bitSHARES - As True Shares and Not a Currency!

[monsterer]

Ok, that makes sense.  So now the question is, why is no one doing any of this instant arbitrage between the various versions of the same assets on the DEX?  Without that, instead of realizing the promise of pooled liquidity, we're mired in a shit storm of duplicate assets that is making the DEX unusable for most people.

They cannot. This would need the blockchain to perform this operation atomically and react instantly. It would be like a built in HFT trader the dividends of which get distributed to BTS holders.

Ok, but apart from the atomic operations you refer to, shouldn't trading only on the DEX allow for MUCH easier arbitrage for any liquidity provider given they don't have to deal with slow deposits/withdrawals between their wallet and their account at the exchange?

I don't think it makes that much difference - you still have to convert native currency into bitshares assets, which requires a bridge which has confirmations. You might argue that it's faster if they keep an all bitAsset inventory, but that's not the case either because you can do the same thing now, by keeping an inventory across multiple exchanges.

[monsterer]

What does transferability of BTS have to do with whether an external exchange can allow its users to trade BTS on their exchange?  All the exchange has to do is purchase BTS in their own wallet and issue EXCHANGE.BTS tokens to their users to trade on their own platform, exactly as they do now.  What am I missing?

So, users arrive on this exchange - how do they deposit their BTS? How do they withdraw it? Walk me through the process.

[tbone]

The answer also depends on what you consider the main benefits of the new approach. If you find that what it does for the bitAssets is the main benefit, why first wait on inferior version of bitAsset to take off before implementing the superior?

I think the point is that it's too risky at the moment to make such a change to Bitshares.  And a new chain would be DOA (that means dead on arrival, tony).  So right now we should concentrate on getting BitAssets moving in the right direction, taking liquidity measures that can be taken now, giving the entire system a chance to become more robust with a lively internal market for BTS, and a much more active DEX in general.  Then we'll be in a better position to create your perfect peg and take BitAssets to the next level.  You have to learn to crawl before you can learn to walk!

[tbone]

A. You misunderstood what I was saying and pretty much repeated the same thing I said, but added sunny skies and rainbows. Someone that wanted to monopolize the BTS volume traded on centralized exchanges may come along sooner than you think, and there is no way of stopping them.

How are they going to do that when you cannot transfer the asset?

What does transferability of BTS have to do with whether an external exchange can allow its users to trade BTS on their exchange?  All the exchange has to do is purchase BTS in their own wallet and issue EXCHANGE.BTS tokens to their users to trade on their own platform, exactly as they do now.  What am I missing?

[tbone]

Ok, that makes sense.  So now the question is, why is no one doing any of this instant arbitrage between the various versions of the same assets on the DEX?  Without that, instead of realizing the promise of pooled liquidity, we're mired in a shit storm of duplicate assets that is making the DEX unusable for most people.

They cannot. This would need the blockchain to perform this operation atomically and react instantly. It would be like a built in HFT trader the dividends of which get distributed to BTS holders.

Ok, but apart from the atomic operations you refer to, shouldn't trading only on the DEX allow for MUCH easier arbitrage for any liquidity provider given they don't have to deal with slow deposits/withdrawals between their wallet and their account at the exchange? 

[monsterer]

A. You misunderstood what I was saying and pretty much repeated the same thing I said, but added sunny skies and rainbows. Someone that wanted to monopolize the BTS volume traded on centralized exchanges may come along sooner than you think, and there is no way of stopping them.

How are they going to do that when you cannot transfer the asset?

holding bitAssets like any indivindual?No?

How does an exchange holding bitAssets allow them to arbitrage BTS?

[liondani]

A. You misunderstood what I was saying and pretty much repeated the same thing I said, but added sunny skies and rainbows. Someone that wanted to monopolize the BTS volume traded on centralized exchanges may come along sooner than you think, and there is no way of stopping them.

How are they going to do that when you cannot transfer the asset?

holding bitAssets like any indivindual?No?

[monsterer]

In this case you earn some profit indeed, since the 1bitBTC you bought can buy more shares now if you haven't bought earlier. It's the one who provided this 1 bitBTC bear the risk, if it's you, you can easily close the position without loss.

As a market maker, we have to remain hedged at all times - same quantities of bitBTC and BTC available on both sides of the market. Selling bitBTC for BTS is not an option as we are not long any one particular currency,

[abit]

Important points:
In case of liquidation the collateral provided by the bridge is used to cover the losses (if any) first [before the collateral from the 'collateral sponsor'] .
The loss for the bridge is fictional BTW. That loss is exactly offset by the same gain of holding BTC received by the customer requesting the bridge from BTC to bitBTC.

I don't think the loss is fictional - If a customer sells us 1 bitBTC, and then the price of BTS drops, we start to incur liquidation risk as the value of the collateral drops, whereas the customer does not, since we sent him 1 genuine BTC.

In this case you earn some profit indeed, since the 1bitBTC you bought can buy more shares now if you haven't bought earlier. It's the one who provided this 1 bitBTC bear the risk, if it's you, you can easily close the position without loss.

No responses whatsoever?

Tony, I replied earlier. Did you see it?

[monsterer]

Important points:
In case of liquidation the collateral provided by the bridge is used to cover the losses (if any) first [before the collateral from the 'collateral sponsor'] .
The loss for the bridge is fictional BTW. That loss is exactly offset by the same gain of holding BTC received by the customer requesting the bridge from BTC to bitBTC.

I don't think the loss is fictional - If a customer sells us 1 bitBTC, and then the price of BTS drops, we start to incur liquidation risk as the value of the collateral drops, whereas the customer does not, since we sent him 1 genuine BTC.

[monsterer]

A. You misunderstood what I was saying and pretty much repeated the same thing I said, but added sunny skies and rainbows. Someone that wanted to monopolize the BTS volume traded on centralized exchanges may come along sooner than you think, and there is no way of stopping them.

How are they going to do that when you cannot transfer the asset?

[tonyk]

Or maybe this split the difference. The bond puts up half of the collateral and pool the other half. Profits are split 50/50 for asset sells.

No actually it seems in order to align the risk/reward profiles:

Negative price movement (aka BTS price going down in comparison to BTC):
- the bridge should get 100% of the  loss due to price movement .(its position is fully hedged so no real loss)
- collateral sponsors should get just a flat fee (or interest).
- Every attempt should be made to liquidated before 100% of bridges collateral is needed to cover any loss on the 'short bitBTC' position.

Positive price movement (aka BTS price going up in comparison to BTC):
- the collateral sponsors should get 100% of the profit due to price movement .(bridge's position is fully hedged so no gains expected, or deserved)
- The bridge can get the fee the sponsors get in the opposite scenario (just a thought).


This sounds too good to be true actually. Wish somebody can check/verify the above!!! @arhag (wish you are around) @theoretical (wish you are not busy coding 100% of the time)
Technical implementation and who controls (able to willing close) the position, are big remaining issues. Seems that the position should be controlled by the bridge, and force liquidated by the blockchain.

No responses whatsoever?
This is pretty odd as this is an issue existing mainly in the current BTS system (and just a 'if need be, probably not; training wheel for the system proposed here).
I should probably move those 2 post in a thread of themselves and see if they receive the same "no reaction" response.
For the love of god, you should all be jumping with joy if the above analyses are correct... or someone should take a direct stub at them if they are/or might be wrong... This non response can only mean, this project is...well I will not say it. But just this time.

[tonyk]

I'm going to set default witness pay and the cap of worker payment to zero. Or maybe change related code entirely. My idea is to pay what we're able to afford, or say, pay from income. Pay by ourUSD but not shares. If no income, no payment. Will you accept this? Anyway we define the rule first (at least before asking for any external fund). Less change is better.

"pay what we're able to afford, or say, pay from income"
I like this approach as well. This should also help us find support from delusion conscious BTS holders.

I also agree on the stable, not changing environment. I will even add "stable aim/goal and not ever shifting focus".


PS
I will give more though on the rest of you post, before responding.

[CoinHoarder]

A. You misunderstood what I was saying and pretty much repeated the same thing I said, but added sunny skies and rainbows. Someone that wanted to monopolize the BTS volume traded on centralized exchanges may come along sooner than you think, and there is no way of stopping them. Derivatives are hardly any different from poloBTS, except you have to exchange them before withdrawing. I do not think exchanges are more powerful or necessary than what they are, but feel free to put words in my mouth. I was simply pointing out the fact that if centralized exchanges want to trade BTS they will.

B. I understand your intentions, but you can't force everyone to use bitUSD and it will fragment the liquidity of BTS into several markets. No if ands but or or about it.

B2. You don't seem to understand basic economics.

C. I misunderstood.

D. You underestimate the amount of issues and confusion that will arise from this. Someone (likely many someones) that doesn't keep up with the forums may make a huge financial mistake assuming BTS still was equity of Bitshares.

[tonyk]

@tonyk

A. You simply cannot make BTS untradable on centralized exchange. This proposal will simply give one exchange, or a small combination of exchanges, a stranglehold on the exchange of BTS. The first exchange that puts in the work to develop the backend for BTS exchange will gain a quasi monopoly. Thus, Bitshares could end up worse off from this proposal... going from traded on many exchanges to one or a few exchanges.

B. You cannot simply make bitUSD the "main" smartcoin that is traded against BTS. Some people, specifically China and Euros may prefer bitEUR or bitCNY. This proposal effectively fragments the main BTS/BTC market into several (possibly many) smaller markets.

Thus, each market separately will have a smaller amount of liquidity than if we were to continue BTS/BTC being the main market... possibly much less depending on how many smart coins are used in this manner and the popularity of other smart coins other than bitUSD. It is a possibility that to get the best price on BTS you would have to buy 3 different smartcoins, then trade all of them for BTS.

C. It is unclear to me how you plan to pay worker proposals and such in bitUSD without autonomously shorting bitUSD into existance or printing unbacked bitUSD. Several community members are vicously against such practices, as I found out when I brought up my proposal.

D. Even with creating a separate asset, and not freezing BTS, I still see a lot of issues arising from the transition period. What would be the value of the original BTS tokens, if anything? What happens when people purchase these tokens after the transition period thinking that they are receiving equity in Bitshares ecosystem?

There are other issues that I can think of that may arise, as mentioned in my first post, but I don't have have time to explain.

A. Yes, we can make them non-tradable on exchanges! What we cannot prevent is the exchanges coming with derivatives on top of BTS to trade. And while in the current state it seems unlikely an exchange to go through the hoops to do that, it will mean something if they go through that trouble one day, doesn't it.
You continue to think of the exchanges as something more powerful (or important) than they really are. But the true trading of the real thing will happen only in the DEX.

B. 1. USD just seem the best choice all things considered, but this is not the main point here. The main point is - it should be one currency where the effort is concentrated. I think this is needed, at least at the beginning. CNY seems the second best, but we might as well end up going with it when all pros and cons are wighted.
2. Your idea about the need to buy 3 smart coins to get the best price is simple incorrect

C. This is my favorite misconception of yours  Read the OP post again. The portion of new BTS coming into the active pool dedicated for witness pay (the same way they do now) is put in a collateral and bitUSD is shorted(created). The witnesses get those bitUSD. The short order is auto (immediately) called  and it starts 'searching' to buy the bitUSD to close itself. it is using the mechanism described in the OP.(by offering decreasing BTS price by 1% each N blocks)

D. 1.It is not new asset on BTS, it is a new chain called dShares. If somebody mistakenly thinks they are buying BTS, when they buy dUSD and they go on the dDEX to buy dDEX Shares ? They need other help.

2. The value of BTS? I honestly have no clue what the price  of BTS will be (and dShares for that matter) at the beginning. The good thing for current BTS holders - they will have substantially similar stake in both, kind of  win-win no matter what and how happens piecewise.