Author Topic: BitUSD Market Maker - Proposal for Discussion  (Read 21676 times)

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bitbro

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Please focus on fixing bugs first, give the system time to mature.

Limiting the downside to 90% will inhibit price discovery and free markets.

I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.

What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.

Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.

Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.

Against this suggestion.

I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.


I don't believe that people need to believe 1 bitUSD = 1 USD for this to work. When there are market frictions present, possibly due to difference in liquidity, market participants, limits to arbitrage, the same asset can and often will trade for different prices. That doesn't hurt anything, its simply a manifestation of limits of arbitrage and market frictions.

In BitsharesX case, there are big limits of arbitrage. I work in quantitative investing, and am interested in building an automated market maker and arbitrage bot, however I am not sure how to go about it (lack of time to develop it, not obvious where to go for information on how to connect with any soft of bitsharesx api, etc.). If this information was more easy to come about perhaps I would develop one, or other like minded people.
There is also large market frictions, in that in order to trade on the platform I need to either buy BTSX for USD, or buy BTC for USD, and then BTSX for USD, then transfer those to my wallet and then I'm ready to go. During that transformation I have lost trading fees, withdrawal fees etc. It is therefore costly to start trading at BitsharesX. All this leads to lower liquidity and differences in pricing.

Improving the arbitrage/cross hedging infrastructure, and making it easy for (not super experienced) developers to interact with the platform should slowly reduce these problems.
+5%


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Offline okidoki

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Please do not make this a "government" controlled market. With this you would destroy any arbitrage opportunities.

Please read this:
http://www.reddit.com/r/BitShares/comments/2exj8j/why_i_am_really_positive_surprised_how_well_the/

I also think that there should be several bitUSD markets at different interest rates (1%,2%,3%,4%,5%,10% and 20%). I perhaps do not save at one bank which pays me 0.1%, but going to another bank which pays me 15% I perhaps would save in USD... So just create the markets and let the markets decide and earn money with arbitrage.

I know that in the short run this would split the few buyers to different interest rates, but I surely would not hold bitUSD at 5% interest.... instead I would prefer to do arbitrage. But I will not do arbitrage if the total volume is 10 USD.

Hell, this would be really interesting if I think about it... a bitUSD without interest should equal more or less 1 USD (as in the normal USD the interest is zero forever), at 5% it should be percentagewise higher that a USD until the market expects the USD to have 5% as well of interest... if they expect it in 1 year to be 5% and stay like this forever than the bitUSD5 would cost now 1.05, any price below would create arbitrage opportunities.

But perhaps creating additional markets would be too complicated for the normal user... perhaps better to stay with one market and the fixed rate. I just want to say that an USD which pays 1% interest is not the same like a USD which pays 5% or 10% interest, and where this price has to be paid by the shorter, he cares as well.

So really... please focus on bug fixes and leave the bitUSD market (or any other market on bitshares-x) alone... you would kill the conecept if you do any intervention... and surely therefor you will loose investors in bitshares-X which will depress the price of the shares.
« Last Edit: August 29, 2014, 05:29:21 pm by okidoki »

Offline James212

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Please focus on fixing bugs first, give the system time to mature.

Limiting the downside to 90% will inhibit price discovery and free markets.

I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.

What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.

Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.

Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.

Against this suggestion.

I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.

 +5% +5%
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Offline okidoki

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Please focus on fixing bugs first, give the system time to mature.

Limiting the downside to 90% will inhibit price discovery and free markets.

I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.

What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.

Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.

Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.

Against this suggestion.

I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.

If it falls too low than do your arbitrage and make money on the spot or let someone else do it... if money can be made somebody will do it at some point... earnings have just to be interesting enough. I do not see a death spiral between bitUSD going lower and bitsharesX-price falling as a consequence until both are 0 :D

Offline okidoki

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Please do not make this a "government" controlled market. With this you would destroy any arbitrage opportunities.

Please read this:
http://www.reddit.com/r/BitShares/comments/2exj8j/why_i_am_really_positive_surprised_how_well_the/

I also think that there should be several bitUSD markets at different interest rates (1%,2%,3%,4%,5%,10% and 20%). I perhaps do not save at one bank which pays me 0.1%, but going to another bank which pays me 15% I perhaps would save in USD... So just create the markets and let the markets decide and earn money with arbitrage.

I know that in the short run this would split the few buyers to different interest rates, but I surely would not hold bitUSD at 5% interest.... instead I would prefer to do arbitrage. But I will not do arbitrage if the total volume is 10 USD.

Offline mas

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Please focus on fixing bugs first, give the system time to mature.

Limiting the downside to 90% will inhibit price discovery and free markets.

I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.

What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.

Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.

Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.

Against this suggestion.

I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.


I don't believe that people need to believe 1 bitUSD = 1 USD for this to work. When there are market frictions present, possibly due to difference in liquidity, market participants, limits to arbitrage, the same asset can and often will trade for different prices. That doesn't hurt anything, its simply a manifestation of limits of arbitrage and market frictions.

In BitsharesX case, there are big limits of arbitrage. I work in quantitative investing, and am interested in building an automated market maker and arbitrage bot, however I am not sure how to go about it (lack of time to develop it, not obvious where to go for information on how to connect with any soft of bitsharesx api, etc.). If this information was more easy to come about perhaps I would develop one, or other like minded people.
There is also large market frictions, in that in order to trade on the platform I need to either buy BTSX for USD, or buy BTC for USD, and then BTSX for USD, then transfer those to my wallet and then I'm ready to go. During that transformation I have lost trading fees, withdrawal fees etc. It is therefore costly to start trading at BitsharesX. All this leads to lower liquidity and differences in pricing.

Improving the arbitrage/cross hedging infrastructure, and making it easy for (not super experienced) developers to interact with the platform should slowly reduce these problems.

Offline emski

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My thinking:
0 NO PRINTING OF ANY ASSET!
1 NO PRINTING OF ANY ASSET!
2 Fix bugs (as you already do) before taking decisions.
3 The following seems reasonable:
make the change that prevents any short that is below the median price feed from being matched. 
4 My proposal:
Market account that has reserves in BTSX and bitUSD that trades at abovementioned thresholds. NO PRINTING OF ASSETS! Although some attacks might be executed on this. The one who grants the initial funds should take the risk.

Offline cygnify

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Given those facts here are some additional things I have realized:
1) There is never any reason for new BitUSD to be created below the market value
This we agree on.  So, please just make the change that prevents any short that is below the median price feed from being matched.  Believe it or not, this is all you need to do.

Everything else is over complication, wasted time, and opening new attack vectors.

Any reason not to make the change?
+5% completely agree. Its pretty close to working no need for drastic changes. This suggestion would help dramatically till the market matures.

Offline stuartcharles

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Please focus on fixing bugs first, give the system time to mature.

Limiting the downside to 90% will inhibit price discovery and free markets.

I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.

What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.

Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.

Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.

Against this suggestion.

I agree with this too, but i also understand the anxiety that if we miss the opportunity make people believe that 1 bitusd = 1 usd then it might be lost for ever. Is it worth discussing this proposal as a plan b to be implemented only if near parity is not reached by xx/xx/xxxx or if the bitusd falls below xx usd? Just having it in place and tested, ready to go at a moments notice could help them aline.

jakub

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6) Any short orders above the "current price" are automatically canceled.

Did you mean below the "current price"?

Offline Empirical1

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In addition to only being allowed to short at parity and having options trading separate...

What if when you short @ 1-1 you pay a 2% fee which goes to the long?

So if the exchange rate is 25 BTSX to $. I have to pay 25 BTSX plus 0.5 BTSX per $ to short even on the main BitUSD market.

BitUSD besides being new, currently has no utility and costs 1/2% to covert to real $. Shorts are more than willing to pay that to longs, this recognition of conversion cost fee should be applied to BitUSD imo.

(People buying at 1-1 will struggle to sell at parity even without being in competition with shorts while this 'utility friction' exists as a result little new BitUSD will be created. We should acknowledge this friction imo.)






Offline mas

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Please focus on fixing bugs first, give the system time to mature.

Limiting the downside to 90% will inhibit price discovery and free markets.

I believe Bitshares is supposed to operate as a free market, without any outside interference. This scheme will create a feeling of a Bitshares central bank that is monitoring and controlling the system.

What will help the system grow will be making arbitrage easier. If there is easy creation of arbitrage bots and automated market makers, then this should work.

Many financial brokers offer CFD, cash for difference instruments, which operate exactly like the bitassets, except the brokers act as a market maker in them, and uses underlying financial markets to hedge the instruments. If we make hedging easy, then automated market makers and arbitrage bots should fulfill that role.

Apologize for lack of understanding and knowledge, been casually following this forum, and do hold BTSX.

Against this suggestion.

Offline gulu

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BitUSD needs interest, based on an interest rate that is determined by the supply and demand of BitUSD. This is the solution to the long term market peg without delegates' price feed.
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Offline Agent86

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1) BitUSD vs USD will work with no market restrictions provided it is a mature market with a proven track record.
This is not true.

Given those facts here are some additional things I have realized:
1) There is never any reason for new BitUSD to be created below the market value
This we agree on.  So, please just make the change that prevents any short that is below the median price feed from being matched.

Everything else is over complication, wasted time, and opening new attack vectors.

Any reason not to make the change?
« Last Edit: August 29, 2014, 05:02:03 pm by Agent86 »

Offline stuartcharles

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where does the market account get its funds from?

The market maker bot would have to print XTS.... but the XTS it prints would be effectively locked up in the collateral of someone until they cover.

Is there another way, could existing xts be lent to the market account as a fixed rate bond say  +5%. The interest could be paid from profits.