Author Topic: Proposal - Significant Enhancement to Market Engine  (Read 24893 times)

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Offline arhag

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The goal isn't to get people to buy BitUSD. If bitUSD is undervalued it is not because "there is not enough bitUSD demand" and it is not fixed by getting more people to buy bitusd. The goal is to make a tight peg which does not depend on getting the right amount of demand for holding bitUSD because you can never get it right. This new incentive scheme lets people maintain a peg while staying long BTSX. If nobody buys bitUSD afterwards it means there shouldn't be any bitUSD and that is fine.

So can we use this same argument to say that having interest or yields on BitAssets is not necessary other than for marketing reasons? Meaning regardless of whether we have 10% or 5% or 0% interest on BitUSD, the market mechanisms will ensure a good peg to the US dollar and thus create demand for BitUSD for people who want price stability. Thus, the only reason for interest/yield is to incentivize more people to hold the BitAssets rather than holding the underlying assets or holding BTSX. Now I am not sure why we care much whether people hold BitAssets vs BTSX, but it is clear why we would want them to hold BitAssets rather than the real world underlying assets, because that puts value into BitShares X and thus BTSX. For that reason, I see value in providing moderate yields (if possible) that out-compete what people can get by holding the real world assets. So a 5% annual yield on BitCurrencies kicks the ass of any other bank out there. But why have higher yields than that and why do we need to spend that money on yields for BitAssets where people could not get that kind of interest by holding the underlying, such as gold, oil, or BTC? In my view it would be smarter to take the value that would have been spent on those yields and instead use them to either boost the yields of the BitCurrencies if necessary, or give them to the delegates so they can invest in growing the BitShares ecosystem faster. And yes, I know this complicates the code, but I think it is worth it to eventually build into the system.
« Last Edit: September 19, 2014, 12:17:10 am by arhag »

Offline liondani

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EDIT:  I posted this answer a couple hours ago in a wrong thread. It supposed to belong here... I admit I wouldn't write it down after all replies I have allready read...
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It is getting to complicated !
Make it please simple!
Cut the Gordian knot!

In theory maybe it's ok, or maybe you will find even "better" solutions than the initial proposal but I think
it will not work! I feel allready I must go to a University to study bitsharesx before starting with trading!

Let the market free! Remove even the initial restrictions for shorting? What can go so wrong ? What are we afraid? Its normal on early days to have a peg even at -40% at some point because the volatility  is huge now for BTSX, but that will change after some weeks/months.... Its different to have a 60 million market cap and different with 6 billion (and we get there).
What do you think will the average investor/speculator/supporter do when 1 bitUSD is 0.6 USD ? (Personally I will only watch because I would have gave all my money for bitUSD when it was at 0.75 USD).And what will I do when 1 bitUSD goes to 1.1 USD? Guess!.... I mean it doesn't need a rocket scientist to predict what will happen! The early days the peg will deviate from parity and every day it passes and the market matures it will come closer and closer... Am I missing something??? We must give more time to the market!
And yes it is more importand to have a stable platform right now with lots of new futures, tweaks, design improvements,bug free and more secure, and of course begin the marketing aggressively. Without happy users (market) the peg will never be established even if we have 10 Agents on our team.

PS After all it's a bitUSD, think about it! The most stable cryptocurrency that gives you interrest....
PS2 Try to accomplish your goals only with a free market and .... interest/dividends
PS3 I really think it will make a big difference when you let the users make orders (bid or asks) depended of the ratio...    [(bitAsset price) / (median price of realAsset)]
      For example :  buy x bitUSD at ratio:85% nobody would be afraid to make orders !!!!!!!!!!!!  for me that's the cut of the GORDIAN KNOT!!!!!!!!! That's the way to help the peg!!!!
      Then we see on the charts BIG BIG WALLS.... ;)

Offline tonyk

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I think I see what you're saying: there exists undervalued bitUSD *right now* and the new mechanism's tight peg won't kick in until all existing bitUSD has been bought up to $1. In that sense, this mechanism doesn't provide "extra" incentive to correct for the result of the old one.

Yes and the currant gap will continue to exist with the new Market Engine until there is actual demand/utility for bitUSD.

And I do not think the yield is actually attracting any interest as of this moment. Practically all BTSX holders believe (rightly so imo) that BTSX will grow in price more than the 5 or 10% interest that biitUSD offers. Nobody has bought BTSX so they can save in bitUSD, not yet, in other words.

[edit] The good part is if indeed the code is ready, already. As much as I have my share of doubts about the effectiveness of the proposal, the proposal will not directly hurt the market, imo. Delaying other important parts of the system, was my main concern with it.
« Last Edit: September 18, 2014, 09:17:58 pm by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline toast

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I think I see what you're saying: there exists undervalued bitUSD *right now* and the new mechanism's tight peg won't kick in until all existing bitUSD has been bought up to $1. In that sense, this mechanism doesn't provide "extra" incentive to correct for the result of the old one.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Xeldal

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Thanks toast, it makes sense that this would be the goal.

My trouble is, at some point, somewhere, somehow, someone is going to have to offer BTSX for sale for the makers(peggers) to cover their shorts to remain neutral.

Lets say there are only 2 market participants.  the willing market maker(bot) who only wants BTSX and some individual(Al) who only wants bitUSD.

bot shorts 1MM bitUSD at 100 BTSX per $
Al buys 1MM bitUSD at 100 BTSX per $

Where is bot going to cover his short from if he intends to only be long BTSX?
There are no other participants.  Is it another market maker (bot2) ?

Then where is bot2 going to cover his short from?  bot3? and at what price is bot12 offering his bitUSD, is it at 101 BTSX per $ maybe more?

I don't understand how bytemaster can so easily guarantee that someone will be willing to provide him with bitUSD to cover at a profit.
Quote from: bytemaster
I will have a huge incentive to provide very highly collateralized shorts and then cover at very narrow spreads because I will remain net long BTSX.

Or maybe this isn't the problem.

If no one is willing to buy from bot or any other short for that matter, then we continue with what we've got with a bid and ask market well below the peg.  There's still no incentive to pay more for bitUSD.  There's plenty of supply below the peg.

At any rate, I'll spend some more time with this.  Its often slow to sink in.

Offline toast

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The goal isn't to get people to buy BitUSD. If bitUSD is undervalued it is not because "there is not enough bitUSD demand" and it is not fixed by getting more people to buy bitusd. The goal is to make a tight peg which does not depend on getting the right amount of demand for holding bitUSD because you can never get it right. This new incentive scheme lets people maintain a peg while staying long BTSX. If nobody buys bitUSD afterwards it means there shouldn't be any bitUSD and that is fine.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Xeldal

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Maybe no one will ever have to hold bitUSD and we can all trade with ourselves. This will be great!  I've got a bot that takes money from one pocket and puts it in the other and I earn the spread as profit.

No offense, but I'm either missing something crucial with this plan or its not going to have the desired effect.  I don't see any increased incentive for anyone to buy bitUSD and from what your saying this was not the intention.  We'll see I guess.  I hope I'm just missing it.

Offline bytemaster

Considering the now inevitable delay with another month or more,
 BM can you include a 'feed price' order while enhancing the market. (AS in short/buy/sell  bitAsset at the current feed price).

No month delay here...  the code is done and just about ready to go.

No I cannot produce a 'feed price' order to enhance the market right now because it would leave me long USD and like every other actor in the market I do not make trades I expect to lose money on for charity or the cause. 

Once this fix is made however, I will have a huge incentive to provide very highly collateralized shorts and then cover at very narrow spreads because I will remain net long BTSX.   
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.

Xeldal

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Quote
think of USD as 'pound of potatoes' and of BTSX as $ (or whichever is your local currency).
Hope this helps.

No. I'm very acquainted with the $ per BTSX , BTSX per $ dilemma.

The following uses BTSX per $ as a reference.
Quote
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD

My understanding was that currently shorts below the feed (BTSX per $) are not valid.  This statement seems to imply the opposite.

And my other question didn't pertain to this.  I'm confused about what was meant by crossing out one of the shorts rather then reordering the book.

Offline tonyk

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maybe not all backwards but this line I don't understand

Quote
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD

why is a short only "valid" if its below the feed? I though it was the other way around.

Quote
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 102.5 BTSX per USD
    Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
    Short Sell USD @ 101 BTSX per USD (min)  with 202 BTSX per USD collateral  (2x collateral);
Sell USD @ 103 BTSX per USD

so the 2 shorts would execute at the feed 102.5  This looks ok
but then in the next section when the feed drops to 101.5 the short at 102 is crossed out.  I don't understand why.

Quote
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
    Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
    Short Sell USD @ 101 BTSX per USD (min)  with 202 BTSX per USD collateral  (2x collateral);
Sell USD @ 103 BTSX per USD

The short at 101 would take priority and execute at the feed 101.5
the short at 102 should still be there yes? just further down the book.

Quote
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
    Short Sell USD @ 101 BTSX per USD (min)  with 202 BTSX per USD collateral  (2x collateral); will execute at feed
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Sell USD @ 103 BTSX per USD[

Is this right?
think of USD as 'pound of potatoes' and of BTSX as $ (or whichever is your local currency).
Hope this helps.
« Last Edit: September 18, 2014, 06:44:30 pm by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Xeldal

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maybe not all backwards but this line I don't understand

Quote
You claim that all orders are "valid" according to the feed which means the feed is >= 102.. so we will call the feed 102.5 BTSX per USD

why is a short only "valid" if its below the feed? I though it was the other way around.

Quote
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 102.5 BTSX per USD
    Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
    Short Sell USD @ 101 BTSX per USD (min)  with 202 BTSX per USD collateral  (2x collateral);
Sell USD @ 103 BTSX per USD

so the 2 shorts would execute at the feed 102.5  This looks ok
but then in the next section when the feed drops to 101.5 the short at 102 is crossed out.  I don't understand why.

Quote
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
    Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
    Short Sell USD @ 101 BTSX per USD (min)  with 202 BTSX per USD collateral  (2x collateral);
Sell USD @ 103 BTSX per USD

The short at 101 would take priority and execute at the feed 101.5
the short at 102 should still be there yes? just further down the book.

Quote
Sell USD @ 100 BTSX per USD;
Sell USD @ 101.1 BTSX per USD;
FEED PRICE 101.5 BTSX per USD
    Short Sell USD @ 101 BTSX per USD (min)  with 202 BTSX per USD collateral  (2x collateral); will execute at feed
Short Sell USD @ 102 BTSX per USD (min) with 408 BTSX per USD collateral (4x collateral);
Sell USD @ 103 BTSX per USD[

Is this right?

Offline tonyk

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Considering the now inevitable delay with another month or more,
 BM can you include a 'feed price' order while enhancing the market. (AS in short/buy/sell  bitAsset at the current feed price).
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Agent86

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My original explanation states exactly how these are matched.
Without units there's no way to tell which direction is which in your hypothetical order book.

With that said, my explanation of the matching algorithm was my original vision for it.  In the interest of simplifying the code I think BM may just match all orders above the feed solely by price and only shorts below the feed are prioritized by collateral. Either way I don't think it will make a lot of difference.

OK, OK  I got the point stated 3 times that I did not include the units. I ALWAS THINK OF BTSX AS THE CURRENCY! Plus going Short BTSX is not possible anyway....

On the bolded part - I do not think the whole 'market enhancement' will make a ton of difference. Period.
 Not much difference other than delaying the actual active marketing of the Bitshares X platform that is.

Yea, I reconsidered my post, the units were probably pretty clear, sorry...  I disagree that the market enhancement won't make much difference.  I think prioritizing by collateral and allowing shorts to cover at a profit by buying back just below the feed (because they didn't have to pay a big transaction fee to go short) will make a big difference.

Offline tonyk

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My original explanation states exactly how these are matched.
Without units there's no way to tell which direction is which in your hypothetical order book.

With that said, my explanation of the matching algorithm was my original vision for it.  In the interest of simplifying the code I think BM may just match all orders above the feed solely by price and only shorts below the feed are prioritized by collateral. Either way I don't think it will make a lot of difference.

OK, OK  I got the point stated 3 times that I did not include the units. I ALWAS THINK OF BTSX AS THE CURRENCY! Plus going Short BTSX is not possible anyway....

On the bolded part - I do not think the whole 'market enhancement' will make a ton of difference. Period.
 Not much difference other than delaying the actual active marketing of the Bitshares X platform that is.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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All short sell orders with the min limit below the feed execute *at the feed price* prioritized by collateral.

Got it!
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.