Professional writer who understands all the details

[Stan]

okay boys and girls, try these on for size, if you would.

somebody please double check the italicized and bolded part of my market pegging article, I'm not yet completely clear on how that works, I'm basically just going off toasts assertion that this would happen at 1.5x the value of the asset being shorted. If somebody could explain this like I'm five it would be very helpful.


Airdrops and Snapshots third draft

You're going to hear the phrases "snapshots," and "airdrops," thrown around quite a bit in the Bitshares community. What are they and what role do they play in the DAC biosphere?

The term "airdrop" was first popularized by the Auroracoin project. The Auroracoin devs thought it would be a good idea to try and bring digital cryptocurrency a little closer to mainstream by premining half a coin, and earmarking it for distribution to a specific demographic, in this case, the population of Iceland.

The Auroracoin team achieved this by using a system set up by the Icelandic government to keep track of their population to verify that they were only handing out coins to Icelandic citizens. Although this is not the only means by which an airdrop can be carried out.

To be clear, "airdrop" does not refer to literally physically dropping anything out of an airbound vehicle, although that would certainly be neat to watch. What it does refer to is any means of distribution of a coin, or in the case of DACs, shares, which are basically coins but tailor-made to suit the purposes of a specific DAC and it's corresponding blockchain.

Developers who create DACs by using the Bitshares toolkit, angelshare funds, or who just want the support of the Bitshare community are expected to honor what the community refers to as a "social consensus," which asks that they airdrop a certain percentage of their coin's initial public offering to holders of PTS and AGS, or if the DAC doesn't work that way contrive a way to otherwise compensate said PTS and AGS holders.

In a typical scenario this would be effectuated by means of a snapshot. Snapshot is a pretty apt metaphor here, when you take a picture with a camera, you're freezing time in a manner of speaking. In DAC-speak a snapshot also means to freeze time, but instead of taking a real-world image, you're taking a picture of the blockchains for different coins.

For those not yet familiar a blockchain is a freely distributed public ledger containing every transaction that has ever taken place in a cryptocurrency. This means that a blockchain contains up-to-date information about the balances of every single wallet, even yours. A snapshot is actually taking a picture of those balances.

Angelshares do not have a blockchain, but there is a means in place by which the same effect can be achieved.

So imagine that you've developed a new DAC, coded it up and you're all ready to go. You decide to honor the social consensus by airdropping a certain percent of your initial coin/share distribution to PTS/AGS holders, so you take a snapshot. Now you have a list of wallets belonging to the holders of PTS and AGS that you'd like to compensate. Through programming magic you can now reward those groups of people for their support by designating a certain amount of your premine to be distributed proportionally to the wallets on those lists. You simply include them in the blockchain from the beginning.

When holders of PTS and AGS see that you've done this they can download the client for your new DAC and there will be an easy to use tool made available that you can point at the wallets you're using to donate to angelshares or to hold an honored currency, which will communicate to the new DAC that you are the holder of those coins, and you'll get credited the balance.

All this kind of begs the question, if you were making a DAC why on earth would you WANT to use a snapshot to airdrop a premine out to people? Well, the main motivation here is that honoring this social consensus by allocating at least ten percent of your initial shares to AGS donators, and ten percent to PTS holders, gets the support of the Bitshares community behind you. This would open up the door to getting marketing help from both the community. This would also cause the community to embrace your project more enthusiastically, and give you a place you could get technical support in maintaining your DAC where needed.

Additionally, honoring the social consensus causes Invictus to be on your side. Depending on the availability of funds, which get replenished from time to time when new snapshots are released, and the amount of other projects currently being backed by the company, support from Invictus, per Stan, could potentially include legal help getting your company set up in it's chosen favorable jurisdiction, literal office space at Invictus' US headquarters at Virginia Tech, help putting together a website while you work on more important things, legal help on the financial end of things, use of Invictus' trusted escrow service, consultation with Bytemaster (Dan Larimer) and other really smart people for help making your code better, help with finding conferences to speak at for marketing your DAC as well as promotional support within the bounds of Invcitus' global marketing campaign. [citation for Stan's post here]

Individual BitShares delegate, who will be given to opprtunity to spread Angelshares funds out through a program of "smart spigots," may also choose to toss you some startup cash at their discretion. [citation]

What kind of support, and how much of it your DAC could get from invictus depends on certain factors including but not limited to how promising the community deems your business model to be, what technologies you choose to use to implement your business model, whether or not you've selected an optimal legal jurisdiction for your DAC to flourish, how qualified you and your team is to make it happen, and how popular your idea is. [citation]

Snapshots aren't limited exclusively to PTS and AGS, you could give a portion of your premine to the Peercoin community if you wanted simply by tacking on a snapshot of their blockchain. This allows you to kickstart a community for your DAC by having a certain percentage of your coins/shares distributed to a demographic who already knows what to do with them. This is a huge advantage in and of itself because since the alt-coin explosion earlier this year just about any demographic you can think of is already represented by an alt-coin of some kind. Let me toss a couple examples out there. Protoshares would be a way of targetting more technically oriented people interested in business. Angelshares might be a way of targetting a group of people more likely to donate to some cause or participate in an IPO. If you're trying to target the meme loving redditors of the world you could include dogecoin in your airdrop. If you had a DAC that you want to get into the hands of scientists you might consider airdropping to Primecoin. If you're trying to undercut a competitor you may even consider airdropping to their coin! Possibilities are limitless and growing with each to addition to the cryptocurrency world.

In effect, the existence of blockchains make possible a system of rewarding early investors in a manner similar to a public IPO, except one need not be an accredited investor to get in on it. The ability to airdrop coins allows for you to start with a nice, diverse community of holders who are already a part of the crypto-world, ready to get behind your DAC and give it value from the get-go.


Market Pegging second draft

Market pegging is a term to describe how the value of bitAssets will be equal to about the value of their real world counterparts. Anything in the real world that has value can theoretically be represented as part of the BitShares X banking and exchange platform, examples: bitUSD, bitEuro, bitGOLD, bitBTC, bitDiapers, bitOil etc.

None of these bitAssets will exist when the exchange first comes out. They get created when people place bets that the price of these real world assets will go down, to facilitate these bets, BitSharesX will have something akin to a prediction market, enabling people to profit from the view that a given asset will go down in value. Placing such a bet is called shorting.

When somebody is shorting an asset this means they think the price of said asset will fall with respect to the price of BitShares, the currency that's to be used as collateral for placing these bets. They put an amount of BitShares equal to twice the value of the amount of the asset they want to short up to be held by the system as collateral, and the system creates an appropriate amount of bitAssets to match the value of half that collateral.

The system holds this BitAsset until somebody decides to accept their bet by taking a long position on the asset. When somebody takes a long position against an asset they are simply purchasing the newly created BitAsset from the system, and the system gives the BitShares paid for that bitAsset back to the person who did the shorting.

Now the person who went short has half the amount of BitShares that they put up as collateral back, the person who went long has the bitAsset, and the system is still holding the collateral that was put up by the person doing the shorting until the person shorting it decides to close their position.

At this point, the person who bought the bitAsset can disappear and do whatever they want with it, if they choose. To close their position, the person doing the shorting will have to purchase an amount of the bitAsset from an exchange equal to what's been created so they can reclaim their collateral. When they do this, if they were correct and the price of the bitAsset has fallen, then it will cost them less bitShares to buy the asset back to cover their position and the difference is profit for them.

On the flipside, if the person doing the shorting was incorrect in the thinking the value of the asset would fall then it would cost them more of their bitshares to buy back enough of the bitAsset to close out their position. If the value goes up 50% and the person who shorted can no longer benefit from covering their position then the network uses the collateral to buy the amount of the bitAsset that was created back from the market and destroys it along with the remaining collateral. This removes the extra value from the market that was created when the bitAsset came into existence, closing the short person's position for them, and they untilmately end up losing half their BitShares.

You might be wondering how we know that the bitAssets that get created through this process will stay the same price as their real-world asset counterparts. This price tracking occurs as a result of the belief by the majority of participants in the market that this bitAsset will be pegged to the price of the real world asset. If the price were to somehow deviate, perhaps from somebody making an incredibly large buy or sell order for a bitAsset, then the rest of the world knows that the bitAsset is supposed to be the same price as the real world asset, and they will buy and sell accordingly, hoping to profit.

This system of market pegging is what makes BitShares X use as a bank possible.

***lead into intro to BitShares X here***

I'm finally beginning to understand this stuff!  Thanks. 

(I would use the word "honor" not "compensate" when share-dropping to PTS/AGS (or Doge).  By "honoring" them you are indicating that they are a demographic you value and are seeking their support.)

[merockstar]

Let's say Sam's wrong, and bitShares falls in value (put another way, bitUSD gains value on BitShares).

after a certain point does he just plain lose the ability to cover his position, and the collateral gets destroyed thus replacing the bitUSD that got created out of thin air?

'out of thin air'  or 'from the unlimited supply of the system' – I advised you to use the second! )

in the actual article, i just say they are "created."

who cares what i put in the forum post? when it comes to that, i prefer conjured

[tonyk]

Let's say Sam's wrong, and bitShares falls in value (put another way, bitUSD gains value on BitShares).

after a certain point does he just plain lose the ability to cover his position, and the collateral gets destroyed thus replacing the bitUSD that got created out of thin air?

'out of thin air'  or 'from the unlimited supply of the system' – I advised you to use the second! )

[merockstar]

okay boys and girls, try these on for size, if you would.

somebody please double check the italicized and bolded part of my market pegging article, I'm not yet completely clear on how that works, I'm basically just going off toasts assertion that this would happen at 1.5x the value of the asset being shorted. If somebody could explain this like I'm five it would be very helpful.


***articles were here, but have been clipped. more current drafts on page 7 of this thread***

[toast]

Let's say Sam's wrong, and bitShares falls in value (put another way, bitUSD gains value on BitShares).

after a certain point does he just plain lose the ability to cover his position, and the collateral gets destroyed thus replacing the bitUSD that got created out of thin air?

Yes, at the margin call price (say, 1.5x original price) the network takes his ENTIRE collateral (2x original price), buys enough bitUSD to cover his position off of the market, destroys the bitusd, and then destroys the rest of the BTS from collateral

[merockstar]

Let's say Sam's wrong, and bitShares falls in value (put another way, bitUSD gains value on BitShares).

after a certain point does he just plain lose the ability to cover his position, and the collateral gets destroyed thus replacing the bitUSD that got created out of thin air?

[merockstar]

this frees larry to go do whatever he wants with the bitUSD he bought, and the whole example is just a contract between sam and the system. sam can just go buy back the necessary bitUSD to cover his position from the exchange.

Sounds like you're getting it!

sweet. but this calls for an almost complete rewrite. I think i see now why tony just pointed me to those threads and said "fix it" without further explanation.

[toast]

this frees larry to go do whatever he wants with the bitUSD he bought, and the whole example is just a contract between sam and the system. sam can just go buy back the necessary bitUSD to cover his position from the exchange.

Sounds like you're getting it!

[merockstar]

I think dan's correction isn't right, I think he just meant "this is how we could do it if collateral was 2x" without thinking it through.

If it did work how he described, it would still be 2x collateral: 1x you put in, 1x from sale of USD which you don't get to have (normally you would get to have it since you put up entire required collateral up front).

Why it's not right:
* If the buy order at your price is not big enough to get another 1x from the market then 1x + extra BTS from sale would not be enough.
* That way only works if the collateral reqiurement is <=2x, which it might not be.

gotcha, so i should change my explanation to reflect the fact that the person doing the shorting actually puts up twice the amount as collateral.

this frees larry to go do whatever he wants with the bitUSD he bought, and the whole example is just a contract between sam and the system. sam can just go buy back the necessary bitUSD to cover his position from the exchange.

[toast]

I think dan's correction isn't right, I think he just meant "this is how we could do it if collateral was 2x" without thinking it through.

If it did work how he described, it would still be 2x collateral: 1x you put in, 1x from sale of USD which you don't get to have (normally you would get to have it since you put up entire required collateral up front).

Why it's not right:
* If the buy order at your price is not big enough to get another 1x from the market then 1x + extra BTS from sale would not be enough.
* That way only works if the collateral reqiurement is <=2x, which it might not be.

[merockstar]

slowly, this continues to come together for me.

on the second thread tony linked, i found this toast-gem of an explanation:

sam wants to short usd. Current price is 10 bitusd per bts. Larry wants to go long usd.

1) sam places a short sell order for 10 usd for 0.1 bts each. To place this order, he has to have 2 bts, which is taken as collateral.
2) larry puts buy order 10 usd for a bts.
3) the orders are matched. Network prints 10 bitusd and gives them to larry, and takes larry's bts and gives them to sam.
3) sam has 1 bts live and 2 in collateral. Larry has 10 usd.
... time passes ...
4) sam buys back 10 bitusd, but his bet was right so it costs him 0.5 bts only. Sam has 0.5 bts live and 2 in collatetal, and 10 bitusd. Larry (assuming he was again on the other side of this trade) has 0.5 bts.
5) sam uses his 10 bitusd to cover and reclaim his collateral. The bitusd is destroyed and now same has 2.5 bts.

Sent from my SCH-I535 using Tapatalk

but... it seems like bytemaster corrects him:

I don't think that's right... you put up 2x collateral at the time you place the order. The bts you trade the bitusd for and your margin are separate. You never have negative balance, just locked collateral

Sent from my SCH-I535 using Tapatalk

Each party puts up 1x for a total of 2x entering the trade, and the output of the trade is -USD backed by 2x and +USD

meaning, that in toast's example sam only offers up 1 BTS as collateral instead of 2, and the system is only holding 1 BTS collateral (with the BTS that larry used to buy the bitUSD going to sam). is this correct?

[merockstar]

xeroc, I will do as you suggest when I feel they're ready. First I need tonyk and toast to finish ripping them to shreds so I can put them back together better. I'm also hoping to post them to devtome when the time comes so I hope that won't create a conflict of interest.








EDIT: I was clearly confused when I wrote this. If you're trying to learn from this thread please skip this post.

Merockstar

There was a thread ‘The life of a short position’ or something like that.(actually I found 2 useful ones)

https://bitsharestalk.org/index.php?topic=4515.0

https://bitsharestalk.org/index.php?topic=4573.0

Read them and fix what  you have written above according to BM/toast/my comments in those threads
. There is only one issue on which we disagree there – I believe my explanation is easier to comprehend *(1)  but it really does not matter - just use their explanation -it is more of a choice of selecting how to think about how particular stuff works, the end result is the same. In their explanation the system looks more powerful, so as I said, use their explanation on that.



*(1) Basically BM and toast are people with well above average intelligence (so they have the ability concepts that are 3 or 5 times more complex). For them adding a new extra twist on top of a concept that about 10 to 25 % of the population will never understand is not a problem, as they see nothing too hard there. For me removing this extra layer of complexity, making the whole explanation more concise and logical makes the difference between 25% not getting it and only 10% not getting it. You know the story of the last straw that broke the camel back, right?

The first thread I've gone through like four times, actually, and am about to go through again.

The second thread you linked is new to me though, and may be helpful, I sincerely thank you for digging that up. About to go look through that one.

I feel like every explanation I've seen so far uses an example instead of just saying how it works, so I wanted to make one that avoids examples because to me that kind of clouds things up. The way I see it examples are for after you've wrapped your head around it to reinforce understanding, not for initial learning. Maybe other people disagree but if I think that way there has to be at least a few others who agree.

Regarding the bolded part above, I would love you if you could give specific examples where I'm wrong. I realize that request may be addressed on those threads already, and grant that I've not gone through the second thread you linked yet (kind of excited about that, actually), but who knows, maybe your redundant explanations could help some of that 15% out.

From what I've seen, I would agree BM and toast are friggin geniuses. I don't think of myself as THAT smart, but normally I'm no dummy myself. I don't know why I'm having such a rough time with this concept, but I'm enjoying the challenge.

Additionally:
1. I do not like ‘long against that asset’ use ‘long in that asset’ even better ‘long that asset’

2. How did you come up with this (bolded):
 
-If the price of the asset/bitAsset falls, then the person doing the shorting has won the bet, and can claim the difference between the new value of the amount of bitAsset that was created and collateral they had put up, closing their position. The remaining collateral is held to sell back to the person who went long and took a loss, in case they choose to claim it.
[/b]
-When somebody who has gone long purchases back their collateral using a bitAsset, the bitAsset is destroyed, and their position is closed – Although theoretically possible -there is no collateral for the long position in this system!!!!  I,e. change collateral to BTS X if you like this to stay. (also read my first post - the bitAsset might or might not be destroyed!)

1) ah, I was kind of wondering about that myself as I was writing it. I will fix that.

2) point taken about there being no collateral for the long. I will fix that as well. I think you zoned right in on a concern I had while I was writing this. What does happen to the leftover BTS if it doesn't get claimed? does the system shuffle it back onto the exchange?

Or can the person who did the shorting just claim all of it? I feel like that wouldn't really make for a fair bet, but it would guarantee that I'm going to be trying my hand at some shorting when this comes out, if that happens to be the case.

Some people may resent the scathing manner in which you present your criticisms, but I appreciate all the help you're giving me and how prompt you're being about it.

Anyway, I'm off to review that second thread you linked. Maybe it will make everything clear.

When everything's done, I'm thinking about titling it "Everything you wanted to know about BitShares but didn't have the time and patience to dredge through the forums and dig up enough info haphazardly to put all the pieces together"

^--- that was another of my attempts at humor

[tonyk]

Additionally:
1. I do not like ‘long against that asset’ use ‘long in that asset’ even better ‘long that asset’

2. How did you come up with this (bolded):
 
-If the price of the asset/bitAsset falls, then the person doing the shorting has won the bet, and can claim the difference between the new value of the amount of bitAsset that was created and collateral they had put up, closing their position. The remaining collateral is held to sell back to the person who went long and took a loss, in case they choose to claim it.
[/b]
-When somebody who has gone long purchases back their collateral using a bitAsset, the bitAsset is destroyed, and their position is closed – Although theoretically possible -there is no collateral for the long position in this system!!!!  I,e. change collateral to BTS X if you like this to stay. (also read my first post - the bitAsset might or might not be destroyed!)

[tonyk]

Merockstar

There was a thread ‘The life of a short position’ or something like that.(actually I found 2 useful ones)

https://bitsharestalk.org/index.php?topic=4515.0

https://bitsharestalk.org/index.php?topic=4573.0

Read them and fix what  you have written above according to BM/toast/my comments in those threads
. There is only one issue on which we disagree there – I believe my explanation is easier to comprehend *(1)  but it really does not matter - just use their explanation -it is more of a choice of selecting how to think about how particular stuff works, the end result is the same. In their explanation the system looks more powerful, so as I said, use their explanation on that.



*(1) Basically BM and toast are people with well above average intelligence (so they have the ability concepts that are 3 or 5 times more complex). For them adding a new extra twist on top of a concept that about 10 to 25 % of the population will never understand is not a problem, as they see nothing too hard there. For me removing this extra layer of complexity, making the whole explanation more concise and logical makes the difference between 25% not getting it and only 10% not getting it. You know the story of the last straw that broke the camel back, right?

[xeroc]

Could you please copy your articles to the bitshares wiki archive?
You could create a [EcoTalk] series much like the [techtalk] series!?

If you need help with that just pm me!

would be awesome!!