Towards parity in the bitAsset markets thru bonds and margin trading

[tonyk]

If this is the case, what do you mean by "end up on the spot market" how do you see it working?

 bitUSDs created from long/short pairing end up on the spot market

When a long CFD pairs with a short CFD, a bitUSD is created but it doesn't belong to the long, it becomes available on the spot market for someone else to buy.

It is becoming tiresome to ask for eeeevery single step. So last attempt.

who is the seller, where the proceeds go.

[monsterer]

If this is the case, what do you mean by "end up on the spot market" how do you see it working?

 bitUSDs created from long/short pairing end up on the spot market

When a long CFD pairs with a short CFD, a bitUSD is created but it doesn't belong to the long, it becomes available on the spot market for someone else to buy.

[tonyk]

If this is the case, what do you mean by "end up on the spot market" how do you see it working?

 bitUSDs created from long/short pairing end up on the spot market

[monsterer]

OK let's try. Why the bitAsset longs will go to this market and put collateral instead of going to the regular market and buy the bitAsset out right?

Because it should cost them less to go long on margin than it would to buy the asset outright. This relies on the margin requirement being less than 1:1 collateral of course.

The logical explanation seems to be that they can buy say 1.25 bitUSD instead of 1 for the same amount of BTS. Which should mean the bitUSD shorters will have the same % margin trading possibility for themselves as well. Which would lead those bitUSD shorters to go to either this or the regular market (whichever offers better margin) with equal other conditions.

What different conditions do you invasion for those 2 markets, that gives different possibilities, and serve the bitAsset shorters differently depending on what exactly do they seek (risk wise, time wise etc. etc)

The margin CFD markets should be the only ones which require collateral, bitUSDs created from long/short pairing end up on the spot market. Longs/shorts in the margin market should have the same margin requirements. I'm not sure that's what you're asking me, though...?

[tonyk]

I have always found the idea of both sides putting collateral quite intriguing, for the same reasons you put at the end of your post.

I have never come up with a complete solution how this can or should be done. This proposal also have the exact same flow. It is too general and we all know where the devil is.

Help me to flesh it out - where would you like more detail?

How do I put it - everywhere. As it is know, I can start explaining what I do not like. But this will be my assumptions on how this works and or elements of my own design that I find not satisfactory...but maybe you have already a solution for them.

OK let's try. Why the bitAsset longs will go to this market and put collateral instead of going to the regular market and buy the bitAsset out right? The logical explanation seems to be that they can buy [more like get exposure to the price movement of] say 1.25 bitUSD instead of 1 for the same amount of BTS. Which should mean the bitUSD shorters will have the same % margin trading possibility for themselves as well. Which would lead those bitUSD shorters to go to either this or the regular market (whichever offers better margin) with equal other conditions.

What different conditions do you invasion for those 2 markets, that gives different possibilities, and serve the bitAsset shorters differently depending on what exactly do they seek (risk wise, time wise etc. etc)

[monsterer]

I have always found the idea of both sides putting collateral quite intriguing, for the same reasons you put at the end of your post.

I have never come up with a complete solution how this can or should be done. This proposal also have the exact same flow. It is too general and we all know where the devil is.

Help me to flesh it out - where would you like more detail?

[tonyk]

I have always found the idea of both sides putting collateral quite intriguing, for the same reasons you put at the end of your post.

I have never come up with a complete solution how this can or should be done. This proposal also have the exact same flow. It is too general and we all know where the devil is.

[tbone]

I think its a great idea! Its similar to non-fungible CFDs that I talked about a while back.

Under this system going long on a BitAsset would not give you a fungible / exchange tradeable asset - its just a CFD. I think thats GOOD. If 90% of BitAsset holders just want to get exposure to dollars/gold, and dont want to use that BitAsset as a currency, then they dont need fungibility.

The drawbacks of fungible BitAssets is that the shorts are always at a disadvantage, resulting in less liquidity. This is what BitAsset traders care about the most, and lack of liquidity is our biggest problem.

@Bytemaster: how about having 2 types of markets: the existing type with fungible BitAssets and a new type where both long and short trades are totally symmetrical? (Assuming the 2 types could not co-exist in the same market).

Could someone please explain the mechanics a little more?  Specifically, I'm curious to know exactly what about fungible BitAssets puts shorts at a disadvantage that wouldn't be the case with non-fungible BitAssets.  Thanks.

[Akado]

This has the advantage that being long holds the exact same risk profile as being short, which means the market stands a better chance of trading at parity rather than at a premium.

Thoughts?

  if this would bring more stability. Not to mention having a bond market would attract more people in and provide more liquidity.

[monsterer]

Actually, this proposal was to create fungible bitAssets as well. The bitAsset is created when a true long is paired with a true short. When either party closes their trade, the other party is matched against the next available opposite CFD type, thereby ensuring the bitAsset continues to exist.

edit: the bitAsset trades on the spot market.  The longs and shorts trade using margin on a different market.

[speedy]

I think its a great idea! Its similar to non-fungible CFDs that I talked about a while back.

Under this system going long on a BitAsset would not give you a fungible / exchange tradeable asset - its just a CFD. I think thats GOOD. If 90% of BitAsset holders just want to get exposure to dollars/gold, and dont want to use that BitAsset as a currency, then they dont need fungibility.

The drawbacks of fungible BitAssets is that the shorts are always at a disadvantage, resulting in less liquidity. This is what BitAsset traders care about the most, and lack of liquidity is our biggest problem.

@Bytemaster: how about having 2 types of markets: the existing type with fungible BitAssets and a new type where both long and short trades are totally symmetrical? (Assuming the 2 types could not co-exist in the same market).

[monsterer]

In the current design bitAssets will always trade at a premium because of the risk of being short compared to holding the bitAsset. This proposal aims to allow the market to trade at parity. It might have horrible flaws, but here it is anyway:

* Add a bond market which is blockchain margin called based on feed prices
* Bond lenders lend BTS for traders to trade on margin
* Traders can go long or short BTS on margin against the feed price
* Traders post BTS collateral to maintain their margin position on both sides of the trade
* When a long is matched with a short, a bitAsset gets created

A long is not equal to a spot buy trade in this proposal - you go long based on your margin, so you can buy more BTS than you hold, comparing a long to a spot buy, and it is always a CFD where you end up back in BTS when the contract ends.

This has the advantage that being long holds the exact same risk profile as being short, which means the market stands a better chance of trading at parity rather than at a premium.

Thoughts?