Author Topic: Can we copy MakerDao blackswan mitigation techniques?  (Read 820 times)

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Offline ElMato

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Can we copy MakerDao blackswan mitigation techniques?
« on: September 10, 2015, 10:47:58 pm »
--disclaimer: not an expert talking--

I think we will have a robust system when 2.0 is out and running.

- Clear and defined governance model
- Ability to (de)centralize at will
- Aligned economic incentives
- A good degree of privacy

Among other excellents features such as smartcoins, transaction speed, scalability, copay-on-protocol, etc, etc, etc.

Looking at MakerDao, one of the things that sounds interesting is the actions their planned to mitigate the effects of a blackswan.

I know that "printing" more BTS is a sensible subject in the community, but i think in an scenario like this.

Supose that 2 years have passed from now and the marketcap of bitUSD is 100M USD, basically a lot of people is using it as a medium of exchange etc etc. Suddenly a black swan event ocurrs, the rainy-day pool is not enough to cover all, and we declare the bitUSD market dead and everyone gets their bitUSD swaped by (what is left) BTS.

Bad publicity and difficult to restart confidence in the sysmtem again.

Should we as stake holders take the losse on it in order to keep the business running?

Offline Akado

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Re: Can we copy MakerDao blackswan mitigation techniques?
« Reply #1 on: September 10, 2015, 10:59:42 pm »
Couldn't we vote on 2.0 for that?
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Offline ElMato

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Re: Can we copy MakerDao blackswan mitigation techniques?
« Reply #2 on: September 10, 2015, 11:27:11 pm »
I think we can vote for "void workers" that put their salary back to the pool (i dont have a link to that nice flow-graph) but i don't know if that BTS pool can also work to help in the rescue.

I don't think that we can vote (at least for the moment) to increase the supply, maybe with a hard fork in the future.

But anyway that will happen after the market (bitUSD) is defunct.

If we want to take the loose we need (speaking without much knowledge) a way to gradually re-collateralize the debts that are undercollateralized first accelerating the drain of the BTS pool and if we are short printing more BTS ... (does it make any sense?)



Offline Bitcoinfan

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Re: Can we copy MakerDao blackswan mitigation techniques?
« Reply #3 on: September 11, 2015, 12:30:22 am »
I'm not familiar with Maker's techniques, but I'm sure if it uses a trading book, it too is exposed to Black Swan regardless.

I've actually figured out a way to get a pegged asset that is not vulnerable to black swans at all.  It uses a non-expiring LMSR that is being worked into prediction markets.  This is probably the simplest and functional way to create bitassets.  If I were you I'd pay close attention, cause like Truthcoin slipping out of Bitshares hands, this could as well.  Cause its possible it will get adopted by everyone. 

http://forum.truthcoin.info/index.php/topic,206.msg1074.html#msg1074

Offline Rune

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Re: Can we copy MakerDao blackswan mitigation techniques?
« Reply #4 on: September 11, 2015, 01:22:03 am »
I actually proposed a simple social contract as an insurance mechanism ages back. So the shareholders could simply vote for delegates that would publicly support a future hard fork to print new BTS in case of a black swan event. But inflation is always a touchy subject, and especially if hardcoded as it could create a true nightmare where the BTS price could literally go to 0 with infinite inflation (this is also a possibility for MKR unless we allow the Dai to depreciate in the case of a total meltdown).

Even if a native insurance scheme doesn't become reality, we will make privatized bitassets collateralized by the Dai ourselves, so there will be BitAssets with collateral insurance on BTS 2.0 within a reasonable amount of time (hopefully before a black swan event ever happens - and initially using an exchange as a gateway until trustless two way pegs exist). And in the very long run we hope the Maker insurance scheme will itself be considered native to BitShares (so you can use native BTS to issue Dai with full insurance directly on graphene, instead of having to transport the BTS to the Ethereum blockchain first). But that's still really far out as it would require scripting or the community to support a hard fork.

Another interesting fact is that Maker will likely use BTS as an insurance reserve asset that it accumulates with income during good times and sells off to cover bad debt in case of a black swan event. So BTS could actually also see the cash flow upside from being an insuring asset without the downside of inflation risk, but the magnitude of this would obviously depend on how tight integration ends up becoming.
« Last Edit: September 11, 2015, 01:23:48 am by Rune »

Offline fuzzy

Re: Can we copy MakerDao blackswan mitigation techniques?
« Reply #5 on: September 11, 2015, 05:18:51 am »
I actually proposed a simple social contract as an insurance mechanism ages back. So the shareholders could simply vote for delegates that would publicly support a future hard fork to print new BTS in case of a black swan event. But inflation is always a touchy subject, and especially if hardcoded as it could create a true nightmare where the BTS price could literally go to 0 with infinite inflation (this is also a possibility for MKR unless we allow the Dai to depreciate in the case of a total meltdown).

Even if a native insurance scheme doesn't become reality, we will make privatized bitassets collateralized by the Dai ourselves, so there will be BitAssets with collateral insurance on BTS 2.0 within a reasonable amount of time (hopefully before a black swan event ever happens - and initially using an exchange as a gateway until trustless two way pegs exist). And in the very long run we hope the Maker insurance scheme will itself be considered native to BitShares (so you can use native BTS to issue Dai with full insurance directly on graphene, instead of having to transport the BTS to the Ethereum blockchain first). But that's still really far out as it would require scripting or the community to support a hard fork.

Another interesting fact is that Maker will likely use BTS as an insurance reserve asset that it accumulates with income during good times and sells off to cover bad debt in case of a black swan event. So BTS could actually also see the cash flow upside from being an insuring asset without the downside of inflation risk, but the magnitude of this would obviously depend on how tight integration ends up becoming.

I for one am interested in this if it works as planned.
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