Author Topic: Radical ideas for liquidity  (Read 17012 times)

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Offline puppies

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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.
"compensate from worker proposal" should not cover all the losses and should not be high, otherwise the system may be seen as "printing unlimited money" and let someone game the system.

IMO the answer is MAKER, maybe.

I agree.  We should not subsidize the losses of bad traders.  The idea is to get more people trading closer to the peg.  A bad trader will lose more than they get from this system and give up. 
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Two points Id like to note.

- Settlement can be discouraged by asking for a percentage fee (1-2%) (this will move the peg AROUND parity. Flat fee for settlement can also be increase which has some negative effects on pred. markets

- the volume of the dex can certainly be addes as source for the price feed. Its about time now

Offline abit

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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.
"compensate from worker proposal" should not cover all the losses and should not be high, otherwise the system may be seen as "printing unlimited money" and let someone game the system.

IMO the answer is MAKER, maybe.
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Offline puppies

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@CoinHoarder what do you see that your proposal can do that providing a worker proposal to the committee-account or committee-trade which allowed that account to short bitassets and sell at a certain rate above the peg?

Nothing to be honest (other than automation and security of the funds used.) It may be much cheaper to simply do it that way.

My only point is that if there is consensus that this is what we should do, we can do it right now.  There is.no reason to wait six months or so for it to be developed.

On a side note have you thought about what would happen if rather than locking up 6x or whatever high amount you locked up a low amount say 2x.  That way any increase in settling would be taken up by the same assets created.  It would also act as an exit strategy for the network.  I haven't done nearly enough thinking about all the possible downsides.  Just thought I would bring it up.
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Offline CoinHoarder

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@CoinHoarder what do you see that your proposal can do that providing a worker proposal to the committee-account or committee-trade which allowed that account to short bitassets and sell at a certain rate above the peg?

Nothing to be honest (other than automation and security of the funds used.) It may be much cheaper to simply do it that way.
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Offline CoinHoarder

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I've posted the reason above but you didn't quote it.
I am still confused as to exactly how the vulnerability you are claiming would work. Please elaborate or explain it differently. I have a strong suspicion that the kind of market manipulation you are mentioning can be done even if my proposal was never implemented.

on the opposite bitUSD is NOT fully backed, especially when huge amount of them are created via dilution

Imo BitUSD can be considered as fully backed if there hasn't been unlimited BTS diluted to create them.
I don't agree with these statements. Are diluted BTS tokens not fungible? Are they not able to be used in a way that any other BTS token could be? Developers seemingly have been selling, trading and transferring diluted BTS tokens with no issues. Why is an IPO-created BTS token any more valuable (or different) than a dilution-created BTS (especially a "neutral-dilution-created BTS token")? I posit that if the price is not directly affected by the dilution, then you can't claim that the SmartCoins' aren't fully backed. SmartCoins' inherently have the possibility of becoming "under collateralized" with or without my proposal. Either way, the price will need to drop substantially for that to happen. I don't see the difference as far as SmartCoin collateralized by "diluted BTS" or "natural BTS", but I think you may have a point about market manipulation and I am still thinking it over.
« Last Edit: February 02, 2016, 05:18:47 am by CoinHoarder »
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Offline puppies

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@CoinHoarder what do you see that your proposal can do that providing a worker proposal to the committee-account or committee-trade which allowed that account to short bitassets and sell at a certain rate above the peg?
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Offline CoinHoarder

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What about making liquidty pools just like NBT has?
How you encourage people put BTS in the liquidty pools?
What is the rules?

Nushares dilutes their shareholders to incentive people to risk their own money to provide liquidity. A majority of the risks of the liquidity operation fall upon the individual users, but the Nushares network has to dilute shareholders to pay for people to take those risks which provides their liquidity.

Oppositely, with my design, the Bitshares network takes the risks that liquidity providers do in Nubits/Nushares. However, Bitshares pays nothing for this liquidity (it uses "neutral dilution"), and only pays if the liquidity operations are unprofitable.

I am honestly not sure which design is best. In Nubits/Nushares you have high costs and have little risk, but in my solution you have high risk but no cost.
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Offline Empirical1.2

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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.

 +5% I've been advocating using BTS as a limited internal market maker for a while.

https://bitsharestalk.org/index.php/topic,14349.msg186859.html#msg186859

I believe the market maker would need limits to stop it losing a lot of money in heavily trending markets.
(Put a maximum it can sell/buy per day, or a maximum it can sell at a certain price in a day.)
 
« Last Edit: February 02, 2016, 04:58:12 am by Empirical1.2 »
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Offline CoinHoarder

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What about making liquidty pools just like NBT has?

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.
@kingscrown @puppies

This is how liquidity pools in Nubits works... users front their own funds for the operations. I think we should seriously consider this avenue as well. However, Nushares still dilutes their shareholders to provide sufficient incentive to liquidity pools. Bitshares would have to endure "real negative dilution" to make that work, but it still may be less risky for BTS shareholders to have users front the funds used in the liquidity operations. They will of course need something in return to front those funds and take that risk, thus "real negative dilution" would have to occur. I am also not sure exactly how many people would be willing to front funds for this. I suppose Nubits hasn't had any trouble with this (finding people willing to take the risks), so maybe it is not a big deal.

Another option is using the liquidity pool to fund my proposal rather than dilution. Over time, assuming the liquidity operations are profitable, the amount of liquidity it is able to provide will grow.

There are a few good ideas floating around regarding liquidity. I think most of the ideas are not true long term solutions, but I have read a handful of solid ideas that would actually have some sort of effect on long term liquidity operations. There are actually so many decent ideas that it is challenging to find which would work best. I am going to continue to improve on my idea in the meantime (because I am biased  :P). After I feel like I cannot improve on my idea any more, then I will proceed look at the other ideas and write a similar paper on each. I see liquidity as being Bitshares number one problem right now, so I will continue to work towards having a liquid DEX.
« Last Edit: February 02, 2016, 04:42:46 am by CoinHoarder »
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Offline Zapply

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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.
https://bitsharestalk.org/index.php/topic,20368.0.html

Offline CoinHoarder

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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 puppies

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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 Zapply

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@CoinHoarder Example USD hyperinflation how your design going to work?

Offline Zapply

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What about making liquidty pools just like NBT has?
How you encourage people put BTS in the liquidty pools?
What is the rules?