Author Topic: Discussing the problems with bitUSD (smart coins)  (Read 20781 times)

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Offline lihuajkl

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Just wonder how to deposit BitUsd to openledger wallet! Sorry for newbie question

Offline merivercap

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With a few small changes we could make the following safe:
1. Borrowing BitUSD + Holding BitUSD means no margin call (account holdings and open orders can be used to cover).
2. If you have no access to BitUSD then your collateral will be sold.

I think this offers some convenience and efficiency for shorters and self-shorters, but probably unnecessary at the moment.  Natural margin calls will help generate activity and price discovery anyways.
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Offline merivercap

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I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

No. I'm going to try and make this as simple as possible to understand. Outside of a systematic failure:

Q) Can you get margin called, when you borrow bitUSD?

Q) Can you get margin called buying bitUSD?

Hey you're the one that brought up black swans and led us on a tangent  :P .. I was just trying to take a guess about where you were going in the conversation.  Anyways your point just goes back to your original hypothesis and my original response.  You believe because one side gets margin-called and has to actively maintain collateral that that creates a premium.  I don't believe that. 

Anyways, the solution of fixing the SQP I mentioned above will most likely fix most of the premium and it's an easy fix.. no need to redesign the entire blockchain either.   I'll save the battle against forced settlement for another day.  That's the other main reason for a premium , but it's probably not as big a factor right now. 
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Offline monsterer

With a few small changes we could make the following safe:
1. Borrowing BitUSD + Holding BitUSD means no margin call (account holdings and open orders can be used to cover).
2. If you have no access to BitUSD then your collateral will be sold.

I can't see how this is much different than a margin call? You still have to cover somehow.

The only way to achieve balance is ensure that both longs and shorts have the exact same risk profile. You can do this by turning them both into CFD like bets with long/short BTS against the feed price, but you lose bitUSD as a currency.
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Offline bytemaster

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

No. I'm going to try and make this as simple as possible to understand. Outside of a systematic failure:

Q) Can you get margin called, when you borrow bitUSD?

Q) Can you get margin called buying bitUSD?

If you hold BitUSD you never get called (except for black swan, in which case you are converted to BTS at the swan price)
If you borrow BitUSD you can get called.

With a few small changes we could make the following safe:
1. Borrowing BitUSD + Holding BitUSD means no margin call (account holdings and open orders can be used to cover).
2. If you have no access to BitUSD then your collateral will be sold.
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Offline Helikopterben

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Thanks for bringing up this discussion. Was wondering similar questions. Bitshares advertises bitAssets as a cool way to store value. You like gold, here we have bitGold for you, its value is pegged to gold. But, in order for bitGold to be a cool store of value, somebody have to issue enough and make the market. How do you issue a bitAsset risk free way? If you borrow bitAsset and BTS falls, you are screwed.

If I borrow BitUSD and sell for USD then I maintain a neutral position (long BTS, no leverage).

Then you can loan out your dollars on bitfinex and effectively earn a dividend on bts, albeit a risky dividend.

Offline monsterer

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

No. I'm going to try and make this as simple as possible to understand. Outside of a systematic failure:

Q) Can you get margin called, when you borrow bitUSD?

Q) Can you get margin called buying bitUSD?
My opinions do not represent those of metaexchange unless explicitly stated.
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clout

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now you and the 'get only what you asked for' order matching invention.... this was a great square wheel, imo... I really do not get the grunge you hold against it.  :)

haha i don't have grudge against it, it just provided a less convenient trading experience than people are accustomed to when trading on traditional exchanges.

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I just recently push a new upgrade to the price feed script so that witnesses can pick SQP on a per asset basis ..

I don't see what that helps. SQP shouldn't be arbitrarily decided. It should just remain equal to the feed price. In a liquid market it doesn't have much effect. In an illiquid market a high SQP will just discourage further liquidity.

Offline tonyk

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Hence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol.  Then you'd be closer to identifying why premiums occur.

That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

this
Since the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?

No. SQP doesn't make any sense regardless of the liquidity. Long positions should not arbitrarily be afforded the opportunity to sell Bitassets at a premium. If long positions do not want to sell they shouldn't be induced to sell. The collateral of undercollateralized short positions should sit on the orderbook at the feed price and long positions can redeem their bitassets with the appropriate amount of BTS at anytime.

The SQP is a ill-conceived improvement to the market engine, just like the 'you get what you pay for' rule in Bitshares 1.0. Both attempt to solve  problems that don't exist and in the process diminish the utility of Bitshares as an exchange.

now you and the 'get only what you asked for' order matching invention.... this was a great square wheel, imo... I really do not get the grunge you hold against it.  :)



After all, it was heavily defended for months ... "The anathema for any front running..."  blog posts were written explaining it!!!!
« Last Edit: November 25, 2015, 08:52:01 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline xeroc

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He meant to say that we could only apply an SQP of 1000 to liquid markets, because the point of the SQP is to protect against low liquidity.

I agree with you that "it is the greatest stupidity anyone can come up with." Its one of those things that only a really intelligent guy like BM could come up with. Intellectuals tend to over think things. This is one of those instances.
well .. yes ..

I just recently push a new upgrade to the price feed script so that witnesses can pick SQP on a per asset basis ..

clout

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Hence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol.  Then you'd be closer to identifying why premiums occur.

That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

this
Since the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?

@ xeroc while I am not sure you are not joking...but as it is not usually your style
SQP is supposed to be.... hopefully.... working... in LIQUID markets...
in illiquid ones , and in BTS case more than anywhere else  it is the greatest stupidity anyone can come up with...

(well, that and exchange without API... but I am drifting here)

He meant to say that we could only apply an SQP of 1000 to liquid markets, because the point of the SQP is to protect against low liquidity.

I agree with you that "it is the greatest stupidity anyone can come up with." Its one of those things that only a really intelligent guy like BM could come up with. Intellectuals tend to over think things. This is one of those instances.

clout

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Hence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol.  Then you'd be closer to identifying why premiums occur.

That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

this
Since the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?

No. SQP doesn't make any sense regardless of the liquidity. Long positions should not arbitrarily be afforded the opportunity to sell Bitassets at a premium. If long positions do not want to sell they shouldn't be induced to sell. The collateral of undercollateralized short positions should sit on the orderbook at the feed price and long positions can redeem their bitassets with the appropriate amount of BTS at anytime.

The SQP is a ill-conceived improvement to the market engine, just like the 'you get what you pay for' rule in Bitshares 1.0. Both attempt to solve  problems that don't exist and in the process diminish the utility of Bitshares as an exchange. 

Offline tonyk

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Hence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol.  Then you'd be closer to identifying why premiums occur.

That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

this
Since the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?

@ xeroc while I am not sure you are not joking...but as it is not usually your style
SQP is supposed to be.... hopefully.... working... in LIQUID markets...
in illiquid ones , and in BTS case more than anywhere else  it is the greatest stupidity anyone can come up with...

(well, that and exchange without API... but I am drifting here)

Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline xeroc

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Hence systemic risk factors should be separated from individual trading risk factors when evaluating the protocol.  Then you'd be closer to identifying why premiums occur.

That's exactly what is already happening and this causes the premium. Traders *know* about the vastly increased risk of getting their position margin called compared to the small systemic risk of black swan, which is why they sell their borrowed bitUSD at a premium.

I think there's some mixing up of ideas and also mixing up of cause and effect,  but I think what you are trying to get at is that the Feed Price confuses short sellers because they can get called based on the SQP rather than the Feed Price.  Hence rather than using the Feed Price as a reference for trades, they will use the SQP and the SQP becomes the defacto reference price.   We discussed that on another thread a while back and I agree.

Easy fix:  Make SQP equal the Price Feed and the premium will probably mostly disappear.

this
Since the whole point of SQP is to protect in illiquid markets .. I would think this only works in LIUID markets .. would you agree?