Author Topic: [BSIP42] Consider derailing feed price  (Read 1932 times)

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Online binggo

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Re: Consider derailing feed price
« Reply #30 on: October 01, 2018, 11:47:53 am »
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Absolutely not, the mechanism of arbitrage is entirely different to Nubits, that is how they managed their price feed, nothing to do with arbitrage. A simple bot can do this:

Bot A: Huobi
Has balance of: USDT, BTS
Market: USDT/BTS

Bot B: DEX
Has balance of bitUSD, BTS
Market: bitUSD/BTS

If price on Huobi is < DEX. Bot A Buys BTS, and Bot B sells BTS. This is done instantly at same time.
If Cheaper on DEX, Bot B buys BTS and Bot A sells BTS.

Over time, one bot will have a excess in one asset and the other will have limited supply and the trader will need to make an intelligent decision on how to balance those assets again in the most efficient manner.

The trader makes a profit depending on what he bought and sold at after fees. This is an easy arbitrage that can be done and its not hard. Whether there is supply of bitUSD or not is irrelevant, that will be the reflected in the price, if there is not much bitUSD then like a properly functioning market the price for bitUSD should be higher.

if all the Cex gone or disapear or no bts, what will the bots do?

The market will do the bot's work, don't need these any more.

The price Spread DEX and the CEX have a very simple cause: the margin call price----which was decided by the MSSR and the feed price.(don't talk about the force settlement and market sentiment here)

If you change the MSSR and the feed price anyone of them, you will find the change of the price spread.

« Last Edit: October 01, 2018, 12:01:31 pm by binggo »

Offline abit

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Re: Consider derailing feed price
« Reply #31 on: October 01, 2018, 01:28:57 pm »
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Putting a Coinmarketcap chart here is only for reference. Afaik no witness is relying on coinmarketcap to produce price feeds. I don't disagree that coinmarketcap sometimes shows inaccurate data. However, from a macro perspective, data showing there is fine.

It's literally quoted as the reference chart and data source in BSIP42 documentation. For the reasons above I cannot agree it's 'fine'.

The chart is more or less showing the real trend, as I said a macro perspective. I think we may have to agree to disagree here. The mention of coinmarketcap in the documentation is in "rationale" section but not "specification" section. Witnesses are expected to make their own efforts/decisions to figure out what an accurate price is.

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I guess you as a big bitUSD holder can't accept that 1 bitUSD value far less than 1 Fiat USD. But would you accept that 1 bitUSD value more than 1 Fiat USD? As a big bitUSD creator/borrower, of course I don't want that 1 bitUSD value too much more than 1 Fiat USD. In short, let's be fair, don't play double standards. If we don't fairly treat borrowers/creators, it's hard for bitUSD to have sufficient supply. BSIP42 is looking for fair.

The 'value' of a bitUSD may fluctuate day to day depending on market access to bitUSD- maybe there is a an excess, maybe a shortage and thats intended. As i hold bitUSD, I hold bitUSD, not real USD. So I acknowledge the asset may fluctuate in value vs an actual United States Dollar. If you think its underpriced then you can buy it, if you think its overpriced you can sell it. Sure as an individual stakeholder you are welcome to benchmark vs exchange 1, 2, 3 and so on. Whether it is fair or not is not relevant, its what the market is pricing it as, thats the price. If its differs too much from the price maybe I sell it or acquire more. So feed producers have a vested interest in ensuring its accurate.

The purpose of a price feed is for price feed producers to analyse this and any other variables they see necessary and then produce a price. I would hope there is more diversity in prices from feed producers in future.

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IMHO bots WON'T work when there is a supply-side issue (either shortage or oversupply). Using trading bots to try to maintain the peg is the approach adopted by NuBits and IMHO has failed.
Actually there is NO instant opportunity when there is a premium or discount if you've tried running bots. There do have long-term opportunity but risks are much higher, E.G. margin calls.
A slight premium or discount is fine, but IMHO it's not acceptable if it's too big. Personally I think the threshold is +/-1%.

Absolutely not, the mechanism of arbitrage is entirely different to Nubits, that is how they managed their price feed, nothing to do with arbitrage.

IMHO why Nubits failed because their bots kept running at a loss, not due to inaccurate feed, but due to wrong market strategy (e.g. setting too little spread even when they can't afford). They introduced too high systematic risks.

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A simple bot can do this:

Bot A: Huobi
Has balance of: USDT, BTS
Market: USDT/BTS

Bot B: DEX
Has balance of bitUSD, BTS
Market: bitUSD/BTS

If price on Huobi is < DEX. Bot A Buys BTS, and Bot B sells BTS. This is done instantly at same time.
If Cheaper on DEX, Bot B buys BTS and Bot A sells BTS.

Over time, one bot will have a excess in one asset and the other will have limited supply and the trader will need to make an intelligent decision on how to balance those assets again in the most efficient manner.

The trader makes a profit depending on what he bought and sold at after fees. This is an easy arbitrage that can be done and its not hard. Whether there is supply of bitUSD or not is irrelevant, that will be the reflected in the price, if there is not much bitUSD then like a properly functioning market the price for bitUSD should be higher.

OK, it turns out that you know how bots work, so we can discuss deeper.

Interestingly you've mentioned "make an intelligent decision", then said supply is irrelevant. How to make decision if there is no supply? In Chinese there is an idiom "巧妇难为无米之炊". When there is lack of supply, bots are simply unable to get into a position, thus unable to balance the market.

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This is simply wrong. As mentioned above, nobody actually use coinmarketcap for price feeds. Also OpenLedger's operation has little impact on the prices so far.

As I said it's quoted in the actual BSIP, so yes I'd say it is used as a price reference. It's also referenced through this and other threads. I mentioned OL because as noted, people seem to reference he bitUSD price on CMC and the bitUSD markets of which CMC bases their 'price' of bitUSD on is derived by the bitUSD markets they have access to- which are OL markets (https://coinmarketcap.com/currencies/bitusd/#markets). I have no idea what openKRM or openXEM are, but if their prices spike, then it will influence the prices CMC uses to calculate bitUSD.

Therefore as I noted before, CMC cannot be used as a reference. You need multiple sources and it just so turns out we have people who are paid to do this and they're called price feed producers.

As of writing, on the chart, the main bitUSD markets are bitUSD/bitCNY and bitUSD/BTS which has around 90% of total volume, so OpenLedger only plays a minor role here.

There is no direct FiatUSD/bitCNY pair elsewhere to compare, so we end up with the only relatively easy method which is comparing BTS/bitUSD and BTS/USDT pairs (and maybe need to check USDT/FiatUSD rate as well which is not very volatile). Any way, I think we both know the data can be affected in many ways, so, anyone please make another tool to track the premium/discount more accurately? I've explained methods to measure it, if you disagree, would you like to give some constructive suggestions?
« Last Edit: October 01, 2018, 01:38:58 pm by abit »
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Offline abit

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Re: Consider derailing feed price
« Reply #32 on: October 03, 2018, 11:30:09 pm »
Update: USDT is now trading at around 0.991 USD. Data sources (direct trading pairs):
* https://www.kraken.com/charts
* https://bittrex.com/Market/Index?MarketName=USD-USDT

CoinMarketCap is reporting 0.9968 which seems a bit off. https://coinmarketcap.com/currencies/tether/
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