Author Topic: Support BitUSD Price by Forced Covering at a Profit  (Read 9681 times)

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Offline Empirical1.1

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Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

But what if she doesn't want to wait and what if she has a large volume that the market can't support in times of low liquidity. We want those kind of buyers to enter the market no?

So it looks like a double punishment for shorters. The imminent consequence of this is fewer people willing to short, and as a result slower growth of BitUSD supply.

There seem to be long queues of people willing to short. The growth of BitAssets in the short to medium term seems like it will be determined  by how appealing it is to the people going long BitAssets.

In the bitsharesx platform is there a part of the Interface that shows people wanting to want to go short?  Or do we have no one wanting to do this yet?  I cant see it in yet but I could be blind (please laugh).

I'm on my phone but if you have a BTSX wallet and click on the 'markets' and choose say BitUSD you will see an image on the left is people wanting to buy on the right is people wanting to short or sell.

The right side is very big. They are saying 'please let me short, I will pay money' then there is a very small green side on the left. They are saying 'it is too risky to go long, if you pay me, maybe'

I think we are going to make no-one short below 1-1 this will work but there will be very little demand on the long side. We need to find a way for the people on the right to pay the people on the left at 1-1
then you have a big market.

Offline eagleeye

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This idea has been discussed in other threads, but the more I think about it the more critical I think it will be.  To describe what I am talking about lets start out with a simple example.

Alice and Bob decide to take opposite bets and one ends up with BitUSD the other is Short BitUSD. 
Immediately after this trade occurs Alice decides she wants out of her position, but Bob doesn't.
Alice has to shop around looking for someone else to take her BitUSD position... no takers.
Alice drops the price to 95%, 90%, 50% of the dollar .... still no takers. 

The value of the dollar hasn't changed during this time, there is just no BitUSD liquidity.  Bob hasn't actually made any money, he is just refusing to give up his position. 

So we have a situation where people are looking to exit their BitUSD position and they are willing to pay a fee to do so.   If the network knows the price then it is easy to implement this.  We simply change the terms of the short "contract".

Bob agrees that Alice has the option to exit her position at  $.90 per BitUSD at any time.  Bob makes money even though the dollar did not fall against BTSX and Alice is assured some liquidity should she need it.   

If we are going to rely on a price feed we can force covering any time the highest offer to buy BitUSD is less than 90% of the feed price.

Does this punish shorts?  I don't think it does.  I think it supports the peg by adding liquidity without adding any risk to the shorts. 

I think this added liquidity should come form which ever shorts are least collateralized.  This way the shorts which don't want to be forced into providing liquidity pre-maturely can avoid it by having a large surplus of collateral and thus making the entire network more secure. 

Under this system BitUSD is always worth at least $0.90 and the market makers / market will likely drive that to near $0.99- $1.01.

I think the problem of overshorting comes from the fact that market is asymmetrical: everybody can sell BitUSD (either by shorting or selling), but only BTSX owners can buy BitUSD.

It would be more natural to make it symmetrical: allow BitUSD owners to short BTSX (effectively create extra BitUSD buy pressure). In this case Alice will have a chance to sell her BitUSD to a pessimist who bought BitUSD, and is so strong about his position that is willing to short BTSX with BitUSD collateral.

How should we accomplish this in bitsharesx or the user interface?

Offline bytemaster

Short orders appear with Bids/asks in the GUI
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Offline eagleeye

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Now all Alice has to do is wait and Bob will buy it back for $1...  This is because due to price movement one of two things will happen:

But what if she doesn't want to wait and what if she has a large volume that the market can't support in times of low liquidity. We want those kind of buyers to enter the market no?

So it looks like a double punishment for shorters. The imminent consequence of this is fewer people willing to short, and as a result slower growth of BitUSD supply.

There seem to be long queues of people willing to short. The growth of BitAssets in the short to medium term seems like it will be determined  by how appealing it is to the people going long BitAssets.

In the bitsharesx platform is there a part of the Interface that shows people wanting to want to go short?  Or do we have no one wanting to do this yet?  I cant see it in yet but I could be blind (please laugh).

Offline jsidhu

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I have a perfect solution to this pegging problem, only need one little change to the current system, no price feeds, no 90% stuff, if you post a 10 M BTSX bounty, I'll post it.

Post your academic background and qualifications and maybe someone will take you up on that offer. But I doubt anyone will take you seriously.

Usually this kind of thing means we structure some sort of incentive to be long bitusd and punish short bitusd.. however this may adversely affect the market in a few ways mainly speculative attacks/hacks and might actually dry up shorts altogether and will undermine confidence in the system.

Main thing is if you're coming up with a solution then what is the incentive to hold long and not hold short? Some are throwing the up idea of interest rates.. some are saying other things, each have their pro's and con's if we weigh each idea with pro's and con's we can find which ones are a better fit in as objective manor as possible.
« Last Edit: September 02, 2014, 05:07:48 pm by jsidhu »
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Offline Empirical1.1

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@ Shentist I don't understand your solution, I will try understand later, but yes the market is there waiting to explode.

There are a queue of people wanting to short BitAssets at fair market price around the peg. (Shorts want to support the peg.) We need to find a very simple mechanism to find that fair market price that supports the peg too.



Offline Shentist

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my idea with my knowledge of english  ;)

what we need:
1. liquidity - the new rules around the median price killed the whole bitUSD market. 1 trade per hour is nothing!
2. we want more stability in direction to the peg

i am against all this 10% of something to cover etc. it makes everything complicated and at most, if we see this in the future on the other side, how do we react?

so we need a solution for every situation.

1. what does it mean to peg the USD?

it will oszillate around it, so if we start not 1:1 it is absolute fine, because in extreme situation the peg will not hold, because the buyers and sellers will struggle for the savesed bet.
so in the moment more people, or extreme more people want to short bitUSD and drive the price away from market peg.

my solution

1. we just count the volume the last say 1.000 trades

- 5000 BTSX are traded on the bid side
- 50.0000 BTSX are traded on the short side

its 5.000 : 50.000 = 1:50

we are in an extreme enviroment, who everyone looks to short bitUSD

so we will do this

1 : 50 = 50 -1 = 49
49 is translatet do 49% interest

bid side is 30 with 1.000 bitUSD
short side is 32 with 30.000 bitUSD

if you want to short and buy the bid side away you have not to pay 1.000 BTSX + colleteral, but the new counting will look like this
30.000 BTSX + 49% interest for the buyer of bit USD or 14.700 BTSX == 44.700 BTSX to buy the bid side away with a short from the buyer (extreme expensive)

now it is extreme expensive to do this.

this interest will adjust after a couple of trades.

advantages?

1. the market can trade freely and will decide which price is worth to pay
2. in an extreme situation it will much more intesting to take the other side, so more liquidity for the unfavorde side
3. the rules are for both sides, so if in the future the conditions are in favore of bitUSD we don't need to worry because the short will get a premium to take the position

i hope you could follow my idea.
« Last Edit: September 02, 2014, 05:13:01 pm by Shentist »

Offline jamesc

I think the people who care the most about the price feeds are the investors.  The delegates don't have any liability; a delegate can claim hey "the platform made me do it!" 

So use the wallet as the testing grounds for these great ideas.  Lets see two simple options become available to wallet uses / investors.   The investor will be highly motivated to monitor and tweak for profitability.  They will decide how much to risk and how tight the stops can operate.  The best methods should spread and stabilize the peg (very quick, and perhaps automated)..

This gives the option to send a notice and: approve, deny, or auto-approve.

Finally, I don't think the platform can do this for Bob, it does not have Bob's private key.  Even if Bob pre-signed transactions, the delegate could misbehave by broadcasting it out too early, late, or not at all.  Best if we only trust delegates to include transactions and be reliable but not to issue transactions.  It would be nice to put the auto-approve in the delegate, but I can't see how to do that.

Finally, platform and delegates can claim "the investor made me do it."
« Last Edit: September 02, 2014, 12:15:50 pm by jcalfee1 »

Offline James212

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Dear yiminih,

Working together and helping each other is very rewarding experience and I would recommend it that you should give it a go. You will be pleasantly surprised.   

Peace and Love  :)

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Offline vegolino

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Dear yiminih,

Working together and helping each other is very rewarding experience and I would recommend it that you should give it a go. You will be pleasantly surprised.   

Peace and Love  :)

Offline yiminh

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hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)


Even if you have the right answer and we come up with the same one we'll never know. Of course you'll jump up and down saying, "Yes! This was my idea!" Frankly it just comes across as looking for attention. So, on that note I'm done responding to your attention bate posts.

Only when you have a solution can you realize the current peg needs work, ByteMaster kind of suspected that, but most of you don't even think there is a problem, I need BTSX, not attention, nobody knows who I am.

Offline Riverhead

hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)


Even if you have the right answer and we come up with the same one we'll never know. Of course you'll jump up and down saying, "Yes! This was my idea!" Frankly it just comes across as looking for attention. So, on that note I'm done responding to your attention bate posts.

Offline Riverhead

Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?

It might be.
I know a person who's idea is worth several trillion dollars (in my estimation)... He did not get the money for posting his idea and expecting someone to pay him for it. In fact most of us here try to help him get most of that value out of this idea.


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Offline tonyk

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Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?

It might be.
I know a person who's idea is worth several trillion dollars (in my estimation)... He did not get the money for posting his idea and expecting someone to pay him for it. In fact most of us here try to help him get most of that value out of this idea.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline yiminh

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Sure, only if it is implemented without changes you get the 1 Million bounty!

10Mil are you nuts?

Don't you think it's worth 10M BTSX if it worked?


Perhaps. But it's just your idea versus everyone else's that are posting up and everyone else thinks they have the solution too. Difference being of course they're collectively trying to solve a problem and you're...I'm not sure what you're doing lol. Buy a lot of BTSX, throw your golden screwdriver out there, and if it works your shares make you rich. If it doesn't you're no further behind.

hehe, this is fun, I'll wait couple of days to see if anyone else can figure it out:)