Author Topic: Earn 5% on your BitUSD Now with BitShares X  (Read 9026 times)

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Offline CLains

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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. :D
« Last Edit: August 16, 2014, 04:53:27 pm by CLains »

Offline toast

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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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Offline santaclause102

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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"?

Offline CLains

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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.
« Last Edit: August 15, 2014, 04:39:34 pm by CLains »

Ggozzo

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

Offline Empirical1

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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.

Offline tonyk

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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?

Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline 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.

Offline xeroc

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thats what I understand, too!

Offline santaclause102

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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
Quote
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?
« Last Edit: August 15, 2014, 03:58:00 pm by delulo »

Offline Pocket Sand

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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.  :-\
+5% Currently in the same boat, if Dan could expand on his thought process behind this it would hopefully make things clearer

Offline liondani

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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.  :-\

Offline santaclause102

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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.

Offline bytemaster

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




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Offline santaclause102

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(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)?