Author Topic: ETF-like BitAsset that's pegged to the price of the top 10 coins?  (Read 16435 times)

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Offline EstefanTT

When you create a smartcoin you can choose the collateral asset .. and by this you also choose a base market .. e.g. USD:BTS (BTS is collateral)
Any price in markets are actually relations between 2 assets. Gold price is denoted in USD or EUR (two assets). BTS price is denoted in BTC (two prices).

Now people shorting speculate on the USD/BTS price to go down .. e.g. BTS to worth more USD. .. or USD being worth less BTS. Then they buy back and make a profit.

This you can do with an index as well .. if the TOP10 index has BTS as collateral, then you speculate the BTS price against the price of all top10 coins .. e.g. the BTS asset to climb in the list of top10 assets.
If the smartcoin had bitUSD as collateral .. then you would speculate on the USD nomination of the top10 index to go up or down (pretty much like the number at the very top of coinmarketcap.com)

So there will CERTAINLY be people shorting it ... if they only knew about it!

So... Basically the collateral asset has to be something that many people believe it will be more valuable than the smartcoin it's backing. Otherwise there won't be enough incentive to borrow the smartcoin into existence.

If CRYPTO10 is backed with USD, it means that there has to be lots of people (or at least a few who are rich and willing to invest in this market) who think that the cryptoindex will lose value against dollar. Not very likely. So there is no incentive to create more CRYPTO10, because the creator has to be adding more collateral every now and then so that he won't get margin called or force settled.

If CRYPTO10 is backed with BTS, it means that there has to be people who believe that BTS price will rise faster than the index. This is certainly possible because we have lots of Bitshares believers in the forum and in the DEX, of course.

But if you believe that BTS is good collateral for CRYPTO10, why would you buy it? Wouldn't it be rational to invest only in BTS in this case?

When you are designing smartcoins, it's important to understand the essentials of the market that you are creating:
- What are the incentives for somebody to borrow smartcoins into existence? What kind of beliefs that person has to have for long term? For example, fiat-smartcoins that are backed with BTS have pretty good incentives because there are lot of people who believe that price of BTS will rise in the future, so they can make money by creating fiat-smartcoins and selling them.
- What are the incentives for buyers? For example, if you create a smartcoin for a very inflationary fiatcurrency, you don't necessarily have any markets. Nobody wants to buy it.

The way I see it, the only way to create this market at the moment is backing the Bit20 with BTS.

If Bit20 is getting the attention of crypto investors who wants an easy investment (without crazy volatily to hold during the next years of crypto growth), there will be a big buyers book for the Bit20, probably well above the pricefeed.

If BTS is a good investment and you like playing with volatility, you will take advantage of the liquidity of the Bit20 book (buyers) to short it when BTS will have low price (about to rise)

There is also a correlation between the success of the smartcoin and the benefit you can generate from shorting it. If the demand of bit20 grows, the price grows. If shorters create new Bit20 to sell,  the index grows and liquidity also. The more liquidity and popularity, the more money comes into the BitShares ecosystem (200% bts collateral by Bit20) and the more the BTS price goes up. It would work like a retroalimentacion loop.

Maybe it's a simplistic point of view. Any feedback is very much appreciated.

To gather all the feedbacks in a proper place, I've just created a thread to discuss it :

https://bitsharestalk.org/index.php/topic,21999.0.html




Bit20, the cryptocurrency index fund http://www.bittwenty.com
(BitShares French ConneXion - www.bitsharesfcx.com)

Offline Samupaha

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When you create a smartcoin you can choose the collateral asset .. and by this you also choose a base market .. e.g. USD:BTS (BTS is collateral)
Any price in markets are actually relations between 2 assets. Gold price is denoted in USD or EUR (two assets). BTS price is denoted in BTC (two prices).

Now people shorting speculate on the USD/BTS price to go down .. e.g. BTS to worth more USD. .. or USD being worth less BTS. Then they buy back and make a profit.

This you can do with an index as well .. if the TOP10 index has BTS as collateral, then you speculate the BTS price against the price of all top10 coins .. e.g. the BTS asset to climb in the list of top10 assets.
If the smartcoin had bitUSD as collateral .. then you would speculate on the USD nomination of the top10 index to go up or down (pretty much like the number at the very top of coinmarketcap.com)

So there will CERTAINLY be people shorting it ... if they only knew about it!

So... Basically the collateral asset has to be something that many people believe it will be more valuable than the smartcoin it's backing. Otherwise there won't be enough incentive to borrow the smartcoin into existence.

If CRYPTO10 is backed with USD, it means that there has to be lots of people (or at least a few who are rich and willing to invest in this market) who think that the cryptoindex will lose value against dollar. Not very likely. So there is no incentive to create more CRYPTO10, because the creator has to be adding more collateral every now and then so that he won't get margin called or force settled.

If CRYPTO10 is backed with BTS, it means that there has to be people who believe that BTS price will rise faster than the index. This is certainly possible because we have lots of Bitshares believers in the forum and in the DEX, of course.

But if you believe that BTS is good collateral for CRYPTO10, why would you buy it? Wouldn't it be rational to invest only in BTS in this case?

When you are designing smartcoins, it's important to understand the essentials of the market that you are creating:
- What are the incentives for somebody to borrow smartcoins into existence? What kind of beliefs that person has to have for long term? For example, fiat-smartcoins that are backed with BTS have pretty good incentives because there are lot of people who believe that price of BTS will rise in the future, so they can make money by creating fiat-smartcoins and selling them.
- What are the incentives for buyers? For example, if you create a smartcoin for a very inflationary fiatcurrency, you don't necessarily have any markets. Nobody wants to buy it.

Offline yvv

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I think the idea is to make a SmartCoin with a feed that tracks the prices of the top 20 cryptocurrencies, the coin will be backed by collateral but there is no need to prove he owns the coins because there will be no coins... just like BitUSD, BitGold, etc..

Both, bitAsset and UIA have pros and cons. UIA is hard pegged and easy to market, but the issuer needs to provide a proof that it is backed by undelying assets to receive trust. Sort of centralized way. BitAsset is decentralized and trustless, but more difficult to market.

Offline yvv

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The thing is, what to use as collateral for it. Fiat might make sense in a way, but also, then we are requiring people from all over the world to own BitUSD for instance.. why USD and not something else?

So in that sense, the collateral being BTS is maybe not a bad idea.. even if the most active market ends up being USD:CRYPTOTEN.


Yes, BTS collateral is good for exactly this reason. Why we should give preference to any fiat? We don't want to make US or other jurisdiction centric asset.

We could choose bitGold or some other exotic asset for collateral, but not at present low liquidity.




Offline hcf27

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When creating this index and website with my friend, we first though about creating an IUA and make a market of it with a 0.1% cut on the trades so we can grow the project with these funds on communication, better website, ... the problem is, it would be centralised and anybody would trust us with large funds.
So we have to make a smartcoin out of it. Is there a way to benefit from the creation and liquidity of a smartcoin ?
The ecomical incentive is important because it would cost a lot of time to evolve this project. BTS didn't reach 1€ this month and still have to work to pay the rent and my free time is already absorbed by the bitsharesfcx.com website.

I'm not familiar with the smartcoin creation and ownership if there is such thing. Am I missing something ?

You UIA will be trusted if you present an evidence that it is 100% backed by underlying assets, which is easy to prove on blockchain. Sell you UIA at premium, buy back at discount, make profit.

If you go decentralized way, you put yourself into same boat with your competitors.

You should create a fund page at cyber.fund which will monitor your public keys for all the blockchain assets held in the fund.  This way people can confirm you have the cryptocoins in real time and their realtime current market value. They could not stop you stealing them however.

I think @Shentist @monsterer  should do this with METAFEES also so that NAV value can be reported in real time.

here's my cyberfund page although I haven't confirmed I control any wallets.    JonnyBitcoin[/member]]https://cyber.fund/@JonnyBitcoin

I think the idea is to make a SmartCoin with a feed that tracks the prices of the top 20 cryptocurrencies, the coin will be backed by collateral but there is no need to prove he owns the coins because there will be no coins... just like BitUSD, BitGold, etc..
« Last Edit: March 18, 2016, 11:26:50 pm by hcf27 »

Offline JonnyB

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When creating this index and website with my friend, we first though about creating an IUA and make a market of it with a 0.1% cut on the trades so we can grow the project with these funds on communication, better website, ... the problem is, it would be centralised and anybody would trust us with large funds.
So we have to make a smartcoin out of it. Is there a way to benefit from the creation and liquidity of a smartcoin ?
The ecomical incentive is important because it would cost a lot of time to evolve this project. BTS didn't reach 1€ this month and still have to work to pay the rent and my free time is already absorbed by the bitsharesfcx.com website.

I'm not familiar with the smartcoin creation and ownership if there is such thing. Am I missing something ?

You UIA will be trusted if you present an evidence that it is 100% backed by underlying assets, which is easy to prove on blockchain. Sell you UIA at premium, buy back at discount, make profit.

If you go decentralized way, you put yourself into same boat with your competitors.

You should create a fund page at cyber.fund which will monitor your public keys for all the blockchain assets held in the fund.  This way people can confirm you have the cryptocoins in real time and their realtime current market value. They could not stop you stealing them however.

I think @Shentist @monsterer  should do this with METAFEES also so that NAV value can be reported in real time.

here's my cyberfund page although I haven't confirmed I control any wallets.    https://cyber.fund/@JonnyBitcoin
« Last Edit: March 18, 2016, 11:02:30 pm by JonnyBitcoin »
I run the @bitshares twitter handle
twitter.com/bitshares

Offline karnal

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I would like to see it also, but perhaps not paired with BTS. It would be nice to have it trade against fiat.

Well, I think there will automatically be a market for it against bitfiats as well just by virtue of the smartcoin existing.

The thing is, what to use as collateral for it. Fiat might make sense in a way, but also, then we are requiring people from all over the world to own BitUSD for instance.. why USD and not something else?

So in that sense, the collateral being BTS is maybe not a bad idea.. even if the most active market ends up being USD:CRYPTOTEN.

But I honestly don't understand the implications very well, so it's sort of an unfounded opinion to be honest. Just looking to continue the discussion, and if someone out there can clarify this, even better.

Offline donkeypong

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I would like to see it also, but perhaps not paired with BTS. It would be nice to have it trade against fiat.

Offline chamber

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Thanks everyone for the info!  Looks like I'm not the only one this would appeal to.  Looking forward to help bring it about.

Offline karnal

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Offline hcf27

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The ramifications quickly get complex.

On one hand, it would make more sense to trade BitFiat against this ETF in the markets.

On the other hand, there is no good liquidity in any of the Smartcoins right now... so whatever we do, this would be dead in the water.. what good is it if nobody can get hold of some USD to gamble?


One thing is for sure ... if this is traded against BTS / backed by BTS, there'll be instant liquidity ... and that may be all we need to make this one successful.

edit: Well, instant liquidity at least on the BTS side.. the CRYPTOTEN would still have to be shorted.

If the asset is backed by BTS and its as successful as I think it will be then I would short the hell out of it because it would mean that the BTS price would sky rocket!

Offline karnal

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The ramifications quickly get complex.

On one hand, it would make more sense to trade BitFiat against this ETF in the markets.

On the other hand, there is no good liquidity in any of the Smartcoins right now... so whatever we do, this would be dead in the water.. what good is it if nobody can get hold of some USD to gamble?


One thing is for sure ... if this is traded against BTS / backed by BTS, there'll be instant liquidity ... and that may be all we need to make this one successful.

edit: Well, instant liquidity at least on the BTS side.. the CRYPTOTEN would still have to be shorted.

Offline hcf27

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When I will have a good idea of the way to do this, I'll create an offical thread on bts.talk for anyone who is willing to give us feedbacks and participate.

As I intent to to fix a % on trades (around 0.1% probably), there will be potential incomes coming from the creation, commercialisation and liquidity of this index and an incentive for anyone wanting to participe in exchanges for the shares of future revenues.
I was thinking about creating a UIA with limited supply that would represent 100% of the revenue generated by the 0.1% on the trades of the Bit20 index. That would allow us to reward anybody helping with this project with an actual % of all trades made on this Smartcoin untill the end of time. When liquidity and trades would kick off, we could use a buy back or dividends system.


I like the idea, once the smartcoin is created I would be more than happy to buy some shares and also collaborate with the marketing.

I am very excited about the potential of this project.

I do think that Bts should be the collateral used tho, there is just not enough liquidity on the bitusd market to be held as collateral.



Offline EstefanTT

I'll probably send a mail to Xerox to have an idea of the steps to migrate the Bit20 index in the BC as a smartcoin. Maybe the Fiat10 would also be a nice smartcoin. First I'll try to figure out the most of it by myself to avoid consuming the Xeroc time, I'm sure he have a lot of things going on.

When I will have a good idea of the way to do this, I'll create an offical thread on bts.talk for anyone who is willing to give us feedbacks and participate.

As I intent to to fix a % on trades (around 0.1% probably), there will be potential incomes coming from the creation, commercialisation and liquidity of this index and an incentive for anyone wanting to participe in exchanges for the shares of future revenues.
I was thinking about creating a UIA with limited supply that would represent 100% of the revenue generated by the 0.1% on the trades of the Bit20 index. That would allow us to reward anybody helping with this project with an actual % of all trades made on this Smartcoin untill the end of time. When liquidity and trades would kick off, we could use a buy back or dividends system.

I still have to think about it but the idea would be :

# Create the BIT20 smartcoin, maybe also the FIAT10 (with other name as we can't have numbers in asset names)
# Revamp the bit20 web site : http://www.bitsharesfcx.com/bit20/homepage_fr.php
       - Decides the content of the website : Bit20 graph and info only or more Crypto stuff (Troll box, news, mini bog, ... ?)
       - Global spirit and design
# Decide how many languages the website will offert : English only ? French, spanish, chinese, portuguese, ... ??



 
« Last Edit: March 18, 2016, 04:33:44 pm by EstefanTT »
Bit20, the cryptocurrency index fund http://www.bittwenty.com
(BitShares French ConneXion - www.bitsharesfcx.com)

Offline CLains

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Just some ideas. I'd love to trade these..

coin10

Bitcoin
Litecoin
Dash
Doge
Monero

alt10

Bitcoin
Litecoin
Dash
Doge
Monero

chain10

Ethereum
Ripple
MaidSafecoin
BitShares
Factom

top10

all of above

altchain20

MaidSafecoin
BitShares
Factom
Peercoin
Counterparty
NEM
NXT

Ultimately whoever is creating these needs to decide what feels like it will be most in demand, what kind of weighting etc. and then iterate with market research to find out what's best.

As far as I can tell, demand is there for anything that's "good enough" in this direction ("perfect" can be enemy of "good enough"!) and I know for my own part I would trade all of these and all of those suggested here so far :)