Author Topic: Radical ideas for liquidity  (Read 11352 times)

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Offline Zapply

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Re: Radical ideas for liquidity
« Reply #60 on: February 01, 2016, 02:48:38 pm »
[member=16778]CoinHoarder[/member] the way that you create the bitasset can be forced Settlement?

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Re: Radical ideas for liquidity
« Reply #61 on: February 01, 2016, 02:55:58 pm »
If the system dilutes unlimited BTS for market making, what will happen when a whale or a group of whales manipulates the price of BTS?
* buy the BTAs which are borrowed via dilution, dump BTS to external exchange, settle
* borrow BTA, and sell to the system, pump BTS on external exchanges, buy BTA back from system

The autonomous liquidity operations would not ever buy SmartCoins. It only shorts them, and then places them on the sell side of the market above the price feed. I don't understand what you mean by "sell to the system" since the "system" is never buying any coins.

If this works how I think it works, couldn't someone do this type of an exploit as Bitshares exists today?
I wrote above post from a manipulator's perspective.
Since your "autonomous liquidity operations" (in my word: your bot) place orders into the market, I named it "the system", whatever price you place it, a manipulator can take advantage of your open orders. Once your smart coins are bought by the manipulator, you have open short positions, which can be settled by the manipulator. Your bot would passively accept all the commands sent by the manipulator, thus cause losses.

//Update
Quote
If this works how I think it works, couldn't someone do this type of an exploit as Bitshares exists today?
Since no one provides unlimited liquidity without moving the price. The manipulator has no opponent to worth exploiting.
« Last Edit: February 01, 2016, 02:59:56 pm by abit »
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Re: Radical ideas for liquidity
« Reply #62 on: February 01, 2016, 03:04:19 pm »
[member=16778]CoinHoarder[/member]: I like your idea. Your document is sound and IMHO we should do it. However, it involves quite some coding to have this an integrated automation and we may start trying to convince the committee to provide some liquidity in the short term. Not sure they are willing to do so.

As for the implementations, internally, those autonomous sell orders could be 'virtual' orders such that the DAC only borrows at the fixed ration IF there is a buyer for them ..
That way, we could have a ${MARKETCAP} sell order at the feed price in every single bitasset owned by the DAC/committee and the wall will be reduced in all markets simultaneously if a trade happens in any of them.
You should certainly write this together into a BSIP and have the devs thing about it ..
IMHO there are flaws. Market making is NOT a 100% safe business, it will definitely loss in a trend, so the system itself should never dilute to operate such service.
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Offline CoinHoarder

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Re: Radical ideas for liquidity
« Reply #63 on: February 01, 2016, 07:18:11 pm »
IMHO there are flaws. Market making is NOT a 100% safe business, it will definitely loss in a trend, so the system itself should never dilute to operate such service.

Meh. You are arguing that once there is a sufficient amount of liquidity on the books, that there will be sufficient incentive for people to manipulate the market to their advantage. You are effectively saying that the DEX is broken, as once a sufficient to amount of liquidity exists that it will be manipulated and profited off of from bad actors. What your are saying is a possibility whether my proposal is enacted or not. It is possible as long as there is enough incentive on the orderbooks, which can occur naturally. How do you know this isn't already taking place as is?

I get what you are saying, but while bringing up a good reason the proposal should not be implemented, you are also stating the DEX is broken and unfixable. As soon as there is enough liquidity (incentive) then bad actors will manipulate the market for easy profits. This seems more like a flaw with Smart coins than with the proposal as it could easily happen without it.
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Offline CoinHoarder

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Re: Radical ideas for liquidity
« Reply #64 on: February 01, 2016, 07:32:49 pm »
[member=16778]CoinHoarder[/member] the way that you create the bitasset can be forced Settlement?

Yes, other than the issue abit is bringing up, I think force settlement is the only other issue. The issue with that is the demand for forced settlement will increase, based on a statistical assumption. This will force other shorts, that will certainly have less collateral, to be force settled.

I have not come up with a solution to this, other than possibly not allowing Smartcoins to be force settled (which is another can of worms.) I was poking around last night and I noticed that committee-issued SmartCoins currently cannot be force settled. Is that truly the case, or is it a glitch in the GUI? Someone told me the other week that forced settlements were enabled...
« Last Edit: February 01, 2016, 08:48:50 pm by CoinHoarder »
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Offline puppies

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Re: Radical ideas for liquidity
« Reply #65 on: February 01, 2016, 08:53:57 pm »
[member=16778]CoinHoarder[/member] the way that you create the bitasset can be forced Settlement?

Yes, other than the issue abit is bringing up, I think force settlement is the only other issue. The issue with that is the demand for forced settlement will increase, based on a statistical assumption. This will force other shorts, that will certainly have less collateral, to be force settled.

I have not come up with a solution to this, other than possibly not allowing Smartcoins to be force settled (which is another can of worms.) I was poking around last night and I noticed that committee-issued SmartCoins currently cannot be force settled. Is that truly the case, or is it a glitch in the GUI? Someone told me the other week that forced settlements were enabled...
Settlement is turned on.  I don't have much USD. but it would allow me to settle it.
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Offline bytemaster

Re: Radical ideas for liquidity
« Reply #66 on: February 01, 2016, 09:32:56 pm »
Here is my proposal fully explained. The PDF version is much easier to follow and read. It is available here: http://docdro.id/2OcoImM

This proposal has some really solid concepts and reflects some of the things I have been thinking about. The challenge is preventing the feed from being abused among a few other things.
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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.

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Re: Radical ideas for liquidity
« Reply #67 on: February 01, 2016, 10:16:33 pm »
IMHO there are flaws. Market making is NOT a 100% safe business, it will definitely loss in a trend, so the system itself should never dilute to operate such service.

Meh. You are arguing that once there is a sufficient amount of liquidity on the books, that there will be sufficient incentive for people to manipulate the market to their advantage. You are effectively saying that the DEX is broken, as once a sufficient to amount of liquidity exists that it will be manipulated and profited off of from bad actors. What your are saying is a possibility whether my proposal is enacted or not. It is possible as long as there is enough incentive on the orderbooks, which can occur naturally. How do you know this isn't already taking place as is?

I get what you are saying, but while bringing up a good reason the proposal should not be implemented, you are also stating the DEX is broken and unfixable. As soon as there is enough liquidity (incentive) then bad actors will manipulate the market for easy profits. This seems more like a flaw with Smart coins than with the proposal as it could easily happen without it.
I've posted the reason above but you didn't quote it.

One of the challenges is: if we have huge liquidity, we shouldn't simply move the feed price when price on external exchange moves, especially when liquidity of external exchanges is less, otherwise it's a good target to manipulate/exploit. But, since the IOU USD backed by exchanges are real USD, on the opposite bitUSD is NOT fully backed especially when huge amount of them are created via dilution, the feed price should move/follow the price on external exchanges, otherwise bitUSD would be considered "not pegged well". Imo BitUSD can be considered as fully backed if there hasn't been unlimited BTS diluted to create them. I'm not saying that smart coins are already broken, but I suspect that it will break if doing this way.

Exactly this:
The challenge is preventing the feed from being abused among a few other things.
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Offline Zapply

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Re: Radical ideas for liquidity
« Reply #68 on: February 02, 2016, 12:38:45 am »
[member=16778]CoinHoarder[/member] to the core of your design your bitasset is backed the BTS blockchain you just play with number only blockchain give UIA better

Offline kingscrown

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Re: Radical ideas for liquidity
« Reply #69 on: February 02, 2016, 01:50:40 am »
What about making liquidty pools just like NBT has?
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Offline Zapply

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Re: Radical ideas for liquidity
« Reply #70 on: February 02, 2016, 03:42:06 am »
What about making liquidty pools just like NBT has?
How you encourage people put BTS in the liquidty pools?
What is the rules?

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Re: Radical ideas for liquidity
« Reply #71 on: February 02, 2016, 03:47:25 am »
[member=16778]CoinHoarder[/member] Example USD hyperinflation how your design going to work?

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Re: Radical ideas for liquidity
« Reply #72 on: February 02, 2016, 03:51:02 am »
I think the answer could be paying users to risk their own bts rather than risking the networks bts directly. 

Lets say a third party set up a program to promote liquidity.  You could register an account with them, and then your trades would be watched.  An algorithm would decide how much each of your trades/positions helped liquidity.  You would then get a monthly payout to the top n liquidity supporters paid for from a worker proposal.

The dilution is low and known.  The risk is held by the traders, and they are compensated for that through the worker proposal.
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Offline CoinHoarder

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Re: Radical ideas for liquidity
« Reply #73 on: February 02, 2016, 04:29:15 am »
I am making the following edits to the proposal:
Cons:
2.   Forced settlements need to be disabled, and instead autonomous buy side support needs to be implemented. If this proposal is enacted, the demand for forced settlement will increase (based on a statistical assumption.) This will force other shorts, that will certainly have less collateral, to be force settled. To solve this, I suggest we disable forced settlements, and instead set a buy side peg to provide buy support on the markets. The buy side peg percentage and amount can be the same as the sell side for the sake of convenience, or it can be set separately for the sake of having more control over the liquidity operation.
3.   Market making operations cannot be guaranteed to be profitable. On the off chance that the market making operations are unprofitable, Bitshares has the potential to have endured actual “negative dilution.”

Along with miscellaneous edits having to do with those changes.
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Offline Zapply

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Re: Radical ideas for liquidity
« Reply #74 on: February 02, 2016, 04:34:57 am »
I think the answer could be paying users to risk their own bts rather than risking the networks bts directly. 

Lets say a third party set up a program to promote liquidity.  You could register an account with them, and then your trades would be watched.  An algorithm would decide how much each of your trades/positions helped liquidity.  You would then get a monthly payout to the top n liquidity supporters paid for from a worker proposal.

The dilution is low and known.  The risk is held by the traders, and they are compensated for that through the worker proposal.
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