Author Topic: BitUSD Market Maker - Proposal for Discussion  (Read 21675 times)

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Offline yiminh

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let's stop the market, longs and shorts agree on a  fair price, sell/cover all, wipe the slate clean, change the rules, get rid of the bugs, then open the market, start over:)

Offline bytemaster

not to many rules/changes please  ,  keep it "simple"  as possible ...

I agree... SIMPLE is key here.   
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Offline liondani

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not to many rules/changes please  ,  keep it "simple"  as possible ...

Offline bytemaster

If we can avoid the feed then we can claim BTSX is allowing price discovery.  With the feed, price discover still occurs off chain.

The looser the feeds role the more accurate the market is.  Allowing delegates to "switch" to a moving average or similar algorithm is also viable.  In this case we remove the average from the validation rules, but can still use it in practice on a "test" basis. 

I think an alternative to the "market maker" which could leave the network exposed, is to force "covering at a profit" when someone wants to exit.  This adds no risk to the network.

For example, suppose we had the following situation:

Initial Price 1 USD == 1 BTSX  and  1 USD == 1 BitUSD
Someone Shorts at 1 BitUSD per BTSX.
The value of 1 BitUSD falls to .90 BTSX   (the short has a 10% profit)
Someone wants to sell 1 BitUSD at .90 and there are no takers...
The short is forced to exit their position at a profit.

How the short has 1.1 BTSX and they can "short again" at the feed price.   

The result is that liquidity is provided by the shorts who are already profitable without any risk to the network.

 
« Last Edit: August 29, 2014, 07:59:46 pm by bytemaster »
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Offline Agent86

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please just make the change that prevents any short that is below the median price feed from being matched...

Any reason not to make the change?

Because then the bitasset ecosystem is not truly decentralized. Isn't that what bitassets are all about in the first place? Accurately determining the price of an asset in a completely decentralized manner?

Give the system time to mature. Many people cannot even access their funds and thus the market because of software bugs. It is a broken experiment thus far that was setup for failure. Give time for the bugs to be fixed, market depth and liquidity to increase, THEN judge whether the experiment was successful or not.
The decentralized feed doesn't change the fact that bitUSD is still decentralized and useful and it doesn't defeat the purpose.  Giving it more time won't help and will decrease confidence.  I'm confident it won't work for reasons that go beyond looking at the price action.  I proposed the feeds because I thought we would need a backstop and I don't know why we switched to moving averages or why everyone hates the feed just on principle.  There's nothing wrong with using a feed and it doesn't violate any important principles.

Offline toast

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the right thing is to implement ONLY the short restriction via median feed, wait for peg to stabilize, then let delegates experiment with disabling feed and only using moving average to restrict shorts, or experiment with market maker if things start going downhill
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Offline CoinHoarder

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please just make the change that prevents any short that is below the median price feed from being matched...

Any reason not to make the change?

Because then the bitasset ecosystem is not truly decentralized. Isn't that what bitassets are all about in the first place? Accurately determining the price of an asset in a completely decentralized manner?

Give the system time to mature. Many people cannot even access their funds and thus the market because of software bugs. It is a broken experiment thus far that was setup for failure. Give time for the bugs to be fixed, market depth and liquidity to increase, THEN judge whether the experiment was successful or not.
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Offline Empirical1

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Will launching BitGLD now be bad for BitUSD?

I think BitBTC in particular will peg closer to parity with the 'we will ultimately achieve close to parity' mandate. https://bitsharestalk.org/index.php?topic=7718.msg102819#msg102819 As a result it should help BitUSD.

I'm sure long term there is a lot of demand for BitGold, but as gold is the ultimate safe haven and BTSX is not robust/decentralised yet, I imagine genuine BitGLD long demand short term would be limited.

Given how much CNY demand BTSX has, I don't know how much BitCNY demand there will be short term, that is the one that interests me the most. 

Offline Agent86

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Any changes made should be limited to ONE VARIABLE. Make one change that you expect will result in the biggest difference and then observe what happens.
+5%

please just make the change that prevents any short that is below the median price feed from being matched...

Any reason not to make the change?
??

Also, arb bots seem like they could open new attack vectors because they will predictably buy unlimited quantities without changing their price.  It gives a gigantic incentive to manipulate feed or take advantage of a bad feed that isn't otherwise there.

Regardless of this, I think arb bot is unnecessary and will waste time.

Offline vlight

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Will launching BitGLD now be bad for BitUSD?

Offline Empirical1

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I am personally not participating in the market until the wallet is stable and the trading platform is released; there are probably a lot of folks in the same boat.

I am in that boat.

However the better BTSX does in general, the more long term BTSX bulls there will be in general, not so? 
the more BTSX bulls there are, the more the $ will be shorted on average below the peg. (Because bulls will pay a premium to increase their BTSX exposure) not so?

As a result if the market believes BTSX will be a good investment in the next 12 months vs. the dollar then BitUSD will peg too far below the dollar,  therefore BTSX won't be a good investment in the next 12 months... 

This is messed up.

As I understand it atm, we need to separate the bulls into an options market or make them pay a premium near parity vs. allowing them to continue shorting below the peg ASAP.

I would like to implement that without the market maker and see the results.
« Last Edit: August 29, 2014, 07:08:58 pm by Empirical1 »

Offline oldman

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BM's proposal is a good plan B if the peg continues to struggle in a more liquid market or as a fail-safe protocol if someone figures out how to attack/manipulate the peg.

However, I agree with the prevailing sentiment that we need a stable interface and some time before making any serious changes.

The fact that the peg is holding as well as it is given the liquidity/wallet is nothing short of amazing.

I am personally not participating in the market until the wallet is stable and the trading platform is released; there are probably a lot of folks in the same boat.

So I would vote for prioritizing on fixing the bugs and getting the system stabilized as-is, collecting some performance data in a more liquid market and then perhaps tweaking.

There should be a fail-safe protocol that would automatically identify and correct broken/manipulated pegs - would really help with investor confidence in pegged/consensus assets.

Perhaps delegates will have to continuously feed asset prices and the feed vs. market price are given a tolerance that if exceeded engages a bot.

Offline yiminh

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if BTSX goes to zero nothing will peg, only thing you can do is to be fair in the mean time to not totally destroy 3i's reputation and intergrity.

clout

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meanwhile, fix the ! bug.

I think this would help the peg tremendously. Can you please fix the "market_add_collateral" command? Thanks.  8)

Offline tonyk

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1.The system buys and sells all the bitUSD at current price (average feed provided by the delegates) with 0.5% spread.

2.Everyone can lend BTSX  to the system. Any amount (based on current value) can be withdrawn at any time after min 1 week initial requirement. (It is more like a stake in the auto buy bussines)

3.Each week the system calculates profit and distributes the profit proportional to each contributor -(Contributed amount * time);

4.Each week the system if at a loss, calculates current value of $1.

5.If Contributed value (loans/stake) reaches 0 for any reason, the system starts printing BTSX. Newly printed money must again reach 0 before any new profit is distributed.

[edit] Can be done with 2x,3x BTSX value set aside at each particular bitUSD issuance.
« Last Edit: August 29, 2014, 06:48:10 pm by TheOnion »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.