Author Topic: Incentivize SmartCoin collateralization  (Read 3967 times)

0 Members and 1 Guest are viewing this topic.

Offline kani

  • Full Member
  • ***
  • Posts: 56
    • View Profile
Incentivize SmartCoin collateralization
« on: January 13, 2017, 04:34:37 pm »
(originally posted in https://bitsharestalk.org/index.php/topic,23706.msg301759.html#msg30175, start new topic to avoid derailing that discussion and start a new one here).

* Committee-controlled SmartCoins add a 0.1% market fee.
* Every trade in that market generates a small bit of revenue FOR THAT MARKET...
* PAY IT BACK to shorters of that asset!
* Holders do not get dividend, only collateralized positions.
* Amount paid in dividend is based upon how much of the particular bitAsset a user has borrowed.
My opinions are my own

Turn up the H.E.A.T.

Offline Chris4210

  • Sr. Member
  • ****
  • Posts: 431
  • Keep Building!
    • View Profile
    • www.payger.com
  • BitShares: chris4210
Re: Incentivize SmartCoin collateralization
« Reply #1 on: January 14, 2017, 12:40:43 pm »
So the idea is basically to charge a 0.1% fee for trading a bitAsset like BitUSD and pay that fee to those who shorted the asset. This would be an additional income stream for those who created a BitAsset.

I added it to the Roadmap list, so that we can vote for it once we have a clear plan how it should work. However, as stated in the original post I would like to discuss the Bitshares business plan with everybody first, and then adjust the dividend and referral program to that. BitShares has a good toolkit for financial services, and we should get the framework for it down now.
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 Chronos

Re: Incentivize SmartCoin collateralization
« Reply #2 on: January 14, 2017, 03:49:58 pm »
Here's a problem:

1) I have some BTS
2) I short some BitUSD
3) I send it to my other account that I also control

Now my net position is the same, but I get a slice of the dividend. This means that everyone with BTS would want to short themselves whatever asset(s) had the most payout, diluting them significantly.

Offline yvv

  • Hero Member
  • *****
  • Posts: 1186
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #3 on: January 14, 2017, 04:28:56 pm »
The best incentive for shorters is low collateral.

Offline kani

  • Full Member
  • ***
  • Posts: 56
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #4 on: January 14, 2017, 04:45:28 pm »
Here's a problem:

1) I have some BTS
2) I short some BitUSD
3) I send it to my other account that I also control

Now my net position is the same, but I get a slice of the dividend. This means that everyone with BTS would want to short themselves whatever asset(s) had the most payout, diluting them significantly.

Yes, position is the same but so is the slice of dividend.  With this idea, sending BitUSD to another account (or selling it, etc) has no effect.  Payout is relative to the amount currently borrowed (only the first account in your example).  Idea is to incentivize collatoralization so more bitAssets are in circulation.

(I seem to remember seeing another idea for a flat percentage to shorters.  I prefer this idea instead, since it relies upon market activity and spreads the cost to those who buy the asset).

Maybe it has merit, maybe not.  I'll leave it to the greater Bitshares minds to decide the fate.
My opinions are my own

Turn up the H.E.A.T.

Offline Geneko

  • Full Member
  • ***
  • Posts: 187
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #5 on: January 14, 2017, 08:11:25 pm »
This is great idea. Thank you for extracting it from the other topic and make it available for discussion.
It will solve low supply of community smart assets. (bitBTC, bitEUR ...).
It will provide what lacks. Incentive for shorters.
I think rasonable fee 0.1% would provide huge benefit. This is same as open.assets. There fee goes to Openledger.
BTWTY and all others to come use same business model.
Model is proven, it is working.

The thing that is brilliant is that Bitshares key feature smart coins will offer benefit to its shorter (the ones that locks collateral, and risk from market swings and margin call). That promise of "Bitshares" was missing all the time. I like idea very much.

Offline JonnyB

  • Hero Member
  • *****
  • Posts: 636
    • View Profile
    • twitter.com/jonnybitcoin
Re: Incentivize SmartCoin collateralization
« Reply #6 on: January 15, 2017, 02:24:35 am »
Here's a problem:

1) I have some BTS
2) I short some BitUSD
3) I send it to my other account that I also control

Now my net position is the same, but I get a slice of the dividend. This means that everyone with BTS would want to short themselves whatever asset(s) had the most payout, diluting them significantly.

Yes, position is the same but so is the slice of dividend.  With this idea, sending BitUSD to another account (or selling it, etc) has no effect.  Payout is relative to the amount currently borrowed (only the first account in your example).  Idea is to incentivize collatoralization so more bitAssets are in circulation.

(I seem to remember seeing another idea for a flat percentage to shorters.  I prefer this idea instead, since it relies upon market activity and spreads the cost to those who buy the asset).

Maybe it has merit, maybe not.  I'll leave it to the greater Bitshares minds to decide the fate.

I don't think it works because you can borrow bitassets and do nothing with them do. As chronos says your can't prove who's really short.
This doesn't improve liquidity .
I run the @bitshares twitter handle
twitter.com/bitshares

Offline 天籁

  • Hero Member
  • *****
  • Posts: 705
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #7 on: January 15, 2017, 02:37:46 am »
This is great idea. Thank you for extracting it from the other topic and make it available for discussion.
It will solve low supply of community smart assets. (bitBTC, bitEUR ...).
It will provide what lacks. Incentive for shorters.
I think rasonable fee 0.1% would provide huge benefit. This is same as open.assets. There fee goes to Openledger.
BTWTY and all others to come use same business model.
Model is proven, it is working.

The thing that is brilliant is that Bitshares key feature smart coins will offer benefit to its shorter (the ones that locks collateral, and risk from market swings and margin call). That promise of "Bitshares" was missing all the time. I like idea very much.
+5%

Offline bitcrab

  • Committee member
  • Hero Member
  • *
  • Posts: 1677
    • View Profile
  • BitShares: bitcrab
  • GitHub: bitcrab
Re: Incentivize SmartCoin collateralization
« Reply #8 on: January 15, 2017, 02:48:48 am »
this just add complex, no other sense.

Offline Geneko

  • Full Member
  • ***
  • Posts: 187
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #9 on: January 15, 2017, 05:23:35 pm »
I don't think it works because you can borrow bitassets and do nothing with them do. As chronos says your can't prove who's really short.
This doesn't improve liquidity .

I am not famiiar with actual code, but I dont see why not, although I dont know, related to our platform, wether it is feasible.

So you introduce 0.1% fee to all send transactions. Buy/Sell has usual fee, borrow and update/close too, payed to the network in BTS.
Now, all short positions receives fee from its coins transactions including Buy/Sell. In Buy /Sell case, Seller pays smartcoin fee and buyer pays network fee in BTS. 
In case you have borrowed and send to another account. You have payed fee to your self. If another account receives and hold, then there is no another transaction and there is no fee. Every time, further account sends, it generates fee for its creator. So it doesn't matter if account that receives is in your possession or not. Eventually it is going to send those funds somewhere and pay fee, which will go to its creator account. All fees payed to its creator, decrease supply of coins, so there is no infinite dilution.

So there is only one question left. How we will know, which account created which coin. Solution is quite simple, every smartcoin sent is basically a record of all previous transactions like bitcoin. Like that they could be easily traced to its creator, the same way bitcoin use record of transactions to provide sum of account held.  Every time position is updated/closed, the amount of smartcoins supplied is burned and the record of transactions with it.

This is basic idea and logic behind and it and may be far away from actual technical solution.

Offline Pheonike

Re: Incentivize SmartCoin collateralization
« Reply #10 on: January 15, 2017, 05:47:59 pm »
This is why need a new shorting mechanism for this. Or have people buy asset like say a smartusd. People send bts to it and get smartusd. The bts is used to short for shorten that asset.

Sent from my SM-N920T using Tapatalk


Offline adolf512

Re: Incentivize SmartCoin collateralization
« Reply #11 on: January 18, 2017, 11:54:31 am »
The best incentive for shorters is low collateral.
+5% yea, i see no need for having collateral requirement above 50%(initial requirement of maybe 100%).

Poloniex the requirement is initially 40% and liquidation at 20% and it works fine.
« Last Edit: January 18, 2017, 12:48:50 pm by adolf512 »

Offline kani

  • Full Member
  • ***
  • Posts: 56
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #12 on: January 18, 2017, 04:29:25 pm »
I'd like to clear up some confusion regarding this idea.

The proposal is simply to add a 0.1% market fee (percentage debatable) to selected bitAssets (like bitCNY) and share as dividend to those with short positions in THAT ASSET (currently have debt).  That's it.  No extra transfer fees, no use for other purposes.

To those who say there is no way to know who is short: Well, of course there is!  The blockchain maintains debt to collateral ratio.  The dividend each shorter will receive is ratio of his/her current debt to the total debt in that asset.

The incentive is to increase the circulation of those bitAssets.  And yes, I believe this WILL improve liquidity -- inevitably some of the increased number of asset will be placed on DEX orderbooks.  Can somebody short without placing in the DEX?  Well, yeah.  Just as they can do now.  But, I believe, increased supply will lead to deeper books.

Will this somehow devalue the underlying bitAsset?  I don't believe so.  There would be a natural equilibrium discovered by market participants.  If the dividend returns are too high, more will short.  If it is too low, less will.

And since the dividend is based upon DEX activity, those who short will have a natural incentive to make markets.  Some will and some won't.

I guess with all the talk of taking fees for other purposes, I thought it best to propose this idea because it rewards those who create bitAssets, which is desperately needed for improved market depth.




My opinions are my own

Turn up the H.E.A.T.

Offline Chronos

Re: Incentivize SmartCoin collateralization
« Reply #13 on: January 18, 2017, 04:47:46 pm »
[member=42649]kani[/member] I think you may underestimate the power of shorting to self under this proposition. Imagine a whale with 50M BTS. This rule goes into effect. The whale uses the entire amount to short BitCNY to himself. Now, he gets a huge chunk of the reward, and the amount that goes to "legit shorts" is greatly diluted.

When other whales do this as well, the net effect from this new feature on "legit shorts" would be almost zero.

Offline kani

  • Full Member
  • ***
  • Posts: 56
    • View Profile
Re: Incentivize SmartCoin collateralization
« Reply #14 on: January 18, 2017, 04:54:49 pm »
Well then, that's an extra 50M BTS locked up in collateral.  I don't know what makes this less 'legit' than normal shorters...  And if this whale really wants to see higher returns for investment, than is in his best interest to make markets will all that bitCNY created.  I see no problem.
My opinions are my own

Turn up the H.E.A.T.