Burn BTS to create BitAssets.

[xiahui135]

I proposed exactly this earlier.  https://bitsharestalk.org/index.php/topic,19338.0.html  That may have been what you read.  I don't know if the blockchain itself could provide liquidity, but maybe it could work in some form... or perhaps even a worker proposal to provide liquidity services.  IMO liquidity is the missing link to boostrap internal markets.  Much more so than the debate over fees.

Yes I believe I saw it there!

Rent USD will always lead to lack of USD. There will be no liquidity.
Burn is a good idea, but it is hard to control amount of USD. This will lead too much USD in the market and hard to realise pegging.

And people can just burn bts to get USD, and  no need to sell bts for USD. So how can you buy bts,.when nobody sell.

Even if it is too much bitUSD in the market with what I proposed they would only be able to be bought at feed price. And once bought, if the person wants to sell it, would probably do it above the feed for a small profit.

As for people burning BTS and get USD for themselves, that I do not agree. The concept of burning is to benefit the network. If that would happen people would just burn BTS, get USD and wouldn't short with a higher collateral of BTS.

My definition of burning assumes when you do, you get nothing in exchange other than reducing the supply of an asset. However with this you would do it and create bitUSD for the market. You wouldn't get the bitUSD for yourself. If you did you would not be burning unless you would burn 2 times what a bitUSD is worth of BTS.

Sorry. I do not understand the idea that burn for the network. If one can not get the USD  generated by one's burn, will there be decent abount of USD created by this burn?

[xiahui135]

There are some problems to be solved. But i support the idea of maket make.

[Samupaha]

I don't quite understand this proposal...

BitAssets are not created by "burning BTS", they are created by putting some amount of BTS to be a collateral for the created asset.

(And Bitshares isn't even burning BTS, it puts the BTS from fees to the reserve pool.)

But I like the idea of using BTS that network collects from fees to increase liquidity. Helikopterben's proposal was better, although would it create a problem by making a lot of orders on the exchange? That would use a lot of memory, especially when many of those orders would be there maybe forever. Would it be too much?

[sittingduck]

Exactly

[monsterer]

Wouldn't it be better if the chain was a market maker itself like he mentioned above?

If you make the chain a market maker, you expose BTS itself to price risk. By socialising that risk between longs and shorts, the participants are exposed to price risk instead of the chain which is inherently more of a distributed design.

The problem with market making is its only profitable in mean reverting markets (sometimes referred to as ranging), as soon as you get a strong trend the market maker will lose money because it will end up with an unbalanced inventory of assets. That risk makes designing a good one very very complicated.

[Akado]

You can have a liquidity settlement that doesn't happen every block and requires 2/3 of witnesses to confirm the price at that time.

True. That confirmation can be scripted to confirm the price given a set of parameters that each witness could set - like they do with the price feeds. Though then we're just back to market making bots.

Wouldn't it be better if the chain was a market maker itself like he mentioned above?

[Riverhead]

You can have a liquidity settlement that doesn't happen every block and requires 2/3 of witnesses to confirm the price at that time.

True. That confirmation can be scripted to confirm the price given a set of parameters that each witness could set - like they do with the price feeds. Though then we're just back to market making bots.

[Akado]

I proposed exactly this earlier.  https://bitsharestalk.org/index.php/topic,19338.0.html  That may have been what you read.  I don't know if the blockchain itself could provide liquidity, but maybe it could work in some form... or perhaps even a worker proposal to provide liquidity services.  IMO liquidity is the missing link to boostrap internal markets.  Much more so than the debate over fees.

Yes I believe I saw it there!

Rent USD will always lead to lack of USD. There will be no liquidity.
Burn is a good idea, but it is hard to control amount of USD. This will lead too much USD in the market and hard to realise pegging.

And people can just burn bts to get USD, and  no need to sell bts for USD. So how can you buy bts,.when nobody sell.

Even if it is too much bitUSD in the market with what I proposed they would only be able to be bought at feed price. And once bought, if the person wants to sell it, would probably do it above the feed for a small profit.

As for people burning BTS and get USD for themselves, that I do not agree. The concept of burning is to benefit the network. If that would happen people would just burn BTS, get USD and wouldn't short with a higher collateral of BTS.

My definition of burning assumes when you do, you get nothing in exchange other than reducing the supply of an asset. However with this you would do it and create bitUSD for the market. You wouldn't get the bitUSD for yourself. If you did you would not be burning unless you would burn 2 times what a bitUSD is worth of BTS.

[xiahui135]

Rent USD will always lead to lack of USD. There will be no liquidity.
Burn is a good idea, but it is hard to control amount of USD. This will lead too much USD in the market and hard to realise pegging.

And people can just burn bts to get USD, and  no need to sell bts for USD. So how can you buy bts,.when nobody sell.

[Helikopterben]

I proposed exactly this earlier.  https://bitsharestalk.org/index.php/topic,19338.0.html  That may have been what you read.  I don't know if the blockchain itself could provide liquidity, but maybe it could work in some form... or perhaps even a worker proposal to provide liquidity services.  IMO liquidity is the missing link to boostrap internal markets.  Much more so than the debate over fees.

[bitmeat]

There's more to a market maker than listing an asset for sale. The work comes in determining the price to list it for on the DEX. The USD/BTS ratio is a moving target and therefore the orders constantly need to be canceled and recreated. Someone needs manage the tolerance to market fluctuations and the interval to which this affects orders. IMHO that's a lot to ask of a blockchain with 3 second blocks.

You can have a liquidity settlement that doesn't happen every block and requires 2/3 of witnesses to confirm the price at that time.

Let's say you even have that only happen once a week, still better than having months of waiting and relying on people to actually come in and actively provide liquidity. Even if you release bots - most people just won't bother. Part of being a BTS holder should be assuming the risk to provide stability for asset holders. In fact the more stable and liquid the assets are, the more interest there will be in BTS.

Can someone get @bytemaster to comment on this?

[Riverhead]

There's more to a market maker than listing an asset for sale. The work comes in determining the price to list it for on the DEX. The USD/BTS ratio is a moving target and therefore the orders constantly need to be canceled and recreated. Someone needs manage the tolerance to market fluctuations and the interval to which this affects orders. IMHO that's a lot to ask of a blockchain with 3 second blocks.

[Empirical1.2]

BM liked the idea for its simplicity, but ultimately people thought that if you can create BTS by burning assets, feeds could be manipulated and the network could be compromised.

But I think some checks and limits could be put into place to prevent that.

You are not really "burning" you are effectively trading against the feed itself. In other words the blockchain itself is a market participant ensuring liquidity, but not preventing others trading within the spread.

Well you could do it without the part of creating BTS? And with adjustable parameters and worker proposals we could have this changed right? Our blockchain seems way more flexible now so there might be an opportunity for this in 2.0!

Atm I would say this should be a go, but I would like to have more people who understand this better than me, to discuss this with you, who seems to know more so I could learn a bit more and see if there is any downside for this. I see none for now, since we could just adjust the parameters.

Yeah I don't understand it that well either.

But I like the idea of the DAC playing market maker with the intention of making a profit at 1% around the feed price but only using profits.

That way the DAC is only at risk of losing profits it's already made & is providing BitAsset liquidity & may make additional profit...

[Akado]

BM liked the idea for its simplicity, but ultimately people thought that if you can create BTS by burning assets, feeds could be manipulated and the network could be compromised.

But I think some checks and limits could be put into place to prevent that.

You are not really "burning" you are effectively trading against the feed itself. In other words the blockchain itself is a market participant ensuring liquidity, but not preventing others trading within the spread.

Well you could do it without the part of creating BTS? And with adjustable parameters and worker proposals we could have this changed right? Our blockchain seems way more flexible now so there might be an opportunity for this in 2.0!

Atm I would say this should be a go, but I would like to have more people who understand this better than me, to discuss this with you, who seems to know more so I could learn a bit more and see if there is any downside for this. I see none for now, since we could just adjust the parameters.

[bitmeat]

In fact lack of blockchain as a market maker is my biggest disappointment with BTS.

If implemented, it basically means that all the shareholders are investing in the market maker. And don't have to run a bot or anything, just hold BTS. Then the blockchain takes care of providing liquidity.

If I see this implemented or interest in it being implemented I would renew my interest in BTS big time.

I think Maker is trying to do something similar but is far more complicated for the end user than it needs to be.

[bitmeat]

BM liked the idea for its simplicity, but ultimately people thought that if you can create BTS by burning assets, feeds could be manipulated and the network could be compromised.

But I think some checks and limits could be put into place to prevent that.

You are not really "burning" you are effectively trading against the feed itself. In other words the blockchain itself is a market participant ensuring liquidity, but not preventing others trading within the spread.

[Akado]

Nice! I don't understand the problem of not being able to burn bitUSD to create BTS. I believe it's good users are not able to create BTS. If you want BTS why not just sell them for bitUSD?

I like the idea of the spread being voted by the community 

What happened last year for this not to be implemented? Were there any valid counter arguments?

[bitmeat]

That's basically half of my proposal from a year ago.

My idea was to fix liquidity problems by making the blockchain be a market maker. Kind of how NBT works but decentralized.

So you burn BTS and create BitUSD or other assets at feed price. No third party is involves - just trader and blockchain.

But then also allow burning of BitUSD to create BTS - I.e. Go the other route as well.

People were too concerned with BTS potentially getting diluted if it can be created out of assets. But in reality I think it would've attracted more serious capital, where you wouldn't be locked in a roach motel, unable to get in or out.

Add to that making it a parameter voted by community for the spread so the blockchain is actually profitable itself. E.g. 1% around feed price - you can convert unlimited amounts.

[Akado]

What if instead of just burning BTS, we could burn them while creating 1 bitUSD for example, that would be immediately be placed as a market order and sold at price feed? Then each time that bitUSD was bought by someone - since now the DAC owns the bitUSD - the BTS used to buy it would be burnt? I've read something similar to this today somewhere but lost the thread.

We usually just burn BTS, what if it had more utility than that? Now each time that bitUSD was bought, a bitUSD worth of BTS would be burnt.. A concept of Burn to Buy.

Person A burns $5 worth of BTS to create $x amount of bitUSD, dunno if it could be 5.
Created bitUSD would be immediately placed as a market order at price feed (i guess the user who creates the asset would also choose the market for the order to be placed? Or would be placed on a default market? Dunno, but those are details)
Person B buys this $x amount of used with BTS
$x worth of BTS were "bought" by the DAC, which burns them
Person B now owns $x amount of bitUSD

I guess this would end here, we would only have 1 iteration of the DAC "buying"(burning) the BTS. Would be awesome to do this multiple times but I guess it would end here. If Person B sold his bitUSD to someone else, the BTS used to buy the bitUSD would go to Person B...

The positive thing is every time someone would do this, it would create a Double Burn. The person originally burning BTS because he wants to, like many other have done, and the people buying the bitAsset at feed price without knowing they are buying it from the DAC. This could possible double the amount of BTS burnt assuming someone would eventually by the created asset, which is safe to assume it would happen.

Still, it might be a more useful way of burning BTS? As it creates bitAssets at feed price?

Random idea, does this even make sense? Or is it something completely stupid? Could this provide more liquidity, help tighten the peg and provide more profit ? If it makes sense, is the concept of the DAC owning a bitUSD feasible?


Btw I saw the idea of burning to create an asset on some thread here on the ofrums, which i lost so I gave it some thought and decided to post it. I didn't come up with this, only tried to expand it a bit.