Author Topic: BitUSD needs liquidity for those that want to buy it.  (Read 24432 times)

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Offline pc

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personally I do not like this idea, business should be done by businessmen.
+1
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Offline JonnyB

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Totally support the idea of actively managing the reserve funds to increase bitAsset liquidity. Here is financial model which could work:

1. Create a worker which receives 100K BTS per day (or whatever voters decide).
2. The worker uses available funds to issue bitUSD and build a sell wall at call price up to 1K bitUSD. If the wall drops below 1K, issue more bitUSD to raise it back.
3. Use available funds to build a buy wall at feed price up to 1K bitUSD. If the wall drops below 1K, settle debt and raise it back.
4. Adjust bid/ask orders to match the current feed/call price hourly.
5. Adjust collateral ratio to safe level hourly.
6. Send unspent funds (if any) back to reserve every week.

If this works:
I Raise the walls to 10K bitUSD.
II Apply this scheme to other bitAssets.

Comments? Can this be automated?


That is a good roadmap to add liquidity. I create a google spreadsheet model for that, including the worker script and current price feeds.
https://docs.google.com/spreadsheets/d/1Zj7b0OCBBx_WYeDJWGdot3454UOTb5zJfZp2ulROfxQ/edit?usp=sharing

When we want to use: committee-trade
then we need to talk to:
Active
- bhuz   
- bitcube
- abit
- dele-puppy
- xeroc

@Bhuz @bitcube @abit @dele-puppy @xeroc

They are in charge of the account and should be able to set up a script as described by yvv.  I would suggest we start with USD and CNY first and test 90-150 days how the program works. It takes around 55 days to set up the 10k wall. It will take probably longer since more and more people will buy BitUSD.

The account can reuse the BTS he receives to create more BitAssets and sells them off.

What are the challenges?
- What if the BTS drops rapidly?
- At what price offset should be the sell wall?
- What happens if somebody buys up the complete wall? What comes next?
- How do we manage the debts of committee-trade once the worker is over?

Thanks for making this spreadsheet.

COLLATERAL RATIO
I have been thinking about the collateral backing for this committee created BitUSD. 
My initial thought was we don't want it to get force settled so we should have a high collateral ratio.
But then I realised the lowest collateralised BitUSD gets settled first meaning all the private bitUSD creators might be force settled in front of the committee's BitUSD.
So it might be better for the committee's created BitUSD to be the least collateralised so as not to dishearten private creators.

When the Committee's BitUSD is inevitably force settled it can just be recreated again until the debts of the committee-trade account are exactly the amount that has been agreed.

My conclusion is 2.5 collateral ratio isn't too low as it doesn't matter if it gets force settled.

DISTANCE FROM PEG TO SELL AT
Obviously we should never sell below the settlement price because anyone could buy it below settlement then force settle it in 24hrs for a profit as I have done in the past.
Also the bitshares price can move more than 5% in a day so if the committee place the sell order 5% over the settlement price and bts drops 6% in a day we will be in a position where the sell order is 1% below the settlement price.
The ultimate solution to this problem would be if bitshares had the ability to place relative orders where you could place orders that move up and down with the settlement price so that it is always priced at exactly +5% over. However this is not possible unless within bitshares now with out using an external bot system.
The current proposal of 100k per day would produce $5447 BitUSD per month using the spreadsheet numbers which is roughly $1361 a week.
This is not a lot of money to be adding each week and I think it should be sold to the highest bids that are over the settlement price at the same time each week.
The goal of this proposal is to get more BitUSD into circulation so even if a whale buys it all up in one go each week this is still good for liquidity.
Unfortunately we need to be creating much more than $5447 but if we tripled it that would be almost the entire dilution budget.
I don't think we will have sell walls for quite sometime. We need to greatly increase the amount of debt free BitUSD in existence and hopefully the traders will create sell walls themselves due to them not be scared of lack of new supply.

My conclusion is that the selling of these creating BitUSD doesn't need to be managed on an hourly/daily basis just a weekly sale to the highest bids at exactly the same time each week. As long as the bids are higher than the settlement price all is good.

WHAT HAPPENS IF THE COMMITTEE MAKES A LOSS
If bitshare go up the committee-trade account will make a profit.
If bitshares goes down the committee-trade account will make a loss.
It doesn't matter. However my guess would be it makes a profit.
Making a profit and avoiding a loss would be a bonus but the purpose is to get more BitUSD out in the wild not to make money.

 
WHAT HAPPENS AT THE END OF THIS WORKER PROPOSAL
I think it needs to be 100 % crystal clear that these funds will be used for exactly what is prescribed and there is no temptation in the future for the committee-trade account to change the debt amounts agreed on or be tempted to spend on something else. These debts should remain on the committee-trade account permanently unless the community votes to change this in the future.


OTHER POINTS
- The committee account already contains 1.5 million BTS which could be used to give this liquidity proposal a head start. 
- I think either BitUSD or BitCNY should be chosen for this liquidity proposal but not both. We have very little money and need to focus on a single one to prove it works.
- I can't see any negatives to trying this proposal apart from a rogue committee. Please let me know if you can see any other big negatives.
- When you hear people say 97% of money in existence is debt it is true. But remember it was the 3% of debt free money that kick started the creation of the other 97%. So we do need a good supply of debt free bitUSD to get the money creation process started.

I run the @bitshares twitter handle
twitter.com/bitshares

Offline yvv

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personally I do not like this idea, business should be done by businessmen.
who need bitUSD? tell me, I'll sell to him with close to market price.


The goal is to create a tighter market spread plus walls so that users can trade thousand BitUSD against USD and BitUSD against BTS.

%5

Centralized exchanges use their reserves for this purpose. If we want to compete against them, we need to have our market making fund. Also, this is essential for your POS to work. If merchant can't cash out coupled of thousand $$ per day, no way they are going to accept any smart coins.
« Last Edit: July 30, 2016, 02:42:02 pm by yvv »

Offline Chris4210

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personally I do not like this idea, business should be done by businessmen.
who need bitUSD? tell me, I'll sell to him with close to market price.


The goal is to create a tighter market spread plus walls so that users can trade thousand BitUSD against USD and BitUSD against BTS.
Vote Chris4210 for Committee Member http://bit.ly/1WKC03B! | www.Payger.com - Payments + Messenger | www.BitShareshub.io - Community based fanpage for the BitShares Blockchain

Offline yvv

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personally I do not like this idea, business should be done by businessmen.
who need bitUSD? tell me, I'll sell to him with close to market price.

Any businessman needs funds to do business. There are $4M worth of BTS sitting in reserve which could be used to boost liquidity for bitshares good. How many bitUSD do you have for sale? Is it enough to provide reasonable liquidity? Then why don't you put your offer on DEX?
« Last Edit: July 30, 2016, 12:19:27 pm by yvv »

Offline yvv

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What percentage of pool funds would be used? We must set a limit, the pool isn't infinite plus we need reserve for possible worker proposals that we might have in the future.

Start with small amount first. 100K BTS per day seems reasonable amount. These funds will not be lost (unless black swan happens). When worker is expired or voted out, he will need to settle debt at market price and send BTS back to reserve (whatever is left).

This is just one of possible ways to fund a market making pool. The other evident way would be to crowdfund the MM pool through UIA. Which way do we choose?

« Last Edit: July 30, 2016, 12:05:42 pm by yvv »

Offline Akado

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What percentage of pool funds would be used? We must set a limit, the pool isn't infinite plus we need reserve for possible worker proposals that we might have in the future.
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Offline bitcrab

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personally I do not like this idea, business should be done by businessmen.
who need bitUSD? tell me, I'll sell to him with close to market price.
Email:bitcrab@qq.com

Offline Chris4210

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Totally support the idea of actively managing the reserve funds to increase bitAsset liquidity. Here is financial model which could work:

1. Create a worker which receives 100K BTS per day (or whatever voters decide).
2. The worker uses available funds to issue bitUSD and build a sell wall at call price up to 1K bitUSD. If the wall drops below 1K, issue more bitUSD to raise it back.
3. Use available funds to build a buy wall at feed price up to 1K bitUSD. If the wall drops below 1K, settle debt and raise it back.
4. Adjust bid/ask orders to match the current feed/call price hourly.
5. Adjust collateral ratio to safe level hourly.
6. Send unspent funds (if any) back to reserve every week.

If this works:
I Raise the walls to 10K bitUSD.
II Apply this scheme to other bitAssets.

Comments? Can this be automated?


That is a good roadmap to add liquidity. I create a google spreadsheet model for that, including the worker script and current price feeds.
https://docs.google.com/spreadsheets/d/1Zj7b0OCBBx_WYeDJWGdot3454UOTb5zJfZp2ulROfxQ/edit?usp=sharing

When we want to use: committee-trade
then we need to talk to:
Active
- bhuz   
- bitcube
- abit
- dele-puppy
- xeroc

@Bhuz @bitcube @abit @dele-puppy @xeroc

They are in charge of the account and should be able to set up a script as described by yvv.  I would suggest we start with USD and CNY first and test 90-150 days how the program works. It takes around 55 days to set up the 10k wall. It will take probably longer since more and more people will buy BitUSD.

The account can reuse the BTS he receives to create more BitAssets and sells them off.

What are the challenges?
- What if the BTS drops rapidly?
- At what price offset should be the sell wall?
- What happens if somebody buys up the complete wall? What comes next?
- How do we manage the debts of committee-trade once the worker is over?
Vote Chris4210 for Committee Member http://bit.ly/1WKC03B! | www.Payger.com - Payments + Messenger | www.BitShareshub.io - Community based fanpage for the BitShares Blockchain

Offline 天籁

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Totally support the idea of actively managing the reserve funds to increase bitAsset liquidity. Here is financial model which could work:

1. Create a worker which receives 100K BTS per day (or whatever voters decide).
2. The worker uses available funds to issue bitUSD and build a sell wall at call price up to 1K bitUSD. If the wall drops below 1K, issue more bitUSD to raise it back.
3. Use available funds to build a buy wall at feed price up to 1K bitUSD. If the wall drops below 1K, settle debt and raise it back.
4. Adjust bid/ask orders to match the current feed/call price hourly.
5. Adjust collateral ratio to safe level hourly.
6. Send unspent funds (if any) back to reserve every week.

If this works:
I Raise the walls to 10K bitUSD.
II Apply this scheme to other bitAssets.

Comments? Can this be automated?
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Offline yvv

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Totally support the idea of actively managing the reserve funds to increase bitAsset liquidity. Here is financial model which could work:

1. Create a worker which receives 100K BTS per day (or whatever voters decide).
2. The worker uses available funds to issue bitUSD and build a sell wall at call price up to 1K bitUSD. If the wall drops below 1K, issue more bitUSD to raise it back.
3. Use available funds to build a buy wall at feed price up to 1K bitUSD. If the wall drops below 1K, settle debt and raise it back.
4. Adjust bid/ask orders to match the current feed/call price hourly.
5. Adjust collateral ratio to safe level hourly.
6. Send unspent funds (if any) back to reserve every week.

If this works:
I Raise the walls to 10K bitUSD.
II Apply this scheme to other bitAssets.

Comments? Can this be automated?


Offline JonnyB

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my bad. got a decimal place wrong. So it would have to be 1 million BTS a week which is almost half the dilution budget!

The committee account would have to keep recreating the BitUSD whenever it got force settled so I'm not sure it can be done as a one off thing.

I run the @bitshares twitter handle
twitter.com/bitshares

Offline paliboy

100,000 bts x 0.5 cent = $5000 with a collateral ratio of 2.5  would create $2000 bitUSD ( plus when sold by the committee for BTS it would create an additional 40,000 bts which could be either added to the collateral or used to create even more bitUSD)

Now I understand where the bug is :)

100,000 bts x 0.5 cent = $500 with a collateral ratio of 2.5  would create $200 bitUSD

Obviously it makes no sense to sell bitusd below the feed price as anyone could buy them up and then force settle them for a profit as I have done in the past.

 +5%

Theres plenty of willing buyers for bitUSD but nobody wants to buy with huge mark ups.

I wish you were right. At the moment there are bids for 145 bitUSD at prices +-2% of feed price and 31 bitUSD at prices +-1% of feed price.

IMHO it would be much safer to do it as a one-time event at the beginning.

Offline JonnyB

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Steem backed dollars at 0.85 usd on external exchanges but not internally on the steem blockchain.
Might be because when you sell you SBD for Steem you have to wait a week to get them. Steem prices are very volatile and could crash a lot in one week.

nope. you can sell instantly. there's a median feature that takes 7 days until you get the median exchange steem, but that's another story

I guess people are taking a 15% hit to get their money out sooner then. But you can settle your SBD for $1 worth of steem with 7 days notice.
I run the @bitshares twitter handle
twitter.com/bitshares

Offline fav

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Steem backed dollars at 0.85 usd on external exchanges but not internally on the steem blockchain.
Might be because when you sell you SBD for Steem you have to wait a week to get them. Steem prices are very volatile and could crash a lot in one week.

nope. you can sell instantly. there's a median feature that takes 7 days until you get the median exchange steem, but that's another story