Author Topic: is it a good idea to disable force settlement and black swan for bitCNY?  (Read 1797 times)

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Offline bitcrab

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BSIP42 now worked fairly well in bitCNY. in several days the bitCNY premium decreased from above 5% to about 0.35%(this moment).

however, we are now facing 2 problems:

1. based on BSIP42, feed price may be much higher than Pdex(BTS price in DEX in bitCNY) in bear market, it may also be much lower than Pdex in bull market, now we have a 5% force settlement offset for bitCNY, but in bull market, it's possible that feed price be more than 5% lower than Pdex, at that time there will be chance for bitCNY holders to make profit by exploiting the debt position owners.


2. black swan possibility increased? now feed price is 12.3% higher than the latest price in DEX, many margined called orders just stayed there without being eaten, at this moment the highest call price in these orders is 0.9088, and we have a global settlement price of 0.5193.

I feel now force settlement and black swan now make little sense for bitCNY, especially after the BSIP implementation.

bitCNY has a force settlement offset of 5% for long time, it is seldom used, no obvious impact on the pegging of bitCNY. thanks to the good liquidity of bitCNY, bitCNY pegging depend little on the force settlement feature.

after BSIP42 implementation, it is the negative feedback mechanism, not the sufficient collateral promise that play the key role for bitCNY pegging, now when bitCNY is close to black swan, bitCNY will also has very high premium, the negative feedback mechanism will work to help to recover the BTS price. no need to trigger global setting.

in my view, for bitCNY, force settlement and black swan now make little sense but bring some trouble, I wonder whether it is possible to disable these 2 features.

any thoughts? we need sufficient discussion on this topic, no need to rush to a conclusion.
« Last Edit: October 02, 2018, 10:24:44 am by bitcrab »

Offline binggo

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #1 on: September 15, 2018, 04:18:01 am »
It is not a goode idea to disable force settlement.

Force settlement offset dynamic varying as the collateral ratio is the right way.

No one can judge when is the bear or bull market.
« Last Edit: September 15, 2018, 04:25:16 am by binggo »

Offline sschiessl

Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #2 on: September 15, 2018, 05:09:51 am »
When I look into BSIP 42 I understand that witnesses are allowed to also adjust the Force settlement offset, which should be looked into now as well. It is unsurprising settlement is seldom used with a 5% fee.

Force settlement and the promise of sufficient collateral is the unique and key value proposition of SmartCoins. Certainly in high liquidity markets this will never be needed, but it must remain. Without those two it is nothing else but a UIA. I think arbitration through force settlement is a healthy market mechanism (the parameters must be fine-tuned).

Offline pc

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #3 on: September 15, 2018, 08:17:32 am »
It is not possible to disable black swans.

This latest idea together with all the experiments and tweaking have taken bitCNY so far away from the original idea of BitShares' smartcoins that it would make sense to introduce a new kind of smartcoin tailored to your needs.
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Offline abit

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #4 on: September 15, 2018, 08:55:49 am »
Technically, black swan can be avoid by feeding a price always higher than black swan price * MSSR. It might be considered as manipulation.

IMHO we do need collateralization, however I don't think a hard limit is the best. The market will tell us how high the collateral ratio is good enough. Let it float. Of course there are risks involved.

In current situation, I concern more about forced settlements than black swan or global settlements. IMHO forced settlements are needed. (Update: I've changed my mind, please read following discussions for the reason) For better user experience, perhaps we should match force-settle "orders" with limit orders when prices of limit orders are better than settlement price for the settler.
« Last Edit: October 01, 2018, 02:45:34 pm by abit »
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Offline Customminer

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #5 on: September 15, 2018, 11:12:12 am »
I wouldn't necessarily call this event a black swan anymore. In the past when a global settlement occurred there was no recovery mechanism for this state and thus a black swan scenario would last months. Since mid 2017 we've had BSIP 18 implemented which provides an automated global settlement recovery mechanism: https://github.com/bitshares/bsips/blob/master/bsip-0018.md

When a global settlement occurs you're unable to borrow new tokens (no issuance). You are however still able to trade it on the DEX, transfer it to anyone, settle your MPA for part of the BTS settlement pool, potentially even use it as backing collateral in an L2 MPA, so it's not completely useless in this state.

I would prefer this mechanism occurs than for force settlement to be disabled, heck I'd rather see MCR go to 101% before these centralized flags are triggered at 175%.

Quote
The proposed operation enables potential investors to "bid" additional collateral for taking over part of the debt (or all of it). When enough bids have been made to cover the full outstanding debt, and all of them are sufficiently collateralized (in terms of price feed and MCR), the settlement_fund and the bids are turned into call positions. Finally, the settlement_price is removed from the asset, which revives it.

If the available bids cover more than the outstanding debt, bids with a higher collateral/debt ratio are preferred over those with a lower ratio. The intent is to turn the competition among investors into better collateralized calls, which is in the interest of the MPA holders.

Perhaps we can incentivize investors to participate in the automated recovery mechanism somehow if you don't think it's sufficient in recovering bitCNY?
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Offline bitcrab

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #6 on: September 15, 2018, 03:59:53 pm »
It is not possible to disable black swans.

This latest idea together with all the experiments and tweaking have taken bitCNY so far away from the original idea of BitShares' smartcoins that it would make sense to introduce a new kind of smartcoin tailored to your needs.

nothing impossible.

what we should do is to make bitCNY/bitUSD the best stable coins in the token economy world, not to fix on the original idea of Bitshares smartcoins.

smartcoin need evolve.

it is reluctant to tell the users:"hi Buddy, bitCNY/bitUSD has some problem, could you please switch to XXXCNY/XXXUSD?"

Offline JonnyB

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #7 on: September 15, 2018, 05:54:06 pm »
Disable force settlement and global settlement, Are you mad?

You initially said the 5% force settlement was a temporary measure,  that was a year ago.  Bitshares is a protocol you can't keep changing the rules for your own interests even as a big whale.

As someone else said, make your own CNY smartcoin don't try and change the committee assets.

How can someone have faith in a stablecoin when the rules change every year.


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Offline fav

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #8 on: September 15, 2018, 06:06:15 pm »
It is not possible to disable black swans.

This latest idea together with all the experiments and tweaking have taken bitCNY so far away from the original idea of BitShares' smartcoins that it would make sense to introduce a new kind of smartcoin tailored to your needs.

this. leave bitCNY and create a privatized MPA instead please
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Offline Crypto Kong

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #9 on: September 15, 2018, 06:29:42 pm »
Its not just the price that should be kept constant and stable on a stable coin but the rules too. You cant keep changing the rules as you please. I agree that we dont have to stick with the original vision and should try and improve but removing global settlement is not it. Any changes should be made across all assetts too not just bitCNY. There should be a standard that represents all smart coins not a different set of rules for each coin.

Offline bitcrab

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #10 on: September 15, 2018, 07:19:09 pm »
Disable force settlement and global settlement, Are you mad?

You initially said the 5% force settlement was a temporary measure,  that was a year ago.  Bitshares is a protocol you can't keep changing the rules for your own interests even as a big whale.

As someone else said, make your own CNY smartcoin don't try and change the committee assets.

How can someone have faith in a stablecoin when the rules change every year.

all the changes are based on consensus.

anyone can suggest to change the committee assets, if there are strong consensus on changing, change will happen. smartcoin need to evolve, don't say "keep *** unchanged, create your own assets", if you disagree one suggestion, just explain your opinion.

change do not lead to losing faith, keep everything unchanged even it is very necessary will lead to losing faith.

bitCNY kept losing faith until BSIP42 come out.

for bitCNY, force settlement make little sense, 5% offset is to protect debt position owners from being hurt, I do not suggest to change the offset back because I don't see any necessity to do that, after the BSIP42 implementation, if we do not disable force settlement for bitCNY, maybe some time we need to increase the offset to 10% or even higher to ensure the system work well.

« Last Edit: September 15, 2018, 07:27:35 pm by bitcrab »

Offline bitcrab

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #11 on: September 15, 2018, 07:43:29 pm »
In current situation, I concern more about forced settlements than black swan or global settlements. IMHO forced settlements are needed. For better user experience, perhaps we should match force-settle "orders" with limit orders when prices of limit orders are better than settlement price for the settler.

if then, why not disable force settlement and just let the users place buy orders in market if they want to convert bitCNY to BTS? what's the difference?

Offline abit

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #12 on: September 16, 2018, 01:34:43 am »
In current situation, I concern more about forced settlements than black swan or global settlements. IMHO forced settlements are needed. For better user experience, perhaps we should match force-settle "orders" with limit orders when prices of limit orders are better than settlement price for the settler.

if then, why not disable force settlement and just let the users place buy orders in market if they want to convert bitCNY to BTS? what's the difference?
I said "when it's better to buy", which means I thought there could be scenarios that "it's better to settle".

We need to improve user experience (UX). There is a "settle" button on UI and people click it for whatever reason, then sometimes they get less than expected and get frustrated. Either improve UI, or improve the back end, or both. Or perhaps as you said -- disable/remove it.

for bitCNY, force settlement make little sense, 5% offset is to protect debt position owners from being hurt, I do not suggest to change the offset back because I don't see any necessity to do that, after the BSIP42 implementation, if we do not disable force settlement for bitCNY, maybe some time we need to increase the offset to 10% or even higher to ensure the system work well.

It's fair to foresee/discuss such a scenario.

When bitCNY is oversupplied, bitCNY will be traded at a discount in the market. According to BSIP42, witness will feed a lower BTS price which will effectively require borrowers to put more BTS in collateral, otherwise they'll get margin called. BitCNY being traded at a discount means there are sufficient orders buying BTS with higher price than external exchanges, so the margin calls will consume(match) the buy orders at the buy orders' price thus will create a pressure pushing the price towards par. The whole process is quick because margin calls execute with no delay and no amount limit. The match price will be fair because it's real market trading price. Due to BSIP38 (target collateral ratio), pressure will be split fairly/evenly among all borrowers because every borrower will sell some collateral when price feed changes.

On the other hand, if enabled forced settlement, due to potential low feed price caused by BSIP42, people can settle bitCNY then sell to the buy orders for profit. Effectively it will lead to the same as margin calls do. The differences are
a) execution price of forced settlements is median feed price * (1+offset),
b) there is a delay to execute forced settlements,
c) there is a limit on amount to settle per hour,
d) lack of a mechanism like BSIP38.

Due to b) and c) the forced-settlement mechanism is slow/inefficient in comparison to margin calls, although the committee IS able to change the parameters to shorter/larger.

a) and d) lead to friction. In other words, the mechanism is unfair, especially when BSIP42 is in place. Opportunists will settle at a too low price then sell to innocent buyers to make profits which will harm the borrowers and the whole ecosystem.

To solve a), we need to either stop executing BSIP42, or adjust the offset accordingly. In the latter case, since the offset is a committee-controlled parameter, it can't be adjust as quickly as price feed. Setting it to a value too high effectively disables force-settlement.

There is no easy solution for d), forced-settlement is not included in BSIP38 because it's difficult to do so at that time. We can discuss more about this if necessary.
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Offline JonnyB

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #13 on: September 16, 2018, 10:20:04 am »
@bitcrab @abit
I think most people agree the GUI should prompt the user to buy BTS with BitAsset when they try and force settle but only when the price is better.
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Offline yvv

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Re: is it a goode idea to disable force settlement and black swan for bitCNY?
« Reply #14 on: September 16, 2018, 11:44:49 am »
Who voted this guy into committee? His retarded proposals, which are aimed to make his private exchange profitable, will kill all bitshares ecosystem. People, stop voting for him, or this network will convert into trash.