Project looks interesting and after reading the WP I have following questions:
1) No section on Risks and in particular the Counter-Party risk, How do you handle it? Which exchange(s) / custodian(s) do you plan to use ?
2) "... there will be times when the fund will be partly held in fiat ,such as Euro or Japanese Yen" > I assume you will use a FX neutral basket of all main FIATs and not only those two, correct ?
3) Do you plan to hold Stable Coins? If yes then will it be only during price correction phases, Which ones and why those ones?
4) At which frequency will you report? Will you disclose publicly the whole portfolio composition? Something similar to a monthly factsheet?
5) Some important decisions like location and accounting method are still under consideration, when do you plan to communicate on this? Will it be before the end of the ICO?
Two comments:
1) "This includes making all software programs and APIs open-source" > I assume it will not include trading algorithms ;-?
2) WP is referring to the term "Fund" > Is it a good idea from a regulatory stand-point ;-?
Thanks
Hey! Thanks so much for the great questions and also nice feedback, let me answer some of your questions in what would hopefully be a sufficient manner:
1.) Are you referring to ANN not having something on that subject? Whitepaper had it originally, although we're a few edits later and I may actually need to check if that includes something regarding that. So actually the goal is to find a private insurer for a portion of deposits. It seems the most common availability of such a service is something where a company underwrites a portion of holdings. We are still working on that, it's not as easy as just contacting AIG yet! Maybe soon it will be, so as for custodial services, I'm actually having an issue with these providers. I believe Gemini is able to offer some kind of depositors insurance to a certain extent BUT only for US individual accounts if I recall correctly. Their fees are quite exorbitant, though is another issue. Somewhere to the tune of $100,000 or 1% yearly, whichever is greater. The same goes for ItBit HOWEVER, ItBit doesn't even offer US individuals any depositor correction but they have plenty of high level sales guys to respond and schedule Skype calls with you to explain "why thats actually a good thing"?! Needless to say, we skipped that skype session. Coinbase has followed suit offering a replica service to Gemini of course haha. We'll skip on them as I can't imagine them placing OptiToken's fiduciaries ahead of any regulatory weird happenings that could come to any crypto service operating in a less than friendly GEO. Switzerland is a nice geo for that but the question becomes this: are any of those options more secure that Bitfinex's cold wallet security protocols for corporate accounts? They're not any different, unless any of them can offer something like insurance on part or all of coins they store for a customer than it makes really no sense to utilize their services over Bitfinex's nearly identical system, actually probably superior as they've been through real fire alarms and not just drills. So right now, we think the best plan of action is to utilize their system AND continue to try to find a company to underwrite a private policy for our project. There's no reason to believe we shouldn't be able to find a solution for this relatively soon. I would guestimate that by mid-March we can have some sort of agreement with a service provider that will assist in protecting the project a great deal. We will add all this to the next version of the WP as it shapes up.
2.) The way we'll likely pick what foreign currency to use at any given time will depend on a few things: availability and current value/trend. I don't think utilizing a basket of currencies makes sense for this at the moment but there's no need to rule something like that out, especially as the portfolio grows and project could become susceptible to intraday price volatility. Utilizing something like that would mean an additional service provider and some additional fees and in my opinion it just doesn't make sense for us at the current juncture. I know we would like to avoid the USD, any reason US regulators could find to say hey you're operating in US somehow or way is just another potential headache. It bodes well for that idea that the USD is currently heading in a downward trend for the foreseeable coming months, at least. BitFinex offers Euro and USD so for the most part I think we'll use the Euro, I also think the Euro is undervalued at the moment so I think it's sufficient for now. I'm semi familiar with the JPY as well so an eye will be kept on it. That's why those 2 are mentioned specifically.
3.) Stable coins are scary too! How stable really is a stable coin, right? I mean it's a question we must ask. Interestingly enough we came up with an interesting hedging method. I actually talk about it in an interview I did the other day. So stable coins are an ingredient of most crypto traders at some point in time, so one needs to consider the Tether dilemma. Is it a fear and propaganda campaign by the likes of banks or people with certain enormous traditional currency interest? Hard to say... Is it real? That's also hard to say. That being said, when the Tether hype was at its worse recently, we actually avoided and put the kibosh on any trades set to execute into it immediately. The result was a bit more loss than had to be realized when the market turned bear on that news and the other negative news around the same time. This was only a few weeks ago Im sure you recall. The answer I found, although how scalable and what risks it carries of it's own, is still being determined and calculated. So, Kraken offers a very interesting trading pair: USDT/USD! Interesting right? I'm looking at it for profitability purposes as well as there's potential there for sure, and anyone even semi-familiar with traditional ForEx can see that, especially since they have some weird way to get credits for fees at the moment. However the fee redemption is a bit confusing and I haven't been able to justify spending a lot of time on it currently, as there are more urgent matters in front of us at the moment. That being said, we recently test margin shorted Tether to USD at a small amount. Only 4000 tether, just to test the flow AND also as it technically was providing a decent little hedge for the test portfolio/algo that is indeed currently live on Bitfinex and plugged into our website VIA api. The position was actually closed at a profit of roughly $12 when UpBit announced they too are backing Tether. I thought that sufficient to close that test position and continue on as is. By that I mean, continue using USDT or EURT on BitFinex while continuing to seek out an insurance policy. So there is a really nice way to sufficiently hedge risk here on a stable coin, I think it's the clear option of stable coin to use as it also happens to be the only one BitFinex offers. Well what about Kraken though becomes the question, would that mean we would also need to seek some sort of depositors insurance policy there? Maybe... It may also be that we will want to avoid Kraken altogether, as they are based in the U.S., so it's a question that will also need to be addressed by legal. It would be pressed higher on the urgency check list HAD UpBit not come out saying they will also back Tether. But since that event happened it's been pushed down the list a bit BUT will be addressed and that info shared publicly of course. The other question here is what amount is needed to hedge at any given time, but that's a much easier question to answer and a simple formula can be made to suffice at the very least a partial hedge, if not complete. That too can be shared publicly and openly when we finish that work.
4.) A good and fair question, actually something we've discussed was a monthly look back at holdings and some sort of breakdown at what transpired. Yes someone could also look at the website and easily comprise the basket BUT that doesn't fully mean every token listed is what basket is comprised of A.) because that report I believe only offers so many lines to list trades and B.) because maybe one of the tokens in the basket just wasn't a trade target that when someone happened to go look and try to discern basket. Make sense? So yes, I think it's something we'll also run by the community as well as there's no reason for that to be a decision made behind closed doors.
5.) So thank you for pointing this out, this is something that needs to be updated in our documents (it wasn't ready when we drafted). We our officially incorporated and headquartered in The Cayman Islands. That section, wherever it state "still being determined...." will be replaced with address and a statement fitting to reflect that's where we are. It's important for the project to be headquartered somewhere that is tax friendly, no one wants big tax bills taking chunks out of the project quarterly or annually! Also, I think Cayman Islands have established themselves as fairly crypto friendly so that was taken into account as well.
Per your comments:
1.) Another good question, it will likely depend on if people start demanding in droves the open-sourcing of such. It could be possible to open source YET obfuscate certain variables to appease all at the same time. Then the only complainers would be people who just want to run our script for their own selfish gains haha.
2.) You're 100% right, that term is not supposed to be there and thank you for pointing that out. It's important for people to understand this is not a fund, its actually closer related to operations that support traditional currencies. Although the difference is we seek to manipulate supply and demand SOLELY TO BENEFIT price, AND never to do something like inflate supply in hopes of "nurturing employment" or in support of any other economic fallacies. So thanks for pointing this out as well, that typo will be removed!
Awesome questions, I love having high level conversations with people who understand the concept. I invite you to join our groups on social media or anywhere that we can chat more in the future.
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I think you have to read more carefully haha. Of course, it will become more detailed in the following weeks as we incorporate more team members and test community interest. We are also working on an infographic with our designers.
