Author Topic: Discussion of a CFD market on Bitshares  (Read 4176 times)

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Offline Shentist

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Discussion of a CFD market on Bitshares
« on: January 21, 2016, 09:18:57 pm »
i am thinking that we should create something like a CFD

how can we do it?

we need a assetclass who can be force settled from both sides.
a margin call should also be done on the feed price

with this both changes i think we can create a asset class which we can copy CFD and Forex markets much easier.

what do you think?
« Last Edit: January 22, 2016, 08:10:32 pm by Shentist »

Offline bytemaster

Re: can we create this asset class?
« Reply #1 on: January 21, 2016, 09:20:55 pm »
We can *do* anything you can fully define.   Define the details of how it would work fully and then we can explore costs.
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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 Shentist

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Re: can we create this asset class?
« Reply #2 on: January 21, 2016, 09:22:20 pm »
We can *do* anything you can fully define.   Define the details of how it would work fully and then we can explore costs.

alright :D

Offline Shentist

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Re: Discussion of a CFD market on Bitshares
« Reply #3 on: January 22, 2016, 08:16:16 pm »
Here is the Contract for Difference proposal idea, and i would like and discuss it and we need an estimation how much it will cost to implement this market.

I think with this kind of market, we will be more attractive to any trader in the cryptospace, because with this feature leveraged trading will be done really easy.

Lets talk :D

Party A wants to short 1 BTC against BTS
Party B wants to go long 1 BTC against BTS

They are matched on the CFD market on the Feedprice of 130.000 BTS
Both parties have to provide 50% of the needed collaterized asset or 65.000 BTS

Both parties have the right to settle anytime on the feedprice with a x% difference here 1%
the execution will cost a percentage fee paid to the CFD market owner (issuer)

In the beginning both parties have the same amount of collateral. Now the price of BTS is rising against BTC and you need 120.000 BTS in exchange for 1 BTC. So Party As contract is now worth 75.000 BTS if he settles and Party B got down to 55.000 BTS. This will go on so long as both parties have enough collateral and no one settles.

Party B wants now to settle because the risk is to high and instantly the least collaterized Party B holder is get settled with a win.

The difference ot a normal CFD is that you trade against a real counterparty and you can get forced to settle your tradingposition if you have the least collaterized position in the market.

To disuss:

1. Is it good to settle anytime or do we give something like. For the first 10 days you can not forced out of your position?
2. Parameters we can use and change:

  • Percentage of collateral (feedprice/2*0.5)
  • Percentage of collateral left to get a margin call (30/100)
  • Settleprice away from feedprice ( >= 0 ) (30/100)
  • Percentage of splitting fees (20% network/20% FBA/workercontract /50% issuer)(30/100)
  • Time to make it possible to settle the position after agreeing on a contract (x hours) (30/100)



Offline bitmeat

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Re: Discussion of a CFD market on Bitshares
« Reply #4 on: January 23, 2016, 02:02:12 am »
It would be nice to have market orders. where it always settles at the feed price.

So you may have more pending buyers or more pending sellers, depending on demand / supply. But it would make it fair for someone who wants to move bigger amounts.

Say someone wants to buy 1M BitUSD, they could put in their order and wait for it to fill at reasonable prices, even if it takes days/weeks, instead of spiking the low liquidity in one go.

Offline tonyk

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Re: Discussion of a CFD market on Bitshares
« Reply #5 on: January 23, 2016, 02:17:57 am »
I did not get who this guy [called 'issuer' in the OP] is?
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Bitcoinfan

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Re: Discussion of a CFD market on Bitshares
« Reply #6 on: January 23, 2016, 03:56:37 am »
Its not clear to me why ayone would want to use a CDF because the other side does not know how to assess whether or not the other party will settle or not.  Since they can't evaluate, traders will avoid it entirely.  There is always a fear of losing your position + more.  CDF's were only invented because there was no such thing as a stable asset.  But now we have that because of cypto, athough I'm convinced the way bitshares is implementing it will not work.  There is always a fear with putting up collateral, which is an obstruction to a frictionless transaction. 

Not to derail your post, but I have figured out a way to create true stablecoin without needing ANY COLLATERAL.  Its done using the LMSR structure that Augur and Bitcoin Hivemind are using for their Prediction Markets.  The only difference is that its a TRUE non-settling prediction market (something Bytemaster could not deliver on when he first created Bitshares).  Its effectively a LMSR that never ever has a maturity date and continues constantly. 

I think this is a better idea than doing a CDF, and will help Bitshares in creating a true stablecoin, where both sides of the bet have symmetric risk profiles.  You might be interested in this.  Take a look.  I think Bitshares should take advantage of this.   

http://forum.truthcoin.info/index.php/topic,206.msg1075.html#msg1075

« Last Edit: January 23, 2016, 03:59:08 am by Bitcoinfan »

Offline Shentist

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Re: Discussion of a CFD market on Bitshares
« Reply #7 on: January 23, 2016, 06:48:48 am »
It would be nice to have market orders. where it always settles at the feed price.

So you may have more pending buyers or more pending sellers, depending on demand / supply. But it would make it fair for someone who wants to move bigger amounts.

Say someone wants to buy 1M BitUSD, they could put in their order and wait for it to fill at reasonable prices, even if it takes days/weeks, instead of spiking the low liquidity in one go.

in this proposal all market operations are done on the feedprice (buy and sell) and the settleprice x% near the feedprice.

if you are in a contract, you can only end the contract with settlement. So it is possible that you have more shorters then sellers, for this reason we need people to take care of this market (market maker)

I did not get who this guy [called 'issuer' in the OP] is?

i assumed a market can create from anyone like you or me. We could charge a fee for executed contracts and for this reason want as much liquidity on our market as possible (share the fees like metaexchange or openledger, or this not yet implemented feature for given liquidity provider some tokens).

Its not clear to me why ayone would want to use a CDF because the other side does not know how to assess whether or not the other party will settle or not.  Since they can't evaluate, traders will avoid it entirely.  There is always a fear of losing your position + more.  CDF's were only invented because there was no such thing as a stable asset.  But now we have that because of cypto, athough I'm convinced the way bitshares is implementing it will not work.  There is always a fear with putting up collateral, which is an obstruction to a frictionless transaction. 

Not to derail your post, but I have figured out a way to create true stablecoin without needing ANY COLLATERAL.  Its done using the LMSR structure that Augur and Bitcoin Hivemind are using for their Prediction Markets.  The only difference is that its a TRUE non-settling prediction market (something Bytemaster could not deliver on when he first created Bitshares).  Its effectively a LMSR that never ever has a maturity date and continues constantly. 

I think this is a better idea than doing a CDF, and will help Bitshares in creating a true stablecoin, where both sides of the bet have symmetric risk profiles.  You might be interested in this.  Take a look.  I think Bitshares should take advantage of this.   

http://forum.truthcoin.info/index.php/topic,206.msg1075.html#msg1075


i tried to read into the paper, but to me it is not clear how these "stablecoins" are created. the original paper talks a lot about "bundled" trading. For me this is to much that a human can handle it, so i am looking for simple solutions for some problems.

With this proposal we could create a new kind of contract and i am sure it could be used for new ideas as well.


Offline xeroc

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Re: Discussion of a CFD market on Bitshares
« Reply #8 on: January 23, 2016, 11:32:17 am »
If you can follow the formal requirements of BSIPs (https://github.com/bitshares/bsips/blob/master/BSIPs-Template.md) I can can certainly add this to the other BSIPs to increase a little exposure and discussion! Go for it!
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Offline tonyk

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Re: Discussion of a CFD market on Bitshares
« Reply #9 on: January 23, 2016, 12:06:59 pm »
Its not clear to me why ayone would want to use a CDF because the other side does not know how to assess whether or not the other party will settle or not.  Since they can't evaluate, traders will avoid it entirely.  There is always a fear of losing your position + more.  CDF's were only invented because there was no such thing as a stable asset.  But now we have that because of cypto, athough I'm convinced the way bitshares is implementing it will not work.  There is always a fear with putting up collateral, which is an obstruction to a frictionless transaction. 

Not to derail your post, but I have figured out a way to create true stablecoin without needing ANY COLLATERAL.  Its done using the LMSR structure that Augur and Bitcoin Hivemind are using for their Prediction Markets.  The only difference is that its a TRUE non-settling prediction market (something Bytemaster could not deliver on when he first created Bitshares).  Its effectively a LMSR that never ever has a maturity date and continues constantly. 

I think this is a better idea than doing a CDF, and will help Bitshares in creating a true stablecoin, where both sides of the bet have symmetric risk profiles.  You might be interested in this.  Take a look.  I think Bitshares should take advantage of this.   

http://forum.truthcoin.info/index.php/topic,206.msg1075.html#msg1075

1.So you have never heard of contracts that can be 'settled' before expiration? Or do you believe no trades in them exist, as it is? I will not go that far and ask about knowledge of mathematically correct ways to determine if and when to do such settlements?

2. While I have my thoughts on if this is gonna actually work (or work better), I want to ask a simple question first.
Why do you believe it cannot be done in bitshares? What is wrong with the feed price being your reference price and forcing trades within 0.5% of that price during your 'freeze window'/ locking period?

PS
and most importantly - there is no difference as it is now between having a collateral in your short position and buying a contract called ' short 1 USD' ... for the particularly scared of having a collateral all is needed is a GUI hiding the collateral from view and displaying  'short 1 USD' - N # contracts instead, and someplace else - remaining margin on your account X.
« Last Edit: January 23, 2016, 12:35:44 pm by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Bitcoinfan

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Re: Discussion of a CFD market on Bitshares
« Reply #10 on: January 23, 2016, 10:39:18 pm »
1.So you have never heard of contracts that can be 'settled' before expiration? Or do you believe no trades in them exist, as it is? I will not go that far and ask about knowledge of mathematically correct ways to determine if and when to do such settlements?

Sorry but Hivemind and Augur's Prediction Markets will make use of CDF's go obsolete...  for the reasons I stated before... holding up collateral is risky and just another needless cost for a trader. 

2. While I have my thoughts on if this is gonna actually work (or work better), I want to ask a simple question first.
Why do you believe it cannot be done in bitshares? What is wrong with the feed price being your reference price and forcing trades within 0.5% of that price during your 'freeze window'/ locking period?

No it can't be done in Bitshares because Bitshares does not use LMSR.  Bitshare needs another party to have collateral, which ensures liquidity problems and thus the bulk of Bitshares problems.  LMSR does not have liquidity issues. 


Offline abit

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Re: Discussion of a CFD market on Bitshares
« Reply #11 on: January 24, 2016, 10:58:15 pm »
1.So you have never heard of contracts that can be 'settled' before expiration? Or do you believe no trades in them exist, as it is? I will not go that far and ask about knowledge of mathematically correct ways to determine if and when to do such settlements?

Sorry but Hivemind and Augur's Prediction Markets will make use of CDF's go obsolete...  for the reasons I stated before... holding up collateral is risky and just another needless cost for a trader. 

2. While I have my thoughts on if this is gonna actually work (or work better), I want to ask a simple question first.
Why do you believe it cannot be done in bitshares? What is wrong with the feed price being your reference price and forcing trades within 0.5% of that price during your 'freeze window'/ locking period?

No it can't be done in Bitshares because Bitshares does not use LMSR.  Bitshare needs another party to have collateral, which ensures liquidity problems and thus the bulk of Bitshares problems.  LMSR does not have liquidity issues.
Can this LMSR thing be implemented as a 3rd party market maker bot which runs in BitShares markets, if have some fund? Thanks.
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Offline Bitcoinfan

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Re: Discussion of a CFD market on Bitshares
« Reply #12 on: January 24, 2016, 11:06:04 pm »

Can this LMSR thing be implemented as a 3rd party market maker bot which runs in BitShares markets, if have some fund? Thanks.

No its a protocol level feature. Otherwise it would be no different from a centralized PM such as Predictit, Intrade, Groupgnosis etc. 

I'd encourage you to take a look at LMSR.  It shouldnt be overlooked. 

Offline tonyk

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Re: Discussion of a CFD market on Bitshares
« Reply #13 on: January 25, 2016, 04:40:45 am »
 LMSR is hilarious.

but on the other hand, do not listen to idiots like myself who cannot even publish a well sounding academic paper...
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline xeroc

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Re: Discussion of a CFD market on Bitshares
« Reply #14 on: January 25, 2016, 06:40:58 am »
No it can't be done in Bitshares because Bitshares does not use LMSR.  Bitshare needs another party to have collateral, which ensures liquidity problems and thus the bulk of Bitshares problems.  LMSR does not have liquidity issues. 
It can be done. It is only a matter of adding a new smart contract (e.g. operation) to the protocol.
There is also no magic behind LMSR, it is simply "market maker" (that can be decentralized and even profitable) and is just "another pricing scheme".
You can think of it as an other approach to sell prediction market tickets. Nothing more.

This quote describes it the best:
Quote
Hanson prefers to describe trader behavior in terms of “changing the price” instead of “buying and selling shares”.

//edit: For those that haven't understood the implications of a "market maker": It can make a LOSS also!
Augur has two nice posts that descibe it very well:
http://www.augur.net/blog/what-is-an-automated-market-maker
http://www.augur.net/blog/augur-s-automated-market-maker-the-ls-lmsr
« Last Edit: January 25, 2016, 06:48:02 am by xeroc »
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