Proposal for Having Alternate Smartcoin Designs

[monsterer]

I agree. I'd like to see a design for parity where risk is equal on each side of the trade. This is made difficult because of the need for fungible longs.

To keep this simple, let's start with a design without fungable longs and go from there.

BTS/USD market:

* Longs and shorts trade on margin in a CFD style market
* The only currency in use is BTS (different to the current design where bitUSD is also used)
* Long BTS orders post BTS collateral
* Short BTS orders also post BTS collateral
* A matching long BTS order with a short BTS order begins the contract
* Both sides need to maintain their positions in order to avoid getting margin called
* Both sides start in BTS and end up in BTS
* Either side can close their position at any time, or get margin called in which case that contract is closed
* The other party which didn't initiate the close (directly or indirectly) gets rematched with next eligible order on the market

Thoughts?

[Samupaha]

What I hope to see is more detailed explanation how and why your system would work. Saying just "should be enough" is not very convincing for people like me who haven't fully grasped these things.

But I somewhat like the idea of MPA that floats around the peg and not over. Could we test it first on a different asset than fiat-MPA? Maybe gold or oil? For now I support fiat-MPAs that are pegged at least for the face value (although I might change my mind later if I see that's not working) because it guarantees the value for users. This is propably a good thing for commerce. But maybe assets like gold do not need such guarantees and we could let them to float around face value?

[merivercap]

I would like to hear more about how to peg something without having a forced settlement. For me it seems to be a really important feature that makes sure that the peg holds. How you are going to replace that?

If you have natural margin-call settlement happen around the price feed that should be enough.   I believe the next fork will update settlement such that margin-calls will only happen if the price-feed is below the call price so that should have the same effect. 

Otherwise illiquid markets should have a range... sometimes it may go to 80 cents... sometimes 1.20... the only way you get tighter spreads is with more active traders and market makers.  I wouldn't make a judgement about a design if a bitUSD trades at 80 cents in an illiquid bull market nor would I be that suprised that a bitUSD trades at 1.20 in an illiquid bear market.   In a liquid market it shouldn't matter if it's a bull or bear market you'll have enough traders on both sides such that it will have a small spread around 1 dollar. 

If the idea of 80 cent bitUSD is that terrible, just set the lower limit to 90 cents and allow a worst-case forced settlement there.  I just don't care to make any judgement about if a design is good or not when the sample size is so small and you have such illiquidity. 

[Samupaha]

I would like to hear more about how to peg something without having a forced settlement. For me it seems to be a really important feature that makes sure that the peg holds. How you are going to replace that?

[alt]

I think the real reason why I prefer to create another smart coin instead of CNY is not because of some unreasonable parameter
the importan reason is committee will never  response as fast as the market's change, they can't and shouldn't take care of all business
an alternate smartcoin can  have a committee which can focus on it's business,  and can get more resouses to suport it's business

[bitcrab]

it's easy to solve this by below setting:

Code: [Select]

  "force_settlement_offset_percent": 200,
it is set that the force settlement requester need to pay 2%(or other reasonable percent) above the feed price to the shorter.

then the premium can be removed and the shorter will be safe enough and the merchant/consumer can enjoy the 1:1 pegging.

[alt]

yes,  we have decided to create another private smart CNY
https://bitsharestalk.org/index.php/topic,20406.0/topicseen.html

[merivercap]

Hey community,
The more I think about the current design of Smartcoins, the more I believe they will not work.  Force settlements, guarantees, and premiums all have negative consequences that will make Smartcoins unattractive to most people. 

For consumers:
Smartcoins with a permanent premium will be both confusing and inconvenient for daily use for consumers.  The further the price of bitUSD goes away from one dollar the more unlikely it will be adopted.  With fees, a permanent premium, and illiquidity I see bitUSD selling at times for 1.25 to 1.35. 

For traders:
The forced settlement feature creates a disadvantage for shorts so there will be far less desire for shorts to create Smartcoins and hence less liquidity overall.   

I think evaluating the traction of any design can take some time so for those that want to experiment, promote and build off the current design I think that's fine.   However,  I strongly believe in a design without forced settlements or permanent premiums and believe we do not have as much time to keep testing one design at a time and risk having to start over again.  If we can create one alternate design or two we can be far more efficient in discovering what design will allow us to gain the most traction and allow businesses more options to help Bitshares grow rapidly.   Hence I propose we have one more design for bitUSD and possibly bitCNY.

I do understand we will be splitting up the liquidity of the market and may cause some slight confusion for traders, but traders will have more options and I think we will have distinct groups of traders and users who would prefer one design over the other so the downside will not be that great.

Let me know your thoughts.  Thanks.