Author Topic: Smart Coins & Forced Settlement  (Read 12501 times)

0 Members and 1 Guest are viewing this topic.

Offline clayop

  • Hero Member
  • *****
  • Posts: 2033
    • View Profile
    • Bitshares Korea
  • BitShares: clayop
@alt 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%?
Bitshares Korea - http://www.bitshares.kr
Vote for me and see Korean Bitshares community grows
delegate-clayop

Offline tonyk

  • Hero Member
  • *****
  • Posts: 3308
    • View Profile
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 bytemaster

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".
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline abit

  • Committee member
  • Hero Member
  • *
  • Posts: 4586
    • View Profile
    • Abit's Hive Blog
  • BitShares: abit
  • GitHub: abitmore
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?
BitShares committee member: abit
BitShares witness: in.abit

Offline bytemaster

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.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline maqifrnswa

  • Hero Member
  • *****
  • Posts: 661
    • View Profile
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 »
maintains an Ubuntu PPA: https://launchpad.net/~showard314/+archive/ubuntu/bitshares [15% delegate] wallet_account_set_approval maqifrnswa true [50% delegate] wallet_account_set_approval delegate1.maqifrnswa true

Offline mf-tzo

  • Hero Member
  • *****
  • Posts: 1725
    • View Profile
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 Empirical1.2

  • Hero Member
  • *****
  • Posts: 1366
    • View Profile
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 »
If you want to take the island burn the boats

Offline mf-tzo

  • Hero Member
  • *****
  • Posts: 1725
    • View Profile
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

I am not sure how this is fair though...I have noticed that when we were @ $18 mil market cap with high volume and volatility before the bts2 launch I wanted to cover my bitusd short positions and  I couldn't because I had to pay a premium of 30%-40% for the bitusd..So eventually I din't cover and finally I have decided to cover when we were @ $8 mil to avoid potential margin call. I did pay a premium of only 5% and my bts collateral released eventually worth now much less..Are you saying that I should have covered back then and pay a premium of 40%??? If that is the case then we are doing something really really wrong!!!

Bottom line...No matter what I will never a short position in bitasset ever ever again because of this..I much prefer buy and sell bts at external exchanges..And don't get me wrong..I have been supporting the experiment of bts for the last 2 years in the DEX instead of dumping bts when they were high on external exchanges as everyone else was doing..We need to sort our things right after 2 years of experimenting if we want bts to survive..

Offline xeroc

  • Board Moderator
  • Hero Member
  • *****
  • Posts: 12920
  • ChainSquad GmbH
    • View Profile
    • ChainSquad GmbH
  • BitShares: xeroc
  • GitHub: xeroc
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

Offline mindphlux

  • Sr. Member
  • ****
  • Posts: 232
    • View Profile
The way I understand it, the premium will get lower with more liquidity in the market, and could be much less than 1% eventually.

Is that assumption correct?
Please consider voting for my witness mindphlux.witness and my committee user mindphlux. I will not vote for changes that affect witness pay.

Offline Samupaha

  • Sr. Member
  • ****
  • Posts: 479
    • View Profile
  • BitShares: samupaha
BitCNY play at least 2 roles in current ecosystem:

A.a value transfer media/payment tool between merchant and users.
B.a derivative played by investors/speculators.

so when we ask "is the fact that 1 BitCNY worth more than 1 CNY pros or cons?", we should first define for which role we are talking about.

unfortunately, I found "1 BitCNY worth more than 1 CNY" do good to role B, but hurt the role A.

This has been explained in the link that Bytemaster gave in the OP:

The Merchant
A merchant wants to be able to price merchandise in BitUSD, and obtain real USD in the bank account, in a reasonable time, with minimal risk. In this case, a merchant would place BitUSD on the market at $1 per BitUSD. As discussed, BTS buyers fight for the opportunity to buy BitUSD at that price.

A smart merchant might recognize that 1 BitUSD can actually fetch $1 plus a variable premium, and start preferring that customers pay them in BitUSD at face value. An even smarter merchant might offer a discount to customers that pay in BitUSD.

Any way you slice it, merchants have a financial incentive to advertise BitUSD as the preferred payment mechanism, because they know that $1.00 is the lower bound on what BitUSD is worth.

The Customer
A customer looking to buy goods and services with BitUSD finds himself paying a premium to acquire BitUSD from the market. This means that customers will prefer merchants that offer a discount equal to the premium paid. On the other hand, the premium is a wash for a customer that earned BitUSD at a nominal value of $1.00. In fact, the only people to whom the premium matters are those who are looking to enter or exit the ecosystem. Once a customer or merchant is within the ecosystem, it is easy to simply trade BitUSD at parity, even if it is theoretically worth slightly more outside the ecosystem.

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.

Merchants and customers are free to negotiate the best way to split the premium, and the free market will take care of the rest. In the mean time, all participants can rest assured that BitUSD is always worth at least $1, and can consider the premium for entering the ecosystem as a one-time fee.

Offline bitcrab

  • Committee member
  • Hero Member
  • *
  • Posts: 1920
    • View Profile
  • BitShares: bitcrab
  • GitHub: bitcrab
Bottom line, the market can price all of the risks which are highest during low liquidity, and get lower as liquidity improves. Someone who steps up to provide liquidity can "trust" in that liquidity and offer a competitive price over those who must trust someone else to provide liquidity.  Bottom line, someone should buy up a lot of BitCNY at a price above 1.0 and then turn around and provide liquidity in the range of 1.05 to 1.06.  The liquidity provider will make all of the money from back and forth trades and the shorts wouldn't really have to worry about getting force settled once there was ample liquidity.

hi BM, thanks for your explanation, I think I totally understand the design, but there are still things to discuss.

BitCNY play at least 2 roles in current ecosystem:

A.a value transfer media/payment tool between merchant and users.
B.a derivative played by investors/speculators.

so when we ask "is the fact that 1 BitCNY worth more than 1 CNY pros or cons?", we should first define for which role we are talking about.

unfortunately, I found "1 BitCNY worth more than 1 CNY" do good to role B, but hurt the role A.

suppose xiaomi decided to accept BitCNY, and in market 1 BitCNY  = 1.05 CNY, then how should xiaomi list the price of its mobile product xiaomi4c? 1400CNY/1333BitCNY? it's too confusing to be feasible.

obviously,this fact will also make it impossible for BTC38 to accept BitCNY for user to deposit CNY.

we haven't considered yet that the CNY/BitCNY price may go up and down now and then, which will add more uncertaity for the payment role of BitCNY.

if the "perfect peg" is not necessary, then the service provided by transwiser is not necessary, BitCNY will be a toy of investors/speculators, not a payment media.

is this really what you want?
Email:bitcrab@qq.com

Offline BTSdac

  • Hero Member
  • *****
  • Posts: 1219
    • View Profile
  • BitShares: K1


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.
alt  I think you can do it now , but I think you cannot succeed
you said other lack of real operation , please do it now
github.com :pureland
BTS2.0 API :ws://139.196.37.179:8091
BTS2.0 API 数据源ws://139.196.37.179:8091

Offline cube

  • Hero Member
  • *****
  • Posts: 1404
  • Bit by bit, we will get there!
    • View Profile
  • BitShares: bitcube
Are you saying CNY/BTS (around 0.0203) or BTS/CNY (around 49)? I was saying CNY/BTS. And bitCNY feed should be higher than CNY because the feed is a price of bitCNY, not CNY Wrong statement. Sorry.
you're not explaining yourself clearly
You didn't answer my question. Tell me when bitCNY has premium than CNY. It's price feed in terms of CNY/BTS is always lower (e.g. 0.0203) than exchanged price (0.0207). Compare USD/BTS depth chart and CNY/BTS chart. You'll find the difference.

Yes it does temporarily change the design of smartcoin. There was no emergency, if we change rules over non issues like this bitshares will not be trusted in the future. Yes I nearly paid 1 million bts to settle some bitCNY
There was some emergency, because someone (you may know who he is) was enjoying (for example, settled 4,200 CNY) free money with the wrong price feed. And you didn't pay 1 million BTS until your order is filled.

No transwiser will not be able to sustain their business model if they sell 1 bitCNY for 1 CNY
the price feed isn't out that drastically, you can ask the witnesses to make adjustments but should not change the rules of a smartcoin contract overnight.[/color]
Again, with this small difference, someone was exploiting the system.

Who's the someone? Can you answer?
@clayop
It's no secret I was buying bitCNY for less than the feed and settling it because I am a rational market participant.
I still have a big sub feed price buy wall up and will continue to profit from it again when instant settlement returns. :-)

I'm not exploiting bitshares I'm exploiting transwiser.

How much profit have you gained from your exploits so far?
ID: bitcube
bitcube is a dedicated witness and committe member. Please vote for bitcube.