bitCNY optimization committee proposal voting begins

[arhag]

After extensive debate about BSIP 0016, it is now scheduled to go into effect on June 21. Some have argued that this breaches the implicit contract that smart coins are convertible to 100% of their BTS value. In this post, I argue that this change does not breach the contract.

The question comes down to this: what is the contract around BitCNY? I believe it is a social contract: a contract for stable value. This is why Bytemaster designed the forced-settlement parameter to be adjustable by the committee. It could have been hard-coded, which would be a technical contract for 100% BTS convertibility, but I think that would leave SmartCoin pegs more brittle, subject to greater volatility.

If the peg breaks out to the upside, the forced-settlement parameter can be lowered, to incentivize traders to bring it back down. If the price pushes below the peg, the parameter can be brought up to 100% to instantly correct it.

It should be noted that, similar to how other markets work, sometimes the expectation and potential of these changes is enough to affect the market. For example, traders are more likely to sell their BitCNY at 105% of the price feed, instead of letting the price creep even higher, when they know that the committee will step in to bring the peg back to sanity in the case of a runaway peg.

If the SmartCoin peg were a technical contract for 100% convertibility, it would have been designed as such, without making parameters changeable by committee. Instead, the committee does have this power, making it a social contract to track a price feed. This social contract will be maintained by BSIP 0016.

 

Yes, this is my understanding as well, which I described previously in this post. This is why I don't believe the proposal violates the intent behind the BitCNY smartcoin.

There is however a dispute in the community regarding this manner. So how does a decentralized blockchain settle the dispute? As I described in this post sharing my thoughts on the The DAO hack and Ethereum's hard forking choice, there needs to be some arbitration process by a decentralized group that people entering into the contract agreed to. Well BitShares 2.0 has that via our on-blockchain governance features. (Technically all blockchains have it ultimately through users choosing which fork they wish to adopt, but it is more convenient to formalize the consensus process with governance mechanisms on the blockchain itself.) The community has gone through the proper process, and it seems the result is clear: it appears that BSIP 16 is going to pass.

Now this doesn't mean that I necessarily think the proposal is a good idea or that it will actually help the peg. But I just wanted to point out that I do not personally believe this change violates the intent of the smartcoin smart contract, and that the community has gone through the proper human-based decentralized arbitration process using our governance features (by voting on the 0-pay worker to support the change and not voting out the committee members who approve the proposal) to settle the dispute regarding whether the smartcoin intent is violated by this proposal.

[Chronos]

Also note: this 99% settlement rule allows for some inaccuracy in the feed price without penalizing organizations that offer one-to-one trades between SmartCoins and their backing asset. (Example: BitCNY to CNY via Transwiser.)

For this reason, combined with those in my prior post, I'm in support of this change.

[Chronos]

After extensive debate about BSIP 0016, it is now scheduled to go into effect on June 21. Some have argued that this breaches the implicit contract that smart coins are convertible to 100% of their BTS value. In this post, I argue that this change does not breach the contract.

The question comes down to this: what is the contract around BitCNY? I believe it is a social contract: a contract for stable value. This is why Bytemaster designed the forced-settlement parameter to be adjustable by the committee. It could have been hard-coded, which would be a technical contract for 100% BTS convertibility, but I think that would leave SmartCoin pegs more brittle, subject to greater volatility.

If the peg breaks out to the upside, the forced-settlement parameter can be lowered, to incentivize traders to bring it back down. If the price pushes below the peg, the parameter can be brought up to 100% to instantly correct it.

It should be noted that, similar to how other markets work, sometimes the expectation and potential of these changes is enough to affect the market. For example, traders are more likely to sell their BitCNY at 105% of the price feed, instead of letting the price creep even higher, when they know that the committee will step in to bring the peg back to sanity in the case of a runaway peg.

If the SmartCoin peg were a technical contract for 100% convertibility, it would have been designed as such, without making parameters changeable by committee. Instead, the committee does have this power, making it a social contract to track a price feed. This social contract will be maintained by BSIP 0016.


After we have time to observe the effect of this change on the market, I would like to propose that all other SmartCoin pegs (BitUSD, BitBTC, etc.) make a similar change to 99% convertibility. As some have pointed out, the consistency across the ecosystem would be desirable.

[bitsharesbrazil]

Like I said I disagree but I respect, It was a lot of talk, posts, its clear in the blockchain, so I hope people can take the best of it, if we we see a growth in the market we all will change a perception of some thing, lets give time, people are already aware, lets give it some support

[pc]

Like i said before im not tech or economics...n now. I just hope everything goes well for bitcny one of best smartcoins performers....I dont see anything wrong with that if you consider that our product is slowly growing....n changes can affect confidence....but lets hope it is for the best n that bitcny n smartcoins can shine

You don't have to be a tech or economics expert to answer the simple question:
Would you enter a contract where your counterparty can change the rules anytime they want?

And now tell me how that makes smartcoins shine.

[bitsharesbrazil]

Like i said before im not tech or economics...n now. I just hope everything goes well for bitcny one of best smartcoins performers....I dont see anything wrong with that if you consider that our product is slowly growing....n changes can affect confidence....but lets hope it is for the best n that bitcny n smartcoins can shine

[pc]

Although probably stake holders agree with those at that time, stake holders may have changed, or their opinions have changed. That's the game. Worker voting has spoken.

That's my point. Worker voting is irrelevant, because you cannot retroactively change the original intent of a contract by vote.

If someone thinks that (like in the case of ETH/DAO) the code is *not* the law but that intent matters, the logical conclusion is that they must oppose BSIP-0016.

[abit]

The recent events on ETH/TheDAO bear a lot of parallels with the proposal discussed here. Of course when I wrote https://steemit.com/bitshares/@cyrano.witness/before-entering-into-a-smart-contract--read-the-fine-print I didn't dream of someone screwing the DAO. However, that's what happened: someone read the "fine print" of the DAO contract, and used it to his advantage.

Today, I read this comment from @cube, which got me thinking:

Yes, "the intent of the parties" is the key.

I agree. Whenever a disagreement about the interpretation of a contract is brought before a court, the court will take a step back and try to find out what the original intent of the parties was when the contract was set up. The precise wording of the contract is relevant only insofar as it sheds some light on that question - which is usually the case, but the truth is bigger than the wording of a contract.

I think in our case here, the intent is quite clear:

SmartCoins are guaranteed to be worth at least their face value
- https://bitshares.org/technology/price-stable-cryptocurrencies/

Even some newer documentation that postdates BSIP-0016, like EstefanTT's writeup or Chronos' first video states that bitassets can be redeemed for their equivalent value in BTS. Which will no longer be true after BSIP-0016 has been accepted. The 1:1 settlement guarantee is the big print, and IMO that's clearly the intent of our BitAssets smart contract.

@cube @datasecuritynode @clayop @Harvey @abit @ebit @bitcrab - please reconsider your vote on 1.10.286.

Thanks.

The words on bitshares.org were BM's idea, not the current major stake holders'.
Although probably stake holders agree with those at that time, stake holders may have changed, or their opinions have changed. That's the game. Worker voting has spoken.

I do understand you're disappointed on something. So did I.

[pc]

The recent events on ETH/TheDAO bear a lot of parallels with the proposal discussed here. Of course when I wrote https://steemit.com/bitshares/@cyrano.witness/before-entering-into-a-smart-contract--read-the-fine-print I didn't dream of someone screwing the DAO. However, that's what happened: someone read the "fine print" of the DAO contract, and used it to his advantage.

Today, I read this comment from @cube, which got me thinking:

Yes, "the intent of the parties" is the key.

I agree. Whenever a disagreement about the interpretation of a contract is brought before a court, the court will take a step back and try to find out what the original intent of the parties was when the contract was set up. The precise wording of the contract is relevant only insofar as it sheds some light on that question - which is usually the case, but the truth is bigger than the wording of a contract.

I think in our case here, the intent is quite clear:

SmartCoins are guaranteed to be worth at least their face value
- https://bitshares.org/technology/price-stable-cryptocurrencies/

Even some newer documentation that postdates BSIP-0016, like EstefanTT's writeup or Chronos' first video states that bitassets can be redeemed for their equivalent value in BTS. Which will no longer be true after BSIP-0016 has been accepted. The 1:1 settlement guarantee is the big print, and IMO that's clearly the intent of our BitAssets smart contract.

@cube @datasecuritynode @clayop @Harvey @abit @ebit @bitcrab - please reconsider your vote on 1.10.286.

Thanks.

[Chronos]

Congratulations @bitcrab on a well-executed proposal.

If this change goes smoothly and is well-accepted by the community, I would like to propose that the same changes be applied to other official BTS SmartCoins such as BitUSD, BitEUR and BitGold. As has been mentioned, there is value in having all the official tokens follow the same basic forced-settlement parameters.

Thanks!

[bitcrab]

Thanks to the committee members that support this proposal, currently the proposal has got enough approval and will be executed at 21st,  June.

kindly remind relevant parties, especially bitCNY holders, to be aware of this and take actions if you feel necessary.

[abit]

So the "bonus" fund would come from a worker? Current supply is about 600K CNY, so 1% would be 6K CNY, equivalent to ~240K BTS at current rate.
A possibility to game this, is to short & hold some CNY before the change, after got free bonus, close the position. It's hard to distinguish self-shorters because they can transfer CNY to other accounts.

IMO the bonus would have to be paid by those who profit from the change, i. e. the shorters. That would also handle the problem of self-shorters.
Obviously this would  be even more tricky to handle, because it requires cooperation from all shorters.

So it's not an option for current case.

By the way I'm going to approve the committee proposal. @bitcrab as current leader of Chinese community deserves our support, just like how we supported BM in the past.

[pc]

So the "bonus" fund would come from a worker? Current supply is about 600K CNY, so 1% would be 6K CNY, equivalent to ~240K BTS at current rate.
A possibility to game this, is to short & hold some CNY before the change, after got free bonus, close the position. It's hard to distinguish self-shorters because they can transfer CNY to other accounts.

IMO the bonus would have to be paid by those who profit from the change, i. e. the shorters. That would also handle the problem of self-shorters.
Obviously this would  be even more tricky to handle, because it requires cooperation from all shorters.

[abit]

In the hangout yesterday, bytemaster hinted at a way to perform the proposed change without harming current holders of bitCNY. Basically, the idea would be to pay out a 1% bonus for bitCNY holders at the time the proposal takes effect. I think it might be possible, but it's not clear to me how pending orders on the DEX would have to be treated.

I suggest we postpone the current proposal until we have worked out a way to perform the desired changes without harming anyone.

Interesting idea.
So the "bonus" fund would come from a worker? Current supply is about 600K CNY, so 1% would be 6K CNY, equivalent to ~240K BTS at current rate.
A possibility to game this, is to short & hold some CNY before the change, after got free bonus, close the position. It's hard to distinguish self-shorters because they can transfer CNY to other accounts.

[bitsharesbrazil]

After reading a lot I dont support the change too, but of course its difficult decision