Author Topic: Idea: make the blockchain a bond market lender  (Read 1546 times)

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Offline monsterer

Idea: make the blockchain a bond market lender
« on: November 11, 2015, 10:12:49 am »
In this new bond market, I propose that the blockchain be a BTS lender. It can print BTS to lend out to potential longs/shorts with 0 risk and pretty much guaranteed profit, which would be burnt, thereby reducing supply.

This would bootstrap liquidity, and make the blockchain as a whole more profitable.

Thoughts?
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Offline xeroc

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Re: Idea: make the blockchain a bond market lender
« Reply #1 on: November 11, 2015, 10:28:10 am »
Not clear to me .. do you propose to use bit USD as collateral for BTS then?

I think we had this discussion already some time ago and agreed that shareholders do not want to have BTS inflated like that .. Besides that, it would be pretty much possible (although, I am not sure about "guaranteed" profits)
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Offline monsterer

Re: Idea: make the blockchain a bond market lender
« Reply #2 on: November 11, 2015, 10:48:25 am »
Not clear to me .. do you propose to use bit USD as collateral for BTS then?

I think we had this discussion already some time ago and agreed that shareholders do not want to have BTS inflated like that .. Besides that, it would be pretty much possible (although, I am not sure about "guaranteed" profits)

If you want to go long USD, you borrow BTS from the bond market, buy it, pay interest on the loan, sell it, give back the BTS + interest, or get margin called. Either way the blockchain gets its BTS back 100% plus profits.

edit: shorts are more tricky, though.
« Last Edit: November 11, 2015, 10:51:03 am by monsterer »
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Offline Shentist

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Re: Idea: make the blockchain a bond market lender
« Reply #3 on: November 11, 2015, 10:56:06 am »
so the blockchain would be the provider of liquidity without 0 risk - only in a black swan event something could happen?


Offline monsterer

Re: Idea: make the blockchain a bond market lender
« Reply #4 on: November 11, 2015, 10:59:48 am »
so the blockchain would be the provider of liquidity without 0 risk - only in a black swan event something could happen?

Even then, there isn't risk - the blockchain handles margin calls, so everything will be liquidated before debt can arise.
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Offline luckybit

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Re: Idea: make the blockchain a bond market lender
« Reply #5 on: November 11, 2015, 11:03:34 am »
In this new bond market, I propose that the blockchain be a BTS lender. It can print BTS to lend out to potential longs/shorts with 0 risk and pretty much guaranteed profit, which would be burnt, thereby reducing supply.

This would bootstrap liquidity, and make the blockchain as a whole more profitable.

Thoughts?

Terrible idea. Let the individuals lend, not the blockchain. Do we need to mimic the central bank?

Individuals need to collect interest. The blockchain doesn't. If individuals compete then interest rates can go down, how does the blockchain compete?
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Offline luckybit

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Re: Idea: make the blockchain a bond market lender
« Reply #6 on: November 11, 2015, 11:05:54 am »
Not clear to me .. do you propose to use bit USD as collateral for BTS then?

I think we had this discussion already some time ago and agreed that shareholders do not want to have BTS inflated like that .. Besides that, it would be pretty much possible (although, I am not sure about "guaranteed" profits)

If you want to go long USD, you borrow BTS from the bond market, buy it, pay interest on the loan, sell it, give back the BTS + interest, or get margin called. Either way the blockchain gets its BTS back 100% plus profits.

edit: shorts are more tricky, though.

The blockchain doesn't need to profit, people do.
The blockchain needs to facilitate people profiting, or do all the people exist to serve the profit of the blockchain?

Why would people lend if they can't get any interest? If they have to compete with the blockchain itself then they'll just lend on Poloniex. Where will people get 5 or 10% yield from to bring liquidity?

The blockchain could bring liquidity but it would only be temporary, it would be unnatural, and unsustainable.
« Last Edit: November 11, 2015, 11:07:43 am by luckybit »
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Offline monsterer

Re: Idea: make the blockchain a bond market lender
« Reply #7 on: November 11, 2015, 11:10:02 am »
Terrible idea. Let the individuals lend, not the blockchain. Do we need to mimic the central bank?

Individuals need to collect interest. The blockchain doesn't. If individuals compete then interest rates can go down, how does the blockchain compete?

Are you sure you don't want the blockchain to be profitable? The blockchain would provide a base level loan offer with a rate/loan size which would be another votable parameter.
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Offline luckybit

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Re: Idea: make the blockchain a bond market lender
« Reply #8 on: November 11, 2015, 11:07:52 pm »
Terrible idea. Let the individuals lend, not the blockchain. Do we need to mimic the central bank?

Individuals need to collect interest. The blockchain doesn't. If individuals compete then interest rates can go down, how does the blockchain compete?

Are you sure you don't want the blockchain to be profitable? The blockchain would provide a base level loan offer with a rate/loan size which would be another votable parameter.

Of course I want the DAC to be profitable but not at the expense of that which would actually attract the liquidity in the first place. Liquidity is attracted by people making a profit, and the transaction fees should be how the DAC makes a profit.

And DAC profit can be in the form of burning fees, but people have to profit in the form of interest, yield, etc. So you need a balanced economy where as many people as possible have an opportunity to profit and when you take opportunities to profit away you make Bitshares less attractive.

So I would say the bond market with individuals profiting is actually better for marketing than trying to market the blockchain profiting. How do you market your proposal to people who used to get dividends from stocks, yield, interest on centralized exchanges, or even yield from BitUSD etc?

Bitshares 1.0 offered profit opportunity to anyone who parked on it. Bitshares 2.0 does not. And then we wonder why Bitshares 2.0 has liquidity problems?
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Offline luckybit

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Re: Idea: make the blockchain a bond market lender
« Reply #9 on: November 11, 2015, 11:12:18 pm »
I would see this as sort of like a subsidized loan, but then the whole network is paying the price instead of individuals on the edge. Where does the interest go? Is it going to be distributed to all shareholders as a dividend? Then maybe on some level it could work, otherwise it's making individual participants compete with the blockchain but for what?

It seems unnecessary and it deviates from how it's successfully done everywhere else. I am not sure if it's economically sound and I think we should ask an economist to weigh in on it.
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Offline monsterer

Re: Idea: make the blockchain a bond market lender
« Reply #10 on: November 11, 2015, 11:14:52 pm »
So I would say the bond market with individuals profiting is actually better for marketing than trying to market the blockchain profiting. How do you market your proposal to people who used to get dividends from stocks, yield, interest on centralized exchanges, or even yield from BitUSD etc?

This proposal does nothing but increase the available liquidity along with blockchain profits all without taking anything away from free market competition.

In any case, you'd never bother to market the blockchain profiting, you'd market the available liquidity. The interest earned by the blockchain based loans are burned, reducing supply and increasing the overall value of BTS, which is what the blockchain being profitable actually means.
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Offline Akado

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Re: Idea: make the blockchain a bond market lender
« Reply #11 on: November 11, 2015, 11:16:03 pm »
Terrible idea. Let the individuals lend, not the blockchain. Do we need to mimic the central bank?

Individuals need to collect interest. The blockchain doesn't. If individuals compete then interest rates can go down, how does the blockchain compete?

Are you sure you don't want the blockchain to be profitable? The blockchain would provide a base level loan offer with a rate/loan size which would be another votable parameter.

That makes sense but it's much easier to sell something where the client can loan and get money than selling something that the client has to buy and wait for it to get more valuable, which since it's burning bts (i assume) will take years and years. People want to make money now and it's more complicated for them to understand. That way people can compete against each other, we can get services in, etc. If it's the blockchain who profits, people won't feel as interested to join.
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Offline Empirical1.2

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Re: Idea: make the blockchain a bond market lender
« Reply #12 on: November 11, 2015, 11:25:50 pm »
In this new bond market, I propose that the blockchain be a BTS lender. It can print BTS to lend out to potential longs/shorts with 0 risk and pretty much guaranteed profit, which would be burnt, thereby reducing supply.

This would bootstrap liquidity, and make the blockchain as a whole more profitable.

Thoughts?

Seems like a good idea.
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Offline GaltReport

Re: Idea: make the blockchain a bond market lender
« Reply #13 on: November 11, 2015, 11:35:22 pm »
Not clear to me .. do you propose to use bit USD as collateral for BTS then?

I think we had this discussion already some time ago and agreed that shareholders do not want to have BTS inflated like that .. Besides that, it would be pretty much possible (although, I am not sure about "guaranteed" profits)

If you want to go long USD, you borrow BTS from the bond market, buy it, pay interest on the loan, sell it, give back the BTS + interest, or get margin called. Either way the blockchain gets its BTS back 100% plus profits.

edit: shorts are more tricky, though.

The blockchain doesn't need to profit, people do.
The blockchain needs to facilitate people profiting, or do all the people exist to serve the profit of the blockchain?

Why would people lend if they can't get any interest? If they have to compete with the blockchain itself then they'll just lend on Poloniex. Where will people get 5 or 10% yield from to bring liquidity?

The blockchain could bring liquidity but it would only be temporary, it would be unnatural, and unsustainable.

I agree with this from my perspective as a BitShares user.  Interest & Dividends are strong incentives.
« Last Edit: November 11, 2015, 11:37:14 pm by GaltReport »

Offline speedy

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Re: Idea: make the blockchain a bond market lender
« Reply #14 on: November 12, 2015, 12:04:45 am »
In this new bond market, I propose that the blockchain be a BTS lender. It can print BTS to lend out to potential longs/shorts with 0 risk and pretty much guaranteed profit, which would be burnt, thereby reducing supply.

This would bootstrap liquidity, and make the blockchain as a whole more profitable.

Thoughts?

If I go long USD, then how much collateral do I have to post relative to the size of the BTS borrowed from the blockchain, and of what type?

Edit: I guess you would post 200% of BitUSD in order to borrow BTS and buy USD. (Always got to be greater than 100% for system to be trust free).
« Last Edit: November 12, 2015, 12:19:16 am by speedy »