Announcement on BSIP42 relevant actions

[Thom]

Allowing witnesses to individually set minimum collateral level changes it from a global, uniform setting to one more akin to "pick your witness, pick your desired margin collateral level". I think it would create an unhealthy competition between witnesses.

IMHO this is actually healthy. It means "vote for witnesses who are working well" when the consensus is to dynamically adjust MCR according to market conditions. Again, witnesses aren't predicting market price, they're acting according to perceived market conditions/data.

Voters should already be voting "for witnesses who are working well", and they do so on the basis of their own subjective perspective of what that is with very few guidelines and understanding of what is important for an economic system that won't self-destruct like mainstream currencies eventually do. Although we all would like to see more people who are dedicated and attentive to the ongoing well being of BitShares, it's probably unrealistic to expect shareholders to care about issues unrelated to them, like trading if they aren't traders, or savers if they're traders as examples.

Unless all witnesses use the exact same sources how could shareholders know if they're working well? What is "working well"? For who is it working well, just the voter or the entire ecosystem? Some think it's only a matter of keeping tight pegs for MPAs, others think more broadly about the ecosystem and vote to balance out competing interests, which is a very difficult thing to do under our decentralized governance structure.

We'll just disagree on this point. I can live with that.

[armin]

No matter if bitUSD holders convert their bitUSD to BTS via margin calls or via forced settlements, the BTS are (forced) paid by debt positions with least collateral ratio, aka by bitUSD borrowers/creators, so what's the difference? IMHO there is no difference.

bitasset value = max(market price, settlement price)
If you take out settlement, this means bitasset value = market price.
The former formula gives a relative minimum price to the feed, but the latter formula looks exactly like UIAs.

So effectively, taking out settlement will make bitassets the same as UIAs in terms of value.

Thoughts?

Essentially you're saying that if you sell some amount of PMA and nobody will buy, its trading price will be pushed lower than its value.

Actually, you ignored how MPA supply is created and who are on the market. Not like UIAs, PMAs are created with debt positions, this means you won't have unlimited amount to sell. In addition, debt positions are always on the market, with BSIP42 or a dynamic MCR-based mechanism, if you place an order to sell some PMA below its value, there will be margin calls appear to fill your order, thus the trading price would be guaranteed. Force-settlements aren't in this process at all.

True, good point! Actually maybe I need to adjust the formula a little bit. Basically what you're saying is that the supply of bitassets is self-regulating with BSIP42 so that it maintains the peg. This means the supply will increase/decrease to fit a tight peg. Change in supply will lead to some change in market price. Interesting

EDIT: OOH that makes sense, so in an empty market there is almost always some form of BTS sell pressure, therefore it will only be "half empty"

[abit]

Allowing witnesses to individually set minimum collateral level changes it from a global, uniform setting to one more akin to "pick your witness, pick your desired margin collateral level". I think it would create an unhealthy competition between witnesses.

IMHO this is actually healthy. It means "vote for witnesses who are working well" when the consensus is to dynamically adjust MCR according to market conditions. Again, witnesses aren't predicting market price, they're acting according to perceived market conditions/data.

[Thom]

No, margin call is initialized by witnesses via price feed. As I've said, whether a debt position is "well collateralized" is subjective.

> witnesses are able to feed parameters to change fully-collateralized debt positions to undercollateralized when needed.

Definitions are crucially important, so if you don't define terms we will keep going in circles. The bare minimum amount of collateral required is 100% of all short positions. Anything less and you risk a house of cards scenario like mainstream financial institutions are about to experience. We have set a standard of 175% to provide more safety to reduce margin calls, and I've seen comments we could reduce that to 130%, but for some that's not enough. 

We had those numbers as parameters before doesn't mean we have to stick with those numbers forever. "for some"? for who?

Bitcrab for one, and I thought you as well wanted to reduce required collateral. So I gather from various comments you both have made recently.

The last statement appears to be yours abit. Putting it upon witnesses to define what they believe is too little collateral creates a conflict of power between witnesses and the Committee who sets various blockchain parameters. The minimum collateral ratio should not be determined by witnesses, it should be uniform and globally defined, and that is the role of the committee. It should not be dynamically set by each witness.

So you're expressing your own opinions as well. Witnesses act according to rules in consensus, rules are defined by BSIPs, consensus is made by stake based voting. Committee doesn't have the final say about parameters, stake holders have.

Yes. You also stated governance model well. However, I didn't say committee had final say on parameters, but they are the only ones authorized by consensus in current graphene design to change them. Sure, if they do that badly they'll risk being voted out, nevertheless the definition of roles is clear, and I maintain far better and more inline with the current design of graphene we have consensus on, than alter the design and put a new responsibility on witnesses that would be more logical with committee.

Allowing witnesses to individually set minimum collateral level changes it from a global, uniform setting to one more akin to "pick your witness, pick your desired margin collateral level". I think it would create an unhealthy competition between witnesses.

[abit]

No matter if bitUSD holders convert their bitUSD to BTS via margin calls or via forced settlements, the BTS are (forced) paid by debt positions with least collateral ratio, aka by bitUSD borrowers/creators, so what's the difference? IMHO there is no difference.

bitasset value = max(market price, settlement price)
If you take out settlement, this means bitasset value = market price.
The former formula gives a relative minimum price to the feed, but the latter formula looks exactly like UIAs.

So effectively, taking out settlement will make bitassets the same as UIAs in terms of value.

Thoughts?

Essentially you're saying that if you sell some amount of PMA and nobody will buy, its trading price will be pushed lower than its value.

Actually, you ignored how MPA supply is created and who are on the market. Not like UIAs, PMAs are created with debt positions, this means you won't have unlimited amount to sell. In addition, debt positions are always on the market, with BSIP42 or a dynamic MCR-based mechanism, if you place an order to sell some PMA below its value, there will be margin calls appear to fill your order, thus the trading price would be guaranteed. Force-settlements aren't in this process at all.

[armin]

No matter if bitUSD holders convert their bitUSD to BTS via margin calls or via forced settlements, the BTS are (forced) paid by debt positions with least collateral ratio, aka by bitUSD borrowers/creators, so what's the difference? IMHO there is no difference.

bitasset value = max(market price, settlement price)
If you take out settlement, this means bitasset value = market price.
The former formula gives a relative minimum price to the feed, but the latter formula looks exactly like UIAs.

So effectively, taking out settlement will make bitassets the same as UIAs in terms of value.

Thoughts?

[abit]

No, margin call is initialized by witnesses via price feed. As I've said, whether a debt position is "well collateralized" is subjective.

> witnesses are able to feed parameters to change fully-collateralized debt positions to undercollateralized when needed.

Definitions are crucially important, so if you don't define terms we will keep going in circles. The bare minimum amount of collateral required is 100% of all short positions. Anything less and you risk a house of cards scenario like mainstream financial institutions are about to experience. We have set a standard of 175% to provide more safety to reduce margin calls, and I've seen comments we could reduce that to 130%, but for some that's not enough. 

We had those numbers as parameters before doesn't mean we have to stick with those numbers forever. "for some"? for who?

The last statement appears to be yours abit. Putting it upon witnesses to define what they believe is too little collateral creates a conflict of power between witnesses and the Committee who sets various blockchain parameters. The minimum collateral ratio should not be determined by witnesses, it should be uniform and globally defined, and that is the role of the committee. It should not be dynamically set by each witness.

So you're expressing your own opinions as well. Witnesses act according to rules in consensus, rules are defined by BSIPs, consensus is made by stake based voting. Committee doesn't have the final say about parameters, stake holders have.

[Thom]

No, margin call is initialized by witnesses via price feed. As I've said, whether a debt position is "well collateralized" is subjective.

> witnesses are able to feed parameters to change fully-collateralized debt positions to undercollateralized when needed.

Definitions are crucially important, so if you don't define terms we will keep going in circles. The bare minimum amount of collateral required is 100% of all short positions. Anything less and you risk a house of cards scenario like mainstream financial institutions are about to experience. We have set a standard of 175% to provide more safety to reduce margin calls, and I've seen comments we could reduce that to 130%, but for some that's not enough. 

The last statement appears to be yours abit. Putting it upon witnesses to define what they believe is too little collateral creates a conflict of power between witnesses and the Committee who sets various blockchain parameters. The minimum collateral ratio should not be determined by witnesses, it should be uniform and globally defined, and that is the role of the committee. It should not be dynamically set by each witness.

Witnesses should be explicitly "reporters of facts they observe" and block producers. Giving them the responsibility to set asset prices (and acceptable collateral levels) that differ from what can be observed in the market is manipulation and potentially opens witnesses up to liabilities and law suits.

When the MCR core bug is resolved we can experiment to achieve a tighter peg by preserving the market price feed and changing MCR or MSSR. Although some may argue that is also price manipulation b/c it achieves an almost identical effect (yet to be demonstrated, but that is general consensus), I don't see it that way.

As I've said and will continue to say, under-collateralization is my main concern regarding BSIP42. It is also Xeroc's and others who have PM'd me. Liquidity and a tight peg are obviously important, but IMHO and others not more than preserving the collateral.

I believe it would also be disastrous to the ecosystem's reputation to renig on the promise of redeemability as some are so willing to do. Yes I recognize redemption to 100% is not always possible but that is not by design as much as it is by the supply and demand of the market.

[abit]

Margin call is initiated by debt holders maintaining poor ratios; forced settlement is initiated by bitUSD equity holders.

The difference may be small to some but as I see it, if the ecosystem is well collateralized and there is no force settlement then it's possible that no user can get BTS autonomously.  The only option is to trade it for BTS.  Maybe that is the way of the future, but there will be a lot of old hodlers who will be suspicious that we are limiting choice.

Maybe this is just an unnecessary rabbit hole.. By "incentivize a run on bitUSD" I mean encourage a bank run where bitUSD is the bank.  In crisis deposit holders want their money out of banks.  When this happens at one time banks go bankrupt.  So by a run on bitUSD I mean a scenario when users trade en masse to BTS and turn around and sell to another crypto like BTC.  If BTS were to experience a chronic low price maybe it would not happen quite like this.  Still thinking about it.  To be honest I don't know exactly how it would play out.

> "Margin call is initiated by debt holders"

No, margin call is initialized by witnesses via price feed. As I've said, whether a debt position is "well collateralized" is subjective.

> When someone wants to sell bitUSD but nobody wants to buy thus caused devaluation of bitUSD, in order to maintain the peg, the bitUSD borrowers/creators should buy back the oversupplied bitUSD (either via force-settlements or via margin calls). This is the risk that a bitUSD borrower/creator have to bear when entering the position.

> witnesses are able to feed parameters to change fully-collateralized debt positions to undercollateralized when needed.

[JohnR]

Margin call is initiated by debt holders maintaining poor ratios; forced settlement is initiated by bitUSD equity holders.

The difference may be small to some but as I see it, if the ecosystem is well collateralized and there is no force settlement then it's possible that no user can get BTS autonomously.  The only option is to trade it for BTS.  Maybe that is the way of the future, but there will be a lot of old hodlers who will be suspicious that we are limiting choice.

Maybe this is just an unnecessary rabbit hole.. By "incentivize a run on bitUSD" I mean encourage a bank run where bitUSD is the bank.  In crisis deposit holders want their money out of banks.  When this happens at one time banks go bankrupt.  So by a run on bitUSD I mean a scenario when users trade en masse to BTS and turn around and sell to another crypto like BTC.  If BTS were to experience a chronic low price maybe it would not happen quite like this.  Still thinking about it.  To be honest I don't know exactly how it would play out.

[abit]

A `margin call` has a very specific meaning for a very specific investing concept.

So by changing what you are doing like with BSIP42, this is no longer a `margin call` in my opinion.

When the value of the collateral falls, the investor must add more collateral value or else liquidate enough or all of the position in order to maintain collateral for the loan.

Losers must pay up or else there is no incentive to win. That is what will serve everybody best.

There can be win-win situation, which would be better to serve everybody.

No matter whether it is traditional margin call, it is the term we're using in the system. Of course we can change it to another more appropriate word if possible.

[abit]

I read the entire thread and of course it is possible I misunderstood you.

* A trader who really wants to convert his bitUSD to BTS doesn't care where he will get the BTS,
  1) the BTS can come from other traders who are selling BTS for bitUSD
  2) the BTS can come from bitUSD debt positions who has less than required collateral ratio (margin calls)
  3) the BTS can come from bitUSD debt positions who has least collateral ratio in the system (force settlements)

You very clearly laid out the three ways for bitUSD holders to get BTS today correct?  And disabling force settlement would eliminate option 3 correct?  What I am trying to point out is that both option 1 and 2 require something from another party (posting a limit order in 1 & holding an undercollateralized position in 2).  In this way it chips away at the trust-less nature of bitUSD.  Not entirely, but recognize it does injects a level of trust in another party.  The community can elect to go this route of course, I would be interested to see how a vote ended up on this front.  You changed your mind on this issue, so maybe my thinking is less evolved.  I'm definitely open to it but rather than disabling maybe it would be better to make it an advanced feature so newbies don't stumble into it.  This would allow us to still claim that bitUSD is 'trust-less'.

No matter if bitUSD holders convert their bitUSD to BTS via margin calls or via forced settlements, the BTS are (forced) paid by debt positions with least collateral ratio, aka by bitUSD borrowers/creators, so what's the difference? IMHO there is no difference.

When someone wants to sell bitUSD but nobody wants to buy thus caused devaluation, in order to maintain the peg, the bitUSD borrowers/creators should buy back the oversupplied bitUSD (either via force-settlements or via margin calls). This is the risk that a bitUSD borrower/creator have to bear when entering the position.

Option 3 is not trustless because it depends on witnesses to provide fair price feeds.

Option 2 requires trust of witnesses to provide fair price feeds and fair MCR, but not trust of another party holding a position. There will always be debt positions if someone wants to settle or sell bitUSD, so this is not a problem. Since MCR is a subjective parameter, whether "undercollateralized" is subjective as well. In other words, witnesses are able to feed parameters to change fully-collateralized debt positions to undercollateralized when needed. So the debate is still about whether to maintain a tight peg.

Newbies are not the problem wrt removing force-settlements, advanced users who take advantages when parameters mismatch are the problem.

Your comment "margin call (which only happens in periods of stress/when the collateral is at its lowest value" is wrong, because, with BSIP42 or another MCR-based approach, margin calls can happen at any time as long as there is more demand of selling bitUSD for BTS than buying bitUSD with BTS.

You're right, this was too strong of a statement.  I did not mean to imply it is or would be a rare event.  But surely you agree that the situation you described in response is one where the value of BTS is lower and/or decreasing.  One concern is if the platform only allows bitUSD holders to get their BTS when price of BTS is decreasing this may incentivize a run on bitUSD.

IMHO BSIP42 or a MCR-based solution will work not only when trading price (I won't say value) of BTS is decreasing, but will also work when price is increasing. Increasing of MCR can cause margin calls even when BTS price is increasing.

Sorry I don't understand what "incentivize a run" means.

[spark]

A `margin call` has a very specific meaning for a very specific investing concept.

So by changing what you are doing like with BSIP42, this is no longer a `margin call` in my opinion.

When the value of the collateral falls, the investor must add more collateral value or else liquidate enough or all of the position in order to maintain collateral for the loan.

Losers must pay up or else there is no incentive to win. That is what will serve everybody best.

[JohnR]

I read the entire thread and of course it is possible I misunderstood you.

* A trader who really wants to convert his bitUSD to BTS doesn't care where he will get the BTS,
  1) the BTS can come from other traders who are selling BTS for bitUSD
  2) the BTS can come from bitUSD debt positions who has less than required collateral ratio (margin calls)
  3) the BTS can come from bitUSD debt positions who has least collateral ratio in the system (force settlements)

You very clearly laid out the three ways for bitUSD holders to get BTS today correct?  And disabling force settlement would eliminate option 3 correct?  What I am trying to point out is that both option 1 and 2 require something from another party (posting a limit order in 1 & holding an undercollateralized position in 2).  In this way it chips away at the trust-less nature of bitUSD.  Not entirely, but recognize it does injects a level of trust in another party.  The community can elect to go this route of course, I would be interested to see how a vote ended up on this front.  You changed your mind on this issue, so maybe my thinking is less evolved.  I'm definitely open to it but rather than disabling maybe it would be better to make it an advanced feature so newbies don't stumble into it.  This would allow us to still claim that bitUSD is 'trust-less'.

Your comment "margin call (which only happens in periods of stress/when the collateral is at its lowest value" is wrong, because, with BSIP42 or another MCR-based approach, margin calls can happen at any time as long as there is more demand of selling bitUSD for BTS than buying bitUSD with BTS.

You're right, this was too strong of a statement.  I did not mean to imply it is or would be a rare event.  But surely you agree that the situation you described in response is one where the value of BTS is lower and/or decreasing.  One concern is if the platform only allows bitUSD holders to get their BTS when price of BTS is decreasing this may incentivize a run on bitUSD.

[abit]

Disabling forced settlement seems like a strong response.  The value proposition of bitCNY/USD is that they are collateralized with assets.  If the user can only get the underlying collateral through margin call (which only happens in periods of stress/when the collateral is at its lowest value) what does that say about the original value proposition?

Looks like you either didn't read my analysis linked above or didn't understand it.

* A trader who really wants to convert his bitUSD to BTS doesn't care where he will get the BTS,
  1) the BTS can come from other traders who are selling BTS for bitUSD
  2) the BTS can come from bitUSD debt positions who has less than required collateral ratio (margin calls)
  3) the BTS can come from bitUSD debt positions who has least collateral ratio in the system (force settlements)

The key is liquidity, aka how much BTS are available in the market. Among these options, 1) is organic liquidity, 2) and 3) are "synthetic" liquidity.

BSIP42 or another MCR-based approach aims to provide as much as possible liquidity via 2), while the original design aims to provide liquidity via 3).

Your comment "margin call (which only happens in periods of stress/when the collateral is at its lowest value" is wrong, because, with BSIP42 or another MCR-based approach, margin calls can happen at any time as long as there is more demand of selling bitUSD for BTS than buying bitUSD with BTS.

[JohnR]

Disabling forced settlement seems like a strong response.  The value proposition of bitCNY/USD is that they are collateralized with assets.  If the user can only get the underlying collateral through margin call (which only happens in periods of stress/when the collateral is at its lowest value) what does that say about the original value proposition?

[abit]

I think "Forced margin calls" is not very necessary for the MPA, because we have another feather "Forced settlement".

Could we use a "Quick Forced settlement with BSIP38 for the collateral<175%" to instead of  “Forced margin calls“ or together？

On the opposite I think force settlement should be removed and we'd better make more use of margin calls, as described here: https://bitsharestalk.org/index.php?topic=27170.msg322381#msg322381

Again, you're only saying what you want but not why you want it, so it makes little sense.

[xeroc]

I think "Forced margin calls" is not very necessary for the MPA, because we have another feather "Forced settlement".

Could we use a "Quick Forced settlement with BSIP38 for the collateral<175%" to instead of  “Forced margin calls“ or together？

Force settlement is for longs (users having bitCNY)
Margin Calls are for shorts (those providing collateral to borrow and sell bitCNY)

You cannot force settle a long position because a short position screwed up.

An option would be to remove margin calls but also remove the collateral from users that run into ratio of less than 130%, but that ultimately requires someone else to provide collateral for the call who would need to buy it up from market and we are back to square one similar to keeping margin calls.

[binggo]

I think "Forced margin calls" is not very necessary for the MPA, because we have another feather "Forced settlement".

Could we use a "Quick Forced settlement with BSIP38 for the collateral<175%" to instead of  “Forced margin calls“ or together？

[JohnR]

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

now I feel to reduce MSSR make sense even after the implementation of BSIP42, and I don't think setting MSSR=100% means the penalization is cancelled, forcing one user to sell it's collateral in market price is still one kind of penalization.

there is another BSIP for setting MSSR to 105% for bitCNY, https://github.com/bitshares/bsips/issues/97, however it is not moved forward when BSIP42 is on the way.

It may be true that collateral holders are 'penalized' in the sense they are forced to sell at what may be an opportune time.  At least this is a qualitative and not a quantitative disruption so far as price goes.  Forced margin calls are a feature of many well-functioning markets with credit risk.

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

Yes. The current price feed modification is interfering with the MSSR in a bad way that renders the intended penalty moot and leads to a price feed that is further away from the real price than necessary.

We cannot aim for a tight peg *and* force margin calls to buy above the market price, at least not without a hard fork.

Thank you for expressing this very simply! 

*Note, in the first question I believe I meant to say 'an MSSR of 1' and not 0.

[xeroc]

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

Yes. The current price feed modification is interfering with the MSSR in a bad way that renders the intended penalty moot and leads to a price feed that is further away from the real price than necessary.

We cannot aim for a tight peg *and* force margin calls to buy above the market price, at least not without a hard fork.

This!

[pc]

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

Yes. The current price feed modification is interfering with the MSSR in a bad way that renders the intended penalty moot and leads to a price feed that is further away from the real price than necessary.

We cannot aim for a tight peg *and* force margin calls to buy above the market price, at least not without a hard fork.

[bitcrab]

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

now I feel to reduce MSSR make sense even after the implementation of BSIP42, and I don't think setting MSSR=100% means the penalization is cancelled, forcing one user to sell it's collateral in market price is still one kind of penalization.

there is another BSIP for setting MSSR to 105% for bitCNY, https://github.com/bitshares/bsips/issues/97, however it is not moved forward when BSIP42 is on the way.

[JohnR]

This OP on bsip42 has veered wildly off the original subject.  Nice to see the creativity, althought there are some misconceptions floating. I would like to know people's opinion on the following.

1) Do you support an experimental MSSR of 0 as an incentive to keep shorts in the game and not penalize future bts collateral holders?

2) Is a dynamic MCR feasible?  What parameters would you like to see for this?
2a) for the skeptics out there remember bitUSD is not quantitatively more sound by having 1.75x vs 2.8x collateral in the pool.  The key metric is a collateralization >= 1 x smartasset denomination.  If an asset can have a slightly lower collateralization (with sufficient safeguards) it may increase supply and robustness of the trading market.  This may lead to second order benefits and harden the economy/strength of bitUSD.

IMO the conversation surrounding bsip42 is an indication of the synthetic price setting mechanism overpowering the natural market price setting mechanism.  It is totally understandable that in a prolonged bear market fewer trading activity will happen and irrational spreads will occur.  Rather than solving this synthetically with price feeds perhaps the ecosystem would be better off focusing on driving fundamental growth and trading activity around smartassets.  Let us what the market thinks of bitUSD when we get more unique users. 

I think between the two options in Jerry's OP, a slight modification to MCR (done responsibly and transparently) is in better keeping with the implicit social contract that bitCNY/USD holders/shorters made when they engaged the platform.

[Peryn]

I will add to my post above.
I wanted to say that you are putting an end to bitcoin (providing bts) which is better than the dollar and fiat money by a margin rate of> 1 (current 1.75)
it's a dead end

[abit]

bitUSD/CNY face chronic shortages partially because it is expensive to hold the .75 x of surplus collateral.  Widgets that are expensive get supplied in lower quantity.

I have brought the idea in another branch, but would like to raise it one more time in this discussion. Although I'm not fond of the way BSIP42 was pushed, I agree that smart coins shall be enhanced to foster mass adoption. IMO there should be more incentive for people to borrow an MPA.
How about adding one more incentive to those who takes the risk? MPA generally is a good service/product, it has big demand. And therefore it can generate revenue stream (e.g. market fees). IMO it would be nice if those who take the risk and support (borrow) MPA shall have a cut from the revenue. To avoid passive yield harvesting, the borrower shall release borrowed MPA to the open market:
1. An MPA owner specifies market fee portion he would like to share with borrowers.
2. A user borrows the MPA providing the collateral.
3. To receive the cut of the MPA market fees, the user has to place market sell order on MPA:Collateral asset (e.g. bitUSD:BTS) market.
4. As the MPA is being bought and sold by other users, market fee goes to the MPA's owner vesting balance, particular part of it (as specified in 1st step) is proportionally sharedropped to all borrowers who has executed step 3.

This proposal sounds interesting, but actually hard to implement to avoid being gamed.
* Liquidity in the DEX is not only MPA:collateral asset market but all markets, e.g. bitUSD:OPEN.BTC need liquidity as well, and perhaps need more liquidity than bitUSD:BTS;
* people who borrowed MPA and sold to others already provided liquidity, they have nothing more to sell, how can they place another order in the market?
* people who borrowed MPA and sold to their sock puppets would earn the cut from the revenue (yield harvesting)
* Orders placed far away from current trading price are useless. With bots it's easy to maintain an order in the market (and perhaps harvest the yield).

The most significant incentive for borrowers to borrow (and perhaps buy the collateral asset again) is there is something (e.g. the collateral asset) to buy and the price will raise after he bought and he can profit by selling the bought asset later, but this is unable to be guaranteed nor incentivized. The risk is he can get margin called if price of the collateral asset drops.

[pc]

3. To receive the cut of the MPA market fees, the user has to place market sell order on MPA:Collateral asset (e.g. bitUSD:BTS) market.

There are several problems here.

First, this does not prevent yield harvesting. A shorter can sell the asset to himself (i. e. to his sock puppet account) through the market, thus avoiding all risk associated with being either long or short.

Second, this is unfair on users who not only trade in the asset but who also want to use it as a fiat replacement. If they short without selling, or (presumably) buy the asset without repaying their debt, they are punished by being excluded from the market fee share.

[yury]

bitUSD/CNY face chronic shortages partially because it is expensive to hold the .75 x of surplus collateral.  Widgets that are expensive get supplied in lower quantity.

I have brought the idea in another branch, but would like to raise it one more time in this discussion. Although I'm not fond of the way BSIP42 was pushed, I agree that smart coins shall be enhanced to foster mass adoption. IMO there should be more incentive for people to borrow an MPA.
How about adding one more incentive to those who takes the risk? MPA generally is a good service/product, it has big demand. And therefore it can generate revenue stream (e.g. market fees). IMO it would be nice if those who take the risk and support (borrow) MPA shall have a cut from the revenue. To avoid passive yield harvesting, the borrower shall release borrowed MPA to the open market:
1. An MPA owner specifies market fee portion he would like to share with borrowers.
2. A user borrows the MPA providing the collateral.
3. To receive the cut of the MPA market fees, the user has to place market sell order on MPA:Collateral asset (e.g. bitUSD:BTS) market.
4. As the MPA is being bought and sold by other users, market fee goes to the MPA's owner vesting balance, particular part of it (as specified in 1st step) is proportionally sharedropped to all borrowers who has executed step 3.

[Thom]

If we have the technology to implement a dynamic MCR we should absolutely proceed with it.  In my opinion, there is far more upside than downside.  It can still remain overcollateralized, so that bitCNY/USD don't become a 'house of cards' like other synthetic/fractional reserve systems.

Thank you JohnR, for understanding of the dangers of under-collateralization. It's a point that can't be over emphasized and shouldn't be ignored IMHO, and requires a longer term view and respect for the ecosystem than most traders appear to have. Why this isn't obvious to everyone here given the numerous failures of centralized economic control is baffling.

[JohnR]

I think we should definitely try a MSSR of 0.  The orthodoxy around here seems to be that a high MSSR is good because it will incentivize people to buy up debt as BTS is falling.  This is flawed reasoning.  Once the secondary buyer takes on the previously undercollateralized debt position he is then in a position of facing adverse forced selling at the same penalty % if BTS continues to fall.  Best case scenario this will net to zero.  But psychologically it may discourage people from jumping into the breach as BTS falls.  The optimal strategy to employ with a MSSR above 0 is to wait for BTS to stop falling then buy up the distressed debt.  Apply that across a market and you have everyone waiting around and BTS languishes.

While I don't totally understand how a dynamic MCR would work technically, if we can pull it off I think it's great.  bitUSD/CNY face chronic shortages partially because it is expensive to hold the .75 x of surplus collateral.  Widgets that are expensive get supplied in lower quantity.  If we have the technology to implement a dynamic MCR we should absolutely proceed with it.  In my opinion, there is far more upside than downside.  It can still remain overcollateralized, so that bitCNY/USD don't become a 'house of cards' like other synthetic/fractional reserve systems.

So, let me summarize my understanding. We basically have three parameters available that we can use
towards fulfilling our optimization criteria:

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

Essentially, we can apply a "feedback loop" on all of them, either by "derailing the price feed", tuning MSSR or MCR.
The main motivation for "detailing the price feed" is because the MSSR as well as the MCR are lower bounded by 100.1%
and thus cannot go lower. A "tuning" of the price feed could lead to reduction of the premium beyond what could be
possible by tuning MSSR or MCR.

Now, the question (at least to me) is, where is the "premium" and how can we lower it, best?

I would like to see how well this approach would work:

* Feed: price feed with a fixed 1% offset from the "fair price" (fixed tuning) - this way, we allow bitasset buyers to outcompete margin calls and have margin calls provide liquidity at 1% 'discount'
* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium
* MCR: dynamic MCR at     max(130, 170 - 40 * (premium/5%))% (feedback) - this way, we have a MCR of 170% in case of 0% premium which groes if the premium is <0% and shrinks towards 130% (linearily) in case of premium >0%

The only thing that I am not sure about is if this approach may not lead to more and more margin calls piling up at the settlement
price with not incentive provided to sell into them - unless the external "premium" is negative ...

Thoughts?

[abit]

If you understood the impossible trinity, you'll see why we need to allow <100% collateral if we always want a tight peg.

My understanding of "impossible trinity" is that the 3 variables can never be in harmony, at least 1 will oppose the other 2 so all 3 are not useful as feedback to maintain the peg. That's why bitcrab says it would be complicated.

Your understanding is obviously wrong.

Impossible trinity is about the whole design, not the 3 parameters in price feed. One of the 3 in the trinity is the peg. That means if we want 100% peg and 100% free capital flow, we can't have independent monetary policy aka limiting how much bitasset we can create aka a limitation on minimum collateral ratio.

If the tradeoff is between allowing collateral to drop below 100% and a tight peg (not proven yet) it's better (safer for system integrity) to allow peg to be less tight. The systemic problem of unstable markets is made worse when collateral drops below 100%, and the problem can cascade when under collateralized assets are used to invest with leverage in other assets. Under collateralized derivatives are the primary reason mainstream financial markets are a "house of cards" waiting to fall.

Impossible trinity means when external money (fiat USD or fiat CNY or BTC or others) flows into bitUSD (placing orders with higher-than-par-value price to buy bitUSD in DEX and/or CEXs that listed bitUSD) thus pushes up bitUSD price, (to maintain a tight peg) we need to create more bitUSD regardless of how much a BTS token is (although BTS price could be indirectly pushed up). The more money flows in, the more bitUSD we need to create. If want to always have more than 100% collateral (assuming BTS price hasn't been pushed high enough), it's unable to maintain the peg when the money flowed in is too much; so in order to maintain a tight peg, either the market pushes BTS price to high enough, or we allow <100% collateral ratio.

For reference, price of Steem Dollar has ever been pushed to 13 USD when money flowed in while the supply was limited (https://coinmarketcap.com/currencies/steem-dollars/). IMHO it's not only "less tight" but actually broken.

On the other hand, when money flows out from bitUSD, we need to reduce bitUSD supply, so we adjust parameters to trigger more margin calls. The process is a bit complicated since the margin calls won't fill in the beginning, and the bitUSD buying BTS would temporarily push BTS price up. Actually it's very hard to maintain a tight peg in this scenario if BTS price is not high enough (aka if collateral ratio is below 100%), filling margin calls at par value means a black swan; if we trigger a global settlement then all will be gone; if we allow bitUSD be traded at a discount and keep the borrow functionality active, eventually trading price will return to par value when enough bitUSD holders exited with a loss.

[Thom]

If you understood the impossible trinity, you'll see why we need to allow <100% collateral if we always want a tight peg.

My understanding of "impossible trinity" is that the 3 variables can never be in harmony, at least 1 will oppose the other 2 so all 3 are not useful as feedback to maintain the peg. That's why bitcrab says it would be complicated.

If the tradeoff is between allowing collateral to drop below 100% and a tight peg (not proven yet) it's better (safer for system integrity) to allow peg to be less tight. The systemic problem of unstable markets is made worse when collateral drops below 100%, and the problem can cascade when under collateralized assets are used to invest with leverage in other assets. Under collateralized derivatives are the primary reason mainstream financial markets are a "house of cards" waiting to fall.

[binggo]

<100% collateral is a bad idea.

impossible trinity has no any relation with <100% collateral.

What we need is how to deal with the <110% collateral as opposed to allow the <100% collateral happening.

You want a MPA, so <100% collateral is not allowed.

if <100% collateral is allowed, so the coin is not a MPA.

You didn't prove your conclusion, thus not a good argument.

these were not a argument, and don't need to prove.

if someone's collateral have 51% percentage of the total collateral and his collateral <100%，what will happen？

[abit]

<100% collateral is a bad idea.

impossible trinity has no any relation with <100% collateral.

What we need is how to deal with the <110% collateral as opposed to allow the <100% collateral happening.

You want a MPA, so <100% collateral is not allowed.

if <100% collateral is allowed, so the coin is not a MPA.

You didn't prove your conclusion, thus not a good argument.

[abit]

So, let me summarize my understanding. We basically have three parameters available that we can use
towards fulfilling our optimization criteria:

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

Essentially, we can apply a "feedback loop" on all of them, either by "derailing the price feed", tuning MSSR or MCR.
The main motivation for "detailing the price feed" is because the MSSR as well as the MCR are lower bounded by 100.1%
and thus cannot go lower. A "tuning" of the price feed could lead to reduction of the premium beyond what could be
possible by tuning MSSR or MCR.

Now, the question (at least to me) is, where is the "premium" and how can we lower it, best?

I would like to see how well this approach would work:

* Feed: price feed with a fixed 1% offset from the "fair price" (fixed tuning) - this way, we allow bitasset buyers to outcompete margin calls and have margin calls provide liquidity at 1% 'discount'
* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium
* MCR: dynamic MCR at     max(130, 170 - 40 * (premium/5%))% (feedback) - this way, we have a MCR of 170% in case of 0% premium which groes if the premium is <0% and shrinks towards 130% (linearily) in case of premium >0%

I'd say your understanding about feedback is wrong.

1. `170 - 40 * (premium/5%)` is a fixed formula but not a feedback-based formula. "Fixed formulas won't work" is proven during current experiment. We don't predict how much to tune in order to maintain a tight peg, we let the algorithm tune dynamically according to current situation (premium or discount).

2. any limitation put in a feedback-based formula will be an obstacle for maintaining the peg at some point. It's proven as well during the experiment. Here I'm talking about the 130.

By the way, tuning more than 1 parameter at a time is hard than tuning only 1 parameter, the former can lead to unexpected behavior, see the 3rd and later comments in this issue for an example: https://github.com/bitshares/bitshares-core/issues/1270#issuecomment-421273567

The only thing that I am not sure about is if this approach may not lead to more and more margin calls piling up at the settlement
price with not incentive provided to sell into them - unless the external "premium" is negative ...

Thoughts?

In order to have less margin calls piling up, we can start to increase MSSR earlier.

Your proposal was to increase MSSR only when MCR reached 170% or higher.

BSIP42's effective MSSR is greater than 100% when effective MCR is 165% (or so) or higher.

[bitcrab]

So, let me summarize my understanding. We basically have three parameters available that we can use
towards fulfilling our optimization criteria:

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

Essentially, we can apply a "feedback loop" on all of them, either by "derailing the price feed", tuning MSSR or MCR.
The main motivation for "detailing the price feed" is because the MSSR as well as the MCR are lower bounded by 100.1%
and thus cannot go lower. A "tuning" of the price feed could lead to reduction of the premium beyond what could be
possible by tuning MSSR or MCR.

Now, the question (at least to me) is, where is the "premium" and how can we lower it, best?

I would like to see how well this approach would work:

* Feed: price feed with a fixed 1% offset from the "fair price" (fixed tuning) - this way, we allow bitasset buyers to outcompete margin calls and have margin calls provide liquidity at 1% 'discount'
* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium
* MCR: dynamic MCR at     max(130, 170 - 40 * (premium/5%))% (feedback) - this way, we have a MCR of 170% in case of 0% premium which groes if the premium is <0% and shrinks towards 130% (linearily) in case of premium >0%

The only thing that I am not sure about is if this approach may not lead to more and more margin calls piling up at the settlement
price with not incentive provided to sell into them - unless the external "premium" is negative ...

Thoughts?

in my view, although there are 3 parameters, we do not to make each one dynamic. adjusting all 3 will make things very complex.

feed price: let it return to just reflect the "real market price". it also do good for information.

MSSR: I feel it's OK to set it to a fixed value, either 10% or 5%.

MCR: is 130% low enough as a limit? is say 110% better as a limit? is it possible to set 100% as the limit? as we all agree that we should allow independent margin call orders with ratio<100%

[binggo]

<100% collateral is a bad idea.

impossible trinity has no any relation with <100% collateral.

What we need is how to deal with the <110% collateral as opposed to allow the <100% collateral happening.

You want a MPA, so <100% collateral is not allowed.

if <100% collateral is allowed, so the coin is not a MPA.

[abit]

Define "hurt"? Debt positions are attached with responsibilities, we can't deny it.

<exactly Abit - Thom comment>

when the debt position is in sufficient collateral, a smartcoin holder can forcibly buy the collateral, this is definitely hurting.

Define "sufficient collateral"? Almost all the time all debt positions have more collateral than debt, from this perspective, they should never be "hurt" in terms of margin calls or forced settlements? Apparently this is not our rule.

Agreed, don't see the hurt either. Not sure why you say "Apparently this is not our rule."

"Our rule" is there is a "maintenance collateral ratio" which is more than 100% so far, that means the positions will be margin called even if they have more than 100% (aka "sufficient" to some extent) collateral.

If you mean 175% is sufficient, I disagree. 175% perhaps is sufficient sometimes, however, when a smartcoin is oversupplied, IMHO that means 175% is NOT sufficient; when under-supplied, I'd say 175% is too high.

So, if we adjust MCR dynamically and keep feed price unchanged, for debt position holders, it's not always "safe" to keep their positions if they have only 175% collateral ratio or even 200%.

Also exactly right.

This what is called "responsibility" of debt position owners according to the initial design of BTS

Maintaining & balancing the collateral ratio in relation to the market volatility and risk tolerance of the investor, THAT is the responsibility inherent in the design.  Thus it is up to each investor what level of risk of being margin s/he is willing to take. EACH trader is in full control of the level of risk they will take.

You do raise a valid point tho when you say there is little capital to increase collateral with in a bear trend. I agree, but that's not an argument against the need to maintain at least 100% collateral at all times to stay truly "safe". Safety is a myth in a highly volatile market. I also believe it's a bad practice to subsidize poor trades, unless you want more of them.

If you understood the impossible trinity, you'll see why we need to allow <100% collateral if we always want a tight peg.

[abit]

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

You missed the settlement offset.

1. I don't think debt positions are "hurt" by forced settlement, because settlement happens at the fair price. (But that's an old argument.)

2. It should be possible to keep a balance using smartcoin parameters. E. g. with the settlement offset the debt position receives a reward for being settled.

Settlement offset is a committee-controlled parameter right now, it responses much slower so unable to be used for fine-tuning.

[pc]

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

You missed the settlement offset.

[clockwork]

* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium

(100-premium*penalty)% means < 100% MSSR if premium < 0? How's that possible

100 - (-1) = 100+1

[armin]

* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium

(100-premium*penalty)% means < 100% MSSR if premium < 0? How's that possible

[xeroc]

So, let me summarize my understanding. We basically have three parameters available that we can use
towards fulfilling our optimization criteria:

* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call

Essentially, we can apply a "feedback loop" on all of them, either by "derailing the price feed", tuning MSSR or MCR.
The main motivation for "detailing the price feed" is because the MSSR as well as the MCR are lower bounded by 100.1%
and thus cannot go lower. A "tuning" of the price feed could lead to reduction of the premium beyond what could be
possible by tuning MSSR or MCR.

Now, the question (at least to me) is, where is the "premium" and how can we lower it, best?

I would like to see how well this approach would work:

* Feed: price feed with a fixed 1% offset from the "fair price" (fixed tuning) - this way, we allow bitasset buyers to outcompete margin calls and have margin calls provide liquidity at 1% 'discount'
* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium
* MCR: dynamic MCR at     max(130, 170 - 40 * (premium/5%))% (feedback) - this way, we have a MCR of 170% in case of 0% premium which groes if the premium is <0% and shrinks towards 130% (linearily) in case of premium >0%

The only thing that I am not sure about is if this approach may not lead to more and more margin calls piling up at the settlement
price with not incentive provided to sell into them - unless the external "premium" is negative ...

Thoughts?

[Thom]

Define "hurt"? Debt positions are attached with responsibilities, we can't deny it.

<exactly Abit - Thom comment>

when the debt position is in sufficient collateral, a smartcoin holder can forcibly buy the collateral, this is definitely hurting.

Define "sufficient collateral"? Almost all the time all debt positions have more collateral than debt, from this perspective, they should never be "hurt" in terms of margin calls or forced settlements? Apparently this is not our rule.

Agreed, don't see the hurt either. Not sure why you say "Apparently this is not our rule."

If you mean 175% is sufficient, I disagree. 175% perhaps is sufficient sometimes, however, when a smartcoin is oversupplied, IMHO that means 175% is NOT sufficient; when under-supplied, I'd say 175% is too high.

So, if we adjust MCR dynamically and keep feed price unchanged, for debt position holders, it's not always "safe" to keep their positions if they have only 175% collateral ratio or even 200%.

Also exactly right.

This what is called "responsibility" of debt position owners according to the initial design of BTS

Maintaining & balancing the collateral ratio in relation to the market volatility and risk tolerance of the investor, THAT is the responsibility inherent in the design.  Thus it is up to each investor what level of risk of being margin s/he is willing to take. EACH trader is in full control of the level of risk they will take.

You do raise a valid point tho when you say there is little capital to increase collateral with in a bear trend. I agree, but that's not an argument against the need to maintain at least 100% collateral at all times to stay truly "safe". Safety is a myth in a highly volatile market. I also believe it's a bad practice to subsidize poor trades, unless you want more of them.

[pc]

1. I don't think debt positions are "hurt" by forced settlement, because settlement happens at the fair price. (But that's an old argument.)

2. It should be possible to keep a balance using smartcoin parameters. E. g. with the settlement offset the debt position receives a reward for being settled.

[bitcrab]

Define "sufficient collateral"? Almost all the time all debt positions have more collateral than debt, from this perspective, they should never be "hurt" in terms of margin calls or forced settlements? Apparently this is not our rule.

If you mean 175% is sufficient, I disagree. 175% perhaps is sufficient sometimes, however, when a smartcoin is oversupplied, IMHO that means 175% is NOT sufficient; when under-supplied, I'd say 175% is too high.

So, if we adjust MCR dynamically and keep feed price unchanged, for debt position holders, it's not always "safe" to keep their positions if they have only 175% collateral ratio or even 200%.

if sufficient collateral become insufficient because of feed price or MCR adjusting, and then the debt position become margin called, it's a well defined and acceptable process. no problem.

but according to the current force settlement rule, smartcoin holders can always settle the debt position with the lowest collateral ratio, regardless whether the ratio is sufficient or insufficient,  regardless whether the smartcoin is in shortage or oversupplied, I don't think that's a well designed rule, and in practice, the force settlement just provide an arbitration tool, it is not a must for smartcoin pegging.

[abit]

Define "hurt"? Debt positions are attached with responsibilities, we can't deny it.

When smartcoin is oversupplied (which is reflected as trading below par value), actually borrowing more will hurt the peg thus we can say it hurts the ecosystem. In this case, in order to encourage people to borrower less, there need to be methods to reduce debt or keep debt at a certain level.
* the original approach is to encourage people to force-settle, in this case, a positive offset does the opposite;
* the BSIP42 approach (as well as a MCR adjustment approach) is to force the least collateralized positions to be margin called

Either way the cost is paid by the debt position owners.

When smartcoin is under-supplied, to maintain the peg, we encourage people to borrow more. In this case, force-settlement doesn't help and thus should be discouraged. People are still possible to buy from market at fair price even if force-settlement is disabled. The offset doesn't really matter here.

when the debt position is in sufficient collateral, a smartcoin holder can forcibly buy the collateral, this is definitely hurting.

maybe this is what is called "responsibility" of debt position owners according to the initial design of BTS, but what had happened is that we have to adjust parameters now and then to avoid hurting debt position owners, and finally we found force settlement do not provide better buying condition to smartcoin holders than just buying in DEX.

in traditional financial systems, I haven't seen that the borrower's collateral can be forcibly "bought" when the collateral is sufficient.

Define "sufficient collateral"? Almost all the time all debt positions have more collateral than debt, from this perspective, they should never be "hurt" in terms of margin calls or forced settlements? Apparently this is not our rule.

If you mean 175% is sufficient, I disagree. 175% perhaps is sufficient sometimes, however, when a smartcoin is oversupplied, IMHO that means 175% is NOT sufficient; when under-supplied, I'd say 175% is too high.

So, if we adjust MCR dynamically and keep feed price unchanged, for debt position holders, it's not always "safe" to keep their positions if they have only 175% collateral ratio or even 200%.

[bitcrab]

Define "hurt"? Debt positions are attached with responsibilities, we can't deny it.

When smartcoin is oversupplied (which is reflected as trading below par value), actually borrowing more will hurt the peg thus we can say it hurts the ecosystem. In this case, in order to encourage people to borrower less, there need to be methods to reduce debt or keep debt at a certain level.
* the original approach is to encourage people to force-settle, in this case, a positive offset does the opposite;
* the BSIP42 approach (as well as a MCR adjustment approach) is to force the least collateralized positions to be margin called

Either way the cost is paid by the debt position owners.

When smartcoin is under-supplied, to maintain the peg, we encourage people to borrow more. In this case, force-settlement doesn't help and thus should be discouraged. People are still possible to buy from market at fair price even if force-settlement is disabled. The offset doesn't really matter here.

when the debt position is in sufficient collateral, a smartcoin holder can forcibly buy the collateral, this is definitely hurting.

maybe this is what is called "responsibility" of debt position owners according to the initial design of BTS, but what had happened is that we have to adjust parameters now and then to avoid hurting debt position owners, and finally we found force settlement do not provide better buying condition to smartcoin holders than just buying in DEX.

in traditional financial systems, I haven't seen that the borrower's collateral can be forcibly "bought" when the collateral is sufficient.

Peter's idea is actually manually setting a MSSR, then dynamically adjusting price feed, so there is a feedback.
Xeroc's MCR-based idea is also dynamically adjusting MCR, so it's also based on feedback.

I am aware of this while replying, I just want to tell this will make things complex, we may need to set MSSR=100% at bear market while increasing it at bull market, the effect is just "make feed price closer to market price".

[abit]

Just because people do not use force settlement does not mean that the
ability to do so provides value.
IMHO, force settlement (I settle bitCNY for its collateral) is a core
feature that provides a floor to the valuation of bitCNY.

Unless of course, you are talking about the 5% offset. Of course, if it
doesn't effect the value, nor it's liquidity, we could as well get rid
of the offset.

if we now reset force settlement offset of bitCNY to 0, it will greatly increase the chance to hurt the bitCNY creators and the whole system.
I haven't found a solution that can enable smartcoin holders to settle in "fair" price but at the same time do not hurt the debt position owners.

Define "hurt"? Debt positions are attached with responsibilities, we can't deny it.

When smartcoin is oversupplied (which is reflected as trading below par value), actually borrowing more will hurt the peg thus we can say it hurts the ecosystem. In this case, in order to encourage people to borrower less, there need to be methods to reduce debt or keep debt at a certain level.
* the original approach is to encourage people to force-settle, in this case, a positive offset does the opposite;
* the BSIP42 approach (as well as a MCR adjustment approach) is to force the least collateralized positions to be margin called

Either way the cost is paid by the debt position owners.

When smartcoin is under-supplied, to maintain the peg, we encourage people to borrow more. In this case, force-settlement doesn't help and thus should be discouraged. People are still possible to buy from market at fair price even if force-settlement is disabled. The offset doesn't really matter here.

I believe we all agree here now.

There have been some options to deal with individual call positions that
go <100%:

* Take call positions that reach <(100+x)% away from users and give it to
  the issuer - effetively a x% penalty for the shorter.
* Allow traders to bid for the call position to provide additional
  collateral in exchange for pro-rata shares of the debt.

And possibly others.

make sense, I am also considering another possibility: possible to integrate the feature to force settlement: enable smartcoin holders to settle the margin call orders with CR<(100%+x) with added penalty to the debt position owners?

Please be aware that any added penalty to debt position holders when smartcoin is under-supplied (in a shortage) will push up the premium (please reread JohnR's analysis), thus will cause bigger adjustments to other parameters in order to maintain the peg.

That said, if reducing MCR to 150% and keeping MSSR at 110% resulted in a tight peg, if we change MSSR to 130% (to punish the debt position owners), it's likely we need to reduce MCR to 140% or so to keep the peg.

On the other hand, if we change MSSR to 100%, likely we can increase MCR a bit.

BTW I don't think any bidding or settling mechanism is better than margin call mechanism. BSIP42 and other MCR-based approach are essentially making more use of the margin call mechanism.

I think we all agree here as well. The disagreement lies in the means
that we use to achieve that goal. So far, BSIP42 meant that the price
feed formula is modified.

However, there has been plenty of discussion also instead of faking
the price feed, to use the margin call ratio as well as the short
squeeze protection ratio to provide a similar solution.

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%. That would lead to margin calls to execute at
the price feed instead of additional penalty of additional 10%. The only
drawback (that might not be one) is that the short protection ratio
cannot be negative. That means that in case there is a margin call
pending in the books, people that want bitUSD will provide a "premium"
to the market to snatch bitUSD from the margin calls.
If this becomes a problem, the price feed could still be "modified", but
at all other times, the price feed would reflect the fair price.

please do not call the current feed price as "faking price feed", BSIP42 just redefined this parameter, if it is confusing to still call it "feed price", I think we can rename it to "guide price" and show in the UI.

just setting MSSR=100% will not get the same result as current setting, as there is no "negative feedback" logic inside.

Will discuss below.

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%.

Minor correction: I think that with MSSR=0 the fake price feed could be kept *closer* to the real price, not that the feed price would always have to represent the fair price exactly.

under BSIP42, in bear market, maybe setting MSSR=100% will help to make the feed price more closer to market price, but in bull market, it will make the feed price farer away from the market price, as it encourage borrowing even when the smartcoin is over supplied, so need bigger negative feedback.

I think it's the best choice to move forward the MCR based solution to get the purpose of  "feed price reflect the real market price".

Peter's idea is actually manually setting a MSSR, then dynamically adjusting price feed, so there is a feedback.
Xeroc's MCR-based idea is also dynamically adjusting MCR, so it's also based on feedback.

Practically they and BSIP42 can all achieve tight pegging if the market condition is within a boundary.

The differences are:
* when smartcoin is under-supplied, setting MSSR to zero and adjusting price only (but not MCR) will result in margin calls never got eaten, thus may accumulate risks as time goes by. in UI, it will show as more and more debt positions hanging.
* adjusting MCR only (but not price) can NOT avoid globally settling when there is a black swan event. Why I think globally settling is bad is explained earlier in this post and/or other posts.

[bitcrab]

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%.

Minor correction: I think that with MSSR=0 the fake price feed could be kept *closer* to the real price, not that the feed price would always have to represent the fair price exactly.

under BSIP42, in bear market, maybe setting MSSR=100% will help to make the feed price more closer to market price, but in bull market, it will make the feed price farer away from the market price, as it encourage borrowing even when the smartcoin is over supplied, so need bigger negative feedback.

I think it's the best choice to move forward the MCR based solution to get the purpose of  "feed price reflect the real market price".

[bitcrab]

Just because people do not use force settlement does not mean that the
ability to do so provides value.
IMHO, force settlement (I settle bitCNY for its collateral) is a core
feature that provides a floor to the valuation of bitCNY.

Unless of course, you are talking about the 5% offset. Of course, if it
doesn't effect the value, nor it's liquidity, we could as well get rid
of the offset.

if we now reset force settlement offset of bitCNY to 0, it will greatly increase the chance to hurt the bitCNY creators and the whole system.
I haven't found a solution that can enable smartcoin holders to settle in "fair" price but at the same time do not hurt the debt position owners.

I believe we all agree here now.

There have been some options to deal with individual call positions that
go <100%:

* Take call positions that reach <(100+x)% away from users and give it to
  the issuer - effetively a x% penalty for the shorter.
* Allow traders to bid for the call position to provide additional
  collateral in exchange for pro-rata shares of the debt.

And possibly others.

make sense, I am also considering another possibility: possible to integrate the feature to force settlement: enable smartcoin holders to settle the margin call orders with CR<(100%+x) with added penalty to the debt position owners?

I think we all agree here as well. The disagreement lies in the means
that we use to achieve that goal. So far, BSIP42 meant that the price
feed formula is modified.

However, there has been plenty of discussion also instead of faking
the price feed, to use the margin call ratio as well as the short
squeeze protection ratio to provide a similar solution.

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%. That would lead to margin calls to execute at
the price feed instead of additional penalty of additional 10%. The only
drawback (that might not be one) is that the short protection ratio
cannot be negative. That means that in case there is a margin call
pending in the books, people that want bitUSD will provide a "premium"
to the market to snatch bitUSD from the margin calls.
If this becomes a problem, the price feed could still be "modified", but
at all other times, the price feed would reflect the fair price.

please do not call the current feed price as "faking price feed", BSIP42 just redefined this parameter, if it is confusing to still call it "feed price", I think we can rename it to "guide price" and show in the UI.

just setting MSSR=100% will not get the same result as current setting, as there is no "negative feedback" logic inside.

[armin]

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%. That would lead to margin calls to execute at
the price feed instead of additional penalty of additional 10%. The only
drawback (that might not be one) is that the short protection ratio
cannot be negative. That means that in case there is a margin call
pending in the books, people that want bitUSD will provide a "premium"
to the market to snatch bitUSD from the margin calls.
If this becomes a problem, the price feed could still be "modified", but
at all other times, the price feed would reflect the fair price.

From what I understand, the MSSR being >0 actually serves the purpose of offsetting the risk of holding smartcoins from going into global settlement mode. In global settlement mode, the smartcoin won't be properly pegged anymore.

The current MSSR seems to be a balancing act to make global settlement mode much less likely, as the margins calls get back to the designated MCR quickly. If the MSSR = 0, global settlement mode becomes more likely and holding smartcoins becomes much less attractive actually (which is the opposite of what bitcrab is aiming for, that is if the holders of the smartcoin realize this)

Thoughts? Maybe I'm wrong to understand that it makes global settlement more likely.

Anyhow, MSSR=0 seems like a decent experiment

[pc]

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%.

Minor correction: I think that with MSSR=0 the fake price feed could be kept *closer* to the real price, not that the feed price would always have to represent the fair price exactly.

[xeroc]

bitCNY has a 5% force settlement offset for long time and this does not impact the value of bitCNY, the value of smart coin do not rely that much on force settlement. if we can not guarantee tight peg+liquidity+fair price force settlement, I believe we should give up the last one.

Just because people do not use force settlement does not mean that the
ability to do so provides value.
IMHO, force settlement (I settle bitCNY for its collateral) is a core
feature that provides a floor to the valuation of bitCNY.

Unless of course, you are talking about the 5% offset. Of course, if it
doesn't effect the value, nor it's liquidity, we could as well get rid
of the offset.

I agree it's OK to not allow MCR<1 in the MCR based solution.
I agree that the overall collateral ratio need to be >1, the problem is, how to handle some single margin call orders with CR<1? I think it's bad to let these single orders trigger global settlement process. can we just leave these orders there and wait they be eaten or disappear?

I believe we all agree here now.

There have been some options to deal with individual call positions that
go <100%:

* Take call positions that reach <(100+x)% away from users and give it to
  the issuer - effetively a x% penalty for the shorter.
* Allow traders to bid for the call position to provide additional
  collateral in exchange for pro-rata shares of the debt.

And possibly others.

I believe there are incentive - actually the “negative feedback” make this logic appears: if there are demands on smart coins (premium>0), there will be incentive to borrow smart coins and buy BTS, this is true incentive that we had ignored, it means if we can make more demands on smartcoins, we can help the BTS price to go up.

I think we all agree here as well. The disagreement lies in the means
that we use to achieve that goal. So far, BSIP42 meant that the price
feed formula is modified.

However, there has been plenty of discussion also instead of faking
the price feed, to use the margin call ratio as well as the short
squeeze protection ratio to provide a similar solution.

For instance, according to Peter Conrad, the current situation may well
be achieved by using the actualy/fair price feed and a short squeeze
protection ratio of 0%. That would lead to margin calls to execute at
the price feed instead of additional penalty of additional 10%. The only
drawback (that might not be one) is that the short protection ratio
cannot be negative. That means that in case there is a margin call
pending in the books, people that want bitUSD will provide a "premium"
to the market to snatch bitUSD from the margin calls.
If this becomes a problem, the price feed could still be "modified", but
at all other times, the price feed would reflect the fair price.

[sahkan]

xeroc asked witnesses to chime in on this conversation, but majority did not. Friday is coming up and I would like to know what is the final consensus? Are we sticking with the current feed prices on BitUSD, BSIP42 or a modified BSIP42?  Starting tomorrow I will start feeding my BitUSD prices in accordance with an outcome from this conversation.

[abit]

We can say the promises were made by BM. Then BM left. We have to make our own decisions.

It wasn't ONLY BM, we ALL were there, it was a community consensus we all (including you) have been living with for at least 3 years, so it is totally inappropriate to blame the redeem-ability or collateral requirements on BM alone.

I was not blaming BM, but describing the fact. We all know BM made his own decisions, we only got the options to accept or not. I'd say most of us didn't understand the design at the beginning and blindly accepted it or hoped it will work. But he has left, and now we need to make our own decisions, it's absurd to think we have to stick with an impossible promise forever.

According to the analysis I made earlier in this thread (please read), some of the promises were too heavy, we're unable to keep all of them. You can't have your cake and eat it. You want the 10M bitUSD in your wallet be fully backed, but in case when BTS market cap dropped to below 10M, they're simply unable to be fully backed if you, as a holder, do nothing other than hold.

Changing strategy is hard, but when it's needed, we have to do so, otherwise there is no future. I'm well aware of the risks.

I am not sure you do understand the risks. If you do, you're willing to risk others funds in this haphazardly conducted experiment.

> "haphazardly conducted"

Sorry, my English is not so good, are these words objective or subjective? Could you please use simpler words?

I do agree if both bears and bulls are promised they can't loose it's a problem. However to some degree that is indeed the situation. One or the other is going to complain there is no balance or it is skewed and needs to be "adjusted". I agree with you in your last sentence, except "they're simply unable to be fully backed if you, as a holder, do nothing other than hold." People that use leverage to trade with are used to the broken, under collateralized mainstream system and thus object to BitShares policies. Sorry, when you come to BitShares it's different for reasons, mostly the safety of funds, and you must maintain your collateral or you will be margin called. We don't need any changes that weaken investors collateral or allows fractional reserves, incentivizes accumulation of debt or skews the market via collusion or manipulation.

If course if a leveraged trader refuses to manage his collateral, well, should know the risks and not do that. It's the trader's responsibility to know the rules of the platform / game. If s/he fails to do so and the market accelerates its downward trend, the loss is on his/her back. It's not proper to blame the ecosystem for not being a mainstream institution. It wasn't intended or designed to be the same. Why can't people understand that? Do they want to repeat the mistakes all over again anew?

Due to different visions of BitShares the platform and the bitAssets. I guess bitcrab explained better than I had, have you read that? Just a few pages above.

Witnesses are paid positions, meant to contribute. Witnesses (read: including you) are the nearest to price data because they produce price feeds, and data is all over there, just need some time/efforts to collect them and summarize and show them to people who asks. Keep asking others to report the result/findings IMHO is not very good behavior.

Why is asking not good behavior? Why is providing a coherent report / summary being avoided so much?

Attitude.

Why don't you gather the data and make the report? Why I have to do that? Only I have the skills to gather data and make a report? You're my boss? I owe you something?

Why (as Thul3 comprehensively asked) are the BSIP42 advocates using such coercion and force to change the ecosystem rather than playing by the consensus rules OR make a solid case why they need to be changed that is persuasive enough to gain the consensus sought? Could it possibly be b/c our principles are not aligned? I have to ask, since you said nothing to me about them. Principles are important, do you disagree with that?

There has been many discussions in months, perhaps you didn't participate in? Is it my fault that didn't notify you? I wrote the BSIP document, I created workers for vote, it's all played by consensus rule. The workers are "voted in" / accepted. TBH I didn't get what you're asking.

If want the process to be more methodical and systematic, please propose the methods and see whether others will follow or convince them. There is a 30+page thread (and other threads) in Chinese forum shows how the algorithm is evolving: https://bitsharestalk.org/index.php?topic=26315.0 , a translator would help.

Actually some "findings" were posted, perhaps not in your favorite format:
* https://bitsharestalk.org/index.php?topic=26966.msg322398#msg322398
* https://bitsharestalk.org/index.php?topic=27170.msg322352#msg322352
* https://bitsharestalk.org/index.php?topic=26315.msg322288#msg322288
* https://bitsharestalk.org/index.php?topic=27203.msg322834#msg322834

Yes, a translator would help. The language barrier is tough for most of us. However, it isn't the place for BSIP42 opponents to fix the BSIP, it's for the authors of it to make their case with facts and data, and make sure that info is made available widely. The links you provided don't do that IMO. It's far from the data and analysis a financial system needs to make a quality engineering decision. The billions of funds invested deserve much better.

> "it's for the authors of it to.."

It's hilarious. It's actually community efforts. Just because I started the writing of a document, then it's my job to maintain it all the lifetime? As a community member, a stake holder, why don't you contribute to the document? If you don't understand Chinese, if you don't understand the charts, if you don't know how to find the data, you can hire someone to help you if you REALLY WANT to get the things done.

About redeem-ability:

I already acknowledged if inappropriate promises are made to 2 contrary positions it's a problem. You have a different take on how to resolve it than I do. You want promise A to be forgotten and I want promise B to be forgotten or reduced. Both of us want more liquidity, we're just not sure how to get it without upsetting someone.

I also think it's quite interesting that there is almost no talk about why things are the way they are now, no consideration of history. Your reference to BM wasn't analysis to facts to say why his reasoning was [all] wrong, you just used him as a scape goat. I'm not saying he was right, but you didn't show where his reasoning is wrong. WHY is an extremely important question. You may be annoyed by it, but it is essential to have the freedom to ask it and explore alternatives.

If there is indeed an "impossible trinity" of promises to community, it needs to be fixed. The question is which leg of the trinity needs to go? Why not add a 4th leg (as discussed at BitFest to publish an additional adjustment value to apply to market feeds)? We all know how unstable 3 legged chairs are.

Off topic, but we (who learnt some physics) all know how stable a triangle structure is. https://zh.scribd.com/document/199099598/Why-is-the-Triangle-the-Strongest-Shape

I advocate for a position that provides the best balance between bears and bulls. I favor Austrian economic principles over the debt based Keynsian model that uses oligarchs to centrally "manage" an economy which has over a century of demonstrating how poorly that model works to help people live freely.

[bitcrab]

Thanks @xeroc, I great appreciate your efforts to find the consensus.

First, let’s define the vision of smartcoin,  in my view, it is 1. enough accurate pegging and 2. enough liquidity. based on these smartcoin will seek wildly adoption comparing to USDT.

I think this is already where people may have a different vision.
For me (and others) the core value proposition of bitassets was:
* always fully collateralized
* settlement available to obtain collateral at a "fair" price.

With respect to settlement, the community has already moved from a
settlement at parity 1:1 with the introduction of the settlement
offset to incentivize shorters to increase liquidity.

My feeling is that those optimization criteria (tight pegging & liquidity
vs. backing and settlement) may not work out together, at least not in
the short term.

So I think we have some difference in defining smartcoin.

In my idea, smartcoin is one solution of the “stable coin” concept which are discussed a lot this year, it is designed as a token that has stable value and is easy to get and transfer when one need it, that’s why I emphasize pegging accuracy and liquidity.

It seems in your idea, smartcoin is more like something that can help people to store value, to hedge the risk in cryptocurrency market.

Let me tell 2 stories.

1.AEX and bigone has listed bitCNY and use bitCNY as the base currency in their exchange, but several months ago they removed bitCNY as base currency because “bitCNY is in serious shortage and very high premium, difficult to get, users are confused and very unsatisfactory”.

2.in August 1971, U.S. President Richard Nixon announced to remove the dollar peg to gold, which had been fixed at $35 an ounce. the Bretton Woods System collapsed.

I’d like to say, before we discussed BSIP42, bitCNY is at a similar dilemma as USD in 1971 - the supply of gold is limited, but the demand to USD increased rapidly, a big conflict comes and US cannot maintain the $35 an ounce gold price.

bitCNY(surely also bitUSD and bitEUR) is potential to get widely adopted, but before BSIP42 the supply of biCNY depend on the price of BTS, that’s why each time bear market comes, bitCNY was squeezed out quickly and lead to very serious shortage and very high premium, at the same time, continuous margin calling bring many users to nightmare.

Maybe in initial design smartcoin is more like just one asset to store value and hedge risk. But if we hope smart coin be widely used in many CEXs as base currency, and in international payments, we have to review and update the design to guarantee the pegging accuracy and liquidity, otherwise smart coins can only  be used by a small community and have no chance to let the whole world share the great innovation of Bitshares community.

force settlement enable smart coin holders to forcibly buy BTS from debt position owners, so here price play a key role, now we set forcesettlement offset and quantity limit to protect debt position owners, now in almost all the cases, to directly buy from DEX is a better way for smartcoin holders to get BTS.

bitCNY has a 5% force settlement offset for long time and this does not impact the value of bitCNY, the value of smart coin do not rely that much on force settlement. if we can not guarantee tight peg+liquidity+fair price force settlement, I believe we should give up the last one.

We both agree on bitassets having a supply side problem and that
we should allow shorters to easier borrow bitassets. According to
my optimization criteria, I still believe we must not allow bitassets
to become undercollateralized (overall - we may find a way to allow
individual positions to go CR < 1)

I agree it's OK to not allow MCR<1 in the MCR based solution.
I agree that the overall collateral ratio need to be >1, the problem is, how to handle some single margin call orders with CR<1? I think it's bad to let these single orders trigger global settlement process. can we just leave these orders there and wait they be eaten or disappear?

After BSIP applied to bitUSD the premium fell drastically, we hope we can keep this trend continue until to a close to 0 premium.

Well, arguable, that is expected behavior because we are "forcing" the marketing
to trade according to parity, we do not provide incentive for the market to
move to parity on its own. This difference is what does sit well with the Western
community.

I believe there are incentive - actually the “negative feedback” make this logic appears: if there are demands on smart coins (premium>0), there will be incentive to borrow smart coins and buy BTS, this is true incentive that we had ignored, it means if we can make more demands on smartcoins, we can help the BTS price to go up.

@Jerry, how about the both of us come to a compromise in that we allow the witnesses
to decide how to go forward and whether or not they want to run BSIP42 on bitUSD, or
not. I think, as a proxy, we shouldn't threaten them with the removal of our votes
just because they support(or not support) a BSIP that actually gives the freedom of
choice to them (the witnesses). With that said, I will retract my statement of removing
votes from BSIP2-bitUSD witnesses and would like to keep rational and
constructive discussion like this one going.

at this moment I'd like to stop "threatening" witnesses - frankly speaking I don't think this can be called "threaten", this is just to express opinion of a voter, it's always not easy to push such kind of update, so sometimes voting power is needed, I don't promise to give up the right of a proxy.

[Peryn]

Good day to all.
with current collateral greater> 1
current 1.75. bts will always be cheaper over time, striving for parity bitusd = bts * 1.75 / usd = 1/1
what we see on the graph starting in 2014

[Thom]

BitShares has been around and around trying to come up with a SmartCoin algorithm that strikes that balance but I fear due to differences in economic principles there will always be a strong tension by one camp or another to change the rules to their advantage. Remember, before the promise of redeem-ability through forced settlement people were creating sock puppet accounts and draining the reserve pool. That problem is no more.

Interesting, I wasn't here back then. Why did people have to make sock accounts to get their collateral back? Were SmartCoins backed by the reserve pool?

It was dubbed "yield harvesting". I just couldn't think of the name for it.

[armin]

BitShares has been around and around trying to come up with a SmartCoin algorithm that strikes that balance but I fear due to differences in economic principles there will always be a strong tension by one camp or another to change the rules to their advantage. Remember, before the promise of redeem-ability through forced settlement people were creating sock puppet accounts and draining the reserve pool. That problem is no more.

Interesting, I wasn't here back then. Why did people have to make sock accounts to get their collateral back? Were SmartCoins backed by the reserve pool?

[Thom]

I'd say blaming won't get things done. It's counterproductive.

It's natural that human beings make mistakes. They're not god.

I agree, blaming won't get things done and yes it's counterproductive. So is not answering questions, and I couldn't help but notice you didn't answer any of his.

[Thom]

We can say the promises were made by BM. Then BM left. We have to make our own decisions.

It wasn't ONLY BM, we ALL were there, it was a community consensus we all (including you) have been living with for at least 3 years, so it is totally inappropriate to blame the redeem-ability or collateral requirements on BM alone.

According to the analysis I made earlier in this thread (please read), some of the promises were too heavy, we're unable to keep all of them. You can't have your cake and eat it. You want the 10M bitUSD in your wallet be fully backed, but in case when BTS market cap dropped to below 10M, they're simply unable to be fully backed if you, as a holder, do nothing other than hold.

Changing strategy is hard, but when it's needed, we have to do so, otherwise there is no future. I'm well aware of the risks.

I am not sure you do understand the risks. If you do, you're willing to risk others funds in this haphazardly conducted experiment. I do agree if both bears and bulls are promised they can't loose it's a problem. However to some degree that is indeed the situation. One or the other is going to complain there is no balance or it is skewed and needs to be "adjusted". I agree with you in your last sentence, except "they're simply unable to be fully backed if you, as a holder, do nothing other than hold." People that use leverage to trade with are used to the broken, under collateralized mainstream system and thus object to BitShares policies. Sorry, when you come to BitShares it's different for reasons, mostly the safety of funds, and you must maintain your collateral or you will be margin called. We don't need any changes that weaken investors collateral or allows fractional reserves, incentivizes accumulation of debt or skews the market via collusion or manipulation.

If course if a leveraged trader refuses to manage his collateral, well, should know the risks and not do that. It's the trader's responsibility to know the rules of the platform / game. If s/he fails to do so and the market accelerates its downward trend, the loss is on his/her back. It's not proper to blame the ecosystem for not being a mainstream institution. It wasn't intended or designed to be the same. Why can't people understand that? Do they want to repeat the mistakes all over again anew?

Witnesses are paid positions, meant to contribute. Witnesses (read: including you) are the nearest to price data because they produce price feeds, and data is all over there, just need some time/efforts to collect them and summarize and show them to people who asks. Keep asking others to report the result/findings IMHO is not very good behavior.

Why is asking not good behavior? Why is providing a coherent report / summary being avoided so much? Why (as Thul3 comprehensively asked) are the BSIP42 advocates using such coercion and force to change the ecosystem rather than playing by the consensus rules OR make a solid case why they need to be changed that is persuasive enough to gain the consensus sought? Could it possibly be b/c our principles are not aligned? I have to ask, since you said nothing to me about them. Principles are important, do you disagree with that?

If want the process to be more methodical and systematic, please propose the methods and see whether others will follow or convince them. There is a 30+page thread (and other threads) in Chinese forum shows how the algorithm is evolving: https://bitsharestalk.org/index.php?topic=26315.0 , a translator would help.

Actually some "findings" were posted, perhaps not in your favorite format:
* https://bitsharestalk.org/index.php?topic=26966.msg322398#msg322398
* https://bitsharestalk.org/index.php?topic=27170.msg322352#msg322352
* https://bitsharestalk.org/index.php?topic=26315.msg322288#msg322288
* https://bitsharestalk.org/index.php?topic=27203.msg322834#msg322834

Yes, a translator would help. The language barrier is tough for most of us. However, it isn't the place for BSIP42 opponents to fix the BSIP, it's for the authors of it to make their case with facts and data, and make sure that info is made available widely. The links you provided don't do that IMO. It's far from the data and analysis a financial system needs to make a quality engineering decision. The billions of funds invested deserve much better.

About redeem-ability:

I already acknowledged if inappropriate promises are made to 2 contrary positions it's a problem. You have a different take on how to resolve it than I do. You want promise A to be forgotten and I want promise B to be forgotten or reduced. Both of us want more liquidity, we're just not sure how to get it without upsetting someone.

I also think it's quite interesting that there is almost no talk about why things are the way they are now, no consideration of history. Your reference to BM wasn't analysis to facts to say why his reasoning was [all] wrong, you just used him as a scape goat. I'm not saying he was right, but you didn't show where his reasoning is wrong. WHY is an extremely important question. You may be annoyed by it, but it is essential to have the freedom to ask it and explore alternatives.

If there is indeed an "impossible trinity" of promises to community, it needs to be fixed. The question is which leg of the trinity needs to go? Why not add a 4th leg (as discussed at BitFest to publish an additional adjustment value to apply to market feeds)? We all know how unstable 3 legged chairs are.

I advocate for a position that provides the best balance between bears and bulls. I favor Austrian economic principles over the debt based Keynsian model that uses oligarchs to centrally "manage" an economy which has over a century of demonstrating how poorly that model works to help people live freely.

[abit]

Just like @Thul3, if he politely ask and focus on the issues themselves

I guess i was more than polite at the beginning asking normal questions but got as response only silence or ignorance as some peoples attitude looked like they don't need to explain anything to the community anymore even they broke heavily a consensus without fearing any restrictions.

You are looking for somebody blameworthy ?
Maybe start looking together with bitcrab in the mirror.

Who was it who broke massivly community consensus on OMO and acted like nothing happened ?
Wasn't it even you who said bitcrab had to contact you how to enable TCR cause he couldn't find it risking that all collateral of the OMO fund would get margin called and that the OMO fund had been running all the time without TCR enabled and thats not acceptable ?
Who created BSIP42 without clear defenitions and without any transparancy to the community ,changing and experimenting in a small group where nobody from the community was informed what is really coming ?
Who said in threads it is only for bitCNY since its a liquid market and later quickly switched to bitUSD without even talking with the community if BSIP42 is a success ?
Who was it who started threatening witnesses with unvoting for not quickly adding new bitusd feed ?
Who banned a witness from a witness telegram channel ?
Who is using spring funds for Voting ?
I could keep going on.

My tone changed after i only recived ignorance ....and if you claim that bitcrab would have talked with me if i were more polite then i'm asking why didn't he responded to any of my concernes before where the tone was polite or emails i sent to him ?

Xeroc already attacked me that i have a personal vendetta against bitcrab which is not true at all but i'm a heavy supporter of bitshares and seeing the massiv change from a decentralised exchange to a centralised planed exchange without any transparency or discussion makes me mad no matter who is responsible for it.

I'd say blaming won't get things done. It's counterproductive.

It's natural that human beings make mistakes. They're not god.

I guess your first posts got ignored due to typos or hard-to-understand wording or bad timing. In a forum it's not uncommon. I do see there are replies from bitcrab and others.

[abit]

@Thom, IMHO it's not your questioning about the changes that mattered, it's your tone and your attitude that mattered.

We're not afraid of rational/professional questioning on the rules/issues/solutions at all. But you were usually asking with doubt without understanding after I explained again and again, and even turned to question me (personal) but not the issues we're facing, which is not *that* rational/professional. I admit I'm unable to remain calm all the time.

Just like @Thul3, if he politely ask and focus on the issues themselves, rather than keeping attacking bitcrab the person, the issues he brought up would be discussed much deeper and broader. Current situation is, many community members chose to ignore his new posts, no matter whether the posts make sense, because, most of posts made by him in the past were garbage and don't worth reading.

It's hard to build a good conversation environment, but easy to destroy it.

Thank you abit for your comments. I recognize that I too let my emotions color my language more often than it should, and I am trying to do better with that.

This feed situation is stirring up emotions on both sides. I do understand the desire for more liquidity and adoption, but I'm not sure BSIP42 advocates appreciate how important it is to maintain derivatives with at least 100% collateral at all times, or about why there are differences between typical centralized mainstream financial institutions and the BitShares ecosysem. The distinctions are important to understand. Promises should not be made and broken, it introduces distrust and has a negative impact on reputation (as do many other things).

We can say the promises were made by BM. Then BM left. We have to make our own decisions. According to the analysis I made earlier in this thread (please read), some of the promises were too heavy, we're unable to keep all of them. You can't have your cake and eat it. You want the 10M bitUSD in your wallet be fully backed, but in case when BTS market cap dropped to below 10M, they're simply unable to be fully backed if you, as a holder, do nothing other than hold.

Changing strategy is hard, but when it's needed, we have to do so, otherwise there is no future. I'm well aware of the risks.

Crypto was created to disrupt corrupt mainstream financial institutions and provide an alternative to them that is based on sound monetary policies. Some think sound policies are debt based Keynesian policies and others believe the Austrian perspective is better. Both can't be right, and it is very difficult for me to understand how anyone can support a Keynesian view with the 100+ years of evidence it doesn't work (except for the oligarchs). Can we all come to consensus that we want more financial freedom not less? Can we all come to consensus we can't replicate a mainstream approach or we will find ourselves right back to the same problems running rampant in mainstream financial institutions?

As I said before, I believe there will always be a tension between traders and savers. It is up to us to establish criteria that both sides can live with. Is that possible? I actually don't know. When force and coercion are the tools used I don't think a consensus is possible. Force is decisive.

We all need to take a step back and be more thoughtful and cooperative to achieve consensus. Attitudes are indeed difficult to smooth out when there are strong disagreements. I have questioned from the start why we can't be more methodical and systematic in our efforts to conduct the BSIP42 experimentation so witnesses would enthusiastically participate. When force and coercion entered the picture it drove a wedge into the community.

As xeroc said, those who oppose BSIP42 do so b/c there is such a huge push to adopt it so fast, without *any* findings published before moving on to try same approach on another asset. Again, without regard to broken smartcoins promise of fair redeem-ability market rate) or that other assets have far less liquidity.

Witnesses are paid positions, meant to contribute. Witnesses (read: including you) are the nearest to price data because they produce price feeds, and data is all over there, just need some time/efforts to collect them and summarize and show them to people who asks. Keep asking others to report the result/findings IMHO is not very good behavior.

If want the process to be more methodical and systematic, please propose the methods and see whether others will follow or convince them. There is a 30+page thread (and other threads) in Chinese forum shows how the algorithm is evolving: https://bitsharestalk.org/index.php?topic=26315.0 , a translator would help.

Actually some "findings" were posted, perhaps not in your favorite format:
* https://bitsharestalk.org/index.php?topic=26966.msg322398#msg322398
* https://bitsharestalk.org/index.php?topic=27170.msg322352#msg322352
* https://bitsharestalk.org/index.php?topic=26315.msg322288#msg322288
* https://bitsharestalk.org/index.php?topic=27203.msg322834#msg322834

Some data sources (please research what data sources are trustworthy and how to extract useful data from them):
* https://coinmarketcap.com/currencies/bitcny/
* https://coinmarketcap.com/currencies/bitshares/
* https://wallet.bitshares.org/#/market/BTS_CNY
* https://www.aex.com/page/trade.html?mk_type=CNC&trade_coin_name=BTS
* https://www.aex.com/page/trade.html?mk_type=CNC&trade_coin_name=BITCNY
* magicwallet API https://bitsharestalk.org/index.php?topic=26122.0

About redeem-ability:

create more sell orders by BSIP42

I don't think this is a market action，it‘s BSIP 42 action，which create a overflow of collateral by a high feed price and then reduce the feed price to sell these overflow of collateral.

also i don't think the 110%MSSR is a market action, it's disrupted the market too much.

otherwise，the“impossible trinity” is not very suitable for the stablecoins.

and i don't agree the opinion of the force-settlement，the design of the force-settlement is not for getting enough fair price of bts，it is used for warnning the the shorter to keep a safe collateral ratio and protect the safe of the bitassets. It will be very usefull if it have a reasonable rule.

if the force-settlement have a reasonable rule, it will protect the shorter which have a safe collateral ratio. If someone want to get enought bts, he can buy form the market or pay more high price than the maket from the safe collateral ratio, everyone will know how to do.

The old rule essentially says "bitCNY holders can FORCE-SETTLE their bitCNY to BTS at market trading price" (note: volume is limited by system parameters, and there is a fee, and a delay)

BSIP42 essentially says "bitCNY holders can EXCHANGE their bitCNY to BTS at market trading price" (note: price may be impacted by volume, or practically cause a delay)

If there is no sufficient limit order selling BTS, bitCNY borrowers will have to sell collateral anyway, effectively it's no difference.

[Thul3]

Just like @Thul3, if he politely ask and focus on the issues themselves

I guess i was more than polite at the beginning asking normal questions but got as response only silence or ignorance as some peoples attitude looked like they don't need to explain anything to the community anymore even they broke heavily a consensus without fearing any restrictions.

You are looking for somebody blameworthy ?
Maybe start looking together with bitcrab in the mirror.

Who was it who broke massivly community consensus on OMO and acted like nothing happened ?
Wasn't it even you who said bitcrab had to contact you how to enable TCR cause he couldn't find it risking that all collateral of the OMO fund would get margin called and that the OMO fund had been running all the time without TCR enabled and thats not acceptable ?
Who created BSIP42 without clear defenitions and without any transparancy to the community ,changing and experimenting in a small group where nobody from the community was informed what is really coming ?
Who said in threads it is only for bitCNY since its a liquid market and later quickly switched to bitUSD without even talking with the community if BSIP42 is a success ?
Who was it who started threatening witnesses with unvoting for not quickly adding new bitusd feed ?
Who banned a witness from a witness telegram channel ?
Who is using spring funds for Voting ?
I could keep going on.

My tone changed after i only recived ignorance ....and if you claim that bitcrab would have talked with me if i were more polite then i'm asking why didn't he responded to any of my concernes before where the tone was polite or emails i sent to him ?

Xeroc already attacked me that i have a personal vendetta against bitcrab which is not true at all but i'm a heavy supporter of bitshares and seeing the massiv change from a decentralised exchange to a centralised planed exchange without any transparency or discussion makes me mad no matter who is responsible for it.

[Thom]

@Thom, IMHO it's not your questioning about the changes that mattered, it's your tone and your attitude that mattered.

We're not afraid of rational/professional questioning on the rules/issues/solutions at all. But you were usually asking with doubt without understanding after I explained again and again, and even turned to question me (personal) but not the issues we're facing, which is not *that* rational/professional. I admit I'm unable to remain calm all the time.

Just like @Thul3, if he politely ask and focus on the issues themselves, rather than keeping attacking bitcrab the person, the issues he brought up would be discussed much deeper and broader. Current situation is, many community members chose to ignore his new posts, no matter whether the posts make sense, because, most of posts made by him in the past were garbage and don't worth reading.

It's hard to build a good conversation environment, but easy to destroy it.

Thank you abit for your comments. I recognize that I too let my emotions color my language more often than it should, and I am trying to do better with that.

This feed situation is stirring up emotions on both sides. I do understand the desire for more liquidity and adoption, but I'm not sure BSIP42 advocates appreciate how important it is to maintain derivatives with at least 100% collateral at all times, or about why there are differences between typical centralized mainstream financial institutions and the BitShares ecosysem. The distinctions are important to understand. Promises should not be made and broken, it introduces distrust and has a negative impact on reputation (as do many other things).

Crypto was created to disrupt corrupt mainstream financial institutions and provide an alternative to them that is based on sound monetary policies. Some think sound policies are debt based Keynesian policies and others believe the Austrian perspective is better. Both can't be right, and it is very difficult for me to understand how anyone can support a Keynesian view with the 100+ years of evidence it doesn't work (except for the oligarchs). Can we all come to consensus that we want more financial freedom not less? Can we all come to consensus we can't replicate a mainstream approach or we will find ourselves right back to the same problems running rampant in mainstream financial institutions?

As I said before, I believe there will always be a tension between traders and savers. It is up to us to establish criteria that both sides can live with. Is that possible? I actually don't know. When force and coercion are the tools used I don't think a consensus is possible. Force is divisive.

We all need to take a step back and be more thoughtful and cooperative to achieve consensus. Attitudes are indeed difficult to smooth out when there are strong disagreements. I have questioned from the start why we can't be more methodical and systematic in our efforts to conduct the BSIP42 experimentation so witnesses would enthusiastically participate. When force and coercion entered the picture it drove a wedge into the community.

As xeroc said, those who oppose BSIP42 do so b/c there is such a huge push to adopt it so fast, without *any* findings published before moving on to try same approach on another asset. Again, without regard to broken smartcoins promise of fair redeem-ability market rate) or that other assets have far less liquidity. 

[abit]

@Thom, IMHO it's not your questioning about the changes that mattered, it's your tone and your attitude that mattered.

We're not afraid of rational/professional questioning on the rules/issues/solutions at all. But you were usually asking with doubt without understanding after I explained again and again, and even turned to question me (personal) but not the issues we're facing, which is not *that* rational/professional. I admit I'm unable to remain calm all the time.

Just like @Thul3, if he politely ask and focus on the issues themselves, rather than keeping attacking bitcrab the person, the issues he brought up would be discussed much deeper and broader. Current situation is, many community members chose to ignore his new posts, no matter whether the posts make sense, because, most of posts made by him in the past were garbage and don't worth reading.

It's hard to build a good conversation environment, but easy to destroy it.

[Thom]

@Jerry, how about the both of us come to a compromise in that we allow the witnesses
to decide how to go forward and whether or not they want to run BSIP42 on bitUSD, or
not. I think, as a proxy, we shouldn't threaten them with the removal of our votes
just because they support(or not support) a BSIP that actually gives the freedom of
choice to them (the witnesses). With that said, I will retract my statement of removing
votes from BSIP2-bitUSD witnesses and would like to keep rational and
constructive discussion like this one going.

There doesn't seem to be a very "fair" perspective on both sides.

The entire design of SmartCoins is at stake here, so we need to get this right. There are aspects of the design that favor one group over another, mainly it favors those going long over shorters. I can certainly understand why traders and those shorting the market want to alter the design, so it gives them an advantage! No mystery there.

I also recognize there is no liquidity without shorters to create the botAssets, so some type of true balance is needed to be discovered.

I will always oppose changes that allow collateral to drop below 100% which risks the collateral of those who maintain it, and which encourages debt building. Debt is what is destroying the world but unfortunately there are too many irresponsible people who think *they* won't get burned when the collapse finally arrives. There are willing to allow their positions to become under collateralized. Too many want a subsidy to from the public trough to pay their fees and don't care about the long term state of the trough and whether it will be there tomorrow.

Verbaltech2 was one of the first "casualties" as Bitcrab and Abit removed their votes in support of my witness when I questioned them about BSIP42. Better than force witnesses to conform to an experimental algorithm would be to ask them to stop feeding the [CNY] price during the experimentation if they are uncertain about the best way to proceed. That would be a less dictatorial, heavy handed way to encourage consensus rather than divide the community.

I like how you phrased your position change xeroc, and appealed to the eastern community not to penalize witnesses and coerce them into supporting BSIP42 prior to seeing info about what was learned from CNY experimentation (not just end result of better peg but how the BSIP42 algorithm achieves that; what tradeoffs were made? (Don't just say, "here use this it works", instead respect us a peers and persuade us with facts and data, don't threaten us when we ask questions or want to understand). Abit says he's not so great at ELI5, but the burden of proof lies with the one making a claim. It's sad to see how quickly people take to voilence when they can't use words effectively.

Xeroc said that as a counter position to proxies pulling their votes for witnesses that want to see the evidence before they alter what they've been doing for the last 3 years.

The nature of SmartCoins is what is at issue here. We need to define a balance between safety and liquidity. It is difficult b/c we don't have a consensus on economic principles. Many don't see the risks involved with debt. Many don't believe they need any collateral b/c they have  an overly high view of their trading skills and they see it as wasted capital tied up, not as what makes the financial system stable and safe for all.

BitShares has been around and around trying to come up with a SmartCoin algorithm that strikes that balance but I fear due to differences in economic principles there will always be a strong tension by one camp or another to change the rules to their advantage. Remember, before the promise of redeem-ability through forced settlement people were creating sock puppet accounts and draining the reserve pool. That problem is no more.

The principle of sufficient collateral is one of the major characteristics of BitShares SmartCoins that separate them from over-leveraged mainstream financial derivative products. You can't have a house of cards debt bubble if your bets are backed by adequate collateral. Reducing collateral requirements may appease shorters and improve liquidity, but at the expense of ecosystem and investor safety.

[binggo]

create more sell orders by BSIP42

I don't think this is a market action，it‘s BSIP 42 action，which create a overflow of collateral by a high feed price and then reduce the feed price to sell these overflow of collateral.

also i don't think the 110%MSSR is a market action, it's disrupted the market too much.

otherwise，the“impossible trinity” is not very suitable for the stablecoins.

and i don't agree the opinion of the force-settlement，the design of the force-settlement is not for getting enough fair price of bts，it is used for warnning the the shorter to keep a safe collateral ratio and protect the safe of the bitassets. It will be very usefull if it have a reasonable rule.

if the force-settlement have a reasonable rule, it will protect the shorter which have a safe collateral ratio. If someone want to get enought bts, he can buy form the market or pay more high price than the maket from the safe collateral ratio, everyone will know how to do.

The old rule essentially says "bitCNY holders can FORCE-SETTLE their bitCNY to BTS at market trading price" (note: volume is limited by system parameters, and there is a fee, and a delay)

BSIP42 essentially says "bitCNY holders can EXCHANGE their bitCNY to BTS at market trading price" (note: price may be impacted by volume, or practically cause a delay)

If there is no sufficient limit order selling BTS, bitCNY borrowers will have to sell collateral anyway, effectively it's no difference.

The old rule is not fair and flexible，so i said  if it have a reasonable rule.

BSIP42 is a good method for now（must limited range），but can't be a  long-term project.

no need too much argument for these, Solved through consultation is the best way.

[abit]

create more sell orders by BSIP42

I don't think this is a market action，it‘s BSIP 42 action，which create a overflow of collateral by a high feed price and then reduce the feed price to sell these overflow of collateral.

also i don't think the 110%MSSR is a market action, it's disrupted the market too much.

otherwise，the“impossible trinity” is not very suitable for the stablecoins.

and i don't agree the opinion of the force-settlement，the design of the force-settlement is not for getting enough fair price of bts，it is used for warnning the the shorter to keep a safe collateral ratio and protect the safe of the bitassets. It will be very usefull if it have a reasonable rule.

if the force-settlement have a reasonable rule, it will protect the shorter which have a safe collateral ratio. If someone want to get enought bts, he can buy form the market or pay more high price than the maket from the safe collateral ratio, everyone will know how to do.

The old rule essentially says "bitCNY holders can FORCE-SETTLE their bitCNY to BTS at market trading price" (note: volume is limited by system parameters, and there is a fee, and a delay)

BSIP42 essentially says "bitCNY holders can EXCHANGE their bitCNY to BTS at market trading price" (note: price may be impacted by volume, or practically cause a delay)

If there is no sufficient limit order selling BTS, bitCNY borrowers will have to sell collateral anyway, effectively it's no difference.

[abit]

Your logic is sound except for one point:

That said, if we want a fixed exchange rate, we need to "break" the promises somehow, or to limit capital movement somehow. This sounds unacceptable for some people, but unfortunately it's the fact.

You don't need to break promises. You don't need to continue making the same promises while you're actively breaking them.

The original design of our SmartCoins favours free capital movement and independent policy over fixed exchange rate.

You prefer fixed exchange rate over independent policy. Fine. You can have that without breaking any promises: create a new type of SmartCoins.

So we have to agree to disagree here.

While we didn't favor fixed exchange rate, all the promotions about bitAssets are saying they are meant to be pegged, aka meant to have fixed exchange rate, and of course also promoted as collateralized. Perhaps some people already knew it's impossible to have both and left. People who stayed are struggling to find a balance between them, in the end, we have only one product with somehow mismatching rules and expectations.

So the fact is we have only one product, and we want mass adoption. The debate is about what the rule should be in order to gain mass adoption. We do have options:
* create a new product, or
* refine current product.

It's clear that it takes great time and efforts to build recognition and reputation for new products, especially when it competes with the old product, due to lack of first-mover advantage. Yes we *can* create a new product, but IMHO it's not the best approach for the whole community.

Your logic is sound except for one point:

That said, if we want a fixed exchange rate, we need to "break" the promises somehow, or to limit capital movement somehow. This sounds unacceptable for some people, but unfortunately it's the fact.

You don't need to break promises. You don't need to continue making the same promises while you're actively breaking them.

The original design of our SmartCoins favours free capital movement and independent policy over fixed exchange rate.

You prefer fixed exchange rate over independent policy. Fine. You can have that without breaking any promises: create a new type of SmartCoins.

The problem with creating a new SmartCoin is the adoption part, network effects are really hard to bootstrap at first. I think that's why theres been this push for changing the existing SmartCoins. Also there's the problem of naming. It's hard to name the new assets without confusing users

Exactly.

We can remember we were feeding around +15% offset on bitCNY price when the premium was around 3%.

So margin calls were settled at 15% offset? With 10% MSSR you have rewareded shorters with 5% for not providing sufficient collateral. Good job. BitShares was always about right?

No, margin calls will be filled at par value, of course, if need to fill them to maintain the peg. When there are lots of limit orders selling the collateral asset (BTS) at par value (below feed/MSSR), it means there are sufficient liquidity, why we have to force the borrowers to sell? Buyers don't care they bought from whom, as long as able to buy at desired price (of course volume affects price). When there is no enough liquidity, witnesses will adjust down the feed according to the feedback mechanism, at that time margin calls will be filled, yes, at par value.

It's true that force-settlements will be executed at 15% offset plus fee. So we have this PR https://github.com/bitshares/bitshares-ui/pull/1847 and even the discussion about disabling forced settlement, for better UX.

[armin]

Your logic is sound except for one point:

That said, if we want a fixed exchange rate, we need to "break" the promises somehow, or to limit capital movement somehow. This sounds unacceptable for some people, but unfortunately it's the fact.

You don't need to break promises. You don't need to continue making the same promises while you're actively breaking them.

The original design of our SmartCoins favours free capital movement and independent policy over fixed exchange rate.

You prefer fixed exchange rate over independent policy. Fine. You can have that without breaking any promises: create a new type of SmartCoins.

The problem with creating a new SmartCoin is the adoption part, network effects are really hard to bootstrap at first. I think that's why theres been this push for changing the existing SmartCoins. Also there's the problem of naming. It's hard to name the new assets without confusing users

[binggo]

create more sell orders by BSIP42

I don't think this is a market action，it‘s BSIP 42 action，which create a overflow of collateral by a high feed price and then reduce the feed price to sell these overflow of collateral.

also i don't think the 110%MSSR is a market action, it's disrupted the market too much.

otherwise，the“impossible trinity” is not very suitable for the stablecoins.

and i don't agree the opinion of the force-settlement，the design of the force-settlement is not for getting enough fair price of bts，it is used for warnning the the shorter to keep a safe collateral ratio and protect the safe of the bitassets. It will be very usefull if it have a reasonable rule.

if the force-settlement have a reasonable rule, it will protect the shorter which have a safe collateral ratio. If someone want to get enought bts, he can buy form the market or pay more high price than the maket from the safe collateral ratio, everyone will know how to do.

[pc]

Your logic is sound except for one point:

That said, if we want a fixed exchange rate, we need to "break" the promises somehow, or to limit capital movement somehow. This sounds unacceptable for some people, but unfortunately it's the fact.

You don't need to break promises. You don't need to continue making the same promises while you're actively breaking them.

The original design of our SmartCoins favours free capital movement and independent policy over fixed exchange rate.

You prefer fixed exchange rate over independent policy. Fine. You can have that without breaking any promises: create a new type of SmartCoins.

We can remember we were feeding around +15% offset on bitCNY price when the premium was around 3%.

So margin calls were settled at 15% offset? With 10% MSSR you have rewareded shorters with 5% for not providing sufficient collateral. Good job. BitShares was always about right?

[abit]

First, let’s define the vision of smartcoin,  in my view, it is 1. enough accurate pegging and 2. enough liquidity. based on these smartcoin will seek wildly adoption comparing to USDT.

I think this is already where people may have a different vision.
For me (and others) the core value proposition of bitassets was:
* always fully collateralized
* settlement available to obtain collateral at a "fair" price.

With respect to settlement, the community has already moved from a
settlement at parity 1:1 with the introduction of the settlement
offset to incentivize shorters to increase liquidity.

My feeling is that those optimization criteria (tight pegging & liquidity
vs. backing and settlement) may not work out together, at least not in
the short term.

If research a bit about economy, there is a famous "impossible trinity" theory. Link: https://en.wikipedia.org/wiki/Impossible_trinity

"
The impossible trinity (also known as the trilemma) is a concept in international economics which states that it is impossible to have all three of the following at the same time:

* a fixed foreign exchange rate
* free capital movement (absence of capital controls)
* an independent monetary policy
"

Actually, IMHO, what we want for bitAssets are "a fixed foreign exchange rate" and "free capital movement (absence of capital controls)", so theoretically we have to give up "independent monetary policy". This means we have to have weaker promises, need to feed whatever price the market demands, but not what we think is fair (read: the trading price, or limitations, etc).

Being able to settle unlimited volume at par is a very strong promise, thus will certainly reflect on prices -- as a premium. Always having full collateral is another strong promise which will cause premium as well. As described in BSIP42, it is the too strong promises/guarantees that caused the premiums. That said, if we want a fixed exchange rate, we need to "break" the promises somehow, or to limit capital movement somehow. This sounds unacceptable for some people, but unfortunately it's the fact.

Having a hourly force-settle volume limit is actually limiting "free capital movement", which more or less helped "fixed exchange rate" plus "independent monetary policy". Having a delay on force-settlement is another limitation on free capital movement. Making more use of force-settlement will lead to more chance of hitting these limits, which effectively weaken the promise. On the opposite, traders are always able to trade freely on market which indicates free capital movement, so if we have enough liquidity around par, it's a win-win. In case when more people want to force-settle, actually they want to buy BTS with bitAssets, we look for a way to fulfill the demand, other than force-settlement, the approach proposed by BSIP42 is to create more sell orders aka margin calls by increasing requirements on collateral ratio, so actually this approach gives up "independent monetary policy" in the hope of maintaining "free capital movement" and "fixed exchange rate".

It's absurd to say that there are people have a lot of money want to buy but there is no enough liquidity. If they really have money and want to buy, please put orders onto the market, I believe the orders can get filled if they offered a fair price. Actions are louder than words. "want to buy if there is a lower price" is actually "don't want to buy", IMHO it means the demand is not strong enough. If there are real demands, they'll reflect as price movements. Being able to buy a lot in a short period even in an illiquid market, without affecting trading price, is just unrealistic. If we promised that, something else will certainly go wrong, E.G. unable to peg well or few participants/opponents.

All these are logical thinking. If someone is unable to think logically, It's really hard for me to explain.

[abit]

I'm very curious as to what you believe it tells seeing as the majority of the witnesses are still feeding BSIP42 feeds and median/price is still with premium.

I just said "seems", and actually some witnesses that had applied BSIP42 on bitUSD now returned back, they now feed price much lower than the median when there is still obvious premium, including delegate.freedom, sahkan-bitshares, witness.yao, xn-delegate, bangzi, witness.hiblockchain...

Just wanted to clear that up because most people are not able to follow the bsip42 discussions. Yes some witnesses switched but the majority are still feeding w/ premium hence anything in the chart has nothing to do with xerocs announcement or a change in pricefeeding (since there wasn't one yet)

From my observation, although there were 15/27 witnesses trying to feed bitUSD according to bsip42, which is more than 1/2, the data says 2 of them have not configured the feedback algorithm well, that said, while bitUSD was still at premium, these 2 witnesses were feeding slightly lower-than-median price (BTS/bitUSD) (although higher than trading price), thus prevented the median feed price from adjusting towards to the "correct" direction. These 2 witnesses are: witness.still and btspp-witness. Likely they manually set a limitation on the adjustment that caused the result.

ok...thanks for clearing that up Abit.

Still, BSIP42 feeds are relatively close clustered together around a higher price just as non-BSIP42 feeds are clustered around a lower price. Final median might not be as high as it would've been had all witnesses adopted BSIP42 but i don't think the difference is big enough to "blame" for the jump in the chart Jerry supplied.

I only mentioned it because both of you have very solid arguments FOR bsip42 (although harder to follow for a big part of the community) which I'm following with great attention and it's a shame to dilute them with a reference to what IMHO is a potentially unrelated market move.

The effect is not linear. We can remember we were feeding around +15% offset on bitCNY price when the premium was around 3%. When the premium reduced to 0%, the offset didn't change/decrease much. Then in the following days, the offset decreased slowly while premium was kept around 0%. So, IMHO the manual limitation set by the 2 witnesses at 10% or so on bitUSD does caused the "jump".

Currently the median price is exactly the higher one fed by the 2 witnesses. If there is one more witness that is feeding according to bsip42 with looser limitation, median will no longer be one of the 2, but will move higher, then the premium will decrease consequently. IMHO xeroc's announcement yesterday did lead to less witnesses applying bsip42, then indirectly increased bitUSD premium.

One thing to clarify: some people misunderstood bsip42, thought witnesses need to "predict" the trend, which is incorrect. Actually BSIP42 is to feedback with existing data, the logic is clear as described by bitcrab, but we do need to explain it better to the community. I'm well aware that I'm not good at ELI5 at all, wish you guys can do better on this.

The core ideas ... is negative feedback - while one smartcoin is in positive premium, loose the smartcoin creation condition， while one smartcoin is in negative premium， tighten the smartcoin creation condition.

[Aleksandr Kwaskoff]

I hope any manipulations with bit assets and collateral not compromise bitshares for world. 

[clockwork]

I'm very curious as to what you believe it tells seeing as the majority of the witnesses are still feeding BSIP42 feeds and median/price is still with premium.

I just said "seems", and actually some witnesses that had applied BSIP42 on bitUSD now returned back, they now feed price much lower than the median when there is still obvious premium, including delegate.freedom, sahkan-bitshares, witness.yao, xn-delegate, bangzi, witness.hiblockchain...

Just wanted to clear that up because most people are not able to follow the bsip42 discussions. Yes some witnesses switched but the majority are still feeding w/ premium hence anything in the chart has nothing to do with xerocs announcement or a change in pricefeeding (since there wasn't one yet)

From my observation, although there were 15/27 witnesses trying to feed bitUSD according to bsip42, which is more than 1/2, the data says 2 of them have not configured the feedback algorithm well, that said, while bitUSD was still at premium, these 2 witnesses were feeding slightly lower-than-median price (BTS/bitUSD) (although higher than trading price), thus prevented the median feed price from adjusting towards to the "correct" direction. These 2 witnesses are: witness.still and btspp-witness. Likely they manually set a limitation on the adjustment that caused the result.

ok...thanks for clearing that up Abit.

Still, BSIP42 feeds are relatively close clustered together around a higher price just as non-BSIP42 feeds are clustered around a lower price. Final median might not be as high as it would've been had all witnesses adopted BSIP42 but i don't think the difference is big enough to "blame" for the jump in the chart Jerry supplied.

I only mentioned it because both of you have very solid arguments FOR bsip42 (although harder to follow for a big part of the community) which I'm following with great attention and it's a shame to dilute them with a reference to what IMHO is a potentially unrelated market move.

[abit]

I'm very curious as to what you believe it tells seeing as the majority of the witnesses are still feeding BSIP42 feeds and median/price is still with premium.

I just said "seems", and actually some witnesses that had applied BSIP42 on bitUSD now returned back, they now feed price much lower than the median when there is still obvious premium, including delegate.freedom, sahkan-bitshares, witness.yao, xn-delegate, bangzi, witness.hiblockchain...

Just wanted to clear that up because most people are not able to follow the bsip42 discussions. Yes some witnesses switched but the majority are still feeding w/ premium hence anything in the chart has nothing to do with xerocs announcement or a change in pricefeeding (since there wasn't one yet)

From my observation, although there were 15/27 witnesses trying to feed bitUSD according to bsip42, which is more than 1/2, the data says 2 of them have not configured the feedback algorithm well, that said, while bitUSD was still at premium, these 2 witnesses were feeding slightly lower-than-median price (BTS/bitUSD) (although higher than trading price), thus prevented the median feed price from adjusting towards to the "correct" direction. These 2 witnesses are: witness.still and btspp-witness. Likely they manually set a limitation on the adjustment that caused the result.

[xeroc]

First of all,
thank you, Jerry, for taking the time to put down in written.

This clears up a few things for me, in particular, the uncertainty
about why you see things the way you see them.

Secondly, I think we can fix this, let me address your points below.

Sad to see these, however, I think I can understand why these actions comes out, I was also an opponent to BSIP42 at the very beginning of discussion, but step by step I was persuaded by others, especially by abit, so here I’ll also try to  summary some key points of the solution and hope that can help to persuade.

Provided that the Eastern community is in discussion about this
for much much longer than the Western community, please give me
the benefit of the doubt. In a sense, I am now in the very same
situation that you have been in, namely as an opponent, while you
are trying to convince the community (and me) about why the approach
make sense. The concept behind BSIP42 is just so different that
most of the Western community need some time to understand and
I feel it is the obligation of the BTS voters and proxies to work
out a way forward together, as a community.

That said, I would like to request that we keep communications up
and try to find common ground where we agree and work forward from there.

First, let’s define the vision of smartcoin,  in my view, it is 1. enough accurate pegging and 2. enough liquidity. based on these smartcoin will seek wildly adoption comparing to USDT.

I think this is already where people may have a different vision.
For me (and others) the core value proposition of bitassets was:
* always fully collateralized
* settlement available to obtain collateral at a "fair" price.

With respect to settlement, the community has already moved from a
settlement at parity 1:1 with the introduction of the settlement
offset to incentivize shorters to increase liquidity.

My feeling is that those optimization criteria (tight pegging & liquidity
vs. backing and settlement) may not work out together, at least not in
the short term.

to improve pegging and also liquidity, now there are 2 solutions:

1. BSIP42
2. To dynamically adjust MCR

The core ideas of these 2 solutions is negative feedback - while one smartcoin is in positive premium, loose the smartcoin creation condition， while one smartcoin is in negative premium， tighten the smartcoin creation condition.

Here, I think we can all agree. The "premium" needs to be fed back into the
bitasset somehow. My understanding is that the first approach is chosen
solely because the second approach is currently not available due to
backend limitations (that abit is fortunately already working on - afaik).

With that said, I do think applying BSIP42 in the short term is quite o.k.,
but long term, I would like to see MCR adjusted instead so that we can
move back to the price feed describing the "fair" price - or at least something
that is very close to it. Who knows, maybe we find out that we need to do both
in the future.

this naturally lead to one question: in bear market both solutions lead to higher black swan risks, a higher feed price lead to higher called price and also higher global settlement price, while solution2 also may lead to a close to 1 collateral ratio.

Ultimately, I believe both proposals are effectively the same when it comes to
overall collateral ratio. BSIP42 just changes the price for settlement and margin
calls.

Also, I do not understand the fear people have with respect to "black swan" (global
settlement). From the perspective of bitCNY/bitUSD, a black swan (caused by a short dip
in BTS price) does not actually affect bitUSD pricing. However, what does change is the
excess collateral that is taken from the shorters. With that said, instead of
removing global settlement, why not try to find another solution for treating global
settlements so that short positions are not punished for a single position not being
collateralized, sufficiently? With that in mind, please think about what it could mean
to remove the short protection ratio if the collateral ratio goes below 150% (or so).

Of course, if we want to keep bitassets "fully" collateralized, then we cannot allow
OVERALL collateral ratio to go below 100%. We may find a way to still allow this for
individual call positions, as long as the OVERALL collateralization is provided. Also,
there needs to be a penalty for those not keeping collateral at over 100%, otherwise,
those that provide excess collateral need to pay the bill, which is unfair.

Let’s do a idea test: if we disable black swan setting, what will happen:
My conclusion is: the actual CR has very low chance to fall below 1, even it fall below 1, it is easy for it to jump above 1.

Easy to understand: if one can borrow with actual CR < 1, he have a infinite leverage and can borrow smart coin and buy BTS endlessly, this is not sustainable as the rapidly increased smartcoin quantity will rapidly lower the smart coin premium, with the negative feedback mechanism  the actual CR will rapidly return above 1, either by lowering price feed in soluton1 or increasing MCR in solution2.

If you have a call position with CR <1, and the MCR (solution 2) is raised, then
that call position will be margin called and needs to buy from the market. Are
you sure that will help liquidity, because I believe that will eat liquidity in
the markets.

In practice, we can expect that when actual CR fall close to 1, the “borrow and buy” activity will happen in big quantity that can resist the actual CR to fall continually, there is a very very little chance for black swan to happen even we keep the black swan setting with solution1 or solution2.

I agree with you that when there is a premium and it is "cheap" to borrow new bitassets,
that this will lead to a reduced premium.

“harsh collateral rule lead to high risk” is one essential experience we lernt in the past several years, increasing force settlement offset, target CR both follow an essential logic: try to be more friendly to debt position owners, request least to borrowers. In BSIP42 the new idea is to let the market decide what an actual collateral ratio is appropriate, this not only improve peg, but also help to convert the demand of smart coin to purchasing power to BTS. The latter make big sense for ecosystem grow up.

We both agree on bitassets having a supply side problem and that
we should allow shorters to easier borrow bitassets. According to
my optimization criteria, I still believe we must not allow bitassets
to become undercollateralized (overall - we may find a way to allow
individual positions to go CR < 1)

After BSIP applied to bitUSD the premium fell drastically, we hope we can keep this trend continue until to a close to 0 premium.

Well, arguable, that is expected behavior because we are "forcing" the marketing
to trade according to parity, we do not provide incentive for the market to
move to parity on its own. This difference is what does sit well with the Western
community.

bitUSD belong to the people all around the world, in China there are also many big bitUSD players. it will benefit the whole ecosystem to keep better peg and better liquidity, I hope the whole community can take action to protect the good pegging status of bitUSD, if we remove BSIP42 at this moment, bitUSD will return to high premium and disappoint potential users again, don’t make the previous efforts wasted.

If anyone would like to try some other solutions like solution2, please leave BSIP42 there and develop the new BSIP, go through the voting->testing->implementation process, if there’s strong enough consensus, it can cover BSIP42.

I agree with this approach - in particular I do want to see how well solution 2
may (or may not) work.

it’s not easy for the whole community to make bitUSD to go on a right way, I now have no choice but try my best to protect BSIP42 from being removed from bitUSD, spring-team now only support the witnesses that apply BSIP42 to bitUSD, if later this week xeroc unvote the witnesses that support BSIP42 on bitUSD, proxy bitcrab will unvote the witnesses that do not support BSIP42 on bitUSD.

I also hope voters that prefer bitUSD to have a better peg/liquidity to take similar actions. save bitUSD, please!

I agree that life as a proxy is not as easy as people may believe.

@Jerry, how about the both of us come to a compromise in that we allow the witnesses
to decide how to go forward and whether or not they want to run BSIP42 on bitUSD, or
not. I think, as a proxy, we shouldn't threaten them with the removal of our votes
just because they support(or not support) a BSIP that actually gives the freedom of
choice to them (the witnesses). With that said, I will retract my statement of removing
votes from BSIP2-bitUSD witnesses and would like to keep rational and
constructive discussion like this one going.

[bitcrab]

Just wanted to clear that up because most people are not able to follow the bsip42 discussions. Yes some witnesses switched but the majority are still feeding w/ premium hence anything in the chart has nothing to do with xerocs announcement or a change in pricefeeding (since there wasn't one yet)

why nothing to do? it's clear that it's xeroc's announcement caused some witnesses to switch back, and then caused the median lower than it would be if they haven't switched back, this means the negative feedback power are not as strong as before.

[clockwork]

I'm very curious as to what you believe it tells seeing as the majority of the witnesses are still feeding BSIP42 feeds and median/price is still with premium.

I just said "seems", and actually some witnesses that had applied BSIP42 on bitUSD now returned back, they now feed price much lower than the median when there is still obvious premium, including delegate.freedom, sahkan-bitshares, witness.yao, xn-delegate, bangzi, witness.hiblockchain...

Just wanted to clear that up because most people are not able to follow the bsip42 discussions. Yes some witnesses switched but the majority are still feeding w/ premium hence anything in the chart has nothing to do with xerocs announcement or a change in pricefeeding (since there wasn't one yet)

[bitcrab]

I'm very curious as to what you believe it tells seeing as the majority of the witnesses are still feeding BSIP42 feeds and median/price is still with premium.

I just said "seems", and actually some witnesses that had applied BSIP42 on bitUSD now returned back, they now feed price much lower than the median when there is still obvious premium, including delegate.freedom, sahkan-bitshares, witness.yao, xn-delegate, bangzi, witness.hiblockchain...

[clockwork]

this biUSD/bitCNY chart can tell something.

bitCNY has pegged well for some days, as bitUSD is still in high premium, the ratio is kept above 7.1 for some days.

about 5 days ago, BSIP42 began working at bitUSD and the ratio fall from above 7.1 to below 6.9, a good trend to return to good peg.

however after xeroc's announcement, it seems some witnesses return back to the non-BSIP42 price feeding algorithms, and  the ratio begin to go up, an off-peg process begin.

I'm very curious as to what you believe it tells seeing as the majority of the witnesses are still feeding BSIP42 feeds and median/price is still with premium.

[bitcrab]

this biUSD/bitCNY chart can tell something.

bitCNY has pegged well for some days, as bitUSD is still in high premium, the ratio is kept above 7.1 for some days.

about 5 days ago, BSIP42 began working at bitUSD and the ratio fall from above 7.1 to below 6.9, a good trend to return to good peg.

however after xeroc's announcement, it seems some witnesses return back to the non-BSIP42 price feeding algorithms, and  the ratio begin to go up, an off-peg process begin.

[armin]

Some thoughts:

The premium seems to be "the cost of securing collateral and preventing black swans"

Premium is not good for shorters, but good for the blockchain.

Shorters may seem disadvantaged, and actually it is true. But they are also disadvantaged in traditional markets, ie you need to pay interest on margin loans

[abit]

Someone with experiences about combining charts please help on this, try combine these 3 data sets into one chart:
1. DEX: BTS/bitUSD historical trading price. (data source: wallet.bitshares.org or any public API node)
2. DEX: BTS/bitUSD historical median price feed. (data source: elastic_objects plugin, kabana)
3. CEX: BTS/USDT historical price

Then calculate bitUSD premium = price_3 / price_1


By the way https://coinmarketcap.com/currencies/bitusd/ has a chart for reference.


If you have better suggesting or data sources, please leave a comment.

[sschiessl]

This is a lightly modified copy of a post in the other thread, but I think it applies in this context even better.

I believe one of the main concerns is lack of readily available information in the approach, which the (mostly english) community desires. I would also like to see a report in the matter (please don't mention that it's all on chain ...). Without even discussing the content of BSIP42 (and I personally don't oppose it) this is enough for me to think we should take a moment and properly analyze how it affected bitCNY.

For example, provide measures over past weeks since BSIP42 is active (and possibly before that timeframe for a comparison):

• old price feed
• effective values of MCR, MSSR and FSO (consider differences in the feeds)
• effective offboarding ratios when
  
  • selling bitCNY for BTS (and BTS for CNY)
  • when settling CNY for BTS (and selling BTS for CNY)
  • offboarding directly with bitCNY (aka the peg)

Those measure are interesting for the common user. I believe you would see that there is a jump when BSIP42 was activated,
and it will show that the values are normalizing over time (which would show that the market accepts the peg, and what the consequences are).
The effectiveness of the BSIP 42 can directly be judged with those measure, furthermore it will be clearer where the premiums are paid now. It will at least paint a much clearer picture for the community.

All those values measures might be clear to you, but not to the common eye.

[bitcrab]

Recently there are some BSIP42 relevant actions: proxy openledger and michaelx vote to oppose BSIP42, proxy xerox claimed that will unvote witnesses that apply BSIP to bitUSD.

Sad to see these, however, I think I can understand why these actions comes out, I was also an opponent to BSIP42 at the very beginning of discussion, but step by step I was persuaded by others, especially by abit, so here I’ll also try to  summary some key points of the solution and hope that can help to persuade.

First, let’s define the vision of smartcoin,  in my view, it is 1. enough accurate pegging and 2. enough liquidity. based on these smartcoin will seek wildly adoption comparing to USDT.

If you do not agree on these, if you think “premium is good, volatility is good, I am bitUSD holder don’t remove the premium” you need not to read follows.

to improve pegging and also liquidity, now there are 2 solutions:

1. BSIP42
2. To dynamically adjust MCR

The core ideas of these 2 solutions is negative feedback - while one smartcoin is in positive premium, loose the smartcoin creation condition， while one smartcoin is in negative premium， tighten the smartcoin creation condition.

this naturally lead to one question: in bear market both solutions lead to higher black swan risks, a higher feed price lead to higher called price and also higher global settlement price, while solution2 also may lead to a close to 1 collateral ratio.

Let’s do a idea test: if we disable black swan setting, what will happen:
My conclusion is: the actual CR has very low chance to fall below 1, even it fall below 1, it is easy for it to jump above 1.

Easy to understand: if one can borrow with actual CR < 1, he have a infinite leverage and can borrow smart coin and buy BTS endlessly, this is not sustainable as the rapidly increased smartcoin quantity will rapidly lower the smart coin premium, with the negative feedback mechanism  the actual CR will rapidly return above 1, either by lowering price feed in soluton1 or increasing MCR in solution2.

In practice, we can expect that when actual CR fall close to 1, the “borrow and buy” activity will happen in big quantity that can resist the actual CR to fall continually, there is a very very little chance for black swan to happen even we keep the black swan setting with solution1 or solution2.

“harsh collateral rule lead to high risk” is one essential experience we lernt in the past several years, increasing force settlement offset, target CR both follow an essential logic: try to be more friendly to debt position owners, request least to borrowers. In BSIP42 the new idea is to let the market decide what an actual collateral ratio is appropriate, this not only improve peg, but also help to convert the demand of smart coin to purchasing power to BTS. The latter make big sense for ecosystem grow up.

After BSIP applied to bitUSD the premium fell drastically, we hope we can keep this trend continue until to a close to 0 premium.

bitUSD belong to the people all around the world, in China there are also many big bitUSD players. it will benefit the whole ecosystem to keep better peg and better liquidity, I hope the whole community can take action to protect the good pegging status of bitUSD, if we remove BSIP42 at this moment, bitUSD will return to high premium and disappoint potential users again, don’t make the previous efforts wasted.

If anyone would like to try some other solutions like solution2, please leave BSIP42 there and develop the new BSIP, go through the voting->testing->implementation process, if there’s strong enough consensus, it can cover BSIP42.

it’s not easy for the whole community to make bitUSD to go on a right way, I now have no choice but try my best to protect BSIP42 from being removed from bitUSD, spring-team now only support the witnesses that apply BSIP42 to bitUSD, if later this week xeroc unvote the witnesses that support BSIP42 on bitUSD, proxy bitcrab will unvote the witnesses that do not support BSIP42 on bitUSD.

I also hope voters that prefer bitUSD to have a better peg/liquidity to take similar actions. save bitUSD, please!

The next work day I’ll visit finance office to request them to remove setting proxy of binance-bitshares-gvbdb84k6h as openledger.