Author Topic: [BSIP#16]Optimization to Force Settlement Parameters of BitCNY  (Read 17276 times)

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Offline pc

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I suggest we all take a step back and take 15 minutes to (re-)read https://bitshares.org/technology/price-stable-cryptocurrencies/ .

What I take from that
  • The settlement price guarantees price stability to holders of BitAssets. This guarantee defines the peg.
  • Shorters are supposed to sell their shorted BitAssets at a premium to cover their risk.
  • BitAssets are expected to trade at a premium, due to the inherent risk of shorters. The premium is expected to be higher in a BTS bear market.
  • The premium is supposed to encourage merchants to accept BitAssets.
  • The premium does not play a significant role to traders or other users of BitAssets.

My conclusions
  • BitAssets are working right now exactly in the way they are supposed to be working.
  • The premium we are seeing in BitAsset markets is due to the BTS bear market. The settlement price is not the cause of this. (Coincidentally, BitCrab's attacks on forced settlement always seem to happen in a bear market.)
  • When (if) the BTS price is rising again, the premium will automatically reduce to something close to zero. (IIRC, two months ago there was actually a negative premium on the markets, where some people bought below the feed and used forced settlement to make a profit.)
  • The premium is good to have, for shorters, merchants and customers. It is the natural market mechanism to keep everyone's interests balanced.
  • We want bitCNY to be pegged to CNY. By changing the settlement offset to 1% we are moving the "guarantee", which in turn means that bitCNY will be pegged to .99 CNY. This is an undesired side effect.

Furthermore, every piece of documentation I have seen tells BitAsset buyers that they can always exchange their BitAssets for an equivalent amount of BTS. The word "guarantee" is used in several places in that context. Do we really want to unilaterally declare that guarantee void, thereby destroying all credibility of the very concept of BitAssets?

From all of this follows that
  • the proposed change is not necessary - it is the function of the premium to encourage shorters, not the function of the settlement offset
  • the proposed change does not have the desired effect - the reason for the premium and the risks of the shorters is the BTS bear market, not the settlement offset
  • the proposed change is extremely harmful to our ecosystem, due to its side effects - it redefines 1 bitCNY to be worth 0.99 CNY and destroys our credibility, because we will be breaking our own guarantees.
« Last Edit: May 15, 2016, 10:08:47 am by pc »
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Offline abit

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The purpose of a forced settlement offset is not to protect any party specifically. The purpose is to maintain the stable and accurate price of the smartcoin, which in turn benefits all users of the system.

So, the best metric is this: how has the trading price of BitCNY compared to the price feed, over the last months? Can we overlay the price feed to the historic price and take a look ourselves? I don't see the price feed in a graph here: http://cryptofresh.com/a/CNY
Are you looking for this http://cryptofresh.com/a/BTS_CNY?
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Offline Empirical1.2

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 +5% Very positive change that should improve BitCNY

1. What about lowering the request settlement to 99%?
It should lower the premium and it's fair that there should be a cost associated with accessing liquidity at the expense of shorters.

I think lowering forced settlement to 98/99% would be beneficial.
« Last Edit: May 12, 2016, 09:53:20 pm by Empirical1.2 »
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Offline Chronos

The purpose of a forced settlement offset is not to protect any party specifically. The purpose is to maintain the stable and accurate price of the smartcoin, which in turn benefits all users of the system.

So, the best metric is this: how has the trading price of BitCNY compared to the price feed, over the last months? Can we overlay the price feed to the historic price and take a look ourselves? I don't see the price feed in a graph here: http://cryptofresh.com/a/CNY

Offline ElMato

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Coming late to the discussion but i have been following this thread with much attention.

Here is what i think in a very disorganized way.

Its a delicate thing to change the offset parameter once its been in a certain value for a time (not so long time .. 5 months?)

Saying robbery its a bold argument since you can still trade bitCNY for BTS (or any other asset) at a fair price, the difference is that you now will get less (CNY value in) BTS if force settle.

@bitcrab is one of the major players pushing, developing and creating bitCNY (and the DEX, and BitShares as a whole) even after the problems they suffered in the 1.0 -> 2.0 upgrade they still commit to the project and is something that we can't disregard easily.

Also they are doing 1:1 conversion (or similar) from bitCNY <-> CNY (alipay). So the value of bitCNY won't be affected in a significant way even if we move the offset 1%.

Are "normal" users of bitCNY doing force-settlement periodically? is a common usage pattern or they are using the gateway basically?

I also recall BM saying that the cheapest way to buy BTS without moving the price is doing a FS on a smartcoin ... so adding a little percent to the offset i think is fair.

Bottom line: I do support the change in the settlement offset from 0% to 1%, but we have votes .. so lets see what the community thinks.

Offline bitcrab

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The term "compensation" implies that there is some damage caused by the settlement, which is often the case in "real-world" finance, but not in BitShares.

If the shorter sells BitAssets with a 1% premium he achieves the same effect for himself as with a 1% settlement penalty, only with the premium existing holders are not hurt.
Very good point ... and part of the problem as this results in the premium we can see on the bitassets/BTS markets.

I think the question we need to answer to ourselves is this: Is a bitUSD worth $1 or not? Then we need to think about WHO is asking the question! A merchant who wants to exit bitUSD would say, YES because he can settled at the feed price (currently without penalty). A user however may say that he cannot enter bitUSD because it as a premium (at least in terms of BTS).
However, the latter argument is only true when people want to *enter* bitUSD, if they instead get paid in bitUSD already, then it's all a wash and we can say 1bitUSD=$1.

Thinking about it I actually prefer it that way, because it supports MERCHANTS and those that want to use it can accept a small premium because bitUSD is WAY WAY more flexible than real cash.
We need to support MERCHANTS and thus it (IMHO) makes sense to keep the 1:1 settlement

I don't know how many MERCHANTS are there accept bitUSD, seems a lot? anyway let's focus on bitCNY here.
AFAIK there are no MERCHANTS in China that accept bitCNY, I don't expect there will be some in the future. even btc38 accept bitCNY mainly because transwiser play the role of gateway.
you may ask then why we need the supply of bitCNY to grow up?
the answer is: DEX

let me tell one plan of transwiser: to introduce ANTSHARE to DEX for trading.
antshares is a famous blockchina project in China(see more in www.antshares.com), which focus on company register and share management, last year it get 2100 BTC in crowdfunding, now it is still under development, maybe will be launched in a couple of months.

ANTSHARE is already in  trading as pre-sales in DEX, after the launch of antshares,   more than 10M CNY worth ANTSHARE will be issued and traded in DEX, so we have a problem, to make which one the main trading pair?
maybe transwiser also need to issue TRANS.BTC and TRANS.CNY for this, but why not use bitCNY here in DEX?

now seems in DEX OPEN.BTC is most wildly used in trading, I know there's some difficult to overcome to make smartcoin wildly used in DEX trading,  however, if we cannot make smartcoin wildly used in DEX, how do you think we can make MERCHANTS accept it?

that's why I focus this problem mostly: how to encourage(or at least do not discourage) shorter to supply bitCNY, with less than 1M supply bitCNY is just a toy.
don't care too much on the MERCHANTS problem in China, in China MERCHANTS do not care whether it is 100% or 99% force settlement, they only care if there is a reliable gateway service.




« Last Edit: May 12, 2016, 09:05:08 am by bitcrab »
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Offline xeroc

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The term "compensation" implies that there is some damage caused by the settlement, which is often the case in "real-world" finance, but not in BitShares.

If the shorter sells BitAssets with a 1% premium he achieves the same effect for himself as with a 1% settlement penalty, only with the premium existing holders are not hurt.
Very good point ... and part of the problem as this results in the premium we can see on the bitassets/BTS markets.

I think the question we need to answer to ourselves is this: Is a bitUSD worth $1 or not? Then we need to think about WHO is asking the question! A merchant who wants to exit bitUSD would say, YES because he can settled at the feed price (currently without penalty). A user however may say that he cannot enter bitUSD because it as a premium (at least in terms of BTS).
However, the latter argument is only true when people want to *enter* bitUSD, if they instead get paid in bitUSD already, then it's all a wash and we can say 1bitUSD=$1.

Thinking about it I actually prefer it that way, because it supports MERCHANTS and those that want to use it can accept a small premium because bitUSD is WAY WAY more flexible than real cash.
We need to support MERCHANTS and thus it (IMHO) makes sense to keep the 1:1 settlement

Offline bitcrab

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It is a little far fetched to call the proposal "full of lies". It may present different interpretation of things though (e.g. fee vs. robbery).

Calling it a fee IS a lie.

Yes, I'm using strong wording, because I have a strong opinion on people who make guarantees only to break them later. As well as on people who invent nice terms to cover up the awful truth.

the force settlement feature is new in BTS2.0, in your words we can say it also break the rule in 1.0, however this feature is good, but only when there are reasonable parameters, at first the community is not so aware of this. but now it's time to review and refine the parameters.

we always need change, be flexible, not so stubborn.

ultimately, let the vote speak.
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Offline bitcrab

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In common financial logic the collateral should not be force settled without any compensation if the collateral price does not fall below the margin call price.



Reference, please.

The term "compensation" implies that there is some damage caused by the settlement, which is often the case in "real-world" finance, but not in BitShares.

If the shorter sells BitAssets with a 1% premium he achieves the same effect for himself as with a 1% settlement penalty, only with the premium existing holders are not hurt.

here the finance principle are same for human society, no different.

existing holders have enough time to execute settlement with 0 offset before the change applies, they can also use the transwiser bitCNY withdraw service. they have ways to avoid the so called "1% loss" after the change.

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Offline pc

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It is a little far fetched to call the proposal "full of lies". It may present different interpretation of things though (e.g. fee vs. robbery).

Calling it a fee IS a lie.

Yes, I'm using strong wording, because I have a strong opinion on people who make guarantees only to break them later. As well as on people who invent nice terms to cover up the awful truth.
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Offline pc

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In common financial logic the collateral should not be force settled without any compensation if the collateral price does not fall below the margin call price.



Reference, please.

The term "compensation" implies that there is some damage caused by the settlement, which is often the case in "real-world" finance, but not in BitShares.

If the shorter sells BitAssets with a 1% premium he achieves the same effect for himself as with a 1% settlement penalty, only with the premium existing holders are not hurt.
Bitcoin - Perspektive oder Risiko? ISBN 978-3-8442-6568-2 http://bitcoin.quisquis.de

Offline xeroc

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@bitcrab What do you think about a collateral offset of 0.1% instead of 0% or 1%? If the feed is accurate, that still results in guaranteed profit for the shorter.
no matter what you set it, there is no such thing as "guaranteed profit" .. you only make this x% profit if there is a settlement and YOUR call position is settled.
To be the one that gets settled, you need to have lowest collateral which leaves you position at risk of a margin call!!

Offline Chronos

In common financial logic the collateral should not be force settled without any compensation if the collateral price does not fall below the margin call price.
@bitcrab What do you think about a collateral offset of 0.1% instead of 0% or 1%? If the feed is accurate, that still results in guaranteed profit for the shorter.

Offline bitcrab

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let me repeat:

In common financial logic the collateral should not be force settled without any compensation if the collateral price does not fall below the margin call price.

In common financial logic the collateral should not be force settled without any compensation if the collateral price does not fall below the margin call price.

In common financial logic the collateral should not be force settled without any compensation if the collateral price does not fall below the margin call price.


and please think globally, the point is not that transwiser can be better as a shorter, but this change can make the bitCNY relevant business grow and benefit the whole economy.

we need to make bitCNY supply grow, to make it a useful trading basis, not just a toy,  that is why most of China community members support change.

hlet's also review the history, in v0.9, the bitCNY is there without force settlement feature, at that time bitCNY already works well, when 2.0 times come, the force settlement comes and had scared many shorters, after argument the maximum settlement volume was reduced from 20% to 2%,change always happen, it's not "mid-game" change, it's just continuous improving.

I don't think the input from @pc is persuading enough, and actually I have answered most of the questions in previous discussions, we need not to rush, but need not to fall in endless argument neither.



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Offline abit

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I wonder if there are other businesses that would like to support this move besides transwiser
BitCash
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