Liquidity has a Price -> Adding Maker / Taker

[clout]

I wasn't attempting to propose any particular solution, merely to point out that if you want a to encourage liquidity it must be paid for by someone.

Furthermore, I am contemplating a solution to this that doesn't involve dilution.  Think about sharing a cut of all future BitUSD fees with those who provide liquidity in that market early on. 

The early participants to the market are the ones who give it life, the late comers don't benefit from the fees.  In other words, make BitUSD a "profit center" where the profits go to those who make it a successful business.

I don't see that as being a viable solution. You talk about revenue from fees as if it were substantial enough to encourage participation. They simply aren't. Bitshares is too small, and its prospects are meager at best.

[yvv]

When you find the test one that works, why would people stop using it and switch back bitusd? The liquidity would be with the testusd.

Yes, but you will probably want to apply the same scheme to bitCNY, bitGold, bitWhatever...

[Pheonike]

When you find the test one that works, why would people stop using it and switch back bitusd? The liquidity would be with the testusd.

[yvv]

I wasn't attempting to propose any particular solution, merely to point out that if you want a to encourage liquidity it must be paid for by someone.

Furthermore, I am contemplating a solution to this that doesn't involve dilution.  Think about sharing a cut of all future BitUSD fees with those who provide liquidity in that market early on. 

The early participants to the market are the ones who give it life, the late comers don't benefit from the fees.  In other words, make BitUSD a "profit center" where the profits go to those who make it a successful business.

You don't need to screw up bitAssets to play around with parameters. Your system allows to issue any number of different USD. Just set the goal to have the best peg to USD without hurting liquidity and test different schemes on testUSD0, testUSD1...testUSDn, then adapt the one which worked the best for all bitAssets.

[donkeypong]

I wasn't attempting to propose any particular solution, merely to point out that if you want a to encourage liquidity it must be paid for by someone.

Furthermore, I am contemplating a solution to this that doesn't involve dilution.  Think about sharing a cut of all future BitUSD fees with those who provide liquidity in that market early on. 

The early participants to the market are the ones who give it life, the late comers don't benefit from the fees.  In other words, make BitUSD a "profit center" where the profits go to those who make it a successful business.

Again, we bribe people to do the dirty work. I'm all for it! 

[merivercap]

Much of the debate around BitAssets being bootstrapped focuses around improving liquidity. Liquidity is what gives people confidence in a price and/or value. If you cannot be guaranteed a buyer ON DEMAND then spreads increase.

To gain immediate liquidity you must compromise price. The more you lower your asking price the more likely you will find an immediate buyer for the asset you wish to sell.

So the question becomes *when* do you make the decision to compromise price for liquidity? 

1. At the time you buy the asset you lock in your liquidity price?
2. At the time you sell the asset you take what you can get?

Long bitAsset holders shouldn't be making the decision and whatever they get when they sell should be what they get.  Aren't all trading markets like that?  Are we trying to reinvent the wheel? You can't force liquidity without consequences.

The current BitAsset 2.0 system is superior to prior systems because the participants lock-in the price of liquidity-on-demand before entering the contract. As a buyer of a BitAsset I pay $1.10 for 1 BitUSD knowing I have locked in liquidity with a maximum downside of $0.10 if I need instant liquidity. 

I disagree it's superior for the general protocol.  We're creating something consumers won't want to use and shorters won't want to create.  Can we just call this particular design BitAsset Plus/Premium/Superior/Gold Standard/Instant Liquidity or something other than just plain BitAsset?  I think it's misleading and shorters are going to lose money because of the name thinking the balance is at 1:1 instead of 1:1.1  for whatever reason why they might be tempted to short in the first place. 

Also can we just create another experiment with a simple plain BitAsset?  It doesn't seem to me too terribly difficult to create another Smartcoin with a different design under the same committee structure.

As a short I am simultaneously pricing the cost of providing liquidity and the risk of dollars rising against my position.  After assessing the risks I agree to sell short at $1.10 per BitUSD.  If someone buys it from me, and then immediately demands liquidity (settlement) then I profit 10%. 

The result is that any short who gets force settled is existing at FAVORABLE price, they collect the full premium relative to the price feed.

We have constructed an asset (BitUSD) that is extremely favorable for the BitUSD holder (guaranteed price floor and liquidity).   To get these benefits, it comes at a price which is paid to the short.  Those who claim the market is "unbalanced" and favors the BitUSD holder over the short ignore the fact that the short gets to NAME THEIR PRICE.  In other words, the short gets to set the price at which BitUSD is created.

While the short gets to set the price at which BitUSD is created, they must buy back from the market to cover.  This means that BitUSD holders + future shorts get to set the price at which BitUSD can be destroyed.

This means the market can function perfectly so long as all participants trade BitUSD according to supply/demand for this asset class and the parties factor in the risks.

Trading is a zero-sum game (not including subjective value externalities)... You can't say you are guaranteeing bitAsset holders liquidity without it costing something to shorts.  'Naming their price' ?  Shouldn't both shorts and longs always be able to 'Name their price'.. otherwise it wouldn't be a free market?  So 'naming their price' is nothing special for shorts because they would would name their price regardless if it was at the market or upon creation.

Adding Maker / Taker

I think adding a Maker / Taker market is fantastic regardless of those who are for or against forced settlement.   I advocated for it before.  You just get more market depth up front and visibility to how much liquidity you have in a market  so count me in as a big supporter of this.

Suppose that open orders to sell BitUSD paid a yield in BTS that was significant. For a certain amount of yield we could find plenty of participants willing to short BitUSD and sell near the feed. All we need to do is define a budget and a payout equation that rewards those who are SHORT and have orders placed near the feed AND keep them there for a while.  An algorithm that is also efficient to implement will be required.

The result of this would be similar to paying people to take a risk that BTS falls in value.  In other words, we can arbitrarily stimulate demand to create BitUSD (ie: simulating a bull market in BTS) by guaranteeing profits to those who place orders.  In principle if we could pay interest to those who are short then that would be best, but unfortunately anyone can easily short to themselves. This means that we can only pay those who keep open orders on the books near the feed. If you attempt to "short to yourself" then you fill your open order and stop earning interest. 

With the right size reward the liquidity problem can be solved while keeping the costs to BTS holders fixed. 

This is an over-design.  We should all read the Dilbert cartoon strip about Wally and the double-handled coffee mug....
 

[bytemaster]

I wasn't attempting to propose any particular solution, merely to point out that if you want a to encourage liquidity it must be paid for by someone.

Furthermore, I am contemplating a solution to this that doesn't involve dilution.  Think about sharing a cut of all future BitUSD fees with those who provide liquidity in that market early on. 

The early participants to the market are the ones who give it life, the late comers don't benefit from the fees.  In other words, make BitUSD a "profit center" where the profits go to those who make it a successful business.

[abit]

This sounds to me like yet another overly complicated solution which will end up having a flaw and get exploited by someone, causing others to lose money.

If only we had a bunch of funds and could have a community fund that kickstarted the liquidity on major bitassets by providing buy and sell walls, like Nubits (which actually works!)  This wouldnt need to be the final solution, but it qould kickstart liquidity enough for traders to get established in the markets, and then once enough traders were providing liquidity, it wouldnt be needed anymore.

Agree

[Ander]

This sounds to me like yet another overly complicated solution which will end up having a flaw and get exploited by someone, causing others to lose money.

If only we had a bunch of funds and could have a community fund that kickstarted the liquidity on major bitassets by providing buy and sell walls, like Nubits (which actually works!)  This wouldnt need to be the final solution, but it qould kickstart liquidity enough for traders to get established in the markets, and then once enough traders were providing liquidity, it wouldnt be needed anymore.

[clout]

The ability to place relative orders would make the market much more efficient.

It would mean everyone can add liquidity and not have to readjust orders all the time.

By "relative orders" I mean the ability to place orders at the feed price with + or - a percentage that you choose.  The order moves in parallel with the feed.

Are there plans to introduce this feature?

Can this not be achieved by placing orders in a gateway market? Instead of worrying about the price of BTS relative to the bitassets underlying you could just provide liquidity in the market where the conversion rate is stable.  If there is liquidity in gateway markets then the effects will spread into the BTS/Bitasset market as well.

Additionally If these shorts that we are incentivizing to be market makers provide liquidity for the gateway market with the bitassets they borrow then they maintain a net long position in BTS and do not incur the cost of BTS / Bitasset price movements.

I would be in favor of this proposal if it incentivized neutral market making (ie market makers with net long positions in BTS) because then the BTS shareholders do not have to pay for the risk of a falling BTS price. It would also encourage people to deposit to gateways in order to acquire bitassets. Upon exchanging the borrowed bitasset for its corresponding gateway assset, the short position (the market maker) would then hold the gateway asset (a demand deposit for the real asset) as collateral. Thus, the bitasset acquired from this process is not only backed by 200% its value in BTS but also 100% its value in the gateway asset (for all intents and purposes, the real asset). The holders of bitassets attained through the gateway market would then have a choice of "settling" their position in BTS (from forced settlement or the exchange of bitasset for BTS) or BTC (from the gateway market maker that holds their original deposit)

[BunkerChainLabs-DataSecurityNode]

Free money for participating.. whats not to like? 

[JonnyB]

The ability to place relative orders would make the market much more efficient.

It would mean everyone can add liquidity and not have to readjust orders all the time.

By "relative orders" I mean the ability to place orders at the feed price with + or - a percentage that you choose.  The order moves in parallel with the feed.

Are there plans to introduce this feature?

[monsterer]

BitUSD would become something worth at least $1.00 with a negative interest rate. A negative interest rate creates a net present value less than $1.00.   You could achieve the same thing by saying that BitUSD is worth at least $0.99 in which case all you are doing is shifting the price and doing nothing about the premium.

Under the positive/negative yield design, bitUSD holders would pay interest only when there is an oversupply and would *receive* interest when there is an undersupply. On average the net value would be $1.00.

[tonyk]

almost great idea... however I do not think you can borrow your way to pay the premium [or enough of it] of an option with no expiration date [that is the premium that the shorts have to calculate and then use as a premium over the 1:1 peg ]. Paying straight up the whole premium is arguably even more crazy.

the best you can do is give the shorts part of the %-age fees paid by the bitWhatever buyers. How much will this help? No clue... but will help some.



On a semi related note - paying for stuff to just sit on the orderbook in arbitrary distance from the market price is ... somewhere between inefficient and manipulative, depending on how much you subsidize it - Are you gonna pay them  the whole risk of being filled [assuming they have no desire to place the order lacking the subsidy?] or just for some of it?

[edit]
 ohh you want the bitAsset holders to pay the interest?. I failed to get that from the OP.
While paying it to the shorters is something definitely worth discussing, I have no clue how the public will react to a currency that makes you pay interest for holding it.
Paying the interest to people for just holding orders on the order book is still a not a good idea at all, as described above.

[sittingduck]

Two options: wait for the market to naturally grow to stop complaining or provide funds to incentivize the Martin's to grow to accelerate things.

Being afraid to spend money to make money is the biggest thing that can hold us back. 

The only thing we need to do is make sure he spend money in the right place failure to spend money is a surefire way to die