Author Topic: BitUSD needs liquidity for those that want to buy it.  (Read 9042 times)

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Offline Chris4210

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #15 on: July 30, 2016, 10:27:04 am »
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
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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?
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Offline bitcrab

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #16 on: July 30, 2016, 10:58:52 am »
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.
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Offline Akado

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #17 on: July 30, 2016, 11:22:16 am »
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 yvv

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #18 on: July 30, 2016, 11:52:19 am »
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 yvv

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #19 on: July 30, 2016, 12:17:18 pm »
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 Chris4210

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #20 on: July 30, 2016, 02:09:05 pm »
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.
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Offline yvv

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #21 on: July 30, 2016, 02:33:18 pm »
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 JonnyB

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #22 on: July 30, 2016, 03:06:21 pm »
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

[member=350]Bhuz[/member] @bitcube [member=18687]abit[/member] @dele-puppy [member=120]xeroc[/member]

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.

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Offline pc

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #23 on: July 30, 2016, 03:08:45 pm »
personally I do not like this idea, business should be done by businessmen.
+1
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Offline JonnyB

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #24 on: July 30, 2016, 03:24:06 pm »
personally I do not like this idea, business should be done by businessmen.
+1
This is not helpful. You need to explain how the committee creating a supply of BitUSD and selling it to those who want it could be negative.
Why would a businessman create and sell a bit asset if he cannot buy it back in the future to close his position?
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Offline paliboy

Re: BitUSD needs liquidity for those that want to buy it.
« Reply #25 on: July 30, 2016, 07:01:28 pm »
I suggest that we either adjust bitUSD's parameters first (see https://bitsharestalk.org/index.php/topic,22936.msg297124) or start with bitCNY.

After I saw what happens when a DAC wastes all of its assets (see what happened in Nushares/Nubits), we should be very careful with reserves, i.e. if this gets support and even though profit isn't goal, commitee should aim to at least break even. Therefore I think that collateral ratio should be set as high as practically possible (my suggestion would be at least 3).

Committee's smartcoins being force settled does matter - it causes dilution with unpredictable outcomes.

Offline ebit

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #26 on: July 31, 2016, 01:22:31 am »
Worker is used for coding.
BitCNY is growing fast,Why?

Or we need a lawsuit,and tell the world what is bitUSD.
« Last Edit: July 31, 2016, 01:26:29 am by ebit »
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Offline karnal

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #27 on: July 31, 2016, 12:12:54 pm »
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.

FWIW, personally I do not bother adding orders for BitUSD because the spread is always huge and there is no stop-loss feature in graphene, which means a distraction would cost me money.

I'd bet many others are in the same position and simply don't bother placing an order.. especially when BitCNY is decently liquid.

I would rather hodl USD, but if I can get my order filled instantly or in minutes with CNY ..

Offline cube

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #28 on: August 01, 2016, 09:03:30 am »

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.


Thanks for bringing up this liquidity bootstrap idea and getting a lively discussion going.  I am all for increasing liquidity but I like to have a detailed carefully draft out plan before going ahead. 

Making a loss does matter, especailly if the espected liquidity did not happen but some users gained from 'wrongly' executed orders by the committee-trade members.  A loss means a loss for the bts shareholders.  At what price (loss) when it becomes too much for the shareholders to bear?  We should mitigate this risk as much as possible.  My concerns are:

1) Committee members are not traders and do not have the necessary experiences nor know-how to trade without making (significant) losses or gamed by experienced traders

2) How to make this into a self-sustainable process and when would it become profitable for users/shorters to step in and take over from this committee-run liquidity-subsidy effort?
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Offline yvv

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Re: BitUSD needs liquidity for those that want to buy it.
« Reply #29 on: August 01, 2016, 11:41:11 am »
Topic starter suggests to provide liquidity with brute force, by taking all bids above the feed price on regular basis. Of course, MM account will be at loss this way, and traders will game it. Imo, it is ok to use reserve for market making, but strategy must be better than this. There should be a plan for issuing AND liquidating bitAsset. And liquidity should be provided both ways, for buyers and for sellers.