One way or another the PEG will be established...

[tonyk]

BM:The network will end up with USD on its balance sheet proportional to the "surplus short demand" and the XTS created to buy this USD is actually locked away in the collateral of the shorts.   Thus we can safely say that printing XTS to perform this market making algorithm will not create additional XTS in circulation. 

What happened? Did you get inspired from the way Ripple increased their market cap, by increasing but not really the # of shares in circulation?

Are you doing this bot, right way, as in now?

[bytemaster]

Here is what I have implemented as an intermediate step:

1) If delegates publish a feed, then the feed will be used rather than the average.  In this way if there is a service interruption on the feed, then the network can still function like it does today.

2) This puts the "shareholders" in control over whether to use feed or average.

3) I have restricted the creation/execution of new shorts to the median / average price.

Result... those who have USD have priority in selling over those who would like to short.   This adds liquidity for those with USD by removing competition from those looking to short. 

Next we are going to open up a second bitasset so that "short demand" can spread between two BitAssets and the bitassets can trade against one another. 

I believe this should implement your proposal without the arb. bot.   

[Agent86]

You can still short below the peg, it just costs a premium. You can match your own short and sell undervalued. I think all this is doing is forcing shorts to say "oh, I am effectively paying a 10% fee? I didn't want that!". I think BitUSD will still be undervalued.

You can't match your own short.  This is not allowed by the system.  The system matches every buy order with the lowest price sell order.

[GaltReport]

BM, can you answer my question about whether there is an equivalent thing or person that performs the function of the arb bot that you described, as part of the structure of the stock market other than just traders?  This is for my education please.

As part of the structure of a "market" not that I am aware, but I think you can view it like a business.

We all know that if the market peg holds then every deviation from the peg is a profit opportunity.  We all expect someone to perform the role of providing liquidity.  How do we expect these individuals to do that job?   If a DAC hard-codes business rules into a blockchain, and we all know that providing liquidity is a profit generating business, then we can encode the same rules that a trader would execute into a blockchain and the network can make money the same way.

The benefit a trader has is they can maintain a dynamic spread, increasing/decreasing as necessary to account for volatility.  I think that if you hard-code a bot with very wide buy/sell prices around a trusted feed then the bot would almost never execute, but everyone would "feel better" just knowing it is there to back things up.

Thank you because it sounds like the bot would be performing a little bit like a market maker in the stock market but I'm not that clear on it all.  I do have a concern about what good it would do given that we expect to have other markets/exchanges.  If their is a demand for the pricing/transaction that we we are trying to limit, it may just move elsewhere.  Maybe that's okay or maybe it's not.  Just something to consider.

[toast]

You can still short below the peg, it just costs a premium. You can match your own short and sell undervalued. I think all this is doing is forcing shorts to say "oh, I am effectively paying a 10% fee? I didn't want that!". I think BitUSD will still be undervalued.

[Agent86]

With the whole market price depending on a feed but not on depth this might allow a few delegates to slightly manipulate the price which will allow someone with large capital to abuse the market. I also think this is not a significant problem for now but it could be exploited.

Keep in mind that all trades are entered into voluntarily by two parties taking opposite sides.  If you didn't want to short at that price, you didn't have to.  If you didn't want to buy at that price, you didn't have to.  You can short below the feed price and it becomes immediately valid if the feed drops.  Any delegate providing an inaccurate feed is easy to spot.

BM do you have a particular reason to suspect my proposal wouldn't keep the peg?

[Empirical1]

I'm not against using price feeds as long as those price feeds are 'decentralised' and it is hard to manipulate. I think the mainstream will be fine with that. Fantastic if it gets us to a close to USD more stable peg quicker.

As for the other stuff, not that I understand everything, but if it's possible to implement Agent86 suggestion of limiting the shorting above the peg and see how that works.

I don't know if this is a factor but for the arb bot or even price feeds, the only problem I can think of is that sometimes the official price is different to the black market price. Like in Argentina there is an official exchange rate of the peso to the dollar but a different black market rate. So using the official feed & or arb bot may be bad. It's possible that could happen to major western currencies too.

[bytemaster]

BM, can you answer my question about whether there is an equivalent thing or person that performs the function of the arb bot that you described, as part of the structure of the stock market other than just traders?  This is for my education please.

As part of the structure of a "market" not that I am aware, but I think you can view it like a business.

We all know that if the market peg holds then every deviation from the peg is a profit opportunity.  We all expect someone to perform the role of providing liquidity.  How do we expect these individuals to do that job?   If a DAC hard-codes business rules into a blockchain, and we all know that providing liquidity is a profit generating business, then we can encode the same rules that a trader would execute into a blockchain and the network can make money the same way.

The benefit a trader has is they can maintain a dynamic spread, increasing/decreasing as necessary to account for volatility.  I think that if you hard-code a bot with very wide buy/sell prices around a trusted feed then the bot would almost never execute, but everyone would "feel better" just knowing it is there to back things up.

[Shentist]

i think the short seller is in a really good position

- on a normal exchange i would have to pay a premium
- today in BTSX at the current prices i also pay a premium to the long side

- if i want stability it is a really good price to buy bitUSD for 27. at the current market cap i should pay more like 31. but not to much people will do it because no one is scared to loose the money. i a pretty sure when BTSX growth it will not a problem at all because now, people have more money at stake and want to hedge more. now everyone wants to maximize the expected rise in value and throws safty measures away.

did you consider to force the short seller to cover after x days? say as a shortseller i have to cover after x days. maybe make it flexible. if the peg is holding increase the days or decrease it like in this enviroment. so we could get more liquidity on the bid side who should force the price near the peg. 

maybe just a needed function in the beginning.

what i like to see is not a feed but maybe the ratio from coinmarketcap "31 BTS a USD Dollar on Coinmarketcap" so everyone could faster realize that the paid price now is not a normal price.

[emski]

And running such bot looks just like subsidizing the bitUSD.

[emski]

With the whole market price depending on a feed but not on depth this might allow a few delegates to slightly manipulate the price which will allow someone with large capital to abuse the market. I also think this is not a significant problem for now but it could be exploited.

[GaltReport]

don't hurry. it is to early to make a decision.

it is normal that in the beginning every one expects that btsx is rising, but maybe in the future everything will balance out. the importent thing is - 1 bitUSD == 1 USD

Yep... the price is holding up fairly well thus far.

BM, can you answer my question about whether there is an equivalent thing or person that performs the function of the arb bot that you described, as part of the structure of the stock market other than just traders?  This is for my education please.

[bytemaster]

don't hurry. it is to early to make a decision.

it is normal that in the beginning every one expects that btsx is rising, but maybe in the future everything will balance out. the importent thing is - 1 bitUSD == 1 USD

Yep... the price is holding up fairly well thus far. 

[Agent86]

USE THE FEED TO LIMIT VALID SHORTS TO ONLY ABOVE THE FEED.

Reasonable.

And now the next issue:
Feeds. Can a few delegates manipulate it ?

It's quite difficult to manipulate a median.  Delegates are elected based on convincing everyone that they are trustworthy.  Everything is done in the open and very much subject to scrutiny and audit.  Virtually impossible to pull off profitable funny business without being caught and voted out.  I have no problem with the feed and I think it will get more accurate and reliable with time.

[bobmaloney]

bitUSD is still very new, as long as the peg is stable, a properly functioning peg should include a discount on bitUSD vs. USD.