Professional writer who understands all the details

[merockstar]

alright guys. double check my understanding here, it was hard earned.

Market Pegging first draft

***article removed, please see page five for a more current draft***

[tonyk]

Using other bitAsset as a collateral

When you will want to do that instead of simply selling the asset and using the BTS received as collateral – When you think that the asset used as collateral  will go up and the shorted asset will go down. So you think bitGold will go up and bitUSD will go down (relative to one another), and you a. you do not have opinion what bitGold will do compared to BTS b. think that bitGold will increase more than BTS compared to bitUSD. So at first look seems that it would be possible and some interest in that feature might exist but: it has to be coded/included in the system (maybe in some future version); While  cross asset direct trades will be possible with the first version we have to wait and see how deep dose cross-market will be in practice.

[tonyk]

Yet another stupid question: are Bitshares themselves the only thing that can be used to short another asset (thus creating bitAsset, which the network will loan to somebody who decides to go long on that asset), or can somebody use BTC, or heck even a different bitAsset to short something?

1.Right know only Bitshares can be used as a collateral.
2.Using other of the assets listed on the exchange is theoretically possible I believe (with implications I have not thought about).
3.Other outside of the exchange assets i.e. BTCs as a collateral? I do not think so, but if you want to go in that big of a detail you should ask Bytemaster.

‘creating bitAsset, which the network will loan to somebody who decides to go long on that asset’
The assets are not loaned by the network to the  party that goes long. The person going long is buying the asset!

[merockstar]

I think I'm finally starting to wrap my head around this. Appreciate you guys patiently tolerating me on this.

Yet another stupid question: are Bitshares themselves the only thing that can be used to short another asset (thus creating bitAsset, which the network will loan to somebody who decides to go long on that asset), or can somebody use BTC, or heck even a different bitAsset to short something?

[tonyk]

Continued ...
‘if *most* market participants were to get together and decide they wanted to screw up the system, they could agree to change the price, ‘


Actually my main topic of interest with this project is finding and proving that prices other than the equilibrium (1~1) will be provably more beneficial to all market participants (and if possible removing such possibilities). But this is not here nor there.
Most people just either believe or do not in the viability of such market peg in the first place.

Would be very interested in any leads you have. Where could there be possible stable points besides 0, 1:1, or a secret colluding signal?

My concerns are well documented… in this forum including...... but if you want to know exactly:

1.any price of bitAsset > collateral, AND time = min

2. any price of bitAsset > purchase price (if collateral > 2x purchase price)


PS
BTW on ‘a secret colluding signal’? – Is not beneficial to all participants if is a ‘secret’, so not my field

[toast]

Continued ...
‘if *most* market participants were to get together and decide they wanted to screw up the system, they could agree to change the price, ‘


Actually my main topic of interest with this project is finding and proving that prices other than the equilibrium (1~1) will be provably more beneficial to all market participants (and if possible removing such possibilities). But this is not here nor there.
Most people just either believe or do not in the viability of such market peg in the first place.

Would be very interested in any leads you have. Where could there be possible stable points besides 0, 1:1, or a secret colluding signal?

[tonyk]

Continued ...
‘if *most* market participants were to get together and decide they wanted to screw up the system, they could agree to change the price, ‘


Actually my main topic of interest with this project is finding and proving that prices other than the equilibrium (1~1) will be provably more beneficial to all market participants (and if possible removing such possibilities). But this is not here nor there.
Most people just either believe or do not in the viability of such market peg in the first place. Most people just either believe or do not in the viability of such market peg in the first place – that’s  danger #1; My theories are danger #2; and market participants colluding is danger#3 – for which the logic why we do not care was explained by toast

[toast]

so it's a self fulfilling prophecy?

Yeah, basically

if *most* market participants were to get together and decide they wanted to screw up the system, they could agree to change the price, but they wouldn't do that because they want to have the ability to short or go long?

Pretty much - not even "ability to go short and go long" as much as "have anything worth anything at all". If word gets out that a particular BTS X chain is in the hands of a small number of colluding individuals then that chain's value would crash. Why don't bitcoin miners collude to give themselves higher block rewards? Furthermore, how easy is it to actually get 51% of hash power? (it turns out to be possible - we assume buying out a whole BTS X chain is more expensive proportional to the value of the network)

[merockstar]

You are getting there ...

But you not gonna write 'a self-fulfilling prophecy' in the actual thing, are you? We prefer the term ‘Nash equilibrium’

of course i'm not going to phrase it that way. just trying to understand it for myself before I go writing about it.

[tonyk]

'so it's a self fulfilling prophecy?'

You are getting there ...

But you not gonna write 'a self-fulfilling prophecy' in the actual thing, are you? We prefer the term ‘Nash equilibrium’

[merockstar]

so it's a self fulfilling prophecy?

if *most* market participants were to get together and decide they wanted to screw up the system, they could agree to change the price, but they wouldn't do that because they want to have the ability to short or go long?

[tonyk]

1. The hypothesis that is being tested is ‘bitUSD will be ‘equal’/’pegged’ to USD ~ 1:1;

2. Start from what toast wrote in his last post. It is a GREAT start/explanation why bitUSD=USD!!!

3. Try explaining it without using supply and demand.

2c

[toast]

Not "everyone agreeing". If *most people* (most capital) agree, you are forced to agree, or you will lose money because price will move in that direction since most people agree.

Let's look at all the scenarios.

If you think BitUSD is worth $0.9, you will short BitUSD when it is $0.95 expect to be able to cover at a lower price. But if the price goes up to $1 and stays there you are forced to cover and take a loss. (You are incentivized to eat your loss because if it goes up too far there is a margin call).

If you think BitUSD is worth $1.1, you will buy when it is $1.05 expecting to be able to make a profit at a higher price. But if the price falls to $1 you can only get out at a loss.

On the flip side.

If you think BitUSD is worth $1, you will buy BitUSD when it is $0.95, pushing the price up a tiny bit. When it finally reaches $1 you can sell it for a profit.

If you think BitUSD is worth $1, you will short BitUSD when it is $1.05, pushing the price down a tiny bit. When it finally reaches $1 you can cover and sell your BTS for a profit.


So, assuming *most* other people agree, the price will move towards $1, hence if you agree you will gain money and if you disagree you will lose money.

So you will either lose all your money or be converted to a believer.

So it is a self-reinforcing belief that BitUSD should be worth one USD.

[merockstar]

the price of a bitUSD will always be worth the same as USD even though it's based on supply and demand because if supply or demand of bitUSD changes then that value change will be reflected in the currencies it's being used to trade against. this is a result of general consensus that a bitUSD should be worth the same as a USD.

But why is the bolded part true, and why should that cause BitUSD to track USD?

The key is "because everyone is trying to make a profit" and "you can only trade profitably by trading towards consensus". It is like a prediction market.

that part is true because by everybody agreeing that a bitUSD should be the same as a USD makes it possible for people to short it, or the opposite of short (borrow money from the people who are shorting it in exchange for taking their risk)?

sorry to be such a pain in the ass about this toast.

[merockstar]

I know you are not chono, you are the 'chicken nuggets filled with taco bell nacho cheese. ' guy.

[edit] Seriously now, let see what you have written.

i am, just wanted to clarify cause it didn't look like chonos had put forth any kind of hypothesis, so i figured maybe you were answering one of my earlier statements thinking mistakenly that he was me.

haven’t started writing on this subject yet, just trying to solidify my understanding.