Author Topic: [BSIP42] Consider derailing feed price  (Read 1944 times)

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Offline abit

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[BSIP42] Consider derailing feed price
« on: August 17, 2018, 11:22:19 pm »
We THOUGHT that feeding accurate price for BTS/FIAT will bring stable pegged smart coins. However, market told us that we were wrong. In a downtrend, smart coins are always running with a premium; in a uptrend, smart coins are tend to run with a discount. See this chart: https://coinmarketcap.com/currencies/bitusd/

Without a tight peg, the smart coins are useless -- we won't get mass adoption. Why do we keep the broken rules unchanged?

Apparently we can adjust the input data. We SHOULD adjust the input. When smart coins are running with a premium, we can feed higher BTS price to encourage more shorting and more supply, to reduce the premium. When running with a discount, we feed lower BTS price.

How much offset should we apply to the price so that we can achieve a tight peg? I don't know the exact value. It depends. However, without trying we'll never know.

Please discuss, and act.


BSIP doc: https://github.com/bitshares/bsips/blob/master/bsip-0042.md


Poll workers:

1.14.118 Poll - BSIP42 - Adjust price feed dynamically

1.14.119 Poll - BSIP42 - NO adjustment to price feed
« Last Edit: October 09, 2018, 10:40:58 pm by abit »
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Offline Bangzi

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Re: Consider derailing feed price
« Reply #1 on: August 18, 2018, 12:30:17 am »
When Smart coins are running with Premium:
I believe adjustment up to +5% from median of witnesses' price feed is acceptable. However if adjust the price over 10%, community may consider it as bad witness.

When Smart coins are running with a Discount:
Change it back 0% rather than -1% -5%

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Offline Customminer

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Re: Consider derailing feed price
« Reply #2 on: August 18, 2018, 11:42:44 am »
The Hz ABA oscillates 14% which produces predictable peak/trough phases - the effect of these peak/troughs on the market activity/behaviour could be observed for the relevant price feed premium effect you're talking about.

Initially the amplitude was set to 50%, reduced to 33% then finally set to 14% due to concerns of undesirable volatility/velocity, however there's been low market activity thus far - 14% may not be enough. There's been times where I've shorted the peak of Hz, only for BTS to change 30% the next day wiping out my upcoming benefits of shorting Hz (28% debt reduction), perhaps instead it'd be more attractive to account for the 30d BTS:USD (or BTS:CNY in your case) price volatility (via an ES query) to create a varying amplitude which may be more attractive (however I don't think you'd want a -+50% oscillation, right?)..

Would you consider applying a small oscillation to the price feed of the MPA in question? You could then create a second identical MPA with a 180' phase offset to mirror the oscillation of the primary MPA (or even 3 with 120' phase offset from one another).

If you're talking about MSSR & MCR values set in price feeds, then I've always just copied what the committee have configured & I'm unsure of the benefits/drawbacks of changing these values - it probably should be configured by the asset owner instead of the price feed publishers though, no? Plus these fields need better explanations om the docs like scenarios where it'd be configured high or low & effects that'd have on the MPA's operation.
« Last Edit: August 18, 2018, 11:49:18 am by Customminer »
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Offline xeroc

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Re: Consider derailing feed price
« Reply #3 on: August 18, 2018, 05:39:56 pm »
So, you are essentially proposing to feed back the internal trading price of BTS in the DEX.

So, lets say we have a CEX price (some price derived from external trading) and the DEX price (the price internally).

Ideally, both prices are 'close' to each other but apparently, arbitrage isnt as efficient as it should. PLUS bitassets have a premium in bear markets (which is btw known to happen for years).

The hope was that when volume grows, the premium may go down, but apparently, the incentives of shorters are not sufficiently aligned for traders to sell into margin calls at 10% mssr, hence the premium in bear markets.

The only thing that i think might offset this is to 'tune' the price feed in (external) bear  markets to make margin calls execute at the external price. Hence the price feed would need to take dex liquidity into account and be tuned by up to MSSR or 10%.

That way, in bear markets the price feed could be up to 10% away from fair price but margin calls would execute up to the external price.

As a consequence, we will see the entire market shifted by 10% but the margin calls execute at the external price instead of 10% above external price.

This may well work for bear markets BUT as usual, this only shifts the problem because now we add an extra 10% "artificial" buffer for black swans. Consequence would be that bitassets (considering the external price of bts could be undercollateralized BEFORE the internal price feed actually triggers it).

There is one thing to consider though, a bitasset goes into black swan when the least collateralized position goes into 100% collateral ratio AND NOT if the total collateralization goes into 100%. That said, even if there is a black swan on USD, the longs are still collateralized by (potentially much) more than 100%.

This might well be worth experimenting with, but it needs proper specification, limits and IMHO it should be a timely limited experiment.
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Offline xeroc

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Re: Consider derailing feed price
« Reply #4 on: August 18, 2018, 05:49:35 pm »
Another thought: settlements.
Assuming we have a 'CONSTANT' offset in the price feed that is equal to the MSSR, so that margin calls execute at the external price ... Then we need to offset settlements by -10% which is to my knowledge not possible.
To keep it fair we would need to have a way to offset settlement with negative percentages and ALSO need to allow feed producers to define that price (probably worth discussing publishing the offset thru feed producers anyways)

Thoughts??
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Offline abit

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Re: Consider derailing feed price
« Reply #5 on: August 19, 2018, 12:49:24 am »
Quote
PLUS bitassets have a premium in bear markets (which is btw known to happen for years).

The goal is to kill this premium. That said, no matter how much in CEX a BTS worth in FIAT, in DEX the same price a BTS can exchange from/to in bitFIAT. It has been happening for years doesn't mean we have to accept it forever.

When there is no premium, I think settlement offset can be set to zero.

In bear markets the smart coins can have more than 10% premium. IMHO MSSR is one reason, volume/liquidity is another. Feed price can be tuned more than 10% if needed.
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Offline pc

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Re: Consider derailing feed price
« Reply #6 on: August 19, 2018, 07:34:56 am »
I disagree with OP. First, to me, the linked graph shows an exceptionally stable smartcoin that normally trades between 0.95 and 1.15. Also, I don't see evidence that this spread is the reason for the lack of mass adoption.

A certain spread is required by the system to incentivize market participants to push the price in the right direction.

Providing a deliberately skewed price feed is (once again, so who cares) a violation of the settlement guarantee.
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Offline yamtt

Re: Consider derailing feed price
« Reply #7 on: August 19, 2018, 01:04:15 pm »
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Re: Consider derailing feed price
« Reply #8 on: August 20, 2018, 08:09:49 am »
I disagree with OP. First, to me, the linked graph shows an exceptionally stable smartcoin that normally trades between 0.95 and 1.15. Also, I don't see evidence that this spread is the reason for the lack of mass adoption.

A certain spread is required by the system to incentivize market participants to push the price in the right direction.
I guess OP merely wants to "tighten the peg" which not necessarily *removes* the incentives.

Quote
Providing a deliberately skewed price feed is (once again, so who cares) a violation of the settlement guarantee.
My concern as well - can't change the price feed without breaking the promise for fair settlement.
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Offline JonnyB

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Re: Consider derailing feed price
« Reply #9 on: August 20, 2018, 11:13:28 am »
Yes I have said this for years. 
In a BTS bear market BitUSD trades at a premium.

This is essentially a BitUSD short squeeze. https://en.wikipedia.org/wiki/Short_squeeze

There is no way to reliably swap real dollars for BitUSD because the quantity of BitUSD is limited by the price of BTS.

I really think Bitshares needs to find a way to collateralise with bitcoin instead of BTS. (don't worry BTS will still have value because its need to pay fees)

 
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Re: Consider derailing feed price
« Reply #10 on: August 20, 2018, 11:19:36 am »
I really think Bitshares needs to find a way to collateralise with bitcoin instead of BTS. (don't worry BTS will still have value because its need to pay fees)
Erm, how does that solve the problem?
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Offline abit

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Re: Consider derailing feed price
« Reply #11 on: August 20, 2018, 11:43:13 am »
I really think Bitshares needs to find a way to collateralise with bitcoin instead of BTS. (don't worry BTS will still have value because its need to pay fees)
You can just create another (private) MPA e.g. YOUR.USD backed by YOUR.BTC. But BTC can be in a bear market as well ..

Anyway, I think this is out of scope of this thread.
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Offline JonnyB

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Re: Consider derailing feed price
« Reply #12 on: August 20, 2018, 11:44:03 am »
The hope was that when volume grows, the premium may go down, but apparently, the incentives of shorters are not sufficiently aligned for traders to sell into margin calls at 10% mssr, hence the premium in bear markets.

Bitcoin is such a deep liquid market with huge volume on hundreds of exchanges. Makes the price harder to manipulate to attack BitUSD shorters.  Also Bitcoin has lower volatility meaning either less chance of black swan with current settings or we could reduce the collateral required to back bitUSD.

Millions of people hold Bitcoin and may be interested in borrowing interest free against it. The number of BTS holders comparatively tiny.
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Offline JonnyB

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Re: Consider derailing feed price
« Reply #13 on: August 20, 2018, 11:46:11 am »
I really think Bitshares needs to find a way to collateralise with bitcoin instead of BTS. (don't worry BTS will still have value because its need to pay fees)
You can just create another (private) MPA e.g. YOUR.USD backed by YOUR.BTC. But BTC can be in a bear market as well ..

Anyway, I think this is out of scope of this thread.


Yes we could create bitUSD backed by OPEN.BTC but as a centralised IOU people won't trust it. Hence the need for a trustless BTC / sidechain.
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Offline abit

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Re: Consider derailing feed price
« Reply #14 on: August 20, 2018, 12:17:12 pm »
I disagree with OP. First, to me, the linked graph shows an exceptionally stable smartcoin that normally trades between 0.95 and 1.15. Also, I don't see evidence that this spread is the reason for the lack of mass adoption.

A certain spread is required by the system to incentivize market participants to push the price in the right direction.
I guess OP merely wants to "tighten the peg" which not necessarily *removes* the incentives.

Quote
Providing a deliberately skewed price feed is (once again, so who cares) a violation of the settlement guarantee.
My concern as well - can't change the price feed without breaking the promise for fair settlement.

1. Settlement is the last method when there is no enough liquidity on the market, that said, why buy high when you can buy low? Perhaps we should change behavior of force-settle operation to buy from market when there is enough liquidity, or perhaps change UI.

2. "Fair" settlement price without thinking of volume/liquidity is not sustainable. Significant change in demand should result in change in price, we should not guarantee a price with unlimited volume. Actually we do have a "maximum_force_settlement_volume" parameter.
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