Collateral

[cylonmaker2053]

The level of counter-party exposure will depend on the counter-party risk inherent in the underlying collateral and the minimum collateral requirements to protect against sudden devaluations. In v 2.0 these will be more flexible and specific to each Smartcoin. So its probably best not to make general statements, other than to say the collateral mechanism aims to substantially reduce counter-party risks.

agreed on the counterparty risk marketing perspective. i didn't realize the 'smartcoins' in 2.0 will have unique collateral requirements...interesting. 

[starspirit]

The level of counter-party exposure will depend on the counter-party risk inherent in the underlying collateral and the minimum collateral requirements to protect against sudden devaluations. In v 2.0 these will be more flexible and specific to each Smartcoin. So its probably best not to make general statements, other than to say the collateral mechanism aims to substantially reduce counter-party risks.

[cylonmaker2053]

saying there's no counterparty risk may be too optimistic, it's just reduced with the collateral requirements. think worst case scenario where the entire BTS network takes a dive and the party short to your long forfeits collateral. sure, you get the collateral at the instantaneous liquidation price, but your ability to turn that BTS into whatever exit currency you want could be severely limited and you may be liquidating your own position at a big disadvantage. i guess that's pushing into the realm of systemic risk, but risk is risk...parsing by terminology could be misleading.

Since the blockchain is in control of the collateral, it's your counterparty risk meaning the entire system would have to fail for you to lose your funds. Unlike dealing with a 3rd party iou outside of you and the blockchain that could fail.
[/quote]

true, that's the systemic risk aspect ...pure counterparty risk in dealing with whoever is on the other side of any particular bitasset trade is mitigated by the blockchain. maybe not termed 'counterparty' risk, but certainly important, is that in a volatile market it could be difficult to locate another counterparty to initiate a trade to exit the BTS network into whatever other medium you may want:

e.g. you own bitUSD, market crashes, auto cover is triggered and counterparty's collateral released to you, you try to sell your BTS for USD and end up taking a big haircut getting funds out. that could be very very nontrivial, so we shouldn't tout too loudly that our products have NO counterparty risk, just that it is reduced.

[cylonmaker2053]

That makes sense. Thanks
1. Realistically then we're sort of in beta until 2.0 is up and running. That's at the end of summer from what I read.

2. Bitshares isn't really a coin as such, like the others. So why are we viewed as a competitor to bitcoin rather than complimentary to facilitate transactions?

Apologies for all the questions

no bother at all with questions...always happy to contribute however i can.

i guess you could view Bitshares as being in beta right now, but it is currently creating valuable market pegged products for customers (or likely, mostly just us BTS fans playing around with it at the moment).

i've heard many a debate on how to view BTS vs. BTC and the other crypto currencies...it really is a matter of perspective and definition. i consider BTS to be shares in the Bitshares venture, which has a function to create market pegged assets. the BTS tokens can be used to transfer value just like BTC, so in some sense it could be in competition, but i think that's just tangential, like people COULD use stock shares to transfer value and crypto currencies and assets are just far more efficient to transfer.

Anyway, happy to have you in the community!

[Permie]

Hopefully you will come to see the potential of Bitshares.  It has many levels.  Hopefully the devs can succeed in getting us a strong product, and then the community can succeed in promoting it to a high level of success.  Hopefully we can make it to at least the first marker of success: a profitable exchange.  And then after that we can see if the project can change the world.

10/10 analysis Ander!
No-one can know for sure what will happen, but if bts is still alive in a years time then it will almost certainly be more valuable than it is today

To any other lurkers or newbies reading - Feel free to ask as many questions as you like! We are a welcoming bunch, here and it is in everyone's interest for new people to learn more about BitShares

[Ander]

2. Bitshares isn't really a coin as such, like the others. So why are we viewed as a competitor to bitcoin rather than complimentary to facilitate transactions?

Welcome!


BTS shares the same store-of-value function in the Bitshares blockchain that BTC does in the Bitcoin blockchain.  Both are similar to gold in this aspect.  (Store of value of course does not mean price stable.  Gold fluctuates in price a lot).


Bitcoin has the added benefit over gold of being transferable anywhere around the world in 10 minutes, with a network limit of 7 TPS (until they change the blocksize).


Bitshares has the added benefit over gold of being transferable anywhere in the world in 1 second, with a network limit of 100,000 TPS (once Bitshares 2.0 releases).  Additionally it acts as collateral that allows you to create SmartCoins, that is, price stable currencies, linked to the value of a dollar, euro, yuan, gold, silver, stock market index, etc.  (Nothing in bitcoin does this)  Additionally it provides voting stake in the running of the blockchain, and its policies.  Additionally it allows you to collect dividends from the profit created by the blockchain fees.  (These last two are equivalent to hash power in bitcoin, which requires you to burn energy to get them, while in Bitshares you do not have to burn energy).


This is why BTS can be seen as a competitor to Bitcoin.  (One with far greater technical  potential, but that potential is not yet realized due to still 'being in beta', and not having as large of a network effect). 


On the other hand, Bitshares could end up working together with Bitcoin.  Bitshares can serve as the trading exchange, like Bitfinex or Bitstamp, but without the possibility of being hacked, and with all balances visible on the blockchain so that you can be sure that someone isnt running a fractional reserve scheme.  In this mode, Bitshares acts like a profitable DOA (I avoided saying company or corporation), making profits on trades, and distributing them to shareholders (via burning of fees).  That is, people buy BTS to use the network, driving the price up, and then some of the BTS is burned to pay for the transaction fee.   In this scenario, Bitcoin could maintain its store of value function, while Bitshares generates profits for holders while being complementary to bitcoin.

Bitshares doesn't have to take over and become the #1 cryptocurrency in order to be a success.  (Unlike all the bitcoin copy, proof of work coins, which have no purpose except to try to become the store of value by replacing bitocin, or to try to become the backup in case bitcoin fails, like litecoin).  Bitshares can succeed by competing against Bitfinex and OkCoin and so on (or getting them to adopt it themselves, joining the Bitshares exchange network, as the CCEDK exchange is doing).

It looks to me that the focus right now is on option #2.  If Bitshares becomes a profitable exchange but never makes it farther than that, it would still be a success.  It would increase greatly in value, and pay dividends.

Stage 1 (becoming an exchange) is collaborative with other cryptocurrencies like Bitcoin.   It helps people trade them without being subject to the risk of having coins on exchanges, and getting Goxxed.


But it might be able to go farther.  It might be able to supplant Bitcoin as a store of value as well (if it takes off and gets heavily adopted, first for use as a trading platform).  Or rather than supplanting Bitcoin as the store of value coin, Bitshares might succeed in other functions, such as becoming the voting system for elections, the DNS system of the web, or prediction markets, and so on.  These are added possibilities but not requirements for success.  Its kindof like how Tesla has started out by making cars, but really they have a dream of changing how the world uses and stores energy.  The cars are just the first stage, to get them a revenue stream, and adoption, so they can build their dream.



It makes sense to focus on the first measure of success first, which is to become a profitable exchange, paying dividends to BTS holders.  This also ensures a revenue stream and thus secures the future of the project.  (Funding issues have been the primary threat so far to Bitshares, the crypto bear market was brutal). 

Hopefully you will come to see the potential of Bitshares.  It has many levels.  Hopefully the devs can succeed in getting us a strong product, and then the community can succeed in promoting it to a high level of success.  Hopefully we can make it to at least the first marker of success: a profitable exchange.  And then after that we can see if the project can change the world.

[Pheonike]

When you sell your bitGOLD you will get 1 ounce of gold in the value of bitshares.

So lets say you bought bitGOLD for $1200 while bts was valued at $.024, this costs 50,000 bitshares.

Now you sell your bitGOLD for $1140 today while bts is valued at $.006 today, you receive 190,000 bitshares.

You just made a great trade and nearly quadrupled the amount of bitshares you had.

I see, so as long as the bitshares network remains viable i would always have bts available to cash out my position. Thank you for the clarification.

I must confess, I like your video KenCode. As someone who is not a trader I would like to understand the how to interpret these bitshares screens, but i love the idea of being able to save in different currencies and commodities.

I see people saying that there is no counter party risk, is that really true?

saying there's no counterparty risk may be too optimistic, it's just reduced with the collateral requirements. think worst case scenario where the entire BTS network takes a dive and the party short to your long forfeits collateral. sure, you get the collateral at the instantaneous liquidation price, but your ability to turn that BTS into whatever exit currency you want could be severely limited and you may be liquidating your own position at a big disadvantage. i guess that's pushing into the realm of systemic risk, but risk is risk...parsing by terminology could be misleading.

Since the blockchain is in control of the collateral, it's your counterparty risk meaning the entire system would have to fail for you to lose your funds. Unlike dealing with a 3rd party iou outside of you and the blockchain that could fail.

[fav]

When you sell your bitGOLD you will get 1 ounce of gold in the value of bitshares.

So lets say you bought bitGOLD for $1200 while bts was valued at $.024, this costs 50,000 bitshares.

Now you sell your bitGOLD for $1140 today while bts is valued at $.006 today, you receive 190,000 bitshares.

You just made a great trade and nearly quadrupled the amount of bitshares you had.

I see, so as long as the bitshares network remains viable i would always have bts available to cash out my position. Thank you for the clarification.

I must confess, I like your video KenCode. As someone who is not a trader I would like to understand the how to interpret these bitshares screens, but i love the idea of being able to save in different currencies and commodities.

I see people saying that there is no counter party risk, is that really true?

saying there's no counterparty risk may be too optimistic, it's just reduced with the collateral requirements. think worst case scenario where the entire BTS network takes a dive and the party short to your long forfeits collateral. sure, you get the collateral at the instantaneous liquidation price, but your ability to turn that BTS into whatever exit currency you want could be severely limited and you may be liquidating your own position at a big disadvantage. i guess that's pushing into the realm of systemic risk, but risk is risk...parsing by terminology could be misleading.

That makes sense. Thanks
1. Realistically then we're sort of in beta until 2.0 is up and running. That's at the end of summer from what I read.

2. Bitshares isn't really a coin as such, like the others. So why are we viewed as a competitor to bitcoin rather than complimentary to facilitate transactions?

Apologies for all the questions

no need to apologize. questions are always welcome

I don't see bitshares as a competitor to bitcoin btw

[MJK]

When you sell your bitGOLD you will get 1 ounce of gold in the value of bitshares.

So lets say you bought bitGOLD for $1200 while bts was valued at $.024, this costs 50,000 bitshares.

Now you sell your bitGOLD for $1140 today while bts is valued at $.006 today, you receive 190,000 bitshares.

You just made a great trade and nearly quadrupled the amount of bitshares you had.

I see, so as long as the bitshares network remains viable i would always have bts available to cash out my position. Thank you for the clarification.

I must confess, I like your video KenCode. As someone who is not a trader I would like to understand the how to interpret these bitshares screens, but i love the idea of being able to save in different currencies and commodities.

I see people saying that there is no counter party risk, is that really true?

saying there's no counterparty risk may be too optimistic, it's just reduced with the collateral requirements. think worst case scenario where the entire BTS network takes a dive and the party short to your long forfeits collateral. sure, you get the collateral at the instantaneous liquidation price, but your ability to turn that BTS into whatever exit currency you want could be severely limited and you may be liquidating your own position at a big disadvantage. i guess that's pushing into the realm of systemic risk, but risk is risk...parsing by terminology could be misleading.

That makes sense. Thanks
1. Realistically then we're sort of in beta until 2.0 is up and running. That's at the end of summer from what I read.

2. Bitshares isn't really a coin as such, like the others. So why are we viewed as a competitor to bitcoin rather than complimentary to facilitate transactions?

Apologies for all the questions

[cylonmaker2053]

When you sell your bitGOLD you will get 1 ounce of gold in the value of bitshares.

So lets say you bought bitGOLD for $1200 while bts was valued at $.024, this costs 50,000 bitshares.

Now you sell your bitGOLD for $1140 today while bts is valued at $.006 today, you receive 190,000 bitshares.

You just made a great trade and nearly quadrupled the amount of bitshares you had.

I see, so as long as the bitshares network remains viable i would always have bts available to cash out my position. Thank you for the clarification.

I must confess, I like your video KenCode. As someone who is not a trader I would like to understand the how to interpret these bitshares screens, but i love the idea of being able to save in different currencies and commodities.

I see people saying that there is no counter party risk, is that really true?

saying there's no counterparty risk may be too optimistic, it's just reduced with the collateral requirements. think worst case scenario where the entire BTS network takes a dive and the party short to your long forfeits collateral. sure, you get the collateral at the instantaneous liquidation price, but your ability to turn that BTS into whatever exit currency you want could be severely limited and you may be liquidating your own position at a big disadvantage. i guess that's pushing into the realm of systemic risk, but risk is risk...parsing by terminology could be misleading.

[MJK]

When you sell your bitGOLD you will get 1 ounce of gold in the value of bitshares.

So lets say you bought bitGOLD for $1200 while bts was valued at $.024, this costs 50,000 bitshares.

Now you sell your bitGOLD for $1140 today while bts is valued at $.006 today, you receive 190,000 bitshares.

You just made a great trade and nearly quadrupled the amount of bitshares you had.

I see, so as long as the bitshares network remains viable i would always have bts available to cash out my position. Thank you for the clarification.

I must confess, I like your video KenCode. As someone who is not a trader I would like to understand the how to interpret these bitshares screens, but i love the idea of being able to save in different currencies and commodities.

I see people saying that there is no counter party risk, is that really true?

[cylonmaker2053]

By the way, here's a great Gold dealer that prefers bitGold too:
http://cryptosmith.info

that's awesome! the power of our network only grows with every new brick and mortar business that starts using our products.

[kenCode]

By the way, here's a great Gold dealer that prefers bitGold too:
http://cryptosmith.info

[lil_jay890]

When you sell your bitGOLD you will get 1 ounce of gold in the value of bitshares.

So lets say you bought bitGOLD for $1200 while bts was valued at $.024, this costs 50,000 bitshares.

Now you sell your bitGOLD for $1140 today while bts is valued at $.006 today, you receive 190,000 bitshares.

You just made a great trade and nearly quadrupled the amount of bitshares you had.

[kenCode]

Hi MJK and welcome to BitShares!

Here's a short video that may help:
https://youtu.be/kVdw1TbyDV4?list=PLjbx3qSmDe7SLa-ueEmdsVevj4d3xPO83
 
Let me know if I can be of any assistance and again, Welcome!
  ken

[MJK]

Hi,

I am new to Bitshares and crypto in general, so please excuse the newbie questions.

I am trying to understand how bitshares works and I read about how it is 300% collateralized. So for example, if i purchase 1 ounce of BitGold for $1200 worth of bitshares and after 6 months the price of bitshares went down 400%, how am i guaranteed that i will still get back my 1 ounce of BitGold?

Thanks
MJ