Author Topic: New BSIP:GS protection via core code  (Read 22198 times)

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Offline bitcrab

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I'm for the 4th option now:
* allow undercollateralization
* no globally settlement
* has individual settlement, the system take over the undercollateralized debt positions (which would form a pool)
* when undercollateralization happens and someone tries to settle, fill the settlement request with the positions with lowest CR (can be the pool) first, so first settler will get less

so the pool as a debt position may have CR<1, when some tries to settle, how can the pool fulfill the request with CR<1? or the pool can only fulfill the request with CR>1?
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Offline abit

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The word "settle" is used in too many places but means different things.


I was referring to "Force Settlement" and the idea that the first person that settles bad debt gets less BTS.
Current rule aka GS means everyone who settles bad debt gets less BTS.

Yes, and that's bad business. And how about if we introduce a 24hr debt settlement where the debt holder gets a chance to close his debt before GS?
Before discussing your idea, how about you think about the 4 options I described?
It's better if you can explain what are the pros and cons first then ask others.

In your words you mentioned "debt holders", I guess you mean "debt position holders"?
When the debt positions turned into margin calls, the debt position holders are already willing to close their positions. It's that nobody buys into the margin calls caused the final undercollateralization. It's the debt asset holders' fault.

When it's already undercollateralized, what's the use of the 24 hours? Assume some debt asset holders will settle, what's the fair price? where to get the collateral to pay them? You still need to face the fact: whether first settler will get less.
« Last Edit: July 19, 2019, 02:07:42 pm by abit »
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Offline abit

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The market will run as your thought? en,that's very interesting.

How about we just increase MSSR to to least 5%? Margin calls will be bought before GS happens. If you continue to 100% protect the debt holders GS events will happen all the time.

If you settle the under collateralized positions to smart coin owners that's just stealing from them and goes against DEX rules.

GS happens because of 1 thing:
1. debt positions don't adjust debt

It's that undercollateralization happens ..., not GS happens .... Whether to GS is what we're discussing, aka whether to change the rule.

Quote

To correct that DEX should:
1. Margin call their position with enough incentive for the position to be liquidated (MSSR), the margin call should be such that debt holder would want to adjust their debt or close it.

We didn't find the way so far, as you can see, changing MSSR didn't work.

You think they "should" do it, but they didn't do it. It means you are wrong, but not them.


Simply, collateralized debt means if you can't pay the debt, you lose the collateral, but nothing more.
When undercollateralization happens, the debt position holder is already prepared to lose the whole collateral.
It's not justice to ask debt position holders to put more funds into the collateral, although they could, they don't have to.

We're on blockchain. Thus "anonymity and unnacountability. If you take margin anywhere outside crypto your liability is unlimited. It is not limited to your deposit. The brokers have your details and can and will pursue you through the courts. In cryoto your liability is limited to your deposit." (credit to Anthony Garner in Telegram BitShares Community Group)

Quote
Shifting risk to the DEX, smart coin holders or anyone else is just not a good business practice.

Think it in another way:
It's the debt asset holders' responsibility to settle before undercollateralization.
The debt asset holders are responsible to keep value of collateral as high as possible, otherwise when they settle they can't get the full face value. It's simple, because settling for collateral is the only way to "redeem the value".

When you go into a position (borrow bitUSD or hold bitUSD) you bear some risks, although different risks for different parties. There is no such thing 100% safe. Current rule, aka GS, doesn't solve the issue.


Quote

But you are most likely a debt holder so you probably want others to pay for the risk you took and lost. When BTS goes up I don't see any debt holders creating GS funds, they just want to use other people's money to cover their risk. And that's the gist of it. The sad part is that by seeing only your way, you fail to notice that BTS continues to slide because of people's mistrust and bad practices.
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Offline sahkan

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The word "settle" is used in too many places but means different things.


I was referring to "Force Settlement" and the idea that the first person that settles bad debt gets less BTS.
Current rule aka GS means everyone who settles bad debt gets less BTS.

Yes, and that's bad business. And how about if we introduce a 24hr debt settlement where the debt holder gets a chance to close his debt before GS?

Offline abit

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The word "settle" is used in too many places but means different things.


I was referring to "Force Settlement" and the idea that the first person that settles bad debt gets less BTS.
Current rule aka GS means everyone who settles bad debt gets less BTS.
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Offline sahkan

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@abit I am not arguing, just stating my thoughts.

Offline sahkan

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The word "settle" is used in too many places but means different things.


I was referring to "Force Settlement" and the idea that the first person that settles bad debt gets less BTS.

Offline abit

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The market will run as your thought? en,that's very interesting.

How about we just increase MSSR to to least 5%? Margin calls will be bought before GS happens. If you continue to 100% protect the debt holders GS events will happen all the time.

If you settle the under collateralized positions to smart coin owners that's just stealing from them and goes against DEX rules.

GS happens because of 1 thing:
1. debt positions don't adjust debt

To correct that DEX should:
1. Margin call their position with enough incentive for the position to be liquidated (MSSR), the margin call should be such that debt holder would want to adjust their debt or close it.

Shifting risk to the DEX, smart coin holders or anyone else is just not a good business practice.

But you are most likely a debt holder so you probably want others to pay for the risk you took and lost. When BTS goes up I don't see any debt holders creating GS funds, they just want to use other people's money to cover their risk. And that's the gist of it. The sad part is that by seeing only your way, you fail to notice that BTS continues to slide because of people's mistrust and bad practices.
Too many wrong assumptions in your comment.

I'd say please understand the situation before starting to argue on something.
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Offline sahkan

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The market will run as your thought? en,that's very interesting.

How about we just increase MSSR to to least 5%? Margin calls will be bought before GS happens. If you continue to 100% protect the debt holders GS events will happen all the time.

If you settle the under collateralized positions to smart coin owners that's just stealing from them and goes against DEX rules.

GS happens because of 1 thing:
1. debt positions don't adjust debt

To correct that DEX should:
1. Margin call their position with enough incentive for the position to be liquidated (MSSR), the margin call should be such that debt holder would want to adjust their debt or close it.

Shifting risk to the DEX, smart coin holders or anyone else is just not a good business practice.

But you are most likely a debt holder so you probably want others to pay for the risk you took and lost. When BTS goes up I don't see any debt holders creating GS funds, they just want to use other people's money to cover their risk. And that's the gist of it. The sad part is that by seeing only your way, you fail to notice that BTS continues to slide because of people's mistrust and bad practices.


Offline abit

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How about we just increase MSSR to to least 5%? Margin calls will be bought before GS happens. If you continue to 100% protect the debt holders GS events will happen all the time.
Last time bitUSD MSSR is 10%, GSed.
This time bitUSD MSSR is 2%, GS-protected.

This means "MSSR" is irrelevant to whether undercollateralization will happen.

Quote
If you settle the under collateralized positions to smart coin owners that's just stealing from them and goes against DEX rules.

The word "settle" is used in too many places but means different things.

Perhaps we need to find a better word.

Force settle - bitUSD holders will pay bitUSD to debt position holders or the GS pool and get BTS
Globally settle - all debt positions will be closed and a pool will be formed, nothing changes to bitUSD holders
Individual settle - undercollateralized debt positions ( whose CR < a special threshold) will be closed and the collateral will be put into a pool, nothing changes to bitUSD holders

What did you mean when saying the one word "settle"?

And what's "against DEX rules" in your sentense?
IMHO, rules can be changed if BTS token holders agree to change via stake-based voting, that's why we have BSIPs. That's why we're discussing how to change.
« Last Edit: July 19, 2019, 01:25:40 pm by abit »
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Offline binggo

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The market will run as your thought? en,that's very interesting.

How about we just increase MSSR to to least 5%? Margin calls will be bought before GS happens. If you continue to 100% protect the debt holders GS events will happen all the time.

If you settle the under collateralized positions to smart coin owners that's just stealing from them and goes against DEX rules.

Offline sahkan

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How about we just increase MSSR to to least 5%? Margin calls will be bought before GS happens. If you continue to 100% protect the debt holders GS events will happen all the time.

If you settle the under collateralized positions to smart coin owners that's just stealing from them and goes against DEX rules.

Offline abit

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Why have many threads to discuss the same thing?

https://github.com/bitshares/bsips/issues/179#issuecomment-512175417

IMHO @bitcrab and @sschiessl were essentially saying the same thing, which is the 2nd option as I described in the BSIP issue: simple GS protection.
* allow undercollateralization
* no globally settlement
* no individual settlement, the system don't take over the undercollateralized debt positions
* when undercollateralization happens and someone tries to settle, fill the settlement request with the positions with lowest CR first, so first settler will get less

I'm for the 4th option now:
* allow undercollateralization
* no globally settlement
* has individual settlement, the system take over the undercollateralized debt positions (which would form a pool)
* when undercollateralization happens and someone tries to settle, fill the settlement request with the positions with lowest CR (can be the pool) first, so first settler will get less

I think the mechanism that I proposed in https://bitsharestalk.org/index.php?topic=27273 favors debt holders too much.
* allow undercollateralization
* no globally settlement
* has individual settlement, the system take over the undercollateralized debt positions (which would form a pool)
* when undercollateralization happens and someone tries to settle, fill the settlement request with the fully-collateralized positions with lowest CR (can be the pool) first, so settlers will always get the same unless the asset is globally undercollateralized.


Perhaps best if the core provide all the options, and let asset owners decide to choose which one.
« Last Edit: July 19, 2019, 12:34:23 pm by abit »
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Offline bitcrab

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then bitUSD holders begin to exploit debt position owners with force settlement.

even worse, the last bitUSD balance cannot do force settlement, it can only fill the settlement orders with higher price.

I don't understand how that exploit works. If I force settle while there are positions with CR < 1 are present, I settle for BTS that are worth less then 1 USD, accepting the undercollaterization. This also closes out the bad margin position, but that is of course the risk of running a undercollaterized position (it's a loss-loss scenario so I expect this is not an exploit for you). In my scenario force settlement still eats the margin position with least CR. There will of course be margin call orders with a price different than the feed price, but that does not force the traders to deviate from the peg. Can you please make another example please?

you cannot force settle debt positions with CR<1 with market price, as that will lead to a debt position with pure debt and 0 collateral, which is not allowed.

you can only force settle debt position with CR<1 with price higher than market price, bitUSD holders obviously will select to force settle debt positions with CR>=1, as it is cheaper.

while bad debt appear, bitUSD is easily be devaluated, as it is not backed by sufficient BTS.

you use devaluated bitUSD(insufficient collateral) to force settle a debt position in market price, is it fair?
« Last Edit: July 19, 2019, 10:48:22 am by bitcrab »
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Offline sschiessl

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then bitUSD holders begin to exploit debt position owners with force settlement.

even worse, the last bitUSD balance cannot do force settlement, it can only fill the settlement orders with higher price.

I don't understand how that exploit works. If I force settle while there are positions with CR < 1 are present, I settle for BTS that are worth less then 1 USD, accepting the undercollaterization. This also closes out the bad margin position, but that is of course the risk of running a undercollaterized position (it's a loss-loss scenario so I expect this is not an exploit for you). In my scenario force settlement still eats the margin position with least CR. There will of course be margin call orders with a price different than the feed price, but that does not force the traders to deviate from the peg. Can you please make another example please?