Author Topic: [BSIP42] Consider derailing feed price  (Read 11216 times)

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Offline abit

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Offline yvv

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In a downtrend, smart coins are always running with a premium

HAHA! What a surprise, right? Nobody wants to short bitUSD in a downtrend market.  It is a natural human behavior and no manipulations with feed price will fix it. You may try to short appreciating asset yourself if you have some funds to lose :)

Any feed price producer is free to mess with their feeds as much as they want, but if you do harm to network, you may end up being kicked out of witnesses. Just go ahead, try and see what happens.

Offline JonnyB

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Yes.
The GUI should be changed so that when you click force settle it prompts you with "you can get a better price by selling, do you wish to sell now"
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Offline abit

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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.

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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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Offline JonnyB

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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 JonnyB

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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 abit

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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 xeroc

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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?

Offline JonnyB

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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)

 
I run the @bitshares twitter handle
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Offline xeroc

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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.

Offline yamtt

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支持改革 让智能币稳定

Offline pc

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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.
Bitcoin - Perspektive oder Risiko? ISBN 978-3-8442-6568-2 http://bitcoin.quisquis.de

Offline abit

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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 xeroc

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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??

Offline xeroc

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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.