Bitcoin Forum

Thanks to digital industry for highlighting Larimer's damning quote.

https://anonfiles.com/file/cb6ea50037eebae4abd05c205350a1f4

This pdf file just uses a logical argument to demonstrate that bitshares is a ponzi.

It is textbook macroeconomics.

Help spread the word to protect the community.


Don't believe them when they claim naivete.  It doesn't add up.

>[...]exchange units of USD via a bitcon client[...]
You lost my attention

Very well, then you are not at risk as a Ponzi victim.

protip: Present your findings as an essay/paper, not a powerpoint pdf. Your slides are very confusing and unconvincing.

Last time I did that I got a request for slides...

You don't have to trust me. Just read the wikipedia article linked in the slides and come to your own conclusion.

“If you own BitBTC you can earn dividends on your bitcoins,” said Larimer. “If you have a thousand bitcoins and you convert them to BitBTC, and then you hold it for six months, then you convert the BitBTC plus the dividends you received back to bitcoins, you’ll end up with more bitcoins than you started with.”

from  http://www.coindesk.com/bitshares-p2p-trading-platform-to-offer-dividends-on-bitcoins/ (http://www.coindesk.com/bitshares-p2p-trading-platform-to-offer-dividends-on-bitcoins/)


Lol - i suppose they have to try ... : |  pfft.


but , i'll be aptly interested to see who will take this up - , i suspect there are always some marks , but it will be interesting to see .

in the same sense , many times we have invested in paper on other assets many times before, this is an investment vehicle , one would have to consider this high risk , but play the game if you can i guess.

Seeing that there is a corporation and VC funding etc, the only plausible explanation is a long con.

This webpage is not available.

can't download

Then that guy is probably still in primary school and reads picture books. Powerpoint slides are to be used in conjunction with an ACTUAL PRESENTATION. You're not going to convince anyone with a poorly structured powerpoint.

Guess why this guy: http://ripplescam.org/ is more convincing than you. Hint: it's because he has a properly structured article that lays out his arguments and then presents evidence for each of them. On the other hand, you present random pieces of economic theory, then come to the conclusion that bitshares is a ponzi.

Oh so you hope to convince people by: "DON'T BELIEVE ME? HERE ARE A BUNCH OF ARTICLES VAGUELY RELATED TO MY CLAIM." Good luck with that.

I put it here too.
https://docs.google.com/file/d/0BwuAen5XHUMEOTdVeW9nX3EwdXM/edit?usp=sharing (https://docs.google.com/file/d/0BwuAen5XHUMEOTdVeW9nX3EwdXM/edit?usp=sharing)

There really isn't any logical argument in the linked page. I prefer to use logical arguments.

If you don't want to accept consistency with basic economic theory as a criteria for correctness, then there is nothing I can do to convince you.  

If you have never taken economics before or lack aptitude in the area, then I don't really have the time to offer a course.

“If you own BitBTC you can earn dividends on your bitcoins,” said Larimer. “If you have a thousand bitcoins and you convert them to BitBTC, and then you hold it for six months, then you convert the BitBTC plus the dividends you received back to bitcoins, you’ll end up with more bitcoins than you started with.”

^^

simply rather than having to write  a white paper - just tell me who takes the risk and where does the "magic" happen in the above scenario.

When trying to find a scam I suggest that if its too difficult to explain without trying to revert to eco-speak , you are scamming.

so simply , who takes the risk in the above scenario to provide the "interest" - where is the "new" BTC issued from, or transferred from, (where is the work?) how does an "investor" asses risk?

if this can't be explained , unfortunately, well, you know....

Often you are completely correct, but that is because people are adopting eco-speak because they don't expect you to understand it.

If you actually understand eco-speak, it makes things crystal clear.
This is simple stuff. e.g. I test undergrads on this all the time and they do just fine.

If you see well-educated people doing this it can only be intentional deception.  

The problem is if something is actually complicated then I will be unable to explain it to you without you immediately thinking it is a scam.
Bitcoin is case in point.

A simpler way of putting it might be through "covered interest rate parity"

Say that a bitUSD is really expected to be worth a bitUSD next year.

If so, then would you agree to buy 1 bitUSD from me for 1 USD next year? (i.e. we are both obligated to make the exchange)

Of course you would, it is just exchanging one USD for another.

Okay, but bitUSD earn interest, so if I can buy it for 1 USD, earn interest, and sell it back to you for 1 USD, it is a great opportunity.

It generates a risk-free return for me. With no risk at all for you either. Hey maybe I can even share the wealth since I can earn infinite money this way.

This is impossible.

ha ha i'm not sure if you are talking to me in the first person here?

As soon as I saw its conception , I never doubted the principal upon which Bitcoin is built .

I can choose to speak eco-speak just find it redundant and obtuse , a disgrace to the field that use to be called "economics" .

I know of others that have had a hard time understanding  PoW Blockchain etc principals , to the point of faith > security > confidence.

But some of these questions are justified certainly with regard to BTC , the principal however I believe is pretty rock solid, its proven, double blind and in real life.

Impossible it may be, idiots will still fall for it. This forum has a profound lack of economic sense.

It could work as long as they could keep printing more bitcoins. But if the interest due increases faster than new bitcoins are printed/minted, it, as described by Cunicula, is obviously doomed.

I suppose in principle the possibility remains that Cunicula is over-simplifying a complicated system, but if their marketing also did so it would seem like the marketers were trying to market it as a ponzi.

EDIT: Oh wait, possibly as long as bitcoin keeps going up in value relative to USD that also could prolong the scheme?

-MarkM-

yes but even a child could understand "earn interest"

so the very simple question of course is , where does thou interest derive ?



interest is the principal of payment for risk , Usury is the principal of fraud .

interest is acceptable on a loan at risk to the counter-party as if this did not exist , no one would have an incentive to loan.

so now that we know that interest in this simple sense is an "offset for risk",  where is the risk?

and where is the "work" - if the principal is investment there is usually "work" related to growth, i.e productive growth.


even in so called no productive loans - there is a work derivative ;

for example Jon borrows 100k for a car loan, he buys the car and promises to pay the interest (lets pretend we don't live in a fraudulent usurious society so i'll leave out all the fake money creation)

he gets the loan and pays back the principal and interests - Jons work to earn the transfer of new currency to pay the principal is allowing for the existence of the loan and by extension the car, back at the car factory there is work being done , to justify its existence . 


@MarkM -

The quote I provided is directly from the Coindesk article. the claim has been made.

Maybe the "work" is the increase in bitcoin value compared to USD value?

So that, like pirateat40, as long as bitcoin keeps going up (or was it down in pirateat40's case?) the scheme will get to continue a little longer?

-MarkM-

over-simplifying it is the whole point.

If someone says something about physics theory, and it turns out that their conclusion implies a violation of the law of thermodynamics...

If you just follow their argument it is very hard to understand. If you check the conclusions of their argument against standard theory and they are inconsistent with one another. Well, this is very revealing. Either the standard theory is wrong or they are wrong.

Most people would trust economics texts over new economic theory developed at bitshares.
However, with the bitcoin community who knows.

If you won't accept the standard theory, however. It is not going to be possible to convince you. (much like if you won't accept the law of thermodynamics then it is going to be hard to argue about the feasibility of your new physics invention)

+1

got it in one.

that's what I would suspect.

See this is where it helps to have a whole newfangled currency of your own you can print at will.

In CoffeeMUD we have gold coins, it just so happens that CoffeeMUD lets the admin(s) create the stuff at will.

So, we could propose a whole grand scheme of things in which we point out how much gold coins trade at, even if that is, say, one satoshi per billion of them, then go on about all the grand investments in magic armour and shields and pounds of wood and stone and so on and so on that we propose to invest in to do productive "work" in the game producing stuff to make more gold coins for you, and thus have some awesome gold coin bonds you can buy that will pay you seven percent per week on the gold coins you invest.

We can do it, too! No problem at all! The MUD admin can create out of thin air seven percent more gold coins!

So buy gold coins right now with your bitcoins, earn seven percent a week, and sell your profit gold coins for bitcoins when you want to cash back out to bitcoins!

Now do you see where the interest rate parity between currencies comes into it?

-MarkM-

In this case, the "work" is actually mining rewards. They print bitshares as interest and distribute them to the holders of bitBTC. You can use the bitshares to print more bitBTC.

If people invest in bitshares then they can keep using bitshares to create bitBTC as long as money keeps flowing in.
They can maintain a market price of 1 bitBTC = 1 bitcoin using some of the inflows as a cash reserves to establish confidence in the system.

Success of the early entrants proves the scheme is legit for the second wave. These guys not only buy bitBTC. They are also buying bitshares too. Bitshares earn interest also. They are marketed as essentially an ownership stake in Pirate, Inc. If you really think Pirate, Inc. created a magic system for printing BTC, USD, and whatever else then it will be worth a lot of money.

As long as people keep sending cash in to buy bitshares they can keep it going. Once net cash inflows stop it must collapse. They walk away with the BTC horde. prices of bitshares and bitBTC go to zero.


If people need to be paid out in BTC then BTC going up in value doesn't help any. They need bitshares to go up in value.
Bitshares will go up in value if people are convinced by the scheme. You need to buy bitshares to mint bitBTC which they then convince you can always be sold for 1 BTC + interest.

If they were really telling the truth about bitshares magical properties then you would want to buy bitshares and it would go up in value. Unfortunately, people may believe they are telling the truth...

I imagine they think that calling this a high risk technological project will cover their asses from the SEC. I fully expect them to end up like pirate.

My quote on this from another thread:


I'm not affiliated with bitshares (more of a competitor, actually), but calling them a Ponzi scheme is just absurd.

Honestly, don't drag yourself into this.

I don't think you are a scammer. I think you have good intentions. Even if your mastercoin proposal is riddled with holes as of now.

There is a big difference between a flawed draft proposal

and a completely impossible proposal + ponzi solicitations

Before I believed they created a ponzi by accident from idiocy. I didn't even give bitshares the time of day relative to mastercoin because the whole thing is so absurd and they insisted on using unintelligible faux-economics jargon.
 
It was only when I read the press releases that I realized what they are doing.

Definition of a Ponzee Scheme:   a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.

So given this definition you make the faulty assumption that I am paying returns with their own money or with money from future investors.  I am responding here because this is complete nonsense and I want to show you how this Distributed Autonomous Cooperation (DAC) works to both make money legitimately and then pay this to the share holders.

The single biggest source of confusion is that the 'mining reward' is partially paid as dividends.  Ignoring the BitAssets such as BitUSD, the logical analogy to this is a stock-split.  No one is 'debased' or has value transferred from one person to another, with the exception that some of the stock split is paid to the miner.  It is no different than bitcoin in this respect.  You would not consider a stock-split a 'ponzi scheme' if a regular corporation did it.   Certainly there are irrational psychological effects with having 'more' of something that is worth 'less' as can be demonstrated by people who think they have made money in the stock market despite the debasement of the dollar.   We will be working very hard to educate people that the stock-split does not transfer any wealth from the holder's of BitShares.   However, the stock split DOES transfer wealth from those who are Short BitBTC to those who are Long BitBTC and this is how we 'charge interest' to the shorts who borrow to pay dividends to the Longs.    

But, to clarify everyone's thinking on the subject, lets look at the long-run when the currency supply stops growing (12 years) and only focus on how dividends will be paid then.

The DAC earns a profit by facilitating trade via transaction fees.  Some of these fees are paid to miners for their services.  The rest are paid as dividends.   These dividends are not SOURCED from future investment and could be sustained forever.  If there are no transactions there are no dividends.  In other words, the system does not promise any particular rate of return beyond a share of the 'profit' the DAC earns selling space in the block chain for transactions.

So how does BitBTC pay dividends on BTC?   The dividends paid are from the BitShares held as collateral for the short position that created the BitBTC.  The source of the dividends is the transaction fees.   The ratio of dividends paid to BitBTC vs BitShares is always proportional to the price ratio between BTC and BitShares and because the collateral is 1.5 to 2.5 the value of the BitBTC short position, in percentage terms BitBTC pays 1.5 to 2.5 the rate of return as owning BitShares proper.

Money is transferred from the people  who are Short BitBTC to the individuals who are Long BitBTC as the carrying cost of maintaining the short position.  This is not a ponzi, these are opposite sides of a trade who entered into a voluntary arrangement.


I will go one step further to prove this isn't a ponzi scheme.  The system will work even if no one ever trades BitBTC for actual BTC.   Your profits are entirely denominated in BitShares and those who 'trade' the best within the system earn the most BitShares.  BitShares could be viewed as nothing but play money or bragging rights in a virtual prediction market on the price between BitBTC vs BitUSD vs BitGold.   If BitSHares have a non-0 value then the dividends paid have real value and at all times the source of the dividends is profits from fees and not future investors money or dilution of existing investor money.

You will never find a more solid group of honest individuals attempting to make the world a better place than at Invictus Innovations.  

You have your own 'solution' based on so many arbitrary constants and price fixing that I must shake my head.... if you cannot understand the economics of BitShares then you are not fit to design mathematical models of anything related to economics and prices.   I suggest you study the mechanics of prediction markets, voluntary exchange, etc before you go around accusing people of running a ponzi scheme.  


 
 

Again, you are not going to cloak your ponzi scheme in a (distributed asset corporation), blah blah blah.

You are going to the press and saying:

Sure you can create whatever type of intellectual property you want. Freedom of speech and all.

You cannot misrepresent what you are doing to naive investors in order to attract investment.

That is fraud.

Distributed / not distributed does not make a damn bit of difference.

Lets simplify this for you... I am Mt. Gox and am running a P2P exchange.  You deposit your BTC with me I pay you interest from the fees I charge facilitating the exchange.   You can withdraw more BTC in 6 months than you started with because the business earned a profit providing a service.

The only thing I have done is decentralize Mt. Gox and allocate the profits to the shareholders.

Sure, you can distribute mining rewards as interest to holders of bitshares. This is bitshares monetary policy. You can choose whatever you want.

Sure, it is possible to maintain a peg to the USD or BTC or whatever.

Sure, it is possible to have free markets in your currency. Currency pairs, etc.

You cannot do all three simultaneously.
http://en.wikipedia.org/wiki/Impossible_trinity

There is a reason why they put the word impossible before the word trinity in the phrase.

You are claiming to be able to violate the impossible trinity in the press. You must know that you cannot do this.
You are using your claim to solicit investment.

This is equivalent to a ponzi. You have tried to cleverly disguise it.

Anyways, aren't you supposed to be sending me a bounty for exposing a flaw in your scheme:

No. You have changed one critical thing.

Mt. Gox does not pay interest on USD deposits using inflows from other depositors (well I hope they don't).

You are offer interest through monetary creation.

This is 100% equivalent to using investments from new depositors to pay interest to existing depositors.
Which is the definition of a ponzi. Therefore, you are planning to run a ponzi.

(I thought printing money was like the original sin for bitcoiners. Apparently, if you dress up seignorage in cryptocurrency it is sufficient to fool a large number of Austrians. Hmmm... are doing this to have a highly profitable fun at their expense? If so, I must say it is brilliant irony.)  

Finally, to repeat
(the funding interest through monetary creation thing + free markets -> impossible to maintain a peg with the USD.)

This is the impossible trinity.

The impossible trinity is true if the only means of controlling the price is 'printing money' or 'destroying' money, but that is not what we have.  Furthermore, the analogy breaks down when you factor in 'Sovereign monetary policy'.    We are not attempting to Peg BitShares to USD via monetary policy.   BitUSD is the result of two sides of a prediction market that neither creates nor destroys value, it merely transfers it from those who bet wrong on future price movement to those who bet right.   This can be maintained forever, especially because of automatic margin calls that 'settle the trade' before the long position can lose money.  

If you are so sure that you deserve payment for claiming to show how my system is flawed, then publicly back your position with an equal amount of BTC for proving you wrong.  

Otherwise, your unfounded claims cost you nothing and the true test of a belief is being willing to put your money on it.

Wow. If this is the best argument against bitshares, maybe it's worth another look!

JR, stop throwing popcorn. Let this play out, it has to.

Holy cow this is amazing.

Cunicula, would my MUDgoldat40 (described in my earlier post) scheme be illegal? If not I think it might be a major moneymaker...

-MarkM-

What exactly is the criteria for determining whether it is flawed? Is it theoretical or empirical?

I have 70 BTC. I am very happy to wager them against your eventual collapse. But I can't put a date on it yet.

It is a ponzi. As long as you maintain positive net inflows you can maintain it for a long time.

See MMM, pirateat40

Perhaps once I can get some measure of growth in inflows than I can predict the date with more accuracy.

I think fraud has to involve intentional misrepresentation. So if you can convince the court that you are simply an idiot trying to design something complex it might work.

This seems to be the defense that bitshares has planned out. Personally though I don't think anyone is going to buy this.

The interest rate on BitBTC is not based upon the mining algorithm and it is not paid in BTC.    No BitBTC is ever created unless two people agree on a price and take opposite sides of the bet on the movement of the price.  Furthermore, they must both put in equal value in terms of BitShares.  

If there is no price movement, the short pays the long via the opportunity cost of lost dividends.
If the price goes up, bitshare-value is transferred from short to long.
If the price goes down, bitshare-value is transferred from long to short.

This is a 0-sum game, not a ponzi, not a peg enforced by monetary policy.  This is a prediction market of voluntary actors speculating on future price movements and making money proportional to their investing skills.  

The return on real BTC is a growing supply of BitShares... which if they have a non-0 value can be sold for additional BTC.   I am not promising any particular rate of return and my peg is not a 'hard peg' but fluctuates over time within a narrow range.  This is why we adopted an axiomatic approach to designing our system:

1) no price fixing
2) all voluntary transactions
3) no creating value from nothing
4) 0 sum, value is only transferred never created nor destroyed.

Unfortunately, your system violates these core axioms despite your fancy math.

One last caveat... we are not pre-mining and have accepted no investor money from non-sophisticated investors... the money I received early on (May) was refunded + 50% and we continue to turn down funds from people who want to invest in the idea because of SEC laws.  These are not the actions that would be taken by a scammer.

Furthermore, we are spending significant time and money to build revolutionary market-based systems far beyond just BitShares with the goal of securing life, liberty and property for all without the need for government.   We want to make the world a better place.

I spent significant time and effort to teach and educate people in the Mastercoin thread.  As a result of my efforts Mastercoin has been forced to redesign their market pegging system.   So while I disagree with the approach of Mastercoin, I have developed the utmost respect for dracoinmister as being well intentioned and thinking outside the box.

Ok, lets find some other metric... perhaps a Market Cap you don't think BitShares will ever achieve?

So are you saying the 'savers' of bitBTC face a risk loss of their BTC depending on price movements?


Since you really don't give that impression in your press release, see above. Seems a bit fraudulent, doesn't it?

From the above, it seems like the bitBTC earns risk free dividends, no?

If the savers of bitBTC can just see their BTC disappear out from under them, then perhaps I misunderstood.

That is all my powerpoint said.

Okay, you are a complete idiot. The MMM ponzi scheme achieved a notional market cap of perhaps $10 billion.
Bernie madoff had on paper gains of $65 billion.

Am I betting that your Ponzi will be less successful than Madoff's? It is not really a bet about whether it is a ponzi or not, but I am willing to take that bet.

BitBTC holders lose opportunity cost relative to gains in BitShares.  The market value of their position will remain near parity with BTC.   The short profits from this lost opportunity of the holder of BitBTC.    On the other hand, the BitBTC holder is protected when the price of BitShares falls against BitBTC because the Short position is forced to cover and thus at the end of the day the BItBTC holder ends up with more BitShares of equal value to real BTC.

So are you saying that the savers of 'bitBTC' risk forced conversion of their derivative into bitshares? (again doesn't look like that from the press claim does it?)


Or when you say someone is forced to cover, are you essentially saying that more capital will flow into the ponzi to prevent the bitBTC from devaluing. And if so what happens when the capital stops flowing in? How do you mop up the outstanding BTC that you can no longer maintain. There must be some confiscation involved, no? Otherwise you can have an arbitrarily large supply of outstanding BTC backed by an arbitrarily small market value of bitshares. Can't you?

So you do confiscate the bitBTC from the holder right? I mean you must be joking me. You have these bitBTC. You have to force their destruction somehow. You can't just say, oh, our liabilities will conveniently also go away if and whenever our assets go away.

Anyways, whatever you plan to do violates basic economic theory of foreign exchange markets.

Further details are just a distraction.  

I never claimed the system was risk free... lets look at the risks:

1) it is a crypto-currency so holding it is subject to risks associated with holding a crypto-currency.
2) buying BitBTC risks the buy-sell spread vs BitShares
3) there is a variable dividend rate based upon transaction volume and small changes in backing between 1.5 and 2.5x...
4) because of the dividend rate, there will be a premium for BitBTC over regular BTC... this premium will fluctuate based upon the expected future dividend rate and the relative flow of money into or out of BitBTC vs BTC.
5) there is a relatively small risk that attempting to sell during rapid decline by 50% of the BitShare price in 10 minutes would blow through the margin... but if you hold through the correction, new shorts/longs will appear at the new price.

All of that said, the risk of investing in BitUSD would be like depositing funds in CD with a Bank that only gave out mortgages at 50% the home value and then claiming the bank was a ponzi scheme because they promise a 'risk free' return on their deposits?  Further, assume the terms on the CD were longer than the terms on the mortgages and factor in the difference in liquidity of homes vs houses (ie eliminate forclosure / resale risk) and it is clear this is a relatively safe ROI... so safe that you might call it 'risk free' without actually being risk free.

The additional collateral is put upfront... not after the fact.   Margin is called long before there is insufficient collateral.

This is not a foreign exchange market, it is a prediction market.   It works just like the prediction markets for president, sporting events, etc with the only difference being that it is continuous and the market players have access to far more information.  If you understand prediction markets and created a prediction market for the price of BTC vs USD based entirely on 'play money' it would be very accurate and you could accumulate 'play money' by investing wisely in this market.   If you replace the 'play money' with a crypto currency then the play money might gain value on its own.

Just answer clearly. If you keep holding a bitBTC. Can it be involuntarily taken from you?

bitBTC earn interest in bitshares correct? So there is some positive rate of return?

In the long-term or over some time interval the bitBTC are expected to maintain parity with BTC on average (not necessarily at every point in time) ?

Because you must know that this cannot all be simultaneously true.

You cannot rename your market and expect different economic behavior because of the name change.

If you are going to have storable, exchangable units of value, then you are going to have to accept that it is a monetary market.
If you are going to offer interest on these storable, exchangable units of value, then you are going to have to accept that this has implications for relative prices.

If it turns out I can't store them (because you confiscate them from me when I try [either all or in part]), well that changes things.

Once you start confiscating my bitBTC, you have more latitude to achieve other aims. Including a stable peg btw.

This is why I keep asking you to answer whether "savers'" bitBTC accounting entries can be involuntarily adjusted in response to price movements.

It is kind of important to understand this, no? People would really want to know that you plan to confiscate their BTC before they agree to use your system right? It is kind of fraud if you don't let in on this possibility, isn't it?

I have no need to confiscate BitBTC because shorts have financial incentive to cover it or they will lose money.    The shorts are the only ones that face a margin call.

Okay then. So you have all these bitBTC lying around that you will not confiscate. They are clearly better than bitcoin because they earn interest.

I don't plan to spend my BTC, they are a speculative investment. Why should I hold on to my BTC if your bitBTC earn interest?

Shouldn't I become a saver instead?

Well, I'm bored, so let's use the shill to respond for you.


It definitely sounds like I should become a saver.

Now there is some risk of fluctuation you admit. But supposedly, on average, 1 BitBTC should have a price of 1 BTC for many years.

So I shouldn't really care about these fluctuations too much. I will just hold the BTC until things improve and earn interest.
Worst case I still earn enough interest over a five year span to cover any loss from the fluctuation.

So now suppose many people think like this and decide to become savers. This is great for you. Everyone is selling BTC and buying bitshares to snap up these magical bitBTC.

Now, you have a large number of people hoarding these bitBTC.

Bitshares itself is not guarenteed to be worth anything just because people hold bitBTC in it. Suppose demand for bitshares drops and the price collapses.

What is to stop you from having more value in bitBTC outstanding than the entire market cap of bitshares? After all, the value of backing can erode. You can't force your speculators to come in forever constantly rebacking your bitBTC as a personal favor. You are assuming they get something out of this (I can't see what). But say they do. Now for some reason a lot less of them arrive. They might move to some other market. Maybe there is a competitor. You can't just assume that more and more money arrives forever (well that is what you assume if you are running a really giant ponzi)

Why is a bitBTC still worth one BTC? Is the backing completely irrelevant? Your speculators have all fled. The bitBTC are still out there. Who the hell is going to back them?

I'd suggest you answer cunicula's questions with great care now...or be forced to answer my question in public on October 3rd in Atlanta.

First stop propagating the meme:

http://yourkillinmesmalls.files.wordpress.com/2012/03/treyhickman.jpeg

Second, we shouldn't wait until C3. Please shoot me a pm and I'll send you my skypeID and we can discuss this at length. BitShares has yet to be released as a product. The TestNet has yet to be released. The whitepaper update has yet to be released. And yet we are a ponzi scheme because we propose sharing the inflation produced from coinbase transactions with BitShares holders?

Maybe I'm missing his point, but dividends do not come from thin air. They are produced from the mining and transaction process and serve as an incentive to save in the system. In order to preserve a sum zero system, someone has to receive the Bitshares dividends from the units held in collateral for a BitAsset. We made a design decision to pay these to the BitAsset holder.

There is still volatility that could result in a BitAsset holder losing money similar to a T-Bill holder losing money. So again, either he doesn't understand our system or he is spreading FUD to promote his own product.

Also we don't have a premine, we have invested a massive amount of time in building several derivative technologies like our ID and anonymous communication system and we are planning on releasing a TestNet with fake BitShares to test our economic assumptions first. So where is the fucking Ponzi? Wouldn't it be discovered with the TestNet? How does my company value from a bad product? Everything we do is open sourced. Every idea we generate, we vet in the open domain.

This has got to stop. You are moving into the domain of slander and have attacked the work of many passionate people trying to build something innovative and cool while also trying to raise 300k for your own idea, Cunicula.

 

I do not see any mention of mining in cunicula's post, perhaps I missed it...

But, is there a system in place to assure no extreme deviation occurs in accumulating bitBTC versus the rate of minting for dividends?  In other words, you cannot control the open market activity.  But can mining properly correlate with market activity?  Is there a white paper with technical details?

(By the way, my profile is publicly available on the CB website.  I wasn't being an internet tough guy at all.  But scams are a common occurrence in the alt coin world, especially lately, and I've lost my patience.  Maybe it's just this forum, I don't know.)

http://4.bp.blogspot.com/_cvdgPlEKW9k/TRq7nI9HNjI/AAAAAAAABlA/ETl9RrJu0kU/s1600/Straw_Man.jpg

We have been incredibly transparent in everything we are attempting to do.   Unfortunately, the arguments presented by cunicula are attacking a straw-man.   If you are going to attack what we are doing you must first understand what we are doing.  I would hope that before you go around calling us scammers you would take some time to talk with us via Skype.

MercSuey, I would be more than happy to publicly answer any and all questions you might have.   Though, I suggest you send me a PM with your skype info so we can chat because your implied intent to 'publicly shame us' with your questions will only serve to prove your ignorance when we are able to answer them fully.  

So here are the questions for you:
1) What money have we taken from the public?  0.
2) How are we using new investor money to payout early investors?
3) How are we using the investors own money to pay out returns?  
4) Are we doing any pre-mining?  No.

Lacking any evidence on those three items, you cannot call us a ponzi scheme and doing so is intellectually dishonest.  

What remains is whether or not the economics of the system we have designed work and are sustainable.  This has several layers, so lets deal with the BitShares themselves and not any derivatives based upon them.   The dividend system pays people a real return from the transaction fees and the stock-split process is just a means of gradually increasing the number of units in circulation without diluting anyones position.  As a result, BitShares as a 'currency' is less inflationary than Bitcoin.

At this point I have done nothing but create a less inflationary crytpo-currency than bitcoin, it could be called an alt-coin if that is all the system allowed.   This is no more ponzi than bitcoin and no more 'pump and dump' than Litecoin which was launched to address centralization in bitcoin and represents significant innovation in the space.

Then I add one very simple instrument on top of a legitimate crypto-coin.  I allow two people to create a transaction that are equal and opposite sides of a bet.  The strike-price on the bet is the current estimated exchange rate between BitShares and some other asset.    The terms of the bet are that the Long side must voluntarily sell their position.  The Short side must pay their dividends to the long side.   And that a miner may force the short-side to accept the lowest ask in order to cover the position if the lowest ask would result in less than 50% margin.     I am not one of these parties, and both parties agree to the terms.

Our theory is that such a contract, enforced by the blockchain, will result in a market-based price discovery system.  If our theory is wrong then the test network which will be used to validate the economics of the system will discover the flaw and no one will make or lose any money.  

You can surmise that the result of this game theory will not result in price stability, but to make that assumption you must pick one of three potential outcomes:

1) BitAsset goes to 0 thus scamming the holder to benefit the short which would profit.
2) BitAsset maintains the value of the collateral and is thus no different than BitShares in terms of volatility.
3) BitAsset will deviate in some non-deterministic manner from the intended market peg.. this is a serious claim and requires proof.

All we are doing is creating a market for people to speculate and we are providing a means to test it prior to anyone investing significant money.  

Good luck raising your own funds, your system is complex, flawed in fundamental ways, and yet you are attempting to raise money directly from the public which has no way to evaluate your ideas.   I would call your system a scam, but that would involve making a judgement about your intentions which I am smart enough to realize I have no ability to know or judge.

Again it is difficult to understand what he is attacking, but the genesis appears to revolve around the ROI of holding onto a BitAsset. The dividends are like interest on a bond and as long as volatility of the derivative is low, over time most positions will result in a positive return.

We are making some economic assumptions based upon this paper alongside other works:

http://www.brookings.edu/~/media/research/files/papers/2012/6/13%20prediction%20markets%20wolfers/13%20prediction%20markets%20wolfers.pdf


It is an exercise in mechanism design and some theory explained in the paper above. This said, we are making economic assumptions in some cases about the nature of the market pegs and thus are launching a TestNet first to test our ideas. Bounties can create market incentives to break the system if possible. Again, we are not premining nor accepting anyone's money other than our VC partners. The TestNet does not contain real money. So we are basically being attacked for running an experiment with our own money.


First let's agree this could be better stated Second, I agree about scams in this market, which is why from day one we started this process with principles:

(1) Don't premine BitShares
(2) Test everything in the open domain
(3) Build the communication and reputation system first in the event we need to adopt a better exchange model

Our goal is to build a prediction market that serves as a decentralized p2p exchange for all cryptocurrencies and an effective way to facilitate fiat to CC transactions. Should the BitShares standard fail, the infrastructure we have built can adopt a different implementation. This is why I take such enormous umbrage to these allegations. They are both misguided and fundamentally dishonest. Our company is trying to build several extremely complex products and we are doing it off of our own money and time in the open domain.

Okay, great.  My issue is the economic assumptions you have made, based on my own experience in the industry.  Isn't it always the 'economic assumptions' that are blamed when a model blows up in the end?  But you address it below...and I'll take a closer look at the white paper, thanks for the link.


Launching it this way seems very necessary, given the assumptions made.  This is good.


revision:  (By the way, my profile is publicly available on the CB website.  I wasn't being an internet tough guy at all.  Lets view this as an exercise in testing integrity....because this forum can really suck sometimes, and completely new ideas can immediately seem dishonest.)


Point (3) was why I was looking forward to seeing how your project turns out....the industry as a whole needs better exchange model(s).



In all honesty, cunicula annoys the shit out of me.  But there is still the issue of how well can your testnet experiment stress the model.  Just because it passes your tests doesn't mean the potential for extremes is nonexistent.  My questions at C3 were going to be with regards to HOW you were going to test/simulate market extremes.   And how well will the mining process financially justify (or 'backs' the bitAssets, to use cunicula's verbiage) market action at these extremes. Because lets face it, every model that blew up passed some kind of initial testing.  

MercSuey,  thanks for your rational response.  Charles and I take great pride in honesty, integrity, and making the world a better place we would certainly hate to hurt anyone. 

The problem with most models on Wall Street are the same problems that cunicula has with all of his fancy math.  This is why we use austrian principles and theory of value rather than mainstream economic models.  For starters we have the following principles:

1) prices are historical data and cannot be used to calculate or 'measure' value because prices can be arbitrarily manipulated.  An existing price represents only the agreement between two market participants at one point in time and could be a 'straw exchange' and thus meaningless.
2) margin call is based upon the buy/sell spread which proves that 100% of the market believes the price should be below the lowest ask and above the highest bid.
3) all value is relative and individualized, you cannot add, subtract, multiply, or divide prices to calculate new prices. 
4) You cannot compare value systems of any two individuals except after a trade has occurred, and that comparison is only valid at the very instant of the trade.
5) All trades are voluntary and occur at a market price with 1 exception, the margin call.  But the user subject to the margin call chose to take that risk and the settlement of the margin call is based upon the lowest ask.

Given all of these systems we are not attempting to 'model' the economy or economic behavior, we have merely created a trust-free way of buying/selling positions in a relatively simple market.  The result is that we avoid 99.9% of all problems with the wall street systems which ultimately attempt to replace market forces and voluntary trades with equations and computer models in a manner that market participants have no way of understanding.

As someone who has made 2,000,000 trades on Wall Street over 20 years...
And about 2,000 this week as a Market Maker in about 150 stocks...
It's completely nonsensical statements like this = pure FUD...
That often show how OUT-OF-DEPTH engineers are when trying to re-invent the Financial Markets.

Ripple is an example of this = something Reuters might have been doing in the 90s.

You guys are gonna be running elaborate simulations on a Testnet...
In order to divine information a good Margin Clerk could give you in 15 minutes.

Also, I would standardize using either 150% or 50% to address the same thing.

--------------------------------------------------------------------------

From the White Paper:

2. by a miner who enforces a margin call when the value of the backing falls to less than
150% of the value of the BitUSD....

If the miner is forced to exercise a margin call, the network assess a 5% transaction fee in order
to motivate market participants to proactively manage their margin. If the market moves so fast
that the margin is insufficient...

Many fast markets are manufactured...
So miners will incentivized to game this market to accumulate FAT fees?


 

More in reference to events like these:

http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all

Hi bytemaster

I'm glad you joined in , true , but that's not what I asked , i asked where does it come from , the "interest" the "work" .

I'd just it to be said here in plain English , so as to not avoid the question :

where does the extra BTC in the scenario quoted above derive from .

** just read the read of the page - but this is still relevant

and cunicula this is what I expected you to say - and you are right , but the important thing is to break it down:

so if i'm Jon on the street , if the "extra" is being derived from a) a simple rise in asset value or b) a new issuance of currency .

why not just invest in the asset ?

as the asset is distributed and digital , with a blockchain.


you see this scam worked with gold etc , but if you go back i explained why it won't with Crypto .  

It has already been said by bytemaster:

The reason why it can't work forever is that the global supply of marks is finite. How big it grows really depends only on their marketing skills. I'm in Malaysia right now. They just hauled some local Ponzi operators off to jail. Their scheme was convincing marks that they were relatives of the Sultan of Johor and therefore could use gov't connections to earn riskless returns.
Funny how the stories behind ponzis are so culture-specific.

We will just have to see how these guys sell their story of being able to generate perpetual riskless returns from some "speculators" paying for a "prediction market." Expect them to generate a lot of spurious transactions in the prediction market to lend credibility to their revenue generation story.

Eventually money leaving the system exceeds money entering the system.
At this point there is no incentive for the operators to maintain the price of 1 bitBTC at 1 BTC anymore.
They now suffer net losses by doing this instead of net gains.

At this point, the price of a bitBTC goes to zero. The early "investors" win and the late investors lose. Zero sum.
It is like any other bubble, but because there is no underlying value creation (I.e. the existence of the product is a fraud) the price drops to zero instead of the pre-bubble valuation.

The best way to prove your good faith is via the following arrangement.

You offer sophisticated investors (i.e. wealthy individuals) the option to enter into the following legally binding contract:

It seems like a great deal for you.

1) The market price of bitBTC in terms of BTC is supposed to remain approximately constant over time.
If so, surely you can find a future period in the next five years when the price is similar to current price, no?
If the price is volatile, that is actually helpful for you. You can just repurchase during downswings in the market earning a tidy profit. If the price is exactly constant, well you can't earn any profit, but you don't take any risk.

2) The investor is depositing x bitBTC worth of capital in your prediction market. Somehow this is generating returns, right? Normally you pay 100% of these returns to the investor, but now the investors is generously offering to give 95% of his returns to you, keeping only 5% for himself.

3) If you don't think investors will take you up on this, you can also offer the regular deal as another option (100% of the interest, but no repurchase agreement). Investors can just choose whichever deal they like best. At worst, people will just not do the repurchase agreement deal. At best, you will end up owning almost all the bitshares in existence while simultaneously attracting more capital investment than under the original arrangement. Seems like a win in every direction for you.

What about the investor?
He earns a guaranteed risk-free return on his BTC. Sure it is only 5% of the extremely low risk return you were initially offering, but the investor gets a lot of piece of mind. He doesn't have to worry about the pesky BTC/bitBTC exchange rate anymore.

What if you run?
Well, you could put up some collateral (e.g. your homes) and use a formal legal arrangement. Or you could find a trusted escrow to hold on to a BTC deposit from you. Then the investors won't have to worry about you skipping town.
As long as the issue of you absconding is taken care of, I would place all the BTC I own in this investment without a second thought.
 
If you promise to offer this contract via trusted escrow for regular guys or via collateral and formal legal arrangements for sophisticated investors, then I will never say anything negative about bitShares again. (as long as you make good on your word)

So how about it? Are you willing to do this for me and other potential investors? If not, please explain why not.

LOL... Sustained forever, huh. Shit they invented a money printing machine called a DAC. Everybody go buy one.

What a tool you are.

Did you help fund this? If so, talk to your lawyer about limiting your legal liability should (that is when) things go sour.

It is probably too late to recover your money. You can likely avoid jail by disassociating yourself from them. If you are already part of a criminal conspiracy, consider coming forward to the SEC now. Maybe you can come to some sort of arrangement.
 

Disclaimer: Not taking sides, just flushing out a question.

I find this notion of risk free investment curious. There is inherent risk by holding assets in BitShares. There is the risk that the system won't be up to snuff and will fail, that is huge risk; or perhaps some other force will bring down the network. How can you not account for these when you critique the efficacy of the system? Or are you saying that doesn't matter when you build the model?

edit: i was waiting for that personal jab. nice one! you just can't keep your hands to yourself, can you? regardless, you bring up a good point with the forever statement, that needs clarification.
double edit: i have no money in this system. i am a voyeur, just curious of the possibilities.

That is a separate issue and introducing it confuses things.  

For the sake of argument, suppose that in 6 years everyone believes that the system is 100% sustainable on technical grounds (i.e. there are no problems with cryptography, any of the programming, no competitors, or risk from government etc.).

They will still be issuing interest on bitBTC at this time. It is encoded in the mining algorithm.

The interest parity condition implies that bitBTC will steadily depreciate against BTC.

I claim they are 100% aware of this now. Their entire path to profitability rests on convincing you otherwise.
They mine/buy bitshares very early, they create bitBTC using these bitshares and market them as risk-free BTC interest, they use a reserve fund to temporarily fix the bitBTC price, you (and many others like you) trade your BTC for their bitBTC, once people stop doing this they stop backing up the bitBTC market price. You end up with worthless 'bitBTC', they end up with your BTC.

That is the whole project. The 'prediction market' is just a cover. Maybe they are 'friends of the Sultan' too?

  

Cunicula, keep attacking that straw man because it won't get you anywhere.   So, let me break it down one more time:

1) Assuming BitShares has non-0 value... something that is true for many alt-coins today.
2) Someone holding bitshares is neither harmed nor hurt by the 'stock split' every block which appears like dividends.
3) Someone holding bitshares profits from every transaction fee earned by the network. 

Thus I have created an asset that pays a positive return based upon legitimate profit by offering a legitimate service. 

Party A decides to post that interesting bearing asset as collateral for a short position in BitBTC.
Party B decides to buy the long position in BitBTC with an equal amount of this interesting bearing asset.

A & B must agree on the exchange ratio.

There are now 2x the value of BTC held in the form of an interest bearing asset as collateral.  The interest from the collateral is paid to the holder of BitBTC.

If the market moves against A, the miner will cover giving B the opportunity to sell their BitBTC for BitShares at the new higher price and thus B ends up with more BitShares + Interest and the market value of these BitShares + Interest is greater than the BTC.   Assuming the prediction market dynamics work.

Nothing unsustainable about this arrangement.

Now it sounds reminscent of Satoshi Dice, which evidently was quite sustainable; plus it also gives some of the gamblers some of the transaction fees of the blockchain it is played on.

What it has to do with dollar or bitcoin pegs is not really evident in this latest description of it, but maybe the use of the term peg was distracting, especially given that it could call to mind the dreaded trilemma.

Use of the term interest was also maybe acting as a distraction, inasmuch as that, too, is a word that comes up in the "impossible trilemma".

Now we have gambling, in a form known as a prediction market, plus some people other than miners getting portions of the transaction fees of the underlying blockchain.

If Satoshi Dice is anything to judge by, lack of transactions on which to charge fees does not sound massively likely, though I guess that depends on how much gamblers happen to like this particular game and how well the gambling site aka prediction market is marketed.

Presto, no "interest", no "peg", just people betting on whether other people will bet high(er?) or low(er?)...

They aren't even betting on what the value of dollars or "whatevers" is going to be really, are they? Aren't they really only betting on how much other people will bet that it is going to be? So ultimately the "whatever" is merely a word/label/textstring, some bettors will bet higher for one "whatever" than they will for some other "whatever", so if you happen to know what a particular textstring/label I am here calling a "whatever" means in the language or culture or subculture of a particular batch of bettors that could help you guess what they are going to bet that other people will bet that that particular "whatever"'s value is going to be?

Couldn't you thus have, say, bitPoundsOfFlesh, and Shylocks will bet different amounts on it than non-shylocks, for example? In effect having a prediction market to predict what the given population of gamblers is going to bet that they collectively are going to think is the most profitable amount to bet on bitPoundsOfFlesh?

-MarkM-

The 'prediction market' is a cover.

You are creating financial instruments, (e.g. bitUSD, bitBTC, etc.), right?

Obviously, there is going to be a financial market.
Financial market equilibrium implies that the long-run value of bitBTC in terms of BTC is 0.
I know this. You know this. Any undergraduate who has taken international economics or international finance knows this.

You are telling people they can earn a risk-free (or extremely low risk whatever) return without any direct involvement in the prediction market at all.
You know this is a lie.

This is called a ponzi scheme. It is illegal.

If it is not a ponzi scheme, then I suggested a contract that enables you to earn essentially free money.
If it is a ponzi scheme, then I suggested a contract that enables your investors to earn essentially free money.

You are not at all interested in my contract because you are 100% aware of what you are doing.
You realize that the contract turns the tables on you.

If not, then why not promise to offer the contract and get me to go away?

Once you have offered my contract as an option for investing in bitshares (prominently displayed whereever you discuss bitshares with the public), I will delete this thread. I will delete any of my posts about bitshares in other threads. I will politely ask anyone quoting my posts to delete their posts. To the extent that I can, I will remove all records of my hatred for bitshares from the internet. I will agree not to bring up bitshares again. As long as you keep to your end of the agreement.  

Okay, if the "prediction market" is a cover, then presumably the "in game productive activities" of CoffeeMUD players in my MUDgoldat40 idea would also be, in much the same way, maybe even in exactly the same way, a cover, right?

So that what MUDgoldat40 would really be doing is simply printing play-money with which to reward players who buy in-game "gameprofitinstruments" from in-game shopkeepers or dealers or shops or whatever?

The third prong of the trilemma is, as I suggested earlier, possibly of interest (pun intended?) there, inasmuch as if the number of MUDgoldcoins in existence increases then the exchange rate(s) of MUDgoldcoins vis a vis other currencies that aren't "inflating" their "money supply" at the same rate might possibly change / might well change?

Or is the big difference between MUDgoldat40 and the bitshares/bitwhatevers proposal fundamentally the fact that MUDgoldat40 proposes to print more MUDgoldcoins instead of to obtain existing MUDgoldcoins from some players and use those to reward other players?

(If the MUD used a blockchain for its goldcoins, and a hard cap on the total number that will ever exist much like Bitcoin has a hard cap on how many will ever exist, would that "fix the problem"?)

-MarkM-

You seem to have it.    The 'peg' is created because the most profitable way to bet is with market consensus and betting against future consensus is a sure fire way to lose.  Thus we use the term 'market-pegged' because the only rationally way to bet is with consensus.   So you can debate whether or not the market will establish a consensus, but it is clear from the long history of prediction markets that simply describing the terms of the bet is enough to establish consensus.   Thus calling it BitUSD with the expectation that users should bet according to their belief of BitShares vis USD will be enough to establish that consensus... what other consensus could they attribute to it?

THis is why in our test network we will be having some exotic BitXYZ... just to prove the point... perhaps BitPoundOfFlesh would be a good option... if the price goes to high though, it might encourage canibalism... so perhaps there are better options.

The 2007-9 Financial Crisis happened...
Not because very dodgy Quantitive Analysis was widely applied...
But the reason WHY it was.

For decades...
Washington/American culture evolved to "every American has a RIGHT to own a home"...
And countless Govt policies were shaped to allow indigent Americans to buy real estate...
Wall Street simply provided the methodologies and markets Washington needed.

No serious Wall Street player was under the illusion that it wasn't TOTAL BULLSHIT...
And no one went to jail in the end.

Just another bubble among dozens in recent history...
So no reason to indict a century old Financial System...
That produced and sustains the most prosperous country in history...
And replace it with a crypto-currency fetish.

If/when the Bitcoin Bubble pops...
Wired will pen a clone article about the "craziness" of Satoshi Nakamoto and his disciples. :)

Ponzi schemes have a formal definition in economics. Every economics PhD is familiar with the so-called "no Ponzi condition".

The no Ponzi condition says that the present value of future debt obligations must be finite.
If not, it is a possible for a firm or government to issue an infinite quantity of debt. This ability to issue infinite debt is called a ponzi scheme.

Bitshares promises to issue interest bearing BTC denominated debt called bitBTC. These bitBTC can be held by creditors indefinately.

This implies that bitshares is a ponzi.

To see why imagine a pure BTC economy. BTC are in fixed supply and are the only form of money in use.
In this economy, BTC must appreciate at an annual rate precisely equal to the economic growth rate. This economic growth rate is also the economy's risk free real interest rate, r. This is a deflationary economy. The nominal interest rate denominted in BTC is equal to 0 and the inflation rate is equal to -r.

Let's introduce a bitBTC into our economy. bitBTC earn strictly positive interest through txn fees. Call this interest rate q > 0.
Let's assume the BTC price of 1 bitBTC is constant over time.

Now consider an investment strategy of buying 1 bitBTC worth of debt an holding it for t years.
This yields a bitBTC payoff of after t years of (1+q)^t bitBTC. The BTC payoff is also (1+q)^t BTC for a 1 BTC investment.

As measured in BTC, the present value at time 0 of this future debt obligation is also (1+q)^t

The no ponzi condition says that the present value of this debt has to remain finite as t goes to infinity. Otherwise, a ponzi scheme exists.

However we now that for any q> 0, (1+q)^t goes off to infinity as t goes to infinity. Therefore, bitshares violates the no ponzi condition.

Ecnonomsts call anything that violates the no ponzi condition a ponzi scheme.

Thus when I refer to bitshares as a ponzi scheme I am going by the textbook definition I was taught in school.
It is the only definition of a ponzi scheme that I know.

To repeat: anyone offering to pay you a positive interest rate on your btc forever[\b] is running a ponzi scheme. Didn't you aleady know that? Since bitshares cannot force you to give up your bitBTC or its share of txn fees, they are promising positive interest for eternity. If you go through the thread you can see that I was very careful to verify these points. I got hemming and hawing as a response. There is a reason for this. The fact that bitBTC pay positive interest and cannot be seized is a smoking gun.

ha ha one thing I do like is in this whole threat is the cute way in which cunicula some how thinks the "Law" will deal with this ha ha....

{wipes some tears away from laughing} anyway ...


no friend , the market will deal with this , the "Law" is there to get the big guys.. , you know all the huge banks that have bankrupt your nation ha ha !

{wipes more tears...sniff}

{bursts out laughing again....}

{sigh....}

{thinking hmm maybe they are small enough to prosecute....??}

byemaster how many Senators have you go in your pocket?

you are going to need at least 3 , according to the "Help Kickstart WW3" video.

you are up for 30 million , to buy 3 Senators .

Never mind  the BTC "early adopters" ha ha ha !

Keep hitting that straw man...

First of all, as long as there are transaction fees in the network dividends can be paid and the holder of BitBTC can receive them. 
Second there is no debt in the system, unless you count 2x collateralized short positions debt.
Third, you must assume a VERY thin market before there would exist a condition where someone Long BitBTC wouldn't voluntarily give it up for a profit as a result of a short squeeze.
Fourth, if the volatility is high enough to wipe out the collateral then the BitBTC could face some losses in the short term.

The thing you are missing in all of this is the dividend paying asset generated by the profitable operation of a p2p exchange.   The BitBTC gets a share of these profits and can continue to get a share of these profits forever.  If profits go to 0 because all trading stops, then of course your asset is probably worth 0 and the non-0 value assumption for BitShares was expressed upfront.

By the way, when you finally do see the errors of your analysis I expect to see those 70 BTC that you have bet on this being a ponzi. 

Dan, let this one go. He's beyond reason and has embraced the picture:

http://cdn.lolchamp.com/wp-content/uploads/2013/03/Arguing-with-retards.jpg

Cunicula, I have some advice that RDJ gave me about what you're doing:

http://www.youtube.com/watch?v=1Y3FzVQi-R8

Yeah yeah its all above board sure thing, yes indeed anyone that questions this rock solid system is an idiot indeed ...

- good luck with everything, personally I think you are living in the 90's if you think anyone is going to fall for this - but then they say an idiot is born every minute , I'm not sure of the target rate for idiots - it may be 2.5 minutes or 2 minutes ?

- actually I don't even know what the acceptable target rate for an idiot is these days ?

- but if an idiot is actually born at least every 2.6 minutes you guys stand to make a packet ! some of those may have a double or triple reward , considering the latest IVF technical's

what's BitBTC target rate going to be?

I purchase 1 bitBTC. I earn bitshares as my share of txn fees. I reinvest these txn fees to buy more bitBTC. Eventually, I have 100 million bitBTC. I earned all these from my share of txn fees you see.

I take these to a market trading bitBTC / BTC pairs. Something about longs and shorts, a prediction market, and other such nonsense ensures that I can always trade 1 bitBTC for about 1 BTC on average.

So now I make my trades and I have my 100 million BTC.

Okay, where do I sign up? We really gotta promote this thing hard!!!

Not sure which of these is the better marketing slogan:
(A completely risk free system to turn 1 BTC into 100 million BTC)
(A completely risk free system to turn 1 BTC into ownership of every single asset in the world. They will have to reintroduce slavery, so you will have new stuff to purchase.)

Its a fool born every minute. Back when I was in high school there was a person born every minute.

"You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time."

So if an idiot is someone you can fool some of the time, then by now they might be being born faster than one per minute.

But if an idiot is someone you can fool all of the time, well, the who you can fool quote isn't a lot of help in determining their birth rate.

-MarkM-

Wooh there , slow down ....

I think your above numbers are based on a 3 or 4 ipmb -  3 or 4 *Idiots Per Minute Born

Bitshare is only expecting I heard from 1 to 2 IPMB - *Idiots Per Minute Born , so you would have to shave that 100 million BTC down to maybe 80 Million , that being generous , but still a good profit...

fool me once shame on me...ah...

fool me ..ah fool ... ah me... fool them.....ah ........{pause}

THE POINT IS I CAN'T BE FOOLED TWICE !

** you know i tried to make a "BUSH for president" Facebook the year Obama got elected, it wasn't very popular - i really don't know why i wasn't actually joking , in fact I don't even live in the USA and I voted for Bush this year , I just wrote him in , in my country .

I still claim he was the best President.   

Dam , sounds familiar .

Ok, this is a fair point of confusion that many people will have... so let me address it.

There are 100 million BitBTC  backed by  150 to 250 million BTC worth of BitShares which means for this situation to occur, BitShares must have a market cap at least 10 x that of Bitcoin or these positions could never have been created.    

Each of these BitBTC would be paying a non-0 amount of BitShares as dividends and therefore the market value of a BitBTC will be greater than a BTC so if you enter the market attempting to sell 100 million BitBTC for actual BTC you would cause the BitBTC/BTC price to sag and create HUGE arbitrage opportunities for people to purchase your BitBTC 'cheap' with BTC and then sell them for BitShares.        

So now that I have explained the market dynamics,  admitted that an idiot could attempt to manipulate the price of BitBTC/BTC by selling at a loss, and shown that 100 million BitBTC cannot be created from thin air, but requires 200 million BTC worth of value to be backing it do you see the difference?

Non-retard part of argument


Let's think very carefully about this one billy. What happens to the supply of BitShares if all of them are in escrow as a result of people shorting BitBTC? The value of your BitBTC falls in relation to the BitShares meaning your 100 million BitBTC isn't worth very much compared to the BitShares you bought them with.


Non-sense like functioning free markets. Yes they totally don't work at all....


It's an unstable equilibrium so no. The dividend rate will have an effect on the price which has yet to be determined and one of the reasons why we are running a TestNet. I disagree that the price will monotonically decrease to zero as you have claimed and you really don't seem to understand that markets have two sides. But this is why we test things before we release them.

You have also completely discounted that we are building the infrastructure for any trading system and Keyhotee will support them as a plugin if desired. We are building a platform and if we got something wrong then it's robust enough to support something else. This is one of the reasons why I have lost all respect for you. You are attacking our integrity while we freely give away a gateway for any type of prediction market ironically including your own.



Ugh

Okay, where do I sign up?[/quote]

We spent countless hours nicely answering his questions with no luck while he both attacked our character and business model. He claims we are a ponzi scheme. He even made a powerpoint and posted it online. I'm sorry if you can't see how these actions differ from just a normal troll. We are building free software and giving it to everybody to use for their own projects and we are being attacked. BFL is a scam. They took people's money and never delivered and then asked for more. Where did we take yours and how do we profit from BitShares? Meanwhile Cunicula is asking for 300k of YOUR MONEY to fund his idea.

Good luck, seriously good luck,  just one thing...

Gold Silver , cumbersome not really fungible compared to , oh say a digital decentralized currency - ., then add the Generational investor differential, baby boomers early X in metals - post x in Crypto..

just a point.

financializing a digital decentralized currency is going to be a very hard "lift time" that is to say , even if you get CNN on board (even if they are still relevant in say 5 years) , your time to get investors in on this I think is going to be,  long an hard.

but I can see what you are trying to do .

it reminds me of the aforementioned Facbook IPO  .

Oh, I wouldn't worry about the market cap. After all you have a created a risk free system allowing anyone and everyone who invests (or their descendents) to achieve world domination. You will have plenty of bitshares to create 100 million bitBTC with.

What I'm more concerned about is how I can own the whole world and my neighbour can own the whole world at the same time? This matter might cause some confusion. Do you have some theoretical physics story to go along with the prediction market? That might help to smooth things over.

"We spent countless hours nicely answering his questions with no luck while he both attacked our character and business model. He claims we are a ponzi scheme. He even made a powerpoint and posted it online. I'm sorry if you can't see how these actions differ from just a normal troll. We are building free software and giving it to everybody to use for their own projects and we are being attacked. BFL is a scam. They took people's money and never delivered and then asked for more. Where did we take yours and how do we profit from BitShares? Meanwhile Cunicula is asking for 300k of YOUR MONEY to fund his idea"

friend , I don't even know what Cunicula's idea is...

Bitcoin is far from flawless or solid in its self , trying to build a financial mechanism on top of it is,  i feel ....  "brave"  .

I don't see the "financialization" of a blockchain innovation, why not just issue a new Cryptocurrency   ?

let its stand on its own two feet .. its hard one isn't it ?

so either you are playing a game that isn't yours or you are playing your own game.

This is just the type of evidence the SEC needs to put you away. Can't wait to see the internal e-mails. Now you tell me that you are still testing, you claim to not be sure, you think maybe it is an "unstable equilibrium."

But when doing reports for the press for the eyes of naive investors you say this:
http://www.coindesk.com/bitshares-p2p-trading-platform-to-offer-dividends-on-bitcoins/


You have been a very naughty boy.

https://bitcointalk.org/index.php?topic=297147.0



BitShares shares no common code with Bitcoin we are building our own blockchain, PoW and desktop client from the ground up


BitShares will be its own cryptocurrency specifically designed for the kinds of trading we are advocating. Bitcoin does not have a method to support shorts and issuing options in a trustless way. We do and we have to design an entirely new currency to do it well.

In case you haven't cottoned on to the fact that these guys are quite ready to lie when it suits them,
read the thread and find my solicitation of $300k. Or maybe you assholes could help out and post it here?

The fabrications are just an attempt to draw the spotlight away from their own criminal conspiracy.
Don't worry, said spotlight is not going anywhere.

Neither one of you own the whole world... because 2x the whole world would have to be held as collateral to back a long position in the whole world... unfortunately, BitShares are part of the world and thus such a concept is entirely impossible.

I can say this... the value of BitShares must always be 1.5 to 2.5 x the value of all BitAssets in existence.  This is easy to prove because the creation of a BitAsset requires equal value from two parties and thus 2x the value of that asset held as collateral.

Given this constraint, no value is ever created or destroyed in our system aside from the increasing value of BitShares themselves due to their utility.   This is like Bitcoin rising in value relative to other things.  

Hey how do I report this to the SEC anyway? Anyone with experience in this area care to point me in the right direction?

Apparently, you are not familiar with the economics that goes along with violating the so-called no ponzi assumption. I can own the whole world and my neighbour can own it too.
That is why we impose this assumption in the first place. Without it everything turns into complete nonsense.

Let me be clear, we believe firmly that the floor will be at or above 1 btc. We have always claimed that and always will believe it. The other end of the tail will vary based upon the interest rate value. But the market peg should keep the value above 1 btc for BitBTC. We are going to launch more than one chain in the TestNet to better understand the dividend rates impact upon prices.

You just can't seem to get this through your head and continue to attack us. What is the SEC going to put us away for? BitShares are mined the same way Bitcoins are mined. We are not selling BitShares to consumers through a premine. We have to acquire them like anyone else in a free market and have no built in advantage. We are also investing a massive amount of our resources in building the supporting infrastructure which is a total loss if BitShares was some machiavellian ponzi scheme. Just nothing makes any god damn sense in your arguments Cunicula.

I mean let's honestly think this through:

To accomplish a ponzi we are going to do the following:

Rebuild Bitmessage and NameCoin for a completely new type of Web of Trust and decentralized email > Give away for free
Build the best Bitcoin Wallet on the market where you send money to names not addresses >Give away for free
Release the testnet of BitShares to test assumptions > Give away for free and pay community bounties to try to break the system
Hope to god no one discovers the secret flaw in the system??????
Then release BitShares into the wild with no vendor advantage and trading against people who have had several months to learn BitShares > SOMEHOW PROFIT?????
Run away with money?????

Either this is one of the worst scams in the world or it's not one. Could you honestly tell me how to scam people. I'm just at a loss here.

What we have would have to be considered a financial instrument under the law...


Legal Classification of BitShares and BitShare-derived BitAssets
Before offering our opinion on the legal classification of BitAssets we want to remind the reader that we are not lawyers and the following does not constitute legal advice.  Please consult a legal professional in your jurisdiction before taking any actions based upon our opinions expressed below.

Throughout this paper we make reference to short, long, margin, call and put options and other traditional financial terms and instruments, however these are only analogies used to explain the behavior of these new BitAssets.  In our opinion these instruments do not meet the legal definition of a financial asset, instrument, bond, or anything else on the books aside from the most generic term 'asset'.  Before attempting to classify these new BitAssets lets review the current definitions.

A financial asset is an intangible asset that derives value because of a contractual claim.

A financial instrument is defined as "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity" according to IAS 32 and 39 (International Accounting Standards Board)

A contract is a voluntary agreement by two or more parties, each of whom intends to create one or more legal obligations between them. A contract is a legally enforceable promise or undertaking that something will or will not occur.

Elements of a contract include:
 Offer and acceptance and Meeting of the Minds
 Intention to be Legally Bound
 Consideration

Additionally the parties to a contract must have capacity to contract, its purpose must be lawful, the form must be legal, the intent must be to create a legal relationship, and the parties must consent.

Under European Union Law you must consider the MIFID (Markets in Financial Instruments Directive). This directive defines a regulated market as a multilateral system operated and/or managed by a market operator which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments - in the system and in accordance with its non-discretionary rules - in a way that results in a contract in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly in accordance with the provisions of Title III.

The common denominator behind all existing financial assets and liabilities (including cash) is a contractual obligation. If there are no contractual obligations made by any party to any other party then by definition BitShare derived BitAssets are not financial instruments. So lets see if we can find anything within BitShares that satisfies all or even most of the requirements of a contract.

1) Bid / Ask Transaction Published to the Block Chain.
A bid or ask is a cryptographically signed transaction by a single, anonymous party. There is no signature by any other party and no obligation to perform. The bid or ask transaction has no legal standing and creates no legal relationships. This bid or ask is processed by a network of anonymous individuals who have no capacity to contract with the anonymous party submitting the bid or ask. In theory, the bid includes payment to anyone who includes the bid in a block and could be considered signed and accepted by the miner. However, once the transaction has been included in a block there is still no outstanding obligation or legal relationship between the two anonymous parties. Furthermore, simply including the transaction in a single block by a single miner does not actually cause the transaction to be executed. It must also be accepted by all other nodes in the network and even if it is accepted there exists no legal relationship or obligation between any two parties.  Furthermore, the result of the accepted transaction is merely an anonymous update to a global shared database and could constitute free speech.
2) Short Sell Transaction Published to the Block Chain
These transactions have all of the properties of a Bid / Ask transaction with the only difference being the type of BitAsset used as the input to the transaction and the nature of the resulting outputs. It is still signed by a single anonymous party and is never signed by any other party. There is no legal obligation created nor legal relationship between two or more parties.
3) Margin Calls and Covering executed by Miners
No party has a contractual obligation to provide additional margin nor to force covering; however, no party has the ability to prevent their position from being covered when the majority of the network agrees. As a result there is no obligation of any party to enforce the margin nor legally enforceable consequences if they do not.  In fact, no entity is able to enforce the margin and therefore no one to hold liable for failure to act.  
4) Contract between Developers and Users
BitShares is a protocol for exchanging information that could be implemented by any number of individuals. The developers release the software open source without warranty or promise of any specific behavior. Users of the software get to choose which version to use and which network to join and therefore are in complete control over how they react to the information they receive from the network.  Users are even free to modify their software at will and therefore any actions or decisions made by the software are entirely an extension of the user’s will and not that of the developers.

Lastly, the developers of BitShares have only created an accounting system that manages a decentralized database.  The value of any particular entry within this database is not under control of the developers.

I'm sorry, which version of the bible are you using? Mine doesn't say anything about the price of bitBTC.

You should submit a resume to the Chinese ministry of railways. Next time they bury people alive to hide the number of deaths in an accident, they could put you up there to explain your eternal beliefs to the press.

Don't worry you're doing a fine job.

Right, I'm sure you are following Pirate's trial closely...

Just super quick browsed over Cunicula's idea white paper - , you see my talent is one in seeing though to the source - i have no time here , but i will say that this idea will be at least as successful as yours. . . .

looks like he is issuing bonds for both USD and Bitcoin , (Hopdollars, and ah Hopbits)  Bonds always contain risk .

Again I will always ask where the risk is derived ?

When a bond is paid (upon 7 months?) where does the Interest come from , and work derived.  

I'm working on a different level of this system here , I know some people coming from a financial background will find these things attractive - that is a tiny minority , I fear you guys might have this all backwards , but that's just my opinion here...

we can only see in the future ?

There is a huge difference... he took assets, Bitcoin, and issued financial instruments (promises to pay).     We never take any assets nor issue any promises to pay.  

Who pays the bond and can they run away?   Are these bearer bonds?  How to you ensure interest is paid?

I'm very well versed with politics - but we are playing a political 0 game here , so yes indeed , I didn't look at the paper it ended on page 9  i haven't had time , but indeed enlighten me.

if there is a suggestion that these are not bonds issued , then what simply are they ?

in any other term they are a "promise to pay" otherwise there is no "leverage" in the system.

I understand the human incentive to  leverage , but I think we are heading in a different direction .

I believe you guys have missed the boat in a sense.

In case you are missing the point here ....

this system i just looked at is "wrapped up" in a "useful human purpose"

and that I believe was suggested at , "to be used as a decentralized payment system"

unfortunately i will suggest that , in a digital system , (as opposed to say as i explained Commodities )

these "useful human purposes" can be overcome easily without "risk" and thus the equation again simplifies .

so you see what we are talking about is "Human work", , "useful purpose" and "risk"

Humans do like to take risk,  but usually when related to benefit, but as that equation equalizes  this aspect, the aspect that you people here are talking about will be in a sense "equaled out"

become zero. it won't be needed , there will be no useful human function for it .

but i could be wrong...

Isn't this exactly what MCXNow is doing with fee shares?

I don't see why both your ideas can't co-exist and compete in the market place without getting the SEC involved. That could be bad for the community. And what about Mastercoin?

Knock yourselves out .

After some thought , I feel I have found the problem , the people designing these systems do not understand what a " Bond" actually is , its purpose and its intent .

That does not suprise me in the least , its been " taught out" or "educated out".

But how does the saying go ?  

" ignoring reality will not protect you from the results of reality "

Mostly  in this case , just wasted time .

Yep, the analogy breaks down if you take it too far though. mcxnow (which, btw, is probably a long con - run by a scammer) shares fee profits with holders of mcxFEE. BitAssets pay dividends in a similar manner, but mcxFEE doesn't have a predictions market or even a fraction of the features BitShares has.

Mastercoin is also in a different boat because it is leveraging the blockchain and is limited by the constraints of the Bitcoin network. This is not to say that Mastercoin basket currencies couldn't be supported in the BitShares network. Oddly, the method by which JR went about presenting and collecting funds for the project are right in line with some kind of scam; he either didn't care or just simply didn't know any better. Even OT/Praesto are different beasts altogether.

C's argument, to some extent has merit, however he(or she,idk) seems to abstract the problem in such a manner that it fatigues his capacity to judge without bias. The fact that he has conceded that some BitAssets are not a ponzi is evidence of that. Take for example this quote:


Here is is making a valid point, but in the wrong context. Nowhere does BitShares imply (explicitly or otherwise) that it can break the laws of physics. Note what bytemaster says:


There is no more value there then there is in the real world. You must give to take. It's not a one way street. Think of it this way: just like you can't get Bitcoins for free, you can't acquire BitAssets for free either. If people choose not to participate in the predictions market then the system will not maintain its viability. Like I said earlier, there is risk that investors will think the system is flawed or not up to snuff; in this case your BitBTC goes to 0. Or perhaps the tech is flawed and it breaks. Again, 0. If people do invest, money is not created, it is redistributed following trade activity. That is all.

He also makes claims like this:


Ironically, many of the arguments c makes are reminiscent of the early-days of Bitcoin when people claimed it was a ponzi, creating value out of thin air. Those claims usually came from economists who didn't take the time to think through the proposition value of the system and the mechanics of how it works. Satoshi certainly could have premined Bitcoin, but then what? No one would use it. Likewise, if BitShares did not offer some return to participants why would anyone bother to use it. It's not about generosity, it's about practicality.

With quotes like this (and, as others have mentioned) I am beginning to think there are issues with semantics. A bitBTC is not in fact generating a return, the network is being fed money via fees generated from the prediction market, which are divided and distributed amongst participants in the network holding bitBTC. Why the word "somehow" needs to be used is beyond me.

He also likes the word interest, and with good reason (Daniel uses it, the coindesk article uses it, etc...):

BitAssets do not provide interest in the traditional sense, so I think it is best the word is removed from the white paper. Perhaps finding a word that has better parity (yea, i used it) with the concept of being rewarded for participating in and supporting a network is needed ASAP. Someone said this I think.

The only thing I can see that would support a claim that this is a pump and dump is the short mining period, which c hasn't even mentioned yet. The whitepaper argues:

If c could break down these motives then I would be more inclined to believe him. However, he won't be able to. When you compare BitShares to Bitcoin which has a >100 year mining, you begin to see why a short mining period is not indicative of a ponzi. The dividends replace the long mining period. In this sense BitShares has greater longevity and absolute scalability when compared to Bitcoin.

As of right now it *appears* that his claims are a peculiar mix of gaining a competitive edge and applying theories of economics to aspects of the system in a vacuum without having a complete picture of how the system works and why it will generate profit. Like he read the first few pages of the whitepaper then stopped; or perhaps his head was filled with too many thoughts to objectively critique the content. Or perhaps I am just too much of a 'tool' and am completely missing the point. Either way if things were kept civil in here it would make this discussion a whole lot easier. But wild behavior and personal attacks are usually indicative of someone trying to shift focus from the important points of the discussion - at least in my experience, the perpetual dicks on this forum are usually partially right but fail to see the big picture because they are blinded by emotional attachments.

c, before you reply take a deep breath it will do you a world of good brother. like i said earlier, I could be totally wrong about these guys and you could be right. But I'm still not convinced! Please prove me wrong :)

I am having trouble following you entirely. Are you implying that the the messaging and ID system should not be included? And how does this follow from your equation?

What do you think is the appropriate definition of a bond? And how does BitShares (if that is what you are talking about, I am not sure) violate that definition? And can the current implemetnation be changed to accommodate the "real" bond? The whole point of this open source thing is to collaborate and share ideas, not make absolute statements then walk away.

Actually carefully reading the white paper you will notice we never used the word 'interest' once and always refer to everything as dividends.    That said, there is no perfect analogy to these financial assets in the current market.   When you are talking to the common man they consider any return on their savings 'interest', when you think of equities you think dividends.    It is a 'variable interest' rate paid to the longs by the 'shorts' which must 'borrow' the asset from the network 'society' and the cost of borrowing from 'the network' in order to 'short' is the dividends paid on the collateral.   These are all just analogies so don't get to caught up on what it is called and instead just look at who is transferring value to whom and why.   

 We also place a heavy focus on eliminating any expectation for contractual obligation of any party to any other party and thus there are no 'bonds' in the traditional sense.  We ask no person to trust any other person to do anything.  There is no way for any person to 'default' because all rules are automated and execute predictably by the block chain entirely out of the control of any one individual.  If there is a way for someone to 'default' or violate a 'contract' then I would love to see it.

If you choose to speculate on the behavior of the chain, you might be able to make money.   It is an experiment with a solid foundation in economics being peer reviewed well known economists in reputable positions who are working to rewrite our white paper.  We are working with professionals from across the Bitcoin space and you will quickly learn that calling us a scam is tantamount to calling all of Bitcoin a scam.   

I encourage you to find a series of transactions / trading algorithm that would allow you to make a profit while systematically crashing the system rendering it insolvent.  It cannot be done because there are no contracts nor ability for anyone to default.   

Scams usually involve breach of trust.  Show me the trust that is being broken, and I am sure we can find ways of resolving it.

Haha, you're right. The word gets  thrown around in here so much I think I implanted the memory.


Great, that is much needed. You should consider having tiered white papers with varying levels of complexity. Right now all you have is the coindesk article for the less econ-inclined.

A quick search of the white paper does reveal the word 'interest' can be found, but not in the definitions section and only in a few sections using analogies.   We recognize the need to define this better and will make it clear long before launch.

With all due respect do you understand what a dividend is ?

I know that recent financial history has tainted the world but , come on , here is what I was talking about , without getting into it , your design is at best Transference Vehicle inside the Bitcoin equation, that's being very generous... now.

Equities  - (similar in manner to bonds) have a Dividend. so lets go though this :

Jon buys equity in "Knight Knives" (they sell knives) Jon knows the dividend , so the two aspects here are:

"Knight Knives" is producing a product and then a demand is receiving it , the part of the production goes back as a "dividend" - for the capital raised to add on the extra Knife factory that is now needed since so many Christians are getting their heads lopped off in Syria by Terrorists.

So,  Capital went to increase production (the new Knife factory warranted by the Terrorist extra demand) and a Dividend was paid back for expansion and work done.

you see the difference between a "vehicle" i.e the liquid and the "product" and the "work" and the "dividend".
 
So even in the world where 85 Billion "dollars" a month goes directly into equities and the Federal Reserve Czar rules with an Iron fist, we still can't quite call any "payment" derived from the design you propose a "dividend" .

You or someone else said that the interest was derived from the "fees" then you say above "It is a 'variable interest' rate paid to the longs by the 'shorts' which must 'borrow' the asset from the network 'society' and the cost of borrowing from 'the network' in order to 'short' is the dividends paid on the collateral. " these things just quoted are somewhat far apart no ?


Of course there is not a contract - becasue there is really no counter-party (not in any relevant sense of that term) - a contract is always the basis of any honest agreement .

David Bowie issues "Bowie Bonds" - for capital for an up and coming Record.

The trust is in the "David Bowie" brand , and the bond is paid with the interest for the work of the album and live shows etc.

the contract is between the two counter-parties .

Sally borrows money from a "bank" - she signs a piece of paper and creates credit in the form of a loan - the Bank commits fraud and Sally's signature creates new money. , which then can be deposited and treated as "reserve" - there is still two counter-parties and still a work derivative (all be it one way)

the 0 game I was talking about is the fact that every thing you propose is occurring already , People can create an actual viable contract to Borrow Bitcoins, that's becasue you (Well as of this month) still hopefully live in a semi free society -

What on earth does mcxNOW have to do with this?

Scammers are more rational than academics because they function in the Real World.

If you have revenue of $50,000/year in an exploding niche...
And a Market Cap of $7,000,000 = very high Price to Revenue of roughly 135...
And only 5% of your Market Cap has been monetized...
What is your next move?

It's definitely not something that would hurt your business.

What? Someone asked, I just added my opinion of the motives of rs. Not sure what that post was all about.

It's not a Ponzi, it is just an alt-coin promising superior return, and we know that all the alt-coins will introduce inflation...

Let's go through another concrete example describing exactly what will happen to bitshares in the future. The example shows that 1) bitshares is a simple ponzi 2) bitshares is nothing at all like bitcoin

1) Suppose that bitshares experiences a bubble just like bitcoin's first bubble. At the peak of the bubble, the market cap of bitshars reaches 1 million in terms of bitcoins. (Recall that the market cap is just the bitcoin denominated price of a bitshare × the total quantity of bitshares in existence)
2) Suppose also that bitshares has issued 100,000 bitBTC at the peak of the bubble. At the peak of the bubble, this is fine. Bithshare's market cap is sufficient to back these 10 times over.
3) Recall that bitBTC cannot be involuntarily confiscated once they are issued. So if the price of bitshares drops the BTC denominated debt (100,000 bitBTC) do not just disappear. Instead bitshares just falls deeper in debt.
4) Suppose that bitshares market cap drops to 1/15  of its bubble peak (as in the 1st btc bubble). This leaves a bitshares market cap of 66 thousand BTC. But wait a minute, bitshares has 100, 000 units of bitBTC outstanding. Liabilities exceed assets. The system is bankrupt.

Let's ask some questions:

1) The bitshares creators tell us that a bitBTC will never fall below 1 BTC. Apperently some kind of price "floor" exists at this level. But ask yourself, would you pay face value for a bitBTC when the bithsares backing them trade for at most worth 0.66 BTC (and in all probability an order of magnitude less)
2) What about bithsares themselves? How much would you pay for a bitshare in this context? Bitshares are effectively equity. If the creditors holding bitBTC are to be repaid, bitshares will have to appreciate by 50% before the equity holders go into the black again. We do not normally see shares in bankrupt companies trading above 0 unless a gov't bailout is expected.
3) Assuming the gov't doesn't bailout bitshares, how is it that the market cap of bitshares could still be as high as 66 thousand BTC? What does this tell us? The value of a bitshare will keep dropping. Sending the system further and further underwater. It will not stop until it hits 0.

Who profits from the ponzi? Anyone who mined bitshares and got out before the bubble burst.

How is the scheme different from other bubbles; why call it a ponzi? The bubble is driven by purchasers of bitBTC from marks hoping for high returns and trusting in the creators' claims that a bitBTC is a completely safe investment. This makes the scheme not just a bubble, but a ponzi. It is no different from pirate ensuring his victims that he will never default, while luring them in with high returns.

What about the prediction market? A sideshow. The bitBTC come out of the prediction market as some kind of by product. The prediction market never needs to generate any value for the ponzi to work. All it has to do is spit out bitBTC to bait in naive, greedy people. If the prediction market does generate massive value, bitBTC still goes to 0. The prediction market is just irrelevant.

Why does the SEC need to get involved? 1) Because this is a predatory scheme designed to rob stupid people. 2) Because the scheme will inflict massive damage on cryptocurrency's reputation. Better to put a stop to it early, then wait for people to lose huge amounts in a cryptocurrency ponzi. Can you imagine how bad the press will be if the protocol itself runs the ponzi? The average Joe already believes cryptocurrency = ponzi. Proving him correct in one instance will not help matters.

Thank you for the pleasant reply.


Am I on the right track here?

No, of course not.

The miners can only enforce margin calls on bitBTC they own. They cannot enforce margin call's on other people's bitBTC. That would be confiscation. Reread the thread if you are unclear on this. BitBTC cannot be removed from your wallet and replaced with bitshares without your consent.

Therefore, unless 1) The savers sell off their bitBTC to miners and 2) The miners decide to enforce margin calls, the 100,000 bitBTC remain outstanding even if the currencies market cap is just a few pennies. Once this is happens there is no backing left to reclaim. All you have are bitBTC c/o your trust in God and the Bank of Zimbabwe.

The whole thing becomes dies permanently. The early miners of bitshares are laughing all the way to the bank (which is full of BTC and USD; late game only marks hold bitshares, bitBTC, or bit*).

Cunicula,
      I walked through your latest example of how BitBTC could in theory become under collateralized.   I want to address this because it was a solid use case that has not been addressed by any of our white papers directly. 

      1) It is theoretically possible for your scenario to occur, and in such a scenario everyone who was  Short BitBTC would be entirely wiped out and everyone who was long BitBTC would end up with twice as many BitShares as they started with (assuming they sold).   It is even possible for the result of this catastrophic loss of value in BitShares to result in BitBTC being on the books without any corresponding short positions backing it up.   Such an event would be terrible for those long BitShares, even worse for those Short BitBTC... but those who are impacted the least would be those who are Long BitBTC... they doubled their BitShare holdings.

      2) This market does not eliminate all risk, it merely transfers a large percentage of ordinary risk from the longs to the shorts.  It is impossible to eliminate all risk even with traditional financial markets.  For example, a US treasury is not a 'risk free' investment, the interest rate fluctuates, the dollar can be debased, and the government could default or be taken over.  You do not consider US treasuries to be a Ponzi or a scam despite the fact that they pay the returns with the investors own tax money or via inflation.   So, if even US treasuries are not 'risk free' then your argument against BitShares is a logical fallacy because you are holding them to an impossible standard and pointing to any risk at all as signs of a scam.

      3) The situation you present is very unlikely to occur for the following reasons:
          a) No savvy investor would short BitBTC against BitShares after a major run up in the market because they know BitShares behave like Bitcoin.  As a result, savvy investors would sell their BitShares and buy BitBTC so that they could make money when the price corrects.  This counter-market force would actually fend off Bitcoin style price volatility.  Because selling BitBTC is cheaper than shorting it, very few if any new BitBTC would be issued at the market peak and most trades would occur as trades in long positions.   
          b) If the BitShare price is heading to the moon, then most people would be swapping out of BitBTC and buying BitShares.  This will reduce the demand for the creation of new BitBTC.
     
       4) Assuming the event was only a case of extreme short-term volatility then anyone who held their BitBTC through the correction and allowed the market to clear would find that once again their BitBTC would recover near parity.   

       5) In the event that BitShares become worthless, clearly BitAssets are worthless and all parties accept this risk.

I would like to make one final statement regarding your claim about miners not having 'authority' to perform a margin call.   This would be like claiming that your stock broker doesn't have authority to perform a margin call.   When you entered into the short position, the network rules stated the terms under which a margin call could be executed and all miners must follow those rules or their block will not be confirmed by the network.  So, if you do not want to risk a margin call, don't enter a short position.   You can buy BitShares or your can Buy BitBTC... but you cannot short BitBTC.     Allowing someone to Short BitBTC and then calling foul when their margin is called would be like allowing someone to mortgage their house and then crying foul when the loan is called when the value of the house falls.   You are using borrowed money, you have no right to keep your short position without sufficient collateral.


Thank you for clarifying your position, your definition of a ponzi applies to every crypto-currency and every corporation that issues stock.    If this is what you think then there is no point in arguing.   

On the other hand it appears that 100% of your claims could be resolved provided we educate all parties to as many risks as we can think of and in this case you have been most helpful in identifying areas where our users must understand the risks.

In conclusion, BitShares allows users to mitigate to a large extent the vast majority of risks associated with crypto-currency price volatility.  However, every holder of BitX is only ever guaranteed to receive the collateral backing their position (2x as many BitShares) in the most extreme cases.   If you are willing to accept that risk, then you can buy BitBTC and earn dividends for taking that risk.   If you are not willing to accept that risk then keep your BTC and forfeit the opportunity cost of lost dividends.     Either way, you as the user of the system are responsible for assessing the risk/reward of using the system.

It is my belief that there is enough utility and corrective market forces to both justify the value of BitShares as non-0 and to prevent the most extreme market events from occurring.   It is also my belief that because BitShares are deflationary, income-producing assets they will on-average rise in value just like Bitcoin and therefore any extreme movements are only temporary in nature.   

So I am more than happy to put as much information in the hands of individuals to make educated investment decisions.

If anyone has any questions I am more than happy to address the concerns via Skype: macman2k. 

Let's put this in simple terms, so that everyone understands.

I purchase 1 BTC worth of bitBTC today. I plan to convert this back into BTC exactly one month from today.
As long as the next month's price of bitshares in terms of BTC is at least 50% of the current price, I will get my 1 BTC back.

However, if next month's price is less than 50% of the current price, I will not be able to recover my initial investment in full. (i.e. I will get back less than 1 BTC)

Correct? (please don't tell me that some magic speculator is going to come in and bail me out)

What about issuing a new coin to bail out underwater investors at that time ?

"QE-coin" - a truly faith based coin.

Mate, it's over now. Give it a rest. All your arguments could be made against Bitcoin (as has been said two times now). There is risk, but that risk != ponzi. If you do in fact report this to the SEC, shame on you. What a filthy thing to do. Paints a grim picture of your character.

This whole system is geared around speculators.  To take speculators out of the equation is like having a debate about whether a car will work and then say don't tell me that some 'magic' wheels are going keep me rolling.

It depends upon what percent of the BitShare market cap was tied up backing that 1 BitBTC and how many traders are in the market and why the price fell 50%.  With a lot of traders in the market you would still be safe because new short positions would be issued the whole time the price of BitSHares relative to BitBTC was falling.  

This is only a problem if  near 75% or more of BitShares are placed in a short position against BitBTC, but if only 10% of the BitShares are used to back BitBTC then the price would have to fall by more than 95% before anyone risked losing money due to this particular scenario.

This system will launch like bitcoin, it will have to prove itself.    

Misrepresenting a highly risky investment as extremely low risk or risk free is illegal.

e.g. recall the coindesk article


Recall the CEO's statement

These have now been acknowledged to be false statements.

If anyone happens to lose money all they have to do is dredge up these quotes. US courts will hold these guys liable.

 

This is not an absolute. Everyone should believe in their product, that doesn't mean they are implying that it will cure cancer. They could have worded the Coindesk article with a bit more grace, but you are overreaching. More likley the author misunderstood what they were trying to say (he got some facts wrong to begin with). Considering the product hasn't even been released (the final draft of the white paper isn't even done yet!!!) there is ample time to mold the message.

Sorry , i dont trust bitshares !

1.bitshares 白皮书去掉了最后一章（和Ripple、Local Bitcoins、Colored Coins的对比）。相对于建立在矿工节点上非信任机制上的去中心化(bitshares)，我个人还是倾向于建立在对gateway信任机制上的去中心化模式（coloredcoin、ripple）。coloredcoin是构建在BTC协议上的，而bitshares完全推倒重来。

2.至于bitshares所强调的金融杠杆功能，coloredcoin在信任机制模式上能够轻易构建，如同796一样，而不需要矿工来维护。coloredcoin构建的资产是基于比特币的，而bitshares构建的资产基于BTS，就像ripple系统中的xrp一样。我们是否需要一种新的虚拟货币来替代BTC呢？

3.在bitshare白皮书15页case里说“He buys his BitUSD by posting an ad on craigslist saying that he is looking to buy some.” 难道，交易BitUSD还需要使用场外交易方式 ？为什么bitasset中经常提到的资产是BitUSD 和 BitGold 而不是BitBTC？要知道 Coloredcoin协议中的资产确实是完全用BTC背书的。

4.另外，bitshares的高额分红完全是吸引新玩家的做法，让人感觉很可疑。我个人认为，就好像http是建立在tcp协议上一样，比特币用户希望看见一个基于BTC协议上的P2P多态智能资产协议框架。而不是一个以P2P 交易所为诱饵的，实际损害比特币价值的”新协议“。

Excellent Work！I feel something is wrong with bitshare but I cannot figure it out. You have reminded me of one important point!

Bitshare is definitely impossible.

You keep thinking that.   But this is not how BitShares works.  BitShares create USD the same way banks do, by lending it into existence against a collateralized loan.   BitUSD is just an IOU for one dollar worth of BitShares.  The block chain is able to honor that request.


BitBTC is an IOU one BTC in BitShares.   The IOU is collateralized with 2 BTC worth of BitShares and is automatically enforced when the collateral falls to 1.5 BTC worth of BitShares

If you set up a straw man, then of course it would never work, but what you describe is NOT how this works.  I am not maintaing a peg by controlling supply of the currency.

Well, can you answer my following questions?
1. How can you guarantee 1BitUSD ≈ 1USD?
2. If I buy 1 BitUSD by USD, I can receive BitShare Dividend, and as a dividend, the value of my BitUSD will become say 1.1 BitUSD, then I can get 1.1 USD, am I right?
3. Why not people choose to by BitUSD rather than BitShares?

Prediction Market dynamics long and short have to agree on the price and have opposing incentives which force an accurate price.   After all the short has to repurchase in the future from someone to free his collateral and the long has to agree to the new price or he will sell to someone else.

If you buy 1 BitUSD then you will accrue additional BitShares as dividends like earning interest at a bank.  You can sell your dividends for more BitUSD and end up with 1.1 BitUSD or you can sell your 1 BitUSD for BTS and end up with 1.1 dollars worth of BitShares.


Why do people go short rather than long?   People disagree about which way the price of BitUSD vs BitShares will move in the future.  If there is high demand for BitUSD then it will cause the value of BitShares to rise in order to meet the demand for BitUSD.  Anyone who expects there to be high demand for BitUSD due to price stability and ROI will want to short BitUSD relative to BitShares.   Demand for BitUSD causes the price to rise above parity with USD until someone decides to create more by shorting it.  At nearly all times there is 1.5 to 2.5x the value in BitShares relative to BitUSD.   

Me personally, I would short BitUSD and go long BitShares to maximize my return.

No the value of BitUSD will decrease without any change in the supply.  Value is not based upon supply alone.

Transaction fees will pay the miners and dividends.

They are market pegged each BitAsset class floats against BitShares based upon supply and demand factors alone.  Of course BitUSD can only be borrowed into existence and is destroyed when the loan is repaid to the blockchain.

The total bitshare is LIMITED, so I wonder your backup will be insufficient unless 1 BitShare can support multiple BitAssets.

Then your transaction fee will be very high....
Your economy will be inefficient.

Suppose a BitShare has value worth $100
1oz of Gold is $1000

You can borrow 1 BitGold from the blockchain provided you post 20 BitShares (worth $2000) as collateral on your loan.  This will create new BitGold and you will be unable to spend your 20 BitShares or receive dividends on them until you pay off your loan.  If the value of 1 BitGold rises relative to BitShares then your collateral will be used to repurchase 1 BitGold and pay off your loan and give you back what ever BitShares are left over... likely 5 BitShares.   When the loan is repaid the 1 BitGold is destroyed.

So, the only way for X value worth of BitGold to exist is if 2x value worth of BitShares already exist.    The only way to increase the supply of BitGold is for the value of BitShares to rise enough to provide the proper backing.

This is exactly how 99% of real USD is created.  First there must exist 1.2x value worth of House.  Then X USD is lent into existence.  When the loan is paid off, X USD is destroyed.  

 

Transaction fee is only as high as required to buy space in the blockchain.  No higher than Bitcoin.

In your example you short BitGold
What if you long BitGold?

The Long position is always paired with a short position.   

To Short BitGold you borrow it like the prior example, and then sell the BitGold you receive to the individual who goes long.   Now to cover your short position you must repurchase it from the Long.

Can you describe the long process just like the short process? It won't take you a long time and I believe it will clear the mist for many people.

The Long and Short process are the SAME the person who borrows BitGold into existence is LONG BitGold until he sells the BitGold at which point he becomes SHORT. 

Example:  If I borrow $100 from you and keep it then I have $100 in my bank and a $100 debt to you on my books.  I am long and short and thus neutral.  If I then spend that $100 I am now short because I no longer have $100 in my bank, but I still owe you $100.  The person who holds the $100 with no debt is LONG USD.

You don't get my point. I know Long. My point is : What is the Long process in BitUSD? You buy BitUSD by what? Flat money or BitShare?

OK, Let discuss the two cases:
1. You buy BitUSD by USD.
Where is your BitUSD ? You have to generate them first, right? And in order to generate them someone else has to short BitUSD. Is that correct? If so, and there is no market-maker, if everyone thinks BitUSD will rocket into sky and no one short BitUSD, you can not generate BitUSD !

2. You buy BitUSD by Bitshare.
What will happen to the Bitshare?

No Reply?

expect one after protoshares is released. Dan and co are probably pulling their hair out right now.

Rise VS does not mean worth more than.

If bitshares are worth $100 each and bitUSD rise from $1 each to $2 each, they have risen VS bitshares, but are still not worth more than bitshares.

In fact, to create $1 worth of bitUSD requires $2 worth of bitshares, so unless there are twice as many bitshares as there are bitUSD, bitshares should tend to be worth more than bitUSD.

Bear in mind also there will need to be twice as much "worth" of bitshares as there are "worth" of bit gold, bitsilver, bitpoop, bitwhatzits, bitwierds, bitwhatevers, bitwhateverelses etc etc all put together.

So hey if I hold a shit-load of bitshares and using some of them to create some bitUSD would increase the value of bitshares why wouldn't I use a few of my bitshares to do that so the massive majority of my bitshares will increase in perceived value thanks to the usefulness and convenience of the bitUSD that I used a few of them to bring into existence?

-MarkM-

It seems those guys finally gave up...

I guess this is pure speculation market.
You are not trading currency, you are trading position.

So, to buy your position, you need money, which is bitshares.
A long position = current price in bitshare.
A short position = 2 * current price in bitshare.

Then went you get out of your position you get :
Out of long = new price in bitshare ( you will win (lose if negative) : new price - old price )
Out of short = old price - new price + 2 * old price ( you will win (lose if negative) : old price - new price )

So basically bitshares are toy money to play speculation.
But you can't get the real thing,  ie you can't use your bitUSD, you can only trade them back for bitshares.
I don't know if decorrelation from real thing for trading is good or not.
But you sure loose the "backing by" aspect of it.
And since bitcoin for example is only good for what you can buy with it...

As a way for a decentralized market place, it could be good, but you still need a way to get out of bitshare (if it's not only for a funny toy), and thus need a real market to get real bitcoin. That's kind of a paradox !

This is one of those things that will work really well until it doesn't (sort of like the subprime mortgage market).

As long as housing (Bitshares) go up in value, all is well and the underlying asset can be backed up.  But once it falls, it will ripple through the market, causing even more instability, crashing the whole house of cards to nothing.

Definitely not a Ponzi, just another bad idea that is just good enough to get attention and work for a period of time until it doesn't.

and in https://bitcointalk.org/index.php?topic=279771.0;all  also he wrote:
"The legal requirement of SETTLEMENT on a specific date...
Whether by Delivery or Cash Settlement is what enforces futures markets.
It's not clear to anyone whether you have a proper mechanism in place.

As for bid-ask spreads... there is no such thing as "you now have".

Bid-ask spreads are a function:

(a)  market liquidity

(b)  market volatility

(c)  market manipulation

You are gonna start with very liitle (a)... and a large amount of (b) and (c).
Including rules like your 5% short closure Tax that will create massive (c).

In general, overly complex systems are designed...
To make it easy for Insiders/Experts to fleece the ordinary Lambs...
So complexity in and of itself... is a reason for skepticism."


@ bytemaster, you have thoroughly addresses concerns of canicula... But can you reply to some of the concerns of quantplus?