Author Topic: Proposal for Having Alternate Smartcoin Designs  (Read 2796 times)

0 Members and 1 Guest are viewing this topic.

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #30 on: December 07, 2015, 05:37:38 pm »

First, we need to understand the roll of the short seller.  The short seller is a lender that provides a service to the network by lending bts to borrowers in the form of smartcoins.  Lenders do not lend money for free so they will either charge interest or charge a premium.  Otherwise, the risk/reward doesn't work.  For example, if I lend 1 usd into existence at a rate of 300 bts/usd with 2x collateral of 600bts, then my risk of loss is 100% of outlay (with a 50% drop in price) while my potential gains are only 50% of outlay.  It just does not make sense to enter this agreement unless I charge a fee to compensate for the added risk.


The short seller is a borrower, not a lender. You borrow bitUSD to provide them to the market. Those who buy these bitUSD are the lenders.

If that is correct, then why do short sellers not PAY premium to smartcoin buyers?  Borrowers almost always pay either premium or interest to lenders.  By your logic, the short seller should pay premium to the buyer.

Short sellers should not pay any premiums, they are already fucked up enough for borrowing bitAssets. Why do you want them to be fucked up even more?

I asked you a question that you failed to answer.  I will ask the question again.  Why do short sellers not pay a premium if they are borrowers?

Because this is how the devs made the bitshares. You don't have to pay a premium for a loan, but you have to keep 200% collateral instead. You are asking trivial questions.

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

Edit:  If I buy a house and go to the bank for a loan, I am not required to put a 200% down payment toward the loan as the borrower.  Same logic applies.
« Last Edit: December 07, 2015, 05:49:55 pm by Helikopterben »

Offline yvv

  • Hero Member
  • *****
  • Posts: 1186
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #31 on: December 07, 2015, 05:48:49 pm »

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

You get it 180 degree wrong. Go to bitshares.openledger.info then "Trade" tab and press "Borrow USD" button. See what happens.

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #32 on: December 07, 2015, 05:55:54 pm »

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

You get it 180 degree wrong. Go to bitshares.openledger.info then "Trade" tab and press "Borrow USD" button. See what happens.

That "borrow USD" button should say "loan USD".  Actually it should say "create USD."  That would be more correct terminology.

Offline Empirical1.2

  • Hero Member
  • *****
  • Posts: 1366
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #33 on: December 07, 2015, 05:57:55 pm »

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

You get it 180 degree wrong. Go to bitshares.openledger.info then "Trade" tab and press "Borrow USD" button. See what happens.

That "borrow USD" button should say "loan USD".  Actually it should say "create USD."  That would be more correct terminology.

I don't think the short seller is a lender/borrower.

The current BitAssets are bit like a contract for difference so it's just a market that matches buyers and sellers.

If the shorts were extremely bullish they'd be wiling to pay a premium to longs to take the other side of the contract and vice versa.

I don't know though.

If you want to take the island burn the boats

Offline yvv

  • Hero Member
  • *****
  • Posts: 1186
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #34 on: December 07, 2015, 05:58:06 pm »

Edit:  If I buy a house and go to the bank for a loan, I am not required to put a 200% down payment toward the loan as the borrower.  Same logic applies.

You continue messing things up. Banks either charge interest for loans or require collateral or do both. Usually, higher collateral you deposit, less interest they charge you. You don't have to pay interest for borrowing bitAssets, because you need to deposit very high collateral.
« Last Edit: December 07, 2015, 06:25:52 pm by yvv »

Offline yvv

  • Hero Member
  • *****
  • Posts: 1186
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #35 on: December 07, 2015, 06:01:18 pm »

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

You get it 180 degree wrong. Go to bitshares.openledger.info then "Trade" tab and press "Borrow USD" button. See what happens.

That "borrow USD" button should say "loan USD".  Actually it should say "create USD."  That would be more correct terminology.

Did you try to do exercise which I suggested? Just go and press the damn button, then check your account overview.

Offline abit

  • Committee member
  • Hero Member
  • *
  • Posts: 4150
    • View Profile
    • Steemit Blog
  • BitShares: abit
  • GitHub: abitmore
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #36 on: December 07, 2015, 06:12:33 pm »
Opinions and facts must be tested.  How are the alternatives being tested?

I tend to agree with proposal to test bitAssets which pay premium or interest to holders. Setting positive interest would motivate holders and demotivate borrowers, increasing demand and reducing supply which would push the price up. Setting negative interest would reduce  demand and increase supply which would push the price down.  This could give an efficient way to keep the asset close to peg.
Why not fork a chain and test if impossible to test by a private MPA?
BTS account: abit
BTS committee member: abit
BTS witness: in.abit

Offline yvv

  • Hero Member
  • *****
  • Posts: 1186
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #37 on: December 07, 2015, 06:24:09 pm »

I don't think the short seller is a lender/borrower.

The current BitAssets are bit like a contract for difference so it's just a market that matches buyers and sellers.


It is a contract for difference, but you still need to borrow bitAsset to create it into existence. It becomes your liability, aka debt.

Quote
If the shorts were extremely bullish they'd be wiling to pay a premium to longs to take the other side of the contract and vice versa.

I don't know though.

This is true. Saying that shorts should not pay premium, I was not correct. They may agree to pay under certain conditions.

jakub

  • Guest
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #38 on: December 07, 2015, 06:26:45 pm »

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

You get it 180 degree wrong. Go to bitshares.openledger.info then "Trade" tab and press "Borrow USD" button. See what happens.
yvv is right. Short position holder borrows bitUSD from the system and one day s/he will have to return these bitUSD.
S/he can do it voluntarily (by buying back bitUSD from the market) or involuntarily (by being margin called or forced settled).
« Last Edit: December 07, 2015, 06:28:21 pm by jakub »

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #39 on: December 07, 2015, 06:35:02 pm »
Did you try to do exercise which I suggested? Just go and press the damn button, then check your account overview.

I have created usd, cny, gold, silver, and bitcoin, but I did not borrow it.  I lent it on the network and charged a premium for that service. 

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #40 on: December 07, 2015, 06:54:54 pm »
yvv is right. Short position holder borrows bitUSD from the system and one day s/he will have to return these bitUSD.
S/he can do it voluntarily (by buying back bitUSD from the market) or involuntarily (by being margin called or forced settled).

So what premium or interest rate does the system charge for this loan?  Borrowers usually pay a premium or interest rate for borrowing money.  Its more like lending to yourself and borrowing from yourself at the same time, instead of the system.  As I said before, maybe lender is not the correct term to use.  The smartcoin creator is more like an options seller.

Empirical1.2 makes sense:
I don't think the short seller is a lender/borrower.

The current BitAssets are bit like a contract for difference so it's just a market that matches buyers and sellers.

If the shorts were extremely bullish they'd be wiling to pay a premium to longs to take the other side of the contract and vice versa.

I don't know though.

Offline merivercap

  • Hero Member
  • *****
  • Posts: 661
    • View Profile
    • BitCash
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #41 on: December 07, 2015, 07:29:17 pm »
The short actually borrows BTS from the long bitUSD buyer.   I think the confusion is the 200% collateral, because it seems like the short is providing both sides.  What's not explicitly seen is the BTS collateral that the long bitUSD buyer brings to the table on trade execution and that's what is used by the short to get leverage.  The short borrows BTS to get more exposure to ups/downs. 

The extra collateral for the short is unnecessary even though the intent might have been to be more conservative with the protocol.   
BitCash - http://www.bitcash.org 
Beta: bitCash Wallet / p2p Gateway: (https://m.bitcash.org)
Beta: bitCash Trade (https://trade.bitcash.org)

jakub

  • Guest
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #42 on: December 07, 2015, 07:50:30 pm »
So what premium or interest rate does the system charge for this loan?  Borrowers usually pay a premium or interest rate for borrowing money.  Its more like lending to yourself and borrowing from yourself at the same time, instead of the system.  As I said before, maybe lender is not the correct term to use.  The smartcoin creator is more like an options seller.

In this case you borrow one type of money (i.e. bitUSD) against a collateral in the form of another type of money (i.e. BTS).
So one might say there is no premium or interest rate involved because the size of the collateral itself is enough to compensate the lender (i.e. the system) for their risk.

Lending to yourself and borrowing from yourself - this concept does not make sense. Similarly you cannot sell something to yourself or buy something from yourself.
In our case you borrow something (i.e. bitUSD) from the system and as long as you remain in control of this borrowed thing, you are not exposed to any risk (and any profit).

It's similar to borrowing money from a bank at zero interest and keeping this borrowed money safely in a bank account of the same bank.
Theoretically you have a debt but still your financial situation is not affected in any way as long as you do nothing with this borrowed money.
« Last Edit: December 07, 2015, 07:52:41 pm by jakub »

Offline GaltReport

Re: Proposal for Having Alternate Smartcoin Designs
« Reply #43 on: December 07, 2015, 08:37:16 pm »
So what premium or interest rate does the system charge for this loan?  Borrowers usually pay a premium or interest rate for borrowing money.  Its more like lending to yourself and borrowing from yourself at the same time, instead of the system.  As I said before, maybe lender is not the correct term to use.  The smartcoin creator is more like an options seller.

In this case you borrow one type of money (i.e. bitUSD) against a collateral in the form of another type of money (i.e. BTS).
So one might say there is no premium or interest rate involved because the size of the collateral itself is enough to compensate the lender (i.e. the system) for their risk.


Lending to yourself and borrowing from yourself - this concept does not make sense. Similarly you cannot sell something to yourself or buy something from yourself.
In our case you borrow something (i.e. bitUSD) from the system and as long as you remain in control of this borrowed thing, you are not exposed to any risk (and any profit).

It's similar to borrowing money from a bank at zero interest and keeping this borrowed money safely in a bank account of the same bank.
Theoretically you have a debt but still your financial situation is not affected in any way as long as you do nothing with this borrowed money.

Yes, bold part is how  I understand it.  Short is putting up their BTS collateral to Borrow BitUSD from the system and sell it (when someone buys it).

« Last Edit: December 07, 2015, 08:41:26 pm by GaltReport »

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: Proposal for Having Alternate Smartcoin Designs
« Reply #44 on: December 07, 2015, 09:42:07 pm »
In this case you borrow one type of money (i.e. bitUSD) against a collateral in the form of another type of money (i.e. BTS).
So one might say there is no premium or interest rate involved because the size of the collateral itself is enough to compensate the lender (i.e. the system) for their risk.

Perhaps you could say that the short seller is borrowing security from the system... but in that case I would say it is the bitusd buyer who is actually paying the premium to borrow security from the system... but this still doen't make sense because the system charges tx fees for this security.

Quote
Lending to yourself and borrowing from yourself - this concept does not make sense.

It makes about as much sense as this:
Quote
It's similar to borrowing money from a bank at zero interest and keeping this borrowed money safely in a bank account of the same bank.


You are not borrowing bts from the system.  You are borrowing bts from yourself because you are the owner of that bts being used as collateral.  The system itself does not own any bts.  I get what you guys are saying but I am still unconvinced that the smartcoin creator is a borrower.  They may not be a lender in the traditional sense but they are not a borrower either.