Author Topic: Smart Coins & Forced Settlement  (Read 11015 times)

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Offline Empirical1.2

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Re: Smart Coins & Forced Settlement
« Reply #45 on: December 01, 2015, 11:25:05 am »
I think I understand the price floor a bit better now.

It should give a great deal of confidence to anyone accepting BitAssets as payment and they will probably also be able to convert their BitUSD to real USD at a very favourable rate.

It is negative for businesses that want to convert Currency to BitAssets as they will probably only be able to do so at something like 0.95 - 1.

It is negative for the poorly collateralised shorts especially during BTS bullish periods, as other shorts may be willing to short below the peg giving instant profit opportunity to longs at their expense.

It also puts some pressure on the price feed accuracy I guess and creates a large premium to compensate for it.

I think it's worth trying because the certainty that 1 BitUSD is always redeemable for 1 USD worth of BTS is very strong in terms of creating confidence for BitAsset accepting third parties. 

It might be though that the system works better with a slightly lower price floor so the premium when entering BitAssets is more reasonable & not that I understand the price feed issues exactly but a lower floor may also lower the premium associated with that and make the BitAsset range tighter.

The premium will get lower with higher liquidity but it will not stay constant over time.
Dan and me, we think that the premium will be higher in times of high volatility in BTS .. and lower in times with less volatility

The premium should also decrease when BTS is rising & increase when BTS is falling in value I guess.

(When people are bullish on BTS they are willing to pay a premium to gain a leveraged position as was demonstrated by people shorting far below the peg in the first iteration of BitAssets.)
« Last Edit: December 01, 2015, 11:33:02 am by Empirical1.2 »
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Offline mf-tzo

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Re: Smart Coins & Forced Settlement
« Reply #46 on: December 01, 2015, 12:11:00 pm »
after 2 years of experimenting I think the best was the first and original rule..depending on demand for bitassets the bitusd could be at a discount or a premium..period..no expiration no SQP and shinny formulas..nothing..traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg
Merchants accepting bitusd as a form of payment would know that at some point their bitasset would worth more or less but at least there would be liquidity from traders and the risk for not beeing able to convert all their bitasset in fiat would be minimal..Now after 2 years we have no liquidity, no traders in the DEX nothing..anyway..

Offline maqifrnswa

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Re: Smart Coins & Forced Settlement
« Reply #47 on: December 01, 2015, 03:06:19 pm »
after 2 years of experimenting I think the best was the first and original rule..depending on demand for bitassets the bitusd could be at a discount or a premium..period..no expiration no SQP and shinny formulas..nothing..traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg
Merchants accepting bitusd as a form of payment would know that at some point their bitasset would worth more or less but at least there would be liquidity from traders and the risk for not beeing able to convert all their bitasset in fiat would be minimal..Now after 2 years we have no liquidity, no traders in the DEX nothing..anyway..

I agree about SQP. Margin calls should only happen when they absolutely must (since it is destroying BTS when in undersupply), and therefore should be tied to whatever is the most liquid/accurate market values. SQP of 1 (fixed to price feed) makes most sense until internal markets are liquid enough.

"traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg"
That did not work. The very first bitshares (version 0.1 or something like that)  tried this with no price feed or incentives to maintain peg, and price ran away very quickly. Why should I pay for something with no intrinsic value just because it has the label "USD" on it? I'll sell you 1000 maqifrsnwaUSD for 1000.

forced settlement is both the "gold standard" and the "federal reserve." It is the "gold standard" since you can always redeem your smartcoin for the equivalent value in something else. It is the "federal reserve" since it incentivizes the destruction of smartcoins when supply exceeds demand such that value is maintained. What (fiat) currency in the world exists without either a "gold standard" or a "federal reserve?"

Confession of a force-settler (before the GUI made it easy):
I will confess that I was a forced-settler before the GUI came out. I was a force-settler because I spent the time to learn the system inside and out in order to test some bots for both smartcoins and UIA (I believe UIA with properly regulated KYC is the growth market for BTS). My bots know nothing about the underlying assets, they only know the market rules: Sell high, buy low, never sell an asset for less than it can be settled for, if you can buy an asset for less than it can be settled then buy the assets and settle. This behavior is rational, generates profit, and keeps BitShares working efficiently - so it is a win-win for everyone. I feel it is a "service" to the community. I probably settled 1-2k CNY since it started. No other market presented settlement opportunities. I did not know why CNY presented this opportunity; I guessed there was a larger supply of "whales" trying to gain leverage any way they can in risky ways.

When I first heard of Transwiser, I was shocked at the business model (since it seemed like it would always lose money since 1 bitCNY> 1CNY) but also extremely impressed that they figured out to "beat the system" where I could not. The service was great for BTS and I was looking forward to them expanding to other currencies.

When I heard about the price feed data inaccuracy, at first I felt bad but then realized that the error was in some thinking smartcoins were something they were not. See: https://bitsharestalk.org/index.php/topic,20375.0/topicseen.html Even if the feed was incorrect, all businesses must know that the feed is all that matters and build their business model off of that (or work to correct the feed).

Now that we're almost through this "crisis," I think we're all stronger. Feeds are more accurate, people know what smartcoins are, and businesses know to research the system completely before building on top of it.
« Last Edit: December 01, 2015, 03:21:19 pm by maqifrnswa »
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Offline bytemaster

Re: Smart Coins & Forced Settlement
« Reply #48 on: December 01, 2015, 03:56:02 pm »
after 2 years of experimenting I think the best was the first and original rule..depending on demand for bitassets the bitusd could be at a discount or a premium..period..no expiration no SQP and shinny formulas..nothing..traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg
Merchants accepting bitusd as a form of payment would know that at some point their bitasset would worth more or less but at least there would be liquidity from traders and the risk for not beeing able to convert all their bitasset in fiat would be minimal..Now after 2 years we have no liquidity, no traders in the DEX nothing..anyway..

I agree about SQP. Margin calls should only happen when they absolutely must (since it is destroying BTS when in undersupply), and therefore should be tied to whatever is the most liquid/accurate market values. SQP of 1 (fixed to price feed) makes most sense until internal markets are liquid enough.

"traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg"
That did not work. The very first bitshares (version 0.1 or something like that)  tried this with no price feed or incentives to maintain peg, and price ran away very quickly. Why should I pay for something with no intrinsic value just because it has the label "USD" on it? I'll sell you 1000 maqifrsnwaUSD for 1000.

forced settlement is both the "gold standard" and the "federal reserve." It is the "gold standard" since you can always redeem your smartcoin for the equivalent value in something else. It is the "federal reserve" since it incentivizes the destruction of smartcoins when supply exceeds demand such that value is maintained. What (fiat) currency in the world exists without either a "gold standard" or a "federal reserve?"

Confession of a force-settler (before the GUI made it easy):
I will confess that I was a forced-settler before the GUI came out. I was a force-settler because I spent the time to learn the system inside and out in order to test some bots for both smartcoins and UIA (I believe UIA with properly regulated KYC is the growth market for BTS). My bots know nothing about the underlying assets, they only know the market rules: Sell high, buy low, never sell an asset for less than it can be settled for, if you can buy an asset for less than it can be settled then buy the assets and settle. This behavior is rational, generates profit, and keeps BitShares working efficiently - so it is a win-win for everyone. I feel it is a "service" to the community. I probably settled 1-2k CNY since it started. No other market presented settlement opportunities. I did not know why CNY presented this opportunity; I guessed there was a larger supply of "whales" trying to gain leverage any way they can in risky ways.

When I first heard of Transwiser, I was shocked at the business model (since it seemed like it would always lose money since 1 bitCNY> 1CNY) but also extremely impressed that they figured out to "beat the system" where I could not. The service was great for BTS and I was looking forward to them expanding to other currencies.

When I heard about the price feed data inaccuracy, at first I felt bad but then realized that the error was in some thinking smartcoins were something they were not. See: https://bitsharestalk.org/index.php/topic,20375.0/topicseen.html Even if the feed was incorrect, all businesses must know that the feed is all that matters and build their business model off of that (or work to correct the feed).

Now that we're almost through this "crisis," I think we're all stronger. Feeds are more accurate, people know what smartcoins are, and businesses know to research the system completely before building on top of it.

Great post!  I think we can probably place a warning in the GUI that prevents someone from selling below the price feed and instead suggests they force settle (if the market supports force settle).   The price feed is constantly moving, so there will always be opportunities for bots like yours to pick up orders below the force settle price and then convert them into force settlement requests.
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Offline abit

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Re: Smart Coins & Forced Settlement
« Reply #49 on: December 01, 2015, 03:56:42 pm »
Customers use BitUSD because it provides them the convenience and freedom of a cryptocurrency, and has the lowest transfer fees of any other payment platform.
The transfer fees are not as low now.
Are we coming back to advertise BitShares as a payment platform? Haven't we argued that BitShares is mainly in exchange business?
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Offline bytemaster

Re: Smart Coins & Forced Settlement
« Reply #50 on: December 01, 2015, 04:00:12 pm »
Customers use BitUSD because it provides them the convenience and freedom of a cryptocurrency, and has the lowest transfer fees of any other payment platform.
The transfer fees are not as low now.
Are we coming back to advertise BitShares as a payment platform? Haven't we argued that BitShares is mainly in exchange business?

That text hasn't changed so there is no "coming back". 
The purpose of BitUSD is to create a currency pegged to the dollar.  Currency is used for payment.
BitUSD depends upon a  successful exchange.

Perhaps we need to remove the word "lowest" and simply say "low".
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Offline tonyk

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Re: Smart Coins & Forced Settlement
« Reply #51 on: December 01, 2015, 05:16:33 pm »
The premium should also decrease when BTS is rising & increase when BTS is falling in value I guess.


Do not guess be sure.
If you think of decreasing prices as increased downside volatility, you combine the generally correct statement by Xeroc - the increased volatility leads (should lead) to higher premiums - with the exact kind of volatility that affects the premium the most.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline clayop

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Re: Smart Coins & Forced Settlement
« Reply #52 on: December 01, 2015, 05:34:27 pm »
[member=4465]alt[/member] X% force settle per day is independent with each asset

When I talk about prices I always think in FIAT prices.  So USD per BTS or USD per BitUSD.  I know this is the opposite of how many in crypto think in terms of their favorite token.

Few understand the whole system.  Many have discussed it, understood it, and since forgot it.   We have to "re-learn" many times unless you live/breath it full time.

http://cryptofresh.com/a/CNY

Max force settle vol   2000

Does 2000 mean 2% or 20%?
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Re: Smart Coins & Forced Settlement
« Reply #53 on: December 01, 2015, 07:58:35 pm »
2%
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Offline bytemaster

Re: Smart Coins & Forced Settlement
« Reply #54 on: December 01, 2015, 07:58:41 pm »
[member=4465]alt[/member] X% force settle per day is independent with each asset

When I talk about prices I always think in FIAT prices.  So USD per BTS or USD per BitUSD.  I know this is the opposite of how many in crypto think in terms of their favorite token.

Few understand the whole system.  Many have discussed it, understood it, and since forgot it.   We have to "re-learn" many times unless you live/breath it full time.

http://cryptofresh.com/a/CNY

Max force settle vol   2000

Does 2000 mean 2% or 20%?

2%
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Offline alt

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Re: Smart Coins & Forced Settlement
« Reply #55 on: December 02, 2015, 12:34:46 am »
[member=25789]Bytemаsteг[/member] can you tell me when market price is 0.02CNY/BTS, what should I set settlement price?
I want set 2% premium, the settlement price should be 0.02*1.02 or 0.02/1.02?

1. as a bitCNY holder, I think price floor means the minimal BTS I can buy with my bitCNY, it's BTS/CNY
so if you want to price it with CNY/BTS, it should be called price ceiling
so the settlement price should greater than real price we got from the exchange?

2. you have set a volume limit, I think of course you want to protect some attack.
but I think this volume limit is still too weak.
may I ask you, do you belive current 0.02CNY/BTS is the real price of BTS? do you belive there are no manipulate?
I think the price is totally unbeliveable, it's because of manipulate of couse.
what I have seen is the whals can manipulate the price so easy, and keep the period so long.
so I don't think the  volume protect is enough.
and if somebody ask force settlement my short position at this price, I can never accept it. so my choise is I'll never short more bitasset.
we are lucky the whals don't read the whitepater carefully, if he know, he can force settlement all short position at such a long time.

I want to ask all the BTS holders, do you accepet the deal? whals buy out all your BTS at such a price, 0.02CNY/BTS
if the answer is no, never short, or this can happend very possible.

[member=4465]alt[/member] X% force settle per day is independent with each asset

When I talk about prices I always think in FIAT prices.  So USD per BTS or USD per BitUSD.  I know this is the opposite of how many in crypto think in terms of their favorite token.

Few understand the whole system.  Many have discussed it, understood it, and since forgot it.   We have to "re-learn" many times unless you live/breath it full time.

Offline alt

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Re: Smart Coins & Forced Settlement
« Reply #56 on: December 02, 2015, 02:13:27 am »
the rule should guarentee two thing:
1. if I want to buy bitCNY, I can buy it at price 1.0 + premium
2. if I want to sell bitCNY, I can sell it at price 1.0 - premium
and the premium should not too small, my suggest is more than 2%
then market maker will give a better offer, with more small premium
then we can buy/sell bitCNY at price 1.0 with small premium from the free wallet market.

force settlement is a way to guarentee you can sell bitCNY at a floor price, so I think the price should set to  * (1.0 - premium) CNY/bitCNY
when the price of BTS is 0.02 CNY/BTS, witness should set settlement price to 0.02 / (1.0 - premium)

on the other hand, force settlement will hurt shorters, because this force them sell BTS even when they have enough collatereal.
so we should  not encourage people use this, we can set the premium to 2% or more,  as compensate for the one be settled.

for all witness, if you approve my point, you can change the parameter at xeroc's price scripts
set discount to 1.02
to avoid add aditional fee for bitCNY,  you should change core_exchange_factor to 1.02 too
and set SQP more than 1020

and I want to tell again, let witness just input feed price, which is the real price from exchange
let commitee adust SQP, settlement price
« Last Edit: December 02, 2015, 03:28:49 am by alt »

Offline merivercap

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Re: Smart Coins & Forced Settlement
« Reply #57 on: December 02, 2015, 02:36:00 am »
the rule should guarentee two thing:
1. if I want to buy bitCNY, I can buy it at price 1.0 + premium
2. if I want to sell bitCNY, I can sell it at price 1.0 - premium
and the premium should not too small, my suggest is more than 2%
then market maker will give a better offer, with more small premium
then we can buy/sell bitCNY at price 1.0 with small premium from the free wallet market.

force settlement is a way to guarentee you can sell bitCNY at a floor price, so I think the price should set to  * (1.0 - premium) CNY/bitCNY
when the price of BTS is 0.02 CNY/BTS, witness should set settlement price to 0.02 / (1.0 - premium)

on the other hand, force settlement will hurt shorters, because this force them sell BTS even when they have enough collatereal.
so we should  not encourage people use this, we can set the premium to 2% or more,  as compensate for the one be settled.

for all witness, if you approve my point, you can change the parameter at xeroc's price scripts
set discount to 1.02
to avoid add aditional fee for bitCNY,  you should change core_exchange_factor to 1.02 too

Something like this would balance the market more, but many bitAsset holders want to keep it for the long term so adding that uncertainty of forced settlement would not be attractive.  We want long term bitAsset holders and long term shorters.... not the unpredictability of force settlement battles...
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Offline bitcrab

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Re: Smart Coins & Forced Settlement
« Reply #58 on: December 02, 2015, 03:35:40 am »
after 2 years of experimenting I think the best was the first and original rule..depending on demand for bitassets the bitusd could be at a discount or a premium..period..no expiration no SQP and shinny formulas..nothing..traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg
Merchants accepting bitusd as a form of payment would know that at some point their bitasset would worth more or less but at least there would be liquidity from traders and the risk for not beeing able to convert all their bitasset in fiat would be minimal..Now after 2 years we have no liquidity, no traders in the DEX nothing..anyway..

I agree about SQP. Margin calls should only happen when they absolutely must (since it is destroying BTS when in undersupply), and therefore should be tied to whatever is the most liquid/accurate market values. SQP of 1 (fixed to price feed) makes most sense until internal markets are liquid enough.

"traders would short when bitasset was at premium and people would buy bitasset when in discount forcing the peg"
That did not work. The very first bitshares (version 0.1 or something like that)  tried this with no price feed or incentives to maintain peg, and price ran away very quickly. Why should I pay for something with no intrinsic value just because it has the label "USD" on it? I'll sell you 1000 maqifrsnwaUSD for 1000.

forced settlement is both the "gold standard" and the "federal reserve." It is the "gold standard" since you can always redeem your smartcoin for the equivalent value in something else. It is the "federal reserve" since it incentivizes the destruction of smartcoins when supply exceeds demand such that value is maintained. What (fiat) currency in the world exists without either a "gold standard" or a "federal reserve?"

Confession of a force-settler (before the GUI made it easy):
I will confess that I was a forced-settler before the GUI came out. I was a force-settler because I spent the time to learn the system inside and out in order to test some bots for both smartcoins and UIA (I believe UIA with properly regulated KYC is the growth market for BTS). My bots know nothing about the underlying assets, they only know the market rules: Sell high, buy low, never sell an asset for less than it can be settled for, if you can buy an asset for less than it can be settled then buy the assets and settle. This behavior is rational, generates profit, and keeps BitShares working efficiently - so it is a win-win for everyone. I feel it is a "service" to the community. I probably settled 1-2k CNY since it started. No other market presented settlement opportunities. I did not know why CNY presented this opportunity; I guessed there was a larger supply of "whales" trying to gain leverage any way they can in risky ways.

When I first heard of Transwiser, I was shocked at the business model (since it seemed like it would always lose money since 1 bitCNY> 1CNY) but also extremely impressed that they figured out to "beat the system" where I could not. The service was great for BTS and I was looking forward to them expanding to other currencies.

When I heard about the price feed data inaccuracy, at first I felt bad but then realized that the error was in some thinking smartcoins were something they were not. See: https://bitsharestalk.org/index.php/topic,20375.0/topicseen.html Even if the feed was incorrect, all businesses must know that the feed is all that matters and build their business model off of that (or work to correct the feed).

Now that we're almost through this "crisis," I think we're all stronger. Feeds are more accurate, people know what smartcoins are, and businesses know to research the system completely before building on top of it.

it's my fault not to pay enough attention to the force settlement feature in 2.0, you have the opportunity because transwiser kept on selling BitCNY at 1 CNY to the market in past.

the force settlement feature bring additional risks to the shorter, the result is that BitCNY will worth more than 1 CNY, with a variable premium.

merchant/customers need a cryptocurrency that has fixed value,  they just need a simple value transfer media, nothing more, to calculate/check/split the premium need to pay more time/energy/management cost, a BitCNY with variable premium added to 1 CNY is not what the really need.

BitCNY has been a good payment media for merchant/customers,  there have been merchant(BTC38), customers(btc38 users), acceptance dealer(transwiser), now the introduction of the force settle make all the above have no space to stay and only speculators will enjoy.

market need speculators, but if there are only speculators in the market, speculators will find no chance to make profit.

« Last Edit: December 02, 2015, 03:42:26 am by bitcrab »

Offline merivercap

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Re: Smart Coins & Forced Settlement
« Reply #59 on: December 02, 2015, 04:48:18 am »

it's my fault not to pay enough attention to the force settlement feature in 2.0, you have the opportunity because transwiser kept on selling BitCNY at 1 CNY to the market in past.

the force settlement feature bring additional risks to the shorter, the result is that BitCNY will worth more than 1 CNY, with a variable premium.

merchant/customers need a cryptocurrency that has fixed value,  they just need a simple value transfer media, nothing more, to calculate/check/split the premium need to pay more time/energy/management cost, a BitCNY with variable premium added to 1 CNY is not what the really need.

BitCNY has been a good payment media for merchant/customers,  there have been merchant(BTC38), customers(btc38 users), acceptance dealer(transwiser), now the introduction of the force settle make all the above have no space to stay and only speculators will enjoy.

market need speculators, but if there are only speculators in the market, speculators will find no chance to make profit.

 +5%

I agree with you and I'm glad to see that it worked well as a payment media for merchants/customers in China.  I don't think it's much different here.  That's precisely how I envision bitCash to work.   
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