Forget Smartcoins, how about Dreamcoins?

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Lots more discussion on this topic may be found on Steemit, including this "ponzi scheme" concern which quickly went down in flames (all modesty aside).

https://steemit.com/bitshares/@Stan/the-power-of-5#@cyrano.witness/re-stan-the-power-of-5-20160623t210949238z

Link doesn't work (duh)

http://goo.gl/w4iHdo

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These shity links on steem never work.

Mark > Right click > open

[bitsharesbrazil]

Lots more discussion on this topic may be found on Steemit, including this "ponzi scheme" concern which quickly went down in flames (all modesty aside).

https://steemit.com/bitshares/@Stan/the-power-of-5#@cyrano.witness/re-stan-the-power-of-5-20160623t210949238z

I really liked your arguments stan, that is the beatiful of smartcoins.

[yvv]

These shity links on steem never work.

[Stan]

Lots more discussion on this topic may be found on Steemit, including this "ponzi scheme" concern which quickly went down in flames (all modesty aside).

https://steemit.com/bitshares/@Stan/the-power-of-5#@cyrano.witness/re-stan-the-power-of-5-20160623t210949238z

[Stan]

This idea could bring new eyeballs to Bitshares, but some of the "benevolent whale" reasoning in this thread seems illogical to me.

It's not that illogical for a whale. Imagine a whale with $2.5 million.

He has purchased a 20% stake in BTS for circa $2 million. He has $500 000 in fiat.
He offers 5% p.a yield on 'BitSumo DreamCoin' & uses some of his stake to help short Dreamcoins into existence when there is demand.
His $500 000 in fiat will cover 5% yield on up to $10 million worth of DreamCoin in year 1 regardless of BTS price.

But $10 million of BitSumo couldn't be created unless there was MANY millions of dollars worth of new demand for BTS which would drive the price of BTS and it's value MUCH higher.

The result is that his leveraged 20% stake in BTS (Currently worth $2 million) should dramatically increase in value.

I would like to see the BTS blockchain itself support yield during the SmartCoin growth stage but this probably works too. (I would also consider reducing forced settlement and have some mechanism that allocates some of the yield to shorts when SmartCoin or Dreamcoin demand in this case, is above the peg.)

Thanks, I was hoping someone would do an analysis like this.

A more detailed analysis would examine typical order books and try to model what the incremental change in BTS price would be as they are taken off the order book to make Sumos.

Naturally, other market effects would be superimposed on the steady state effect, but those wiggles get damped out by the whale only buying when the price  is below the nominal ramp.

Now, I wonder how to calculate what the nominal ramp should be.

Are there diminishing returns for each new Sumo coined?

If the combined value of all BTS accumulated tends to reliably grow significantly beyond the combined price paid for them you would think that is a good place for a whale to put some of her existing revenues.  Especially if the whale has additional plans for what could be done building an ecosystem on such a currency.

The extent to which the whale could later exit would be the extent to which other speculators join her on the treadmill.

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what if you only make bitsumo tradeable for LTM members? shouldn't this drive the price as well?

[Empirical1.2]

This idea could bring new eyeballs to Bitshares, but some of the "benevolent whale" reasoning in this thread seems illogical to me.

It's not that illogical for a whale. Imagine a whale with $2.5 million.

He has purchased a 20% stake in BTS for circa $2 million. He has $500 000 in fiat.
He offers 5% p.a yield on 'BitSumo DreamCoin' & uses some of his stake to help short Dreamcoins into existence when there is demand.
His $500 000 in fiat will cover 5% yield on up to $10 million worth of DreamCoin in year 1 regardless of BTS price.

But $10 million of BitSumo couldn't be created unless there was MANY millions of dollars worth of new demand for BTS which would drive the price of BTS and it's value MUCH higher.

The result is that his leveraged 20% stake in BTS (Currently worth $2 million) should dramatically increase in value.

I would like to see the BTS blockchain itself support yield during the SmartCoin growth stage but this probably works too. (I would also consider reducing forced settlement and have some mechanism that allocates some of the yield to shorts when SmartCoin or Dreamcoin demand in this case, is above the peg.)

[Stan]

True, but the hypothetical whale is committed to investing a steady stream of revenue from some other source, that could tend to favorably bias that sentiment.

Presumably a whale with this business model would also be advertising the product aggressively.

One difficulty might be that the price of BTS zooms on speculation to the point where speculators take a time out from shorting until it drops back to the desired growth curve.

So this would need a clever bot to "regulate" the whole process to the Goldilocks "just right" rate of growth.

[starspirit]

So let me get this straight:

-We create "Sumo" that has 1.05 the feed price of a basket of currencies
-Obviously there will be demand for this asset
-We need people to short it into existence, but the only reason to do that is to think that BTS will rise by greater than 5% per year vs the basket of currencies
-Since there is no reason to think bts will rise more than 10% each year since BTS isn't profitable and even BM has said increased network activity won't drive BTS market cap higher, no one will short it.
-We hope that a whale comes in and shorts a bunch of it?  Why would they do that?  Aside from the costs to enter the BTS ecosystem, they will be giving up 5% right off the bat.

Are we just hoping that speculators will see a whale investing in something and follow them?  Then we hope that enough people are coming into the system that the demand for BTS rises and outpaces the 5% premium on "sumo".  I have to be missing something because I can't see why anyone would ever short this product...

The theory is that if you start selling lots of dream coins you will need to buy lots of BTS to make them.  That will put buying pressure on the market which will cause the price to rise more than 5%.  Since you are leveraged 2x even a 5% gain would double your profits.  And the more coins you make the more the collateral in the earlier coins you made will be worth.

Thus the price of BTS becomes a more or less direct function of the demand for Dreamcoins.

This is a common but false belief. The best that we can say is that while there is latent demand for leverage from BTS bulls, an increase in Smartcoin supply helps to facilitate their bids by providing the leverage. But any increase in price depends on how many sellers the new higher price motivates in the market. In turn this depends on the perceived future return prospects envisioned by remaining marginal buyers and sellers of BTS, not any price at which historic transactions have already taken place. The BTS market will shift more with sentiment, not push from Smartcoin demand.

So no rational short would support this with other alternatives available to them. Of course, irrational shorts might!

This is a bit like saying that if only all producers in the economy gave great 2 for 1 deals to consumers, the economy would be buzzing with the increased consumer spend, and stock prices would go through the roof, more than compensating business owners for their income losses. Not really a viable model.

[Stan]

All we need is someone who is smaaaarter than the average whale...

[yvv]

When this is going to happen? I'll short this.

[xeroc]

plot twist: Use bitUSD as backing asset for bitSUMON

[Stan]

Oh yeah?  Short this!

Of course, the underlying assumption is that the demand for such a coin as the, um, Sumo would draw so much BTS out of circulation that its percentage gain would zoom far beyond the Sumo.

At first glance it doesn't look like you would want to short something like this, but remember, a whale would be shorting the Sumo against a zooming BTS, not the CPI or anything else. 

This plot is just pegging the Sumo above the dollar.  If it were pegged to a basket, presumably the wiggles would be smoothed out and pegging to the strongest currency at any point in time would maybe eliminate all dips.

But, we just need something simple to explain that is better than what most people have, so I'm thinking sticking with the above definition is a good compromise.

Your actual mileage may vary.

[unreadPostsSinceLastVisit]

Would it worth it to shorters to short sumo, then sell it for enough of an upcharge to offset shorting losses?

People wanting sumo would have to pay a ridiculous price, but then they could hodl long enough to offset that.

The question is how much more than base currency value would people be willing to pay for sumo?