Author Topic: FDIC for BitUSD  (Read 26226 times)

0 Members and 1 Guest are viewing this topic.

busygin

  • Guest
I support option 3 too

Offline bytemaster

Fiduciary Dilution for Insufficient Collateral :-)

Free DAC Insured Collateral .... though i like yours better.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bitmeat

  • Hero Member
  • *****
  • Posts: 1116
    • View Profile
I was about to start a competitor to bitshares X doing 3) because I wasn't happy with 1)

I am glad you have taken this approach.

Offline xeroc

  • Board Moderator
  • Hero Member
  • *****
  • Posts: 12922
  • ChainSquad GmbH
    • View Profile
    • ChainSquad GmbH
  • BitShares: xeroc
  • GitHub: xeroc
I hate to say it, but that's what XTS is there for. To keep BitUSD stable, XTS must suffer the whims of the market. From an economic perspective, there really is no choice but #3. And hopefully, the market is robust enough and the technology is strong enough that things will keep on moving without this sort of issue. It gives me more faith in BitShares every time I see a post like this, though. You are thinking through these issues, testing, and seeking community consensus. This is going to be a damn fine product.
+5%

Offline donkeypong

  • Hero Member
  • *****
  • Posts: 2329
    • View Profile
I hate to say it, but that's what XTS is there for. To keep BitUSD stable, XTS must suffer the whims of the market. From an economic perspective, there really is no choice but #3. And hopefully, the market is robust enough and the technology is strong enough that things will keep on moving without this sort of issue. It gives me more faith in BitShares every time I see a post like this, though. You are thinking through these issues, testing, and seeking community consensus. This is going to be a damn fine product.

Offline Riverhead

Fiduciary Dilution for Insufficient Collateral :-)

Offline bytemaster

One of the nagging issues we have been facing is what happens when the collateral behind a short position is not enough.  Our options have been:

1) Freeze all markets until someone who holds BitUSD is willing to sell at a loss.
2) Debase BitUSD by allowing unbacked BitUSD to circulate
3) Debase XTS by issuing new XTS to cover the loss.

Test net 12 implemented Option #1... but this option depends upon someone being willing to "take one for the team" to restart the markets.  This is a principle I don't like.
Debasing BitUSD everytime this happens would gradually break the peg and BitUSD would become an asset that is correlated to USD by some constant factor that changes slightly every time a short is blown out.   This makes the system appear to be broken.

Option 3 was considered too risky because someone could manipulate the market to print up unbounded XTS.  Fortunately we have introduced price feed / rate-of-movement restrictions that prevent this particular attack from yielding unlimited XTS.    Without being able to attack in this manner Option 3 returns as the best overall approach. 

What this means is that all XTS holders stand behind the "market peg" and that those who hold USD have a stronger peg.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.