BitAsset 2.0 Requirements & Implied Design

[xiahui135]

Make a simple rules ,discard suplus part.
It is only way to resolve issues.
Don't fear liquidity not enough. don't fear BTS's price volatility，Please let BTS adjust by itself。
Most people like me just fear the complex rules, so not like trade in BTS.
Make rules simple , Will bring more people trade in it.

Yes, this should be basic rules!

[merivercap]

It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 

Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

Lol.  You can use google translate, but you can see the exchange rates w/o translation. Free market?  A gateway is an exchange.  People buy or sell voluntarily... Not sure what you mean exactly...

I'm making some educated guesses here about how gateways operate. In free markets relative supply and demand can be measured by a floating price. Gateways on the other hand may adopt a fixed price for promotional purposes, or out of faith that the free market will hover around parity. So you wouldn't immediately see lopsided market demand in their price, only in their inventory. Ultimately they have to adjust to meet the market price, but for quite a long time they could hold their fixed prices somewhere different until it is clear that their inventories can't sustain it any longer. [I don't know how transwise manage things internally, but there is some insight here... https://bitsharestalk.org/index.php/topic,15759.msg202527.html#msg202527]

I suspect the best comfort we could offer gateways and other market makers is a commitment to having the mechanisms in place to restore parity when prices drift. That way they can be assured of being able to offset their inventory in the market when required and being able to maintain their prices around that. But it would be useful to get the view from gateways themselves.

Thanks for the link.  I think it's good to analyze the business of this gateway.  The main problem it seems Transwiser mentions in his comment was a lack of access to bitCNY supply and a desire to have a preference for self-shorting so it can buy its own bitCNY before others so they can fill the demand.  It's more about the lack of supply of bitCNY caused either by the bear market in BTS or the design that is unfavorable for shorts or both.  In any case the system seems to be running fine, but I can see how lack of supply can effect the business. 

I don't believe the gateway issues has anything to do with the peg.  (You might be trying to solve an impossibility if you start with assumption that bitUSD & BTS are both volatile and that you are somehow trying to peg them together.)  The better way is to assume bitUSD is stable and that way you can track BTS volatility and price moves. 

Gateway businesses enforce the 1:1 peg and charge a fee, either to buy bitCNY or sell bitCNY.  In this case Transwiser charges for buying bitCNY.  So everyone can sell bitCNY and get CNY 1:1.  In a ecosystem of consumers/merchants the bitCNY to CNY can get transferred back and forth between each other 1:1 without ever having going to a cryptoexchange.  If the demand for bitCNY increases, the gateway just has to buy or create more bitCNY to match the demand.  If the gateway creates bitCNY by self-shorting, it doesn't really care if BTS goes up or down because bitCNY will maintain value...It's on both sides of the CFD contract.  All the gateway needs is the BTS collateral to short.  The gateway just wants to fill general bitCNY demand.  It can continually create supply by self-shorting as much bitCNY demand there is and not worry.

The bigger problem is there is just a lack of bitCNY creation.  Worse yet, the proposed design of unlimited forced-settlement won't allow the gateway to maintain their self-shorts and maintain the supply of bitCNY necessary to promote general use.   I would be interested in helping set up a similar bitUSD/bitGold ecosystem as Transwiser and create supply by self-shorting if it weren't for the forced settlement rules. 

[starspirit]

It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 

Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

Lol.  You can use google translate, but you can see the exchange rates w/o translation. Free market?  A gateway is an exchange.  People buy or sell voluntarily... Not sure what you mean exactly...

I'm making some educated guesses here about how gateways operate. In free markets relative supply and demand can be measured by a floating price. Gateways on the other hand may adopt a fixed price for promotional purposes, or out of faith that the free market will hover around parity. So you wouldn't immediately see lopsided market demand in their price, only in their inventory. Ultimately they have to adjust to meet the market price, but for quite a long time they could hold their fixed prices somewhere different until it is clear that their inventories can't sustain it any longer. [I don't know how transwise manage things internally, but there is some insight here... https://bitsharestalk.org/index.php/topic,15759.msg202527.html#msg202527]

I suspect the best comfort we could offer gateways and other market makers is a commitment to having the mechanisms in place to restore parity when prices drift. That way they can be assured of being able to offset their inventory in the market when required and being able to maintain their prices around that. But it would be useful to get the view from gateways themselves.

[merivercap]

It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 

Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

Lol.  You can use google translate, but you can see the exchange rates w/o translation. Free market?  A gateway is an exchange.  People buy or sell voluntarily... Not sure what you mean exactly...

[profitofthegods]

Yield is only OK, once we have guaranteed liquidity (walk before you run).

Of course both is better.

As long as we are offering the most competitive (stable-coin) product.

Guaranteed liquidity plus variable yield would be an absolutely incredible offering (if SuperDan could pull it off)

Most of the interest should flow to bts holder and the delegate.
As they support and serve for the bitasset holder.
And some interest should be saved as money to save the market. This can make the peg more tight.
There should no interest for bitasset holder, because they just hold the cash. If they want interest, they should rent the money to the bank or bond market.

As long as investors are made aware of how it works, greater demand for BitAssets should drive up the value of BTS, because a higher value of BTS will be required to short the assets into existence. Demand for BitAssets should therefore be encouraged, and BTS holders should expect to profit from the increasing value rather than needing additional dividends.

Current problems with the peg are at least partially due to insufficient new investors. That is something that can be remedied.

I think eventually BitAssets with yield will be a big draw for Bitshares, perhaps the biggest.

[xiahui135]

Yield is only OK, once we have guaranteed liquidity (walk before you run).

Of course both is better.

As long as we are offering the most competitive (stable-coin) product.

Guaranteed liquidity plus variable yield would be an absolutely incredible offering (if SuperDan could pull it off)

Most of the interest should flow to bts holder and the delegate.
As they support and serve for the bitasset holder.
And some interest should be saved as money to save the market. This can make the peg more tight.
There should no interest for bitasset holder, because they just hold the cash. If they want interest, they should rent the money to the bank or bond market.

[xiahui135]

merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html

I read through what I could, but I might need a summary version. 

If the idea is that the market can be fixed externally, that sounds good.  We don't currently have any bitUSD:USD markets to reference.  However we do have a bitCNY:CNY market: https://www.transwiser.com/

I'm not clear on the exact mechanisms of the website, but it would be interesting to know.  The peg seems reasonably tight.

Rather than unlimited forced-settlement, I think daily settlement at the price feed for undercollateralized positions should bring enough volume to tie pricing to an external price feed as you want.   We want to have long term shorters to maintain enough supply for bitUSD holders.  Shorters need predictability.

Summary version:
- On any day when the external bitUSD:USD market falls below 1:1, this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over parity

It does not require a bitUSD:USD market necessarily, but if not, it does require at least one external market where both bitUSD and USD trade against a liquid asset like BTC, so that a bitUSD:USD exchange ratio can be inferred (edit: actually any bitUSD market will suffice as long as there is a path to USD).

I think your idea to not force-settle under any price scenario, and just cover under-collateralized positions (which only depends on BTS), would allow the external bitUSD:USD external rate to swing further from the peg, as there is no mechanism to force it back toward parity.

I am against the settlement is that the bitusd can settle for bts any time.
I agree with the system force-settle when the bts collateral is not enough. In this situation, once the collateral is under some level, say 120%, the market should force the short to cover.
The martket rules should be simple and fair to two side. This make the market work.

As to pegging of bitusd, it should be realised by market make. As the bitasset is well backed, pegging can be done via market make.
You idea sounds you want to use the collateral to do market make work to support the bitusd price. But when bitusd is higher than usd, people will not willing short more bitusd. I think this should be.considered.

[bytemaster]

To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.

This is a fair point. 

[starspirit]

It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 

Is there an English version? Unfortunately I can't read Chinese. But it seems to be a gateway rather than an exchange. So its not a free market?

[helloworld]

Make a simple rules ,discard suplus part.
It is only way to resolve issues.
Don't fear liquidity not enough. don't fear BTS's price volatility，Please let BTS adjust by itself。
Most people like me just fear the complex rules, so not like trade in BTS.
Make rules simple , Will bring more people trade in it.

[merivercap]

Summary version:
- On any day when the external bitUSD:USD market falls below 1:1, this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over parity

It does not require a bitUSD:USD market necessarily, but if not, it does require at least one external market where both bitUSD and USD trade against a liquid asset like BTC, so that a bitUSD:USD exchange ratio can be inferred (actually any bitUSD market will suffice as long as there is a path to USD).

I think your idea to not force-settle under any price scenario, and just cover under-collateralized positions (which only depends on BTS), would allow the external bitUSD:USD external rate to swing further from the peg, as there is no mechanism to force it back toward parity.

Thanks for the summary.

 It seems to be better than unlimited forced-settlement, but it seems over-complicated and I don't have as much fear as you in regards to the peg.  Did you check out: https://www.transwiser.com/?  That's the only CNY:bitCNY market I know and it's pretty much 1:1. 

I think many of the designs in the past have been over-complicated.  Participants in a  free market will eventually work around any of the complications, but it's better to achieve the same result with a much simpler design.  A simple design reduces the chances of manipulation and  lowers the barriers to entry for market participants and will increase liquidity.

[starspirit]

Following my last post, I want to consider the limit case where the only bitUSD market is the internal one, as is the case currently. Then BTS is the only path to USD, and the method resolves as follows:

- On any day when the bitUSD:BTS market falls below the price feed, the inferred value of a bitUSD is less than a USD, and this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over the feed price

So in the limit case, the difference to BTA 2.0 is that:
- supply reduction is automatically enforced rather than triggered by settlement requests from individual longs
- the cover price for shorts is a market price, rather than the feed price, with all participants given 24 hour notice to ensure full information and fair pricing

The advantage of this approach might be that a long can no longer manipulate the BTS price to their benefit, because they compete for the BTS made available through the short covers, including with new shorts. Even if somebody owned 100% of the bitUSD, they can only force out blocks of BTS gradually around the price feed, because whenever it goes over that price the short covers stop.

Shorts are protected from unfair pricing by the 24 hour market notice period and by taking account of market conditions in setting block sizes. Block sizes would err on the lower side, and may require several periods to remove the market discount.

As bitUSD found wider external acceptance, the shortest path to USD would be external markets, and preferably bitUSD:USD markets, and its the discounts in those markets that would trigger the short covers. This would demonstrate a commitment to underpin parity in the broader market.

Still just an early idea though.

[Edit: In fact, the short cover procedure is a lot like the way short expiries work, when they are subject to paying no more than the feed price (100%). The main benefit here is that rather than having forced expiries which are often unnecessary when bitUSD is trading at or above parity, we are only forcing covers when there is a discount, and covering from the shorts that are the least keen to hold their position.]

[starspirit]

merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html

I read through what I could, but I might need a summary version. 

If the idea is that the market can be fixed externally, that sounds good.  We don't currently have any bitUSD:USD markets to reference.  However we do have a bitCNY:CNY market: https://www.transwiser.com/

I'm not clear on the exact mechanisms of the website, but it would be interesting to know.  The peg seems reasonably tight.

Rather than unlimited forced-settlement, I think daily settlement at the price feed for undercollateralized positions should bring enough volume to tie pricing to an external price feed as you want.   We want to have long term shorters to maintain enough supply for bitUSD holders.  Shorters need predictability.

Summary version:
- On any day when the external bitUSD:USD market falls below 1:1, this instantly triggers a block of shorts to be selected for calling
- Calling is implemented like a margin cover, by buying bitUSD with the collateral, but with 24 hour notice to the market
- This could continue on consecutive days until the ask returns back to or over parity

It does not require a bitUSD:USD market necessarily, but if not, it does require at least one external market where both bitUSD and USD trade against a liquid asset like BTC, so that a bitUSD:USD exchange ratio can be inferred (edit: actually any bitUSD market will suffice as long as there is a path to USD).

I think your idea to not force-settle under any price scenario, and just cover under-collateralized positions (which only depends on BTS), would allow the external bitUSD:USD external rate to swing further from the peg, as there is no mechanism to force it back toward parity.

[merivercap]

merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html

I read through what I could, but I might need a summary version. 

If the idea is that the market can be fixed externally, that sounds good.  We don't currently have any bitUSD:USD markets to reference.  However we do have a bitCNY:CNY market: https://www.transwiser.com/

I'm not clear on the exact mechanisms of the website, but it would be interesting to know.  The peg seems reasonably tight.

Rather than unlimited forced-settlement, I think daily settlement at the price feed for undercollateralized positions should bring enough volume to tie pricing to an external price feed as you want.   We want to have long term shorters to maintain enough supply for bitUSD holders.  Shorters need predictability.

[starspirit]

merivercap, xiahui135, others interested - I had an initial go at a structure as an alternative to forced settlement in the internal market. You can see it here. https://bitsharestalk.org/index.php/topic,16352.0.html