of market ovetcaptilization leading to decoupling from USD.

[BTSdac]

too many words  , it is difficult to understand
HI BM
 if the feed price bitusd:bts=1, the bts holder want to settle ,   how many BTS they can got  per bitusd    0.99BTS or 1.01 BTS ?