Earn 5% on your BitUSD Now with BitShares X

[merockstar]

pretend btsx and bitUSD blows up and the vast majority of people use it.

would that make much higher returns possible through a market peg?

bitUSD1000 or even bitUSD10000?

No one would short at interest rates that high...

point taken.

what if the supply were introduced and regulated artificially, or by delegates?

[bytemaster]

pretend btsx and bitUSD blows up and the vast majority of people use it.

would that make much higher returns possible through a market peg?

bitUSD1000 or even bitUSD10000?

No one would short at interest rates that high...

[merockstar]

pretend btsx and bitUSD blows up and the vast majority of people use it.

would that make much higher returns possible through a market peg?

bitUSD1000 or even bitUSD10000?

[santaclause102]

BItUSD interest isn't tied to growth of BTSX.  That's where the misunderstanding was.

A BitAsset can be defined in terms of any clear consensus point.  By default we have BitUSD which is consensus tied to the dollar.  We can also define it to be any easily calculated (unambiguous) equation relative to a well defined value.   IE:  a weighted basket of commodities, or an interest bearing bond.  Think "Bit30YearTreasuries"

I have two assumptions:
(1) There will be a demand for different BitUSDs (BitUSD-5, BitUSD0, BitUSD5 (= BitUSD 5 %), BitUSD10, BitUSD100 etc.).
(2) shorting BitUSD is going long BTSX and going long BitUSD (buying BitUSD) is going short BTSX.

Therefore...
If BTS X is believed to grow much for sure then many will want to go short BitUSD and the demand for going long BitUSD will be small. Therefore the BitUSD shorters have to offer the BitUSD long positions much interest so there is enough demand for BitUSD long positions to meet the BitUSD short positions.
If BTSX is doubted to grow much or if the growth of BTSX is doubted at all many will want to go long BitUSD and woun't be able to get much interest....

Conclusion:
Depending on the growth potential of BTS X the demand for BitUSD long and short positions will vary. Therefore, depending on the growth potential of BTSX, sometimes BitUSD0 and sometimes BitUSD50 will be what traders will agree on to trade.

Is this the problem you call "liquidity problem" (either not enough BitUSD shorters OR long positions)?

[xeroc]

how will the bitAssets ''appear'' or be distributed, if they are? I mean, the first time we buy them, we will buy them from who/what? Which entity so to speak, will sell them to whoever is buying? Im confused about that. Maybe i missed some explanation about it

There is no 'distribution' the bitAssets. They are created by the market once people start to trade them.
Read about the market_peg over here:
http://wiki.bitshares.org/index.php/Market_Peg
http://wiki.bitshares.org/index.php/Bitshares_X#There_is_no_real_Gold_backing_BitGold._How_does_it_have_any_value_at_all_then.3F

[Akado]

how will the bitAssets ''appear'' or be distributed, if they are? I mean, the first time we buy them, we will buy them from who/what? Which entity so to speak, will sell them to whoever is buying? Im confused about that. Maybe i missed some explanation about it

[luckybit]

For the record, I don't like this idea.  I think there are ways of doing interest paying bonds but I don't think this is it.  I hope we don't push this or advertise it anytime soon.

"Holding this asset would appreciate at 5% based upon consensus alone"
If you are suggesting this doesn't require changes to the code, just a different asset name, than I don't think it works.

Why not advertise it? It would encourage people to save in BitUSD5.

[Agent86]

For the record, I don't like this idea.  I think there are ways of doing interest paying bonds but I don't think this is it.  I hope we don't push this or advertise it anytime soon.

"Holding this asset would appreciate at 5% based upon consensus alone"
If you are suggesting this doesn't require changes to the code, just a different asset name, than I don't think it works.

[santaclause102]

BItUSD interest isn't tied to growth of BTSX.  That's where the misunderstanding was.

A BitAsset can be defined in terms of any clear consensus point.  By default we have BitUSD which is consensus tied to the dollar.  We can also define it to be any easily calculated (unambiguous) equation relative to a well defined value.   IE:  a weighted basket of commodities, or an interest bearing bond.  Think "Bit30YearTreasuries"

I have two assumptions:
(1) There will be a demand for different BitUSDs (BitUSD-5, BitUSD0, BitUSD5 (= BitUSD 5 %), BitUSD10, BitUSD100 etc.).
(2) shorting BitUSD is going long BTSX and going long BitUSD (buying BitUSD) is going short BTSX.

Therefore...
If BTS X is believed to grow much for sure then many will want to go short BitUSD and the demand for going long BitUSD will be small. Therefore the BitUSD shorters have to offer the BitUSD long positions much interest so there is enough demand for BitUSD long positions to meet the BitUSD short positions.
If BTSX is doubted to grow much or if the growth of BTSX is doubted at all many will want to go long BitUSD and woun't be able to get much interest....

Conclusion:
Depending on the growth potential of BTS X the demand for BitUSD long and short positions will vary. Therefore, depending on the growth potential of BTSX, sometimes BitUSD0 and sometimes BitUSD50 will be what traders will agree on to trade.

[bytemaster]

What is the frequency in which interest is paid to bitUSD holders?

In this system the 5% is simply in appreciation relative to USD.   IE:   In one year 1 BitUSD5 will be worth 1.05 BitUSD.   The nice thing about this approach is that instead of income you get capital gains!

[hamiltino]

What is the frequency in which interest is paid to bitUSD holders?

[bytemaster]

BItUSD interest isn't tied to growth of BTSX.  That's where the misunderstanding was.

A BitAsset can be defined in terms of any clear consensus point.  By default we have BitUSD which is consensus tied to the dollar.  We can also define it to be any easily calculated (unambiguous) equation relative to a well defined value.   IE:  a weighted basket of commodities, or an interest bearing bond.  Think "Bit30YearTreasuries"   

[santaclause102]

Thanks toast for the reply but I don't get it yet.

The question to me is: If the interest rate on BitUSD is variable and depends on the growth potential of BTS X then we have two assets BitUSD and BTSX but the BitUSD is not always worth 1 USD because: If BTS X is believed to grow much for sure per year then many will want to go short BitUSD and those that go long BitUSD will get much interest on their BitUSD. If BTSX is doubted to grow much or if the growth of BTSX is doubted at all many will want to go long BitUSD and woun't be able to get much interest.

Where is the flaw in my argument?

Any answer to this?

[santaclause102]

Thanks toast for the reply but I don't get it yet.

The question to me is: If the interest rate on BitUSD is variable and depends on the growth potential of BTS X then we have two assets BitUSD and BTSX but the BitUSD is not always worth 1 USD because: If BTS X is believed to grow much for sure per year then many will want to go short BitUSD and those that go long BitUSD will get much interest on their BitUSD. If BTSX is doubted to grow much or if the growth of BTSX is doubted at all many will want to go long BitUSD and woun't be able to get much interest.

Where is the flaw in my argument?

[Gentso1]

I believe that the one thing Bitshres eco system lacks is complexity.
It is so flat learning curve that in order to make it intriguing for every newcomer we need to add up everyday. Mass adoption will easily follow if everybody comes to Bitshares and do not finds the whole concept boring and lacking new ideas. If there is nothing progressive, innovative, experimental and groundbreaking they will simply leave. Actually if only a couple of groundbreaking innovations happen at the time of their visit they may leave and never return.

 The market peg is a Giant experiment in itself... DPOS TITAN a bunch other DACs...and that is for people already following the projects


Leave it for 3-6 mo. after we have working peg... will you?

[CLains]

Wouldn't there be a single point that marks the percent interest people are willing to buy bitUSD at? This point would shift dynamically as BTSX is trending up or down.

I just had the same thought. The x in BitUSDx should equal the percentage BTSX is thought to grow per year which fluctuates. Then we would not have a market peg anymore (?).

In fact, the bitUSD here only works as a stable value. A superior stable value would be a value combined out of many different stable values. If you allow it, the market will find the most stable value - least risk of volatility - and figure out the interest rate this value deserves.

what do you mean by "many different stable values"?

Well, I just thought if we combine like USD, Gold, Yen, whatever is most stable, into a single value, then we begin to approach the most stable value. Such stability is often what people really want. So given this ideal, most stable, non-volatile value; what percent interest does it pay? If the interest is too positive, nobody will sell it, if it is too negative, nobody will buy it.

In the case of bitUSD we already know what the price is, it is 1 USD worth of BTSX. In this case, do I trade my BTSX into 1 USD? Depends on what interest rate I get. Perhaps I accept a positive interest rate, perhaps I accept a negative interest rate. But overall, in the free market, these considerations will reach an equilibrium interest rate, which means I know what interest rate I should be getting. Similarly, the market would decide on an interest rate for holding a zero risk, perfectly non-volatile value.

But I know nothing of economics so this may all be nonsense. Think of it as a question.

[toast]

Think of it in terms of how quickly the long is eating the short's collateral in terms of % of the collateral. It is just like if the short was buying up extra bitusd and paying it to the long as interest as was the original interest model.

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[santaclause102]

Wouldn't there be a single point that marks the percent interest people are willing to buy bitUSD at? This point would shift dynamically as BTSX is trending up or down.

I just had the same thought. The x in BitUSDx should equal the percentage BTSX is thought to grow per year which fluctuates. Then we would not have a market peg anymore (?).

In fact, the bitUSD here only works as a stable value. A superior stable value would be a value combined out of many different stable values. If you allow it, the market will find the most stable value - least risk of volatility - and figure out the interest rate this value deserves.

what do you mean by "many different stable values"?

[CLains]

Wouldn't there be a single point that marks the percent interest people are willing to buy bitUSD at? This point would shift dynamically as BTSX is trending up or down.

In fact, the bitUSD here only works as a stable value. A superior stable value would be a value combined out of many different stable values. If you allow it, the market will find the most stable value - least risk of volatility - and figure out the interest rate this value deserves.

[Ggozzo]

This just took away the incentive to sell bitUSD in the even of a market crash.

[Empirical1]

do you mean Vitalik Buterin?

good catch .. i read Vikram ..

so?

You heard me.  The v man himself.


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Interesting!

As far as BitUSD5 is concerned, I don't pretend to understand these things, but

Does this mean that if you want to go long BitUSD, you're better off going long BitUSD5?

It seems likely the BitUSD5 peg will adjust lower to reflect the additional cost to the person going short, thereby nullifying the difference.

It seems like BitUSD5 would only be necessary in the event that there were not enough people willing to go long BitUSD. However if that were the case, the BitUSD peg would reflect that situation and trade at like $0.98, without the need to introduce BitUSD5. But I don't know.

[tonyk]

I believe that the one thing Bitshres eco system lacks is complexity.
It is so flat learning curve that in order to make it intriguing for every newcomer we need to add up everyday. Mass adoption will easily follow if everybody comes to Bitshares and do not finds the whole concept boring and lacking new ideas. If there is nothing progressive, innovative, experimental and groundbreaking they will simply leave. Actually if only a couple of groundbreaking innovations happen at the time of their visit they may leave and never return.

 The market peg is a Giant experiment in itself... DPOS TITAN a bunch other DACs...and that is for people already following the projects


Leave it for 3-6 mo. after we have working peg... will you?

[Riverhead]

Why wouldn't the 5% be paid to the lender out of the shorter's funds? When you short on a traditional exchange you borrow the money and pay interest on the borrowed amount to the exchange who bought the shares for you to sell short.

[xeroc]

thats what I understand, too!

[santaclause102]

I think I understand.

Let's take the extreme case of a BitUSD50/hour (a BitUSD which increases in value against BTSX by 50% per hour). It would be an easy win for me to buy some of those BitUSD50/hour. But someone has to go short BitUSD and long BTSX against me. I probably would not find anyone who thinks BTSX is going to go up against the USD faster then 50% per hour.

-> If BTSX has a fair value price and has no potential to expand anymore (market saturation) then it would be hard to find someone who would want to go short BitUSD5 . So as long as BTSX grows (more than 5% per year in this case) BitUSD-X is possible.

So this

There are more counter parties at 5% than 0%

would have to be twisted. There are more BitUSD shorters with a BitUSD0 than with a BitUSD5. Right?

[Pocket Sand]

The demand to short the dollar requires a counterparty.  There are more counter parties at 5% than 0%




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Maybe on the beginning... but why should the demand to short bitUSD5 be higher in future?
let's say the prizes stabilize close to 1 bitUSD=$1 and 1 bitusd5=$1.05 (as it should)
why would the demand of shorting be higher for one of them? I don't get it. 

Currently in the same boat, if Dan could expand on his thought process behind this it would hopefully make things clearer

[liondani]

The demand to short the dollar requires a counterparty.  There are more counter parties at 5% than 0%




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Maybe on the beginning... but why should the demand to short bitUSD5 be higher in future?
let's say the prizes stabilize close to 1 bitUSD=$1 and 1 bitusd5=$1.05 (as it should)
why would the demand of shorting be higher for one of them? I don't get it. 

[santaclause102]

The demand to short the dollar requires a counterparty.  There are more counter parties at 5% than 0%
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Facts (please correct me if necessary): Increase in purchasing power by 5% each year when holding BitUSD (you can buy 5% more goods after one year).

If no one has created any value, the 5% have to be subtracted somewhere. Where am I wrong here?

The value creation of BTSX is added to BTSX anyway by burned tx fees (dividends) and/or earned tx fees by delegates - this is not part of the equation above.

[bytemaster]

The demand to short the dollar requires a counterparty.  There are more counter parties at 5% than 0%




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[santaclause102]

(2) If BitUSD wins 5 % per year BTSX would have to loose 5% per year (if no other factors play a role like feesidends or share appreciation due to growth/speculation). Would the fees be high enough to compensate for the loss? If not I think that would not a be a huge problem. Traders of BTSX can take that into account.

The 5% is payed by the shorts to the longs. There's no change in supply is there?

You can't have interest without the creation of value that "pays" for the interest long term. If no additional value is created someone has to pay for the interest on an asset which you can exchange for real goods (e.g. real USD or anything which has a non zero price) which would be the case for BitUSD.
The value of BitUSD is supposed to be constantly the value of a USD but the price ratio to BTSX changes as the value of BTSX changes. Now if BitUSD is worth 5% more than one USD a year from now and I get 105 USD from selling my 100 BitUSD or I can buy 5% more goods (if all other factors stay the same) with my BitUSD than a year before, this increase in purchasing power has to come from somewhere. I would guess that it comes form a 5% decrease in value of BTSX (cet. par.) because there is less incentive to short BitUSD which is a long position in BTSX.
Question: In the case of BitUSD5, would 1 BitUSD be worth 1.158 USD after three years (I added 5% each year)? 

[Pocket Sand]

I don't think it is a good idea.
BitUsd5 BitUsd6 BitUsd7 BitUsd8 BitUsd9......
Like
Goldcoin10%gold  Goldcoin20%gold  Goldcoin30%gold Goldcoin40%gold......
May be it will cause competition,and out-of-balance.
But have a try is ok.

Another  question:
The Bitusd's  largest number of supply100,000,000,000 USD , is fixed or  Adjustable?

I agree - having multiple different BitUSDs looks messy, and makes the whole thing look like an experiment. Another way to introduce interest would be to have a single BitUSD, but gradually raise its interest from 0% -> 1% -> 5% etc, whilst checking that the peg still holds.

-5%  I think that is a bad idea considering it could screw up the entire peg for actual BitUSD if it does not work out well and hurt the whole system's integrity indefinitely versus implementing a separate asset which will either succeed as theorized or just end up being traded on a very different peg than the actual/idealistic value of BitUSD.

[speedy]

I don't think it is a good idea.
BitUsd5 BitUsd6 BitUsd7 BitUsd8 BitUsd9......
Like
Goldcoin10%gold  Goldcoin20%gold  Goldcoin30%gold Goldcoin40%gold......
May be it will cause competition,and out-of-balance.
But have a try is ok.

Another  question:
The Bitusd's  largest number of supply100,000,000,000 USD , is fixed or  Adjustable?

I agree - having multiple different BitUSDs looks messy, and makes the whole thing look like an experiment. Another way to introduce interest would be to have a single BitUSD, but gradually raise its interest from 0% -> 1% -> 5% etc, whilst checking that the peg still holds.

[luckybit]

I don't think it is a good idea.
BitUsd5 BitUsd6 BitUsd7 BitUsd8 BitUsd9......
Like
Goldcoin10%gold  Goldcoin20%gold  Goldcoin30%gold Goldcoin40%gold......
May be it will cause competition,and out-of-balance.
But have a try is ok.

Another  question:
The Bitusd's  largest number of supply100,000,000,000 USD , is fixed or  Adjustable?

Can there be a way to revoke or retract previously issued assets?

[Riverhead]

do you mean Vitalik Buterin?

good catch .. i read Vikram ..

so?

You heard me.  The v man himself.


Sent from my iPhone using Tapatalk

Interesting.

[ebit]

I don't think it is a good idea.
BitUsd5 BitUsd6 BitUsd7 BitUsd8 BitUsd9......
Like
Goldcoin10%gold  Goldcoin20%gold  Goldcoin30%gold Goldcoin40%gold......
May be it will cause competition,and out-of-balance.
But have a try is ok.

Another  question:
The Bitusd's  largest number of supply100,000,000,000 USD , is fixed or  Adjustable?

[bitcoinerS]

do you mean Vitalik Buterin?

good catch .. i read Vikram ..

so?

You heard me.  The v man himself.


Sent from my iPhone using Tapatalk

Vitalik's name was misspelled in the original post causing confusion.

[bytemaster]

do you mean Vitalik Buterin?

good catch .. i read Vikram ..

so?

You heard me.  The v man himself.


Sent from my iPhone using Tapatalk

[luckybit]

(2) If BitUSD wins 5 % per year BTSX would have to loose 5% per year (if no other factors play a role like feesidends or share appreciation due to growth/speculation). Would the fees be high enough to compensate for the loss? If not I think that would not a be a huge problem. Traders of BTSX can take that into account.

The 5% is payed by the shorts to the longs. There's no change in supply is there?

Someone would have to go long BitUSD? Please explain?

[Riverhead]

(2) If BitUSD wins 5 % per year BTSX would have to loose 5% per year (if no other factors play a role like feesidends or share appreciation due to growth/speculation). Would the fees be high enough to compensate for the loss? If not I think that would not a be a huge problem. Traders of BTSX can take that into account.

The 5% is payed by the shorts to the longs. There's no change in supply is there?

[santaclause102]

(1) Wouldn't this increase the complexity for traders? With no interest (no 5%) traders only have to speculate on whether BitUSD/USD falls/increases against BTSX at any time or within the next xy if they want to finish the trade fast again but timing is necessary to make money on a trade. With an interest through market peg traders have to calculate also at which point in time their guess about the ratio of BTSX and BitUSD will be in place.

(2) If BitUSD wins 5 % per year BTSX would have to loose 5% per year (if no other factors play a role like fees/dividends or share appreciation due to growth/speculation). Would the fees be high enough to compensate for the loss? If not I think that would not a be a huge problem. Traders of BTSX can take that into account.

[xeroc]

do you mean Vitalik Buterin?

good catch .. i read Vikram ..

so?

[liondani]

... that would be a BitAsset where the shorts paid the longs X% interest. 

what about a combination of shorts  + delegates to pay x% interest to the longs?

[liondani]

do you mean Vitalik Buterin?

[Markus]

The question remains is how much market demand is there for such an asset.

Obviously enormous in your opinion...

Yes, the demand should be enormous. The problem will be that there won't be much supply.

… did I understand that correctly, that there will be two BitUSDs? One with interest and one without?

[Riverhead]

What incentive would there be to short at 5% interest vs the 0% of bitUSD?

[tonyk]

The question remains is how much market demand is there for such an asset.

Obviously enormous in your opinion...

[Overthetop]

 

[bytemaster]

About 8 months ago we started the +5 meme on this forum when we planned to offer BitAssets that paid interest.  We decided to post-pone the 5% interest plan to simplify implementation and make things easier for the market to price.

Today I am happy to announce the good news that we can provide 5% on BitUSD with BitShares X today (or once the hard fork takes over) without having to implement any code changes what so ever.

Vatalik and I were discussing BitAssets today over dinner and he proposed a hypothetical BitAsset that had its price defined as a mathematical function of time and suggested that it would be unstable.    We debated the issue for a while and then I realized exactly what that would be... that would be a BitAsset where the shorts paid the longs X% interest. 

So we can define a new asset BitUSD5 that has a market valued defined by the continuously compounded 5% ROI on a dollar starting the day it launched.  Holding this asset would appreciate at 5% based upon consensus alone and shorts would only short if they expected the price of USD to fall faster than 5%. 

In other words, we can do through market consensus what we had originally planned to implement in code.  If the theory of BitAssets holds true, then this process should work.

The question remains is how much market demand is there for such an asset.   The crazy thing is we could peg to any interest rate or even the inflation rate + X%.