Author Topic: Support BitUSD Price by Forced Covering at a Profit  (Read 6213 times)

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Offline bytemaster

Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #60 on: September 02, 2014, 05:18:01 pm »
Short orders appear with Bids/asks in the GUI
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Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #61 on: September 02, 2014, 05:18:41 pm »
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 Empirical1.1

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #62 on: September 02, 2014, 05:21:19 pm »
Quote
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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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #63 on: September 02, 2014, 05:33:28 pm »
Short orders appear with Bids/asks in the GUI

Im having some errors in the GUI (im probably on an old version, I have to uninstall it and reinstall new one? This is what I believe)

Anyways will later versions of bitsharesx platform update when you login?

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #64 on: September 02, 2014, 05:35:04 pm »
A86, this does not explain how Alice gets $0.90, 10 seconds after she purchased the dollar.
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

It is actually not Alice that wants to buy them, it is us  wanting her to buy them  :)
My response stays the same, regarding the not-bold text:

I think the idea is that in Alice's mind she would be absolutely secure that she can sell at 90%, at all times. Just like the system bot proposal but without a bot.

So how do we make/encourage/convince Alice to buy them?  Them being bitUSD?

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #65 on: September 02, 2014, 05:43:12 pm »
Surely bitUSD is a safe haven for any perceived future drop in BTSX. While BTSX rises perhaps it'll be tempting not to buy bitUSD but to short it? So, between those two, you have a draw into bitUSD.

I'm not sure whether you need to control the market as much as sell the idea of it. I wonder there needs to be some ELI5 descriptions for those of us with less experience of financial markets; and those of us who've drunk too much beer :p

If ever there is a prospect of bitUSD being widely available on exchanges and used in the real world, it seems very likely it'll find its market. USD is an imposed consensus; bitUSD is a distributed consensus and as such it's not bitUSD==USD but the peg and the utility and the idea of bitXYZ acknowledging real world assets is a powerful one. Just add time.. not rules.

Quote this:

The only way BitUSD will be used as a safe haven is if information flow and market signalling is improved. People make rational decisions only when they receive timely information otherwise it's just gambling.

BitUSD is best used when you have accurate pertinent information about a market disrupting event which is about to occur. A spike in the purchasing of BitUSD may be a statistical indicator that something has happened which will result in a crash in the price. If Mt Gox gets hacked, if the Bitcoin ETF is about to open, if big whale investors are about to enter the market, all of that influences whether or not people should buy BitUSD because it's a prediction market.

Information right now doesn't flow very well. It's hidden in the forums, in the Mumble meetings, etc. This lack of information flow causes a delay in people purchasing BitUSD, and it is partially why people don't value BitUSD yet. It's going to take a dramatically more interconnected and efficient information flow to create a true information market.

What do you mean about information flow and market signaling?

How do you think information should flow better?  (Looking for ideas)

It is the GUI or User Interface of bitsharesx "Market" that needs to be worked on we need to change it to a system of "The market should be categorized simply like

Name           Market Value               Daily Volume               Todays percent change"

bitUSD               xxxxx                           xxxxx                           %xx.xx

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #66 on: September 02, 2014, 05:56:04 pm »
Frankly I understand nothing of this, so I have stayed away, but was wondering something (might be stupid).

Is one of the issues is that there are not enough longs or shorts; means at some point one look more attractive than the other and so its skewing it? In that case, can you introduce some kind of 'odds'? In betting, if you are taking less risk, you will receive  a less return; but higher risk nets higher profits.

In the same way if it feels like majority is against, say, short, but you do anyway, shouldn't there be a more incentive? Might balance up both sides this way.

Yes Sir Sumantso.  We need market makers, we need activity, we need adoption.  There are 3 big questions behind that

(1 market makers, (convince them that we have no fees (I dont understand how will we adjust the fees when the price of bitcoin goes up, so market makers stay competitive))
2) we need activity, tell your friends about this post https://bitsharestalk.org/index.php?topic=8072.0 so we get activity.  Be choosey who you tell, we do not want the government thinking we are going to destroy the world (I do believe they think technology is good.
3) We need adoption.  of bitUSD How is the question?

Even basic questions are good questions, or questions that you think are stupid.  You are a valued member Sumantso.

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #67 on: September 02, 2014, 05:58:14 pm »
This is history in the making.

I love that you guys are taking the time to dissect every idea and try to implement something that works.

You are operating well outside of the dogmatic belief systems that some people have on here, and you can only be cheered for it.

I think considering to implement multiple, different solutions might be more productive than to just try to get the one way that will work out of the box, because who knows what happens when it gets out of the box?

Good job guys, keep an open mind.

*A tear comes off his eye*

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #68 on: September 02, 2014, 06:00:02 pm »
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.

Could price feeds reduce price security?  Could there be DDOS attacks on feed sources to could make the network less stable?  Just wondering..


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 don't mind this approach but I'm glad we're discussing it.  I have been Alice and run into a couple liquidity problems so far trading BTSX and I think what you're proposing would be fair and increase liquidity.  With that said, is it the best way?  Will liquidity not increase as other currencies/options are added to the platform?  In your example Alice is stuck because there is one exit from her USD position and it's blocked.  But what if there were more exits?  What if Alice could buy CNY from Zhang Li?  ;)  Or Bitcoins from Stan?   More exits = more liquidity.

Very important question about the DDOS attack.  We need more delegates we need more processing power, we need more ram, more speed!

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #69 on: September 02, 2014, 06:01:04 pm »
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.

yiminh we are here for free.  You tell us the solution, you will make 1000x your money,

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #70 on: September 02, 2014, 06:06:05 pm »
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.

yiminh a bounty is no different than a ransom, you are trying to mentally, or perhaps for your own quick game take us hostage.  In Colombia they kill the hostage takers.  (This is not Colombia this is the Internet, this si a free board, free software, be nice)

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #71 on: September 02, 2014, 06:08:01 pm »
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.


 +5% +5% +5%

Possible WINNER WINNER CHICKEN DINNER.  How do change the GUI of bitsharesx platform for this?

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #72 on: September 02, 2014, 06:09:16 pm »
Short orders appear with Bids/asks in the GUI

Please post a screenshot.  (I am sorry I am a dummby I can not get there on the platform).

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #73 on: September 02, 2014, 06:20:29 pm »
Well, I think it shows that the token she holds will fetch the holder $1 given some time.  If she offers it at a discount ($0.90) I believe there will be other people willing to scoop it up knowing that they will eventually get $1 for it, assuming Bob doesn't take the opportunity.

Maybe Alice shouldn't be buying things that she doesn't want.  All in all, I think with enough people participating my belief is that this problem does not exist and is purely academic.

That's right. All markets will move to equilibrium (price parity) given enough time and liquidity.

The only reasons the peg is slightly off presently is the wallet software (could be more stable and also needs to help the user know when opportunities arise), not enough traders and few abritage opportunities at the moment.

Everyone is forgetting the key element of an information market. Information flow is a key element and we have very poor information flow. If information is like the oxygen in our blood flowing through our bloodstream then if we have poor circulation we can't survive.

BitUSD/BTSX is an information market. It's a prediction market where you're trying to guess whether BTSX is going up or down in price. Since most people have been convinced that it's going up in price not many people decided to buy BitUSD. The other problem is not many people even knew what BitUSD is or how to use it (myself among them).

So you have to consider the amount of time it takes to master the UI of Bitshares X along with figuring out all the advanced features. As expertise begins to increase, along with automation, there will be people who can capitalize quickly, if and only if information circulates.

So we need to build information feeds into the GUI so that information can flow efficiently to eyeballs. The GUI could be like the heart of the whole ecosystem where all information flows through so that everyone using Bitshares X software receives a live stream on their dashboard. This would increase situation awareness and information flow so that speculators can make rational informed decisions quickly.

Right now the Bitshares interface and bugs in the software prevent anyone from using it properly.

This point needs to be seriously addressed.  Like imgur.com (5 billion pageviews a month).  Look at how there comment system is, maybe have a "Categorize" button on the forum posts.

Offline eagleeye

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Re: Support BitUSD Price by Forced Covering at a Profit
« Reply #74 on: September 02, 2014, 07:02:03 pm »
I just came up with an idea.  Why not people just put $1 dollar bitUSD shorts, to make it seem like thereis a market.  Its like making a forum, first there are some fake user accounts but then people start adopting because they believe there is activity.  It is not just like an empty forum.