Author Topic: settlement is the best method to maniuplate the market  (Read 1952 times)

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Offline xeroc

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Re: settlement is the best method to maniuplate the market
« Reply #15 on: December 01, 2015, 10:08:31 am »
actually ,everyone  can buy a big volume of BTS on btc38.com , make the price of bts increase , then sell his BTS,  and get profit .
it is more easy than by settlement .

The difference between this and forced settlement is that the above method drives the BTS price down whereas forced settlement doesn't.
Forced settlement happens instantly, for the full amount at a fixed price. Try to achieve that by selling on a market.

There is also a 24h delay for settlements to prevents this exact exploit ..
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Offline pc

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Re: settlement is the best method to maniuplate the market
« Reply #16 on: December 01, 2015, 05:25:55 pm »
There is also a 24h delay for settlements to prevents this exact exploit ..

Read the OP again... the attacker waits until just before the 24 hours are over before he starts manipulating the market price. So the delay doesn't help.
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Re: settlement is the best method to maniuplate the market
« Reply #17 on: December 01, 2015, 09:18:21 pm »
There is also a 24h delay for settlements to prevents this exact exploit ..

Read the OP again... the attacker waits until just before the 24 hours are over before he starts manipulating the market price. So the delay doesn't help.
One way for shorters to protect their collateral is to show enough buy power (place buy orders) on external exchanges to keep the price high, and place enough sell orders in internal exchange above feed price to incentive buying instead of settling. Would it be profitable if make a bot to do this?
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Offline bytemaster

Re: settlement is the best method to maniuplate the market
« Reply #18 on: December 01, 2015, 10:21:55 pm »
The attack doesn't seem that realistic though, as it relies on someone going long on BTS and then attacking the BTS price.

1) a buy a bunch of BTS, then a bunch of bitCNY. In a properly functioning market, I paid a premium for bitCNY because 1 bitCNY is supposed to be > 1 CNY.
2) I request a forced settlement (losing the premium I paid).
3) I wait 23 hours and sell all the BTS I bought (which incurs a loss as I drive down the market)
4) my forced settlement goes through, and I get a lot of BTS because of my attack. But those BTS are now worth less than what I paid for them in order to get the CNY in the first place.

In the end: I paid a premium to buy CNY, which I lost. I sold a lot of BTS for less money than I paid for them. I force settled my CNY for more BTS than the CNY was originally worth (as long as I can overcome the premium I paid). Now I have BTS, which are not worth very much since I drove down the price and I overpaid for CNY in the first place.

Great analysis.  Furthermore, the attack can be mitigated dramatically by rate limiting force settlement.  If the maximum daily force settlement amount is not enough value to manipulate the market by enough to overcome the premium paid then this is a non-issue.   Furthermore, I am not convinced that a 24 hour delay is ideal for force settlement.  Perhaps closer to a few hours would be better.
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Offline alt

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Re: settlement is the best method to maniuplate the market
« Reply #19 on: December 02, 2015, 12:15:53 am »
The attack doesn't seem that realistic though, as it relies on someone going long on BTS and then attacking the BTS price.

1) a buy a bunch of BTS, then a bunch of bitCNY. In a properly functioning market, I paid a premium for bitCNY because 1 bitCNY is supposed to be > 1 CNY.
2) I request a forced settlement (losing the premium I paid).
3) I wait 23 hours and sell all the BTS I bought (which incurs a loss as I drive down the market)
4) my forced settlement goes through, and I get a lot of BTS because of my attack. But those BTS are now worth less than what I paid for them in order to get the CNY in the first place.

In the end: I paid a premium to buy CNY, which I lost. I sold a lot of BTS for less money than I paid for them. I force settled my CNY for more BTS than the CNY was originally worth (as long as I can overcome the premium I paid). Now I have BTS, which are not worth very much since I drove down the price and I overpaid for CNY in the first place.
the attack don't need to be a BTS longer. he can borrow BTS from others(in polo),
or maybe the attack is an exchange like BTC38, sell BTS don't belong to themself.

you  should think these from another vision.
maniuplate always happen, when whales dump a stock, they always want to get more stock at the low price.
BTS have give them a gift, get these cheap stock much easy than all other stock.  and the shorters never have a way to save themselves.

only the volume limit can protect something.  but I think it is not enough, and if we want this protect work good, maybe we need to adjust this very often, it can be very complex.

we need give the shorters a more easy way to save them from the settle, just like can't be settled if my collatereal is more than 200%

Offline bytemaster

Re: settlement is the best method to maniuplate the market
« Reply #20 on: December 02, 2015, 10:26:52 pm »
Shorts can pick their place in line for settlement.  Think of it this way, if you fall in the bottom 2% of shorters by collateral you have been given notice of potential margin call.  This is like any other market where they give you 24 hours to add collateral.  If someone is short and doesn't want to meet the new higher collateral limits then they can either cover on their own terms or add collateral.

By giving 24 hours shorts have an opportunity to cover prior to any price manipulation. 

If there is a 10% premium on BitUSD relative to the feed, then the attacker would have to increase reported price feed (value of BTS) by 10% just to get the force-settlement price to equal the previously fair value for BitUSD.  They would have to push beyond 10% before the short starts taking a loss relative to a voluntary cover.     All savvy market participants would be aware of a large force-settle order and would therefore reset the manipulator making it much harder to manipulate the price.  In effect, price manipulation represents "free money" to those who know it is going on.

Look at it another way, someone enters a large force-settlement order it becomes an opportunity for the shorter to do reverse manipulation. It is a tug of war where both sides (short and long) have equal opportunity to manipulate the market in their favor.  They go to battle and the result is just the fair market price at that point in time.  It is not a guaranteed win for the potential manipulator.

 
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