Author Topic: BitUSD Market Maker - Proposal for Discussion  (Read 17696 times)

0 Members and 1 Guest are viewing this topic.

Offline emski

  • Hero Member
  • *****
  • Posts: 1282
    • View Profile
    • http://lnkd.in/nPbhxG
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #15 on: August 29, 2014, 05:05:26 pm »
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 mas

  • Newbie
  • *
  • Posts: 15
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #16 on: August 29, 2014, 05:11:38 pm »
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 okidoki

  • Full Member
  • ***
  • Posts: 64
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #17 on: August 29, 2014, 05:15:12 pm »
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 okidoki

  • Full Member
  • ***
  • Posts: 64
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #18 on: August 29, 2014, 05:17:56 pm »
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 James212

  • Sr. Member
  • ****
  • Posts: 312
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #19 on: August 29, 2014, 05:25:53 pm »
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%
BTS: theangelwaveproject

Offline okidoki

  • Full Member
  • ***
  • Posts: 64
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #20 on: August 29, 2014, 05:26:42 pm »
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 »

bitbro

  • Guest
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #21 on: August 29, 2014, 05:27:50 pm »

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%


Sent from my iPhone using Tapatalk

Offline GaltReport

Re: BitUSD Market Maker - Proposal for Discussion
« Reply #22 on: August 29, 2014, 05:35:00 pm »
I will support this.  More I think about it the more I agree with your analysis of shorts and the option contract.  When I short a stock, I short it at it's current price I believe.  Otherwise, I would use an option. 

I think it's fine to have a market maker type of bot to smooth things out. There are parallels to all of this in the  stock/options markets.  We should leverage good ideas...not re-invent the wheel so to speak.

I think you/we will be able to stablize this in the BitShares ecostem.  My concern is ensuring BitUSD can be used to purchase goods and services and/or be converted to Fiat in my bank account if needed.  (see Galt's Test of Value  :) )  i.e. when BitUSD escapes into the wild.

Would be interested in hearing ideas of how that is envisioned to happen. 
« Last Edit: August 29, 2014, 05:38:04 pm by GaltReport »

Offline liondani

  • Hero Member
  • *****
  • Posts: 3737
  • Inch by inch, play by play
    • View Profile
    • My detailed info
  • BitShares: liondani
  • GitHub: liondani
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #23 on: August 29, 2014, 05:41:56 pm »




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?

He is convincing...




Offline kisa

  • Sr. Member
  • ****
  • Posts: 240
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #24 on: August 29, 2014, 05:48:30 pm »
While it is perfectly reasonable for BitUSD to trade at a discount to attract new buyers, it confirms the suspicions of the deniers and thus could potentially end up changing the market consensus that BitUSD will go to 0.      BitUSD only works so long as the majority of the market expects it to work and that "faith" can be hard to establish early on without a large market maker willing to back it.

- IMHO a solid market maker is a good idea. Market-makers improve tradeability of most asset classes lacking stable liquidity and suifficient granularity. market makers should be backed by serious funds, just to be able to act in large volume on extreme swings, thus counteracting impulsive and exaggerated moves in their view. the danger is that, unless market maker is regulated by I3, we don't know of their true motivations, which might sometimes include benefitting from the panic. And, whereas a market maker would improve the pricing/liquidity, she is not a lender of last resort (e.g. FED, which ultimately can guarantee that lenders get their fiat money back and so inspires confidence. without the lender of last resort function, the functioning of financial markets would be severily hurt whenever emotional panic feeds on itself so that it becomes rational...). Therefore, even with market-makers, btsx might be targeted by speculative or hostile attack aiming to destroy confidence.

There is a HUGE demand to short USD and right now that demand shows up as BitUSD being massively undervalued.   I think this demand to short needs to be done via option contracts.   Someone can therefore set a price on the option contract and this price will absorb the short demand without breaking the peg.

Suppose I think XTS is going to rise by 50% in the next month.   I want an option to buy it at todays prices, so I have to find someone willing to sell me the option to buy it at todays prices within the next month.   These options will be purchased by the people who currently wanting to short who otherwise would not be able to.

BM how can the motivation of option sellers in that case be controlled? e.g. if they delta-hedge options and so continue to build up  bitUSD shorts in the system?

Disclosure: Even as I like the idea of derivatives at some point, intuitively this moment doesn't feel right for their introduction. This would create an additional complexity level in a system where most participants get yet easily lost in its current state.

thx - kisa
« Last Edit: August 29, 2014, 06:12:10 pm by kisa0145 »

Offline bitmarket

  • Sr. Member
  • ****
  • Posts: 369
    • View Profile
    • BitShares TV
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #25 on: August 29, 2014, 05:52:58 pm »
I agree with Coin hoarder.

Let's face it. Who of btsx users wants to hold bitusd and miss the gains of btsx?   

IT may take time but we should be patient.   Remember it took bitcoin nearly 2 years to discover a price at all.

If I understand BM's solution, this is effectively a bailout program.  The unwise actors who sold bitUSD below parity are looking to have their investment losses covered by the "system" (read Federal Reserve) creating new btsx (read QE) and creating an artificial market for toxic investments in bitUSD (read Mortgage backed securities)

Markets that are only speculators never work.  There must be a customer base first. (regression theorem)

Said another way... In all the readings about market pegs I read, Sally wanted to hedge her position in bitUSD.   We never found Sally.

So who wants bitUSD? Who are they?  What problem does bitUSD solve?

The only customers for such a service that I can see are exclusively crypto business. Ones that do not want give up their privacy, want to remain out of fiat but have fixed costs and want to avoid the fluctuations of price.  But here is the catch.... If my business has costs at the end of the month and I have to pay those costs if I cant pay for it in bitUSD then what was the point?   I just held bitUSD for a few weeks and then had to convert to fiat anyway.  I may as well have just used bitpay from the get go and gave up my privacy upfront and skipped the bitUSD step.

So I think bitUSD's customers will most likely come from those who will sacrifice everything for privacy.  They dont even believe in crypto but are forced to use it because in their industry they must remain anonymous. 

Just like bitcoin I think the original users of bitUSD will come from the silkroad type market places.  Think Open bazaar/ Dark Market/ Silk Road 2, etc.

And just like bitcoin it may take them 1-3 years to catch on and start using it at all let alone in serious volumes.

« Last Edit: August 29, 2014, 05:55:17 pm by bitmarket »
Host of BitShares.TV and Author of BitShares 101

Offline bytemaster

Re: BitUSD Market Maker - Proposal for Discussion
« Reply #26 on: August 29, 2014, 06:05:05 pm »
6) Any short orders above the "current price" are automatically canceled.

Did you mean below the "current price"?

Yes..
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 Shentist

  • Board Moderator
  • Hero Member
  • *****
  • Posts: 1601
    • View Profile
    • metaexchange
  • BitShares: shentist
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #27 on: August 29, 2014, 06:13:31 pm »
i am a friend of kiss - but why make everything more complicated?

just leave the market the market and watch. why act after 5 DAYS with major bugs, many people coundn't buy etc. etc.
keep in mind. maybe the changes will hurt the system in the future and you need changes, after changes - this will hurt BTSX big time!

add one simple rule

1. if the short is x away from the median the margin will double, tripple etc. it should be possible to make a trade but the possibility of a margin call should be increased

Offline bytemaster

Re: BitUSD Market Maker - Proposal for Discussion
« Reply #28 on: August 29, 2014, 06:14:51 pm »
So far the feed back I see is this:

1) No one wants a "DAC Government"
2) Many expect the peg to resolve itself in time and are worried we are not giving it time.
3) Rules for creating arb bots are not clear.

I do believe that liquidity is the primary reason the BitUSD price is low... it is just too hard to take advantage of arb. opportunities this early in the experiment.

I also fully believe that if we use price feeds at all then a blockchain ARB bot will do no harm and can be removed in the future. 
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 Empirical1

  • Hero Member
  • *****
  • Posts: 884
    • View Profile
Re: BitUSD Market Maker - Proposal for Discussion
« Reply #29 on: August 29, 2014, 06:17:43 pm »
What if there was going to be a substantial instant revaluation of the $ like there was in 1933. Those in the know would sell to BTSX market maker at 0.9 in volume and damage BTSX before the official announcement?

Quote
In 1933, through a series of gold-related acts, culminating in the Gold Reserve Act of 1934, America realized a dollar devaluation of 41% when the price of gold was adjusted from $20.67 per ounce of gold to $35 per ounce

http://www.forbes.com/2008/12/09/dollar-devaluation-gold-pf-ii-in_fb_1209soapbox_inl.html