Author Topic: bitUSD black swan possiblity  (Read 9652 times)

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Offline Crypto Kong

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We need a massive dedicated account used exclusively for creating BitUSD and BitCNY. 
It should be funded by a rolling worker proposal.

We have discussed this more than once. It is not the purpose of the reserve pool to take the risk away from traders.

Yes, and everytime it is discussed most people agree that something like this needs to be done.
Worker proposals are for anything that helps bitshares grow and improve and having a large supply of well collateralised BitUSD and BitCNY would reduce the chances of a black swan.
Theres obviously an issue with lack of BitUSD/BitCNY when looking at those margin calls that were coming in.
If either BitUSD or BitCNY did black swan how do you expect bitshares to recover from the the damage in reputation it would suffer if the peg failed.
I kind of agree with both of you at this point, I agree with Johnny it’s needed but don’t think our pool funds should be used for interfering in markets. There’s no law on this and a worker proposal should be raised and put to vote.


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Offline moinyoin

Bailing out margin calls with reserve funds is like bailing out banks with taxpayer's money.

Nobody complained about bitassets while BTS was going up. AFAIK nobody sent the profits from going short to the reserve pool.

If a black swan damages the reputation of BTS, then the solution is not to spend money on preventing black swans. The solution is to educate traders about the risks involved with bitassets.

No need to bail out bitassets. But simply paying workers and witnesses with bitUSD by creating it only as needed from reserve pool (e.g. only ~2500:1 ratio at most in a day) would go a long way to creating them (and thus avoiding black swans) in same manner done by steem.

Offline larsonreever

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 If they are heavy in the bitUSD and nobody is willing to buy it from them for their BTS then they are screwed and have to wait.The other way around, they need to acquire BitUSD/BitCNY. Go ahead, create bitUSD and bitCNY during BTS crash using your own funds, I am very sure many people will be happy to buy them

vip588888888

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大范围的增加外币的冲提是不是可以增加cny的可靠性

Offline JonnyB

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Bailing out margin calls with reserve funds is like bailing out banks with taxpayer's money.

Nobody complained about bitassets while BTS was going up. AFAIK nobody sent the profits from going short to the reserve pool.

If a black swan damages the reputation of BTS, then the solution is not to spend money on preventing black swans. The solution is to educate traders about the risks involved with bitassets.

1.) It is not bailing anyone out. When a short wants to close they need to buy back the BitUSD they borrowed. That price is made externally of the dex with feeds from poloniex etc. They wouldn't getting bailed out because they would be selling their BTS for less than the market price (feed).

Now if you argue that if they can get a better price on polo they should take it, it doesn't make sense because polo only has USDT. And secondly we want to encourage people to trade on the dex.

2.) People have always complained about bitassets for the same reason again and again since the beginning which is low liquidity and huge spreads.

3.)Good luck trying to tell traders what they should be doing in a free market. Of course we should use reserve pool money to make our stable coins secure and successful. Also what I propose is not inflationary in the way you probably think it is, the newly created BitUSD/BitCNY would not enter circulation unless someone pays above market price for it.

So again it's not bailing anyone out, your analogy about bailing out banks with taxpayers funds is all wrong.

Dude, when the BTS price is falling, more people buy bitAssets like bitUSD to stabilize their wallet. They then put buy orders of BTS at lower prices. This is exactly what I did yesterday. bitUSD is more attractive in a falling bts environment.

For point number 2, this is why you place limit orders and not market orders. Let the market come to you at your price. Trading 101. Dont chase the market.  There is no getting around spreads. Every stock and option has a spread and the more liquid the stock the tighter the spread. If BTS gets more liquid the spreads will get smaller, you can't force that without liquidity. This is an education opportunity, not a rule changing opportunity.

@Bitshiz you say people buy BitUSD when BTS falls. But people also buy BitUSD when BTS hits new higher highs to lock in profit.
But lets assume what you say is correct and more people want to buy BitUSD when BTS falls. As BTS price falls and more and more BitUSD creators are getting margin called and the BitUSD supply is shrinking when people want it most.

There are ways to reduce the spread. Arbitraging, specifically across from poloniex can be done by purchasing BTS under the feed price which is my proposition.  Many listed firms do pay market makers to reduce spreads of their own stock. Also you state stocks and options always have a spread which is true but we are talking about BitUSD which we want to be used as a currency. Currencies have tiny spreads.
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Offline Bitshiz

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Bailing out margin calls with reserve funds is like bailing out banks with taxpayer's money.

Nobody complained about bitassets while BTS was going up. AFAIK nobody sent the profits from going short to the reserve pool.

If a black swan damages the reputation of BTS, then the solution is not to spend money on preventing black swans. The solution is to educate traders about the risks involved with bitassets.

1.) It is not bailing anyone out. When a short wants to close they need to buy back the BitUSD they borrowed. That price is made externally of the dex with feeds from poloniex etc. They wouldn't getting bailed out because they would be selling their BTS for less than the market price (feed).

Now if you argue that if they can get a better price on polo they should take it, it doesn't make sense because polo only has USDT. And secondly we want to encourage people to trade on the dex.

2.) People have always complained about bitassets for the same reason again and again since the beginning which is low liquidity and huge spreads.

3.)Good luck trying to tell traders what they should be doing in a free market. Of course we should use reserve pool money to make our stable coins secure and successful. Also what I propose is not inflationary in the way you probably think it is, the newly created BitUSD/BitCNY would not enter circulation unless someone pays above market price for it.

So again it's not bailing anyone out, your analogy about bailing out banks with taxpayers funds is all wrong.

Dude, when the BTS price is falling, more people buy bitAssets like bitUSD to stabilize their wallet. They then put buy orders of BTS at lower prices. This is exactly what I did yesterday. bitUSD is more attractive in a falling bts environment.

For point number 2, this is why you place limit orders and not market orders. Let the market come to you at your price. Trading 101. Dont chase the market.  There is no getting around spreads. Every stock and option has a spread and the more liquid the stock the tighter the spread. If BTS gets more liquid the spreads will get smaller, you can't force that without liquidity. This is an education opportunity, not a rule changing opportunity.
« Last Edit: September 16, 2017, 02:29:06 pm by Bitshiz »

Offline gloine

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Hi guys,

In my opinion, liquidity providers should be regarded as workers and compensated properly if we don't want to do a bail out and maintain the stability at the same time. Issuing bitUSD with collateral and adjusting it according to the market change seems to be a pretty good amount of work, with accompanying risks.

I think BIP 19 and 20 should be revised so that we explicitly reward market makers. There is no need to reward BTS holders unless they work for the market. For me, it seems the best way is to add an automatic mechanism to let an account lock its asset for a given period of time, always issue the maximum amount of bitUSD and sell/buy at the pegged price, and reward them a certain portion of fee income (raise until there are enough participants for liquidity). My gut feeling is that we need to spend 50% of the income to maintain liquidity.

EDITED: In case of black swan events despite of this mechanism, market makers would be removed one by one since they don't have enough collaterals for the MPA assets they issue (and force-settled, losing a lot of money after the market goes back to normal). If there remains the last market maker, the reward would be substantial since 50% of all the fees for bitUSD will belong to her. This would encourage market makers quickly lock more assets during the period to sustain the event. The minimum locking period should be at least one day, and the reward should increase exponentially as the locking period increases.

Thanks,
Gloine
« Last Edit: September 15, 2017, 11:56:54 pm by gloine »

Offline kingslanding

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I agree w/ jonny that a solution needs to be found.  Bitshares is being marketed heavily with the benefits of having a bitUSD & bitCNY as a way to park your money.  When things like Bitspark and the Hero Dollar are being presented, I guarantee 99% of the people aren't thinking in terms of a collateralized asset that can blow up.  The Hero is in the same boat as bitUSD, maybe even worse.  Because the HERO is marketing to the mainstream and advertises itself as having no counterparty risk, a black swan event will collapse it like a house of cards.
BTS username/address:   kingslanding9999

Offline JonnyB

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1.) It is not bailing anyone out. When a short wants to close they need to buy back the BitUSD they borrowed.

Of course it is bailing out. A short position contains a risk, and you want to use the reserve pool to cover that risk. In a downtrend, shorters will happily pay a 10% premium if they can thereby avoid a 100% risk.

3.)Good luck trying to tell traders what they should be doing in a free market.

I don't want to tell them how to behave. I want to tell them what the risks are, so they don't have a reason to complain when the market turns against them.

It's not risk free for sure but it is not a bailout of anyone.  It is essentially a large BTS long position. How is that bad?
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Offline JonnyB

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I don't think that there is an easy way to fix this without breaking everything else. BitAssets do a good job when BTS is stable, they do amazingly good job, when BTS grows. Everything can't be good all the time in this life, and  bitAssets suck when BTS crashes. I guess, we have to live with this for now.

I don't want to live it I want to improve bitshares and make it a viable global dex.
I'm open to other ideas but I don't see how creating a base layer of BitUSD/BitCNY is damaging in anyway.
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Offline pc

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1.) It is not bailing anyone out. When a short wants to close they need to buy back the BitUSD they borrowed.

Of course it is bailing out. A short position contains a risk, and you want to use the reserve pool to cover that risk. In a downtrend, shorters will happily pay a 10% premium if they can thereby avoid a 100% risk.

3.)Good luck trying to tell traders what they should be doing in a free market.

I don't want to tell them how to behave. I want to tell them what the risks are, so they don't have a reason to complain when the market turns against them.
Bitcoin - Perspektive oder Risiko? ISBN 978-3-8442-6568-2 http://bitcoin.quisquis.de

Offline yvv

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I don't think that there is an easy way to fix this without breaking everything else. BitAssets do a good job when BTS is stable, they do amazingly good job, when BTS grows. Everything can't be good all the time in this life, and  bitAssets suck when BTS crashes. I guess, we have to live with this for now.

Offline JonnyB

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Quote
Theres obviously an issue with lack of BitUSD/BitCNY when looking at those margin calls that were coming in.

Yes, there is an issue with bitUSD/bitCNY. This issue is an inherent flaw of bitAsset model, which was pointed out million of times by different people in crypto community. When BTS falls and bitAssets are in high demand, nobody in good mind wants to issue them by locking BTS collateral. This is the same as giving money away.

Yes theres an inherent flaw with bitasset model. This is why we need to create some base money, even fiat is about 3% debt free base money.
what do you suggest instead? if you think there's a flaw how would you fix it?
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Offline JonnyB

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This crash proves to me that we need a base supply of both BitUSD and BitCNY.

If whales like @bitcrab need to exit their positions we need more BitUSD and BitCNY in the system.

We need a massive dedicated account used exclusively for creating BitUSD and BitCNY. 
This account should have all of its BTS as collateral at all times and hold no other assets.
It should be funded by a rolling worker proposal.
The BitUSD and BitCNY created would be used to purchase any BTS below the settlement price.
The BTS purchased would just get added to the collateral.
The account would never pay back its borrowed BitUSD and BitCNY because that would destroy the supply.

I really think this is needed for BitShares to be successful.

You are proposing to give money away.  You are welcomed to do this, but with your own money. Go ahead, create bitUSD and bitCNY during BTS crash using your own funds, I am very sure many people will be happy to buy them at a good premium.

I'm not proposing to give money away. I'm proposing we sell bitassets at a profit to increase their supply to benefit the whole system.
I run the @bitshares twitter handle
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Offline JonnyB

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Bailing out margin calls with reserve funds is like bailing out banks with taxpayer's money.

Nobody complained about bitassets while BTS was going up. AFAIK nobody sent the profits from going short to the reserve pool.

If a black swan damages the reputation of BTS, then the solution is not to spend money on preventing black swans. The solution is to educate traders about the risks involved with bitassets.

1.) It is not bailing anyone out. When a short wants to close they need to buy back the BitUSD they borrowed. That price is made externally of the dex with feeds from poloniex etc. They wouldn't getting bailed out because they would be selling their BTS for less than the market price (feed).

Now if you argue that if they can get a better price on polo they should take it, it doesn't make sense because polo only has USDT. And secondly we want to encourage people to trade on the dex.

2.) People have always complained about bitassets for the same reason again and again since the beginning which is low liquidity and huge spreads.

3.)Good luck trying to tell traders what they should be doing in a free market. Of course we should use reserve pool money to make our stable coins secure and successful. Also what I propose is not inflationary in the way you probably think it is, the newly created BitUSD/BitCNY would not enter circulation unless someone pays above market price for it.

So again it's not bailing anyone out, your analogy about bailing out banks with taxpayers funds is all wrong.
I run the @bitshares twitter handle
twitter.com/bitshares