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.
Topic: is it a good idea to disable force settlement and black swan for bitCNY? (Read 16944 times)
