At time of my last post, DeVCorp was finalising a loan of 1,000,000 DeVCoins at just under half a percent per day, compounded hourly. This was a refinancing arrangement for secured debts that had been denominated in GMC and GRF scrip and paying interest of about 1% a day, compounded hourly. The debtor's credit is still very good, in fact better even that it was back then, so even if no payments were made at all (due to their natural preference for first paying off completely their higher rate loans) the fact that they would now owe about 2520776.55 is actually a good thing; holders of DeVCorp shares would actually prefer that. Indeed it would have been nice for DeVCorp to have been able to provide a larger loan. It was felt though that it would be wise to keep some funds handy to actually buy shares in the event some of the debtors arrange to "go public" since obviously any operation able to pay off such high interest loans is going to be quite the earner once all its loans are paid off.

-MarkM-

Has anyone looked into getting .bit added to the opendnsproject's portfolio of top level domains?

-MarkM-

The Open Transactions server does not directly access "assets" such as bars of gold, coins on blockchains, cars on car-for-sale-lots, mansions on land somewhere and so on. So far such things are not even "smart assets" such as Mike Hearn described on the wiki. Rather, tokens are issued on the server to represent such things, and responsibility for actually backing the tokens with the real things falls upon the "issuer" of the tokens. On my server so far I am the only "issuer" so my server is not an example of the idea situation Open Transactions is designed to allow. The design allows the "issuer" function to be entirely separate from the operator of the server, by having all transactions the server performs have to be signed by a client as well as by the server. Audit functions are planned which will allow the "issuer" of an asset to check that the server is not "cheating".

To get your actual bars of gold or *coins or cars or houses or whatever the token represent though you have to "redeem" the tokens with the "issuer" or with a third party marketmaker (who basically either interfaces with the "issuer" for you or keeps the tokens circulating thus avoiding the expense of constantly "bailing in" assets to the issuer's vault and "bailing out" assets from the issuer's vault.

The issuer presumably hopes (I know I, as an issuer, do) that most of the tokens will keep circulating, reducing to a minimum the amount of bailing-in and bailing-out operations that need to be done, since bailing in and bailing out are overhead expenses, especially if they involve sending armoured cars with armed guards running around fetching assets from one place and moving them to another.

As to letting loaners lend free of charge, that is of course their choice in private deals. But to set up automated systems maintaining pools of capital for shorters (and others) to draw loans from typically some kind of itnerest rate would presumably be implemented in order to create an incentive to put your capital into such a pool. In principle a pool with no interest could be set up if in fact there were people wishing to loan without interest though. Moslems maybe would insist on no interest though possibly they may have other incentive structures that still somehow provide an incentive.

-MarkM-

The difficulty is fixed and the block time is only ten seconds, so you just get more and more and more errors/orphans, it was painful.

-MarkM-

Unfortunately that particular coin-type is not supported by my server and I have no plans to add it.

However, my server does support a bunch of coin types that are not currently running as actual blockchains on this planet, such as Britcoin, Martian Botcoin, Canadian Digital Notes, General Mining Corp, General Retirement Corp, bitNicKeLs, and so on and so on, as well as a growing number of shares. Maybe something among those might strike your fancy as worth trying to drive down in value by shorting?

GMC and GRF might be of particular interest to a number of entities, because there is a lot of well-secured debt denominated in them; the debtors would presumably love to see them driven down in price so their debts will be easier to pay back.

-MarkM-

Yes, I agree, I brought that up in a "Shorting" altcoins thread in the altcoins section of the forum.

-MarkM-

I played around with "bc", the arbitrary accuracy calculator command-line app often used from shell scripts to do calculations, to try to figure out how much a certain percent per day would be if implemented as compounding per second so that I could use unix dates (seconds since the epoch) conveniently to compute interest to the second. It turns out that calculator seems to maybe use a loop; 1.01 ^ 86400 is not a swift calculation.

I wonder if it would suffice to use hours, with any loan period being taken to be at least one full hour even if paid back before the hour is up?

Using hours and eight decimal rates (though 16 decimal calculations) I found I can get pretty close to one percent per day by setting the rate per hour, compounded hourly, to 1.00041469.

100 * (1.00041469 ^ 24) = 101.0000167764657900

One percent per day seems to be pretty much the common ceiling on interest rates lately when compounding is per whole day rather than per hour, minute or second so I am not sure whether it would be better to just use whole days, or maybe min (1, seconds div 86400), as the compounding period.

It seems offhand though that for loans that might last only a few days compounding in days instead of hours might be too "chunky" (insufficiently "granular").

-MarkM-

Sure, its just that an asset is an asset. Once the capability is in the code, which asset pair it is used with is of no importance to the code.

Plus of course the ideal is to "do this right", in such a way that the only risk lies in whether the tokens you play with in the Open Transactions server will turn out to actually be convertible into "real assets" such as actual bitcoins, actual devcoins, actual groupcoins, actual litecoins, actual namecoins, actual iocoins, actual ixcoins etc.

That risk exists regardless of why one bothers to use such tokens instead of using assets directly, but properly speaking the counterparty of that risk is not the server but, rather, the issuer of each type of token.

It just happens to be the case on my server that I have not yet allowed anyone else to issue assets on my server, due to not wanting to be seen as an enabler of issuers of fraudulent/scam assets, issuers planning to fly by night with the actual assets etc etc.

So if anyone has tokens on the server they already have the risk. The question then is would they like to loan out tokens to earn interest?

-MarkM-

Open Transactions development has reached a point where it is time to start figuring out how best to handle "shorting" of assets. Since I already support a number of altcoins on my server, looking into how shorting of altcoins would work seems a reasonably good idea.

Since shorting involves borrowing an asset from someone, it would seem that introducing shorting to an asset introduces a demand for loans of that asset, thus it provides people who own that asset an opportunity to earn interest by loaning it. Possibly shorting might therefore create a demand for loans of assets that hitherto no one had any desire to borrow.

How much interest are people likely to want on loans when they know the loan is going to be used to try to drive down the value of that which is loaned?

Might shorting drive up demand for an asset due to people wanting to own some to loan in order to earn interest?

Are there, for each altcoin type, people in the community who hold large numbers of that type and are willing to loan them out for shorting?

Each type of coin the server supports will of course be shortable against each other type of coin, supply of coins available to be borrowed permitting. Thus it is not only altcoins that will be short-able. You will also be able to short Bitcoins and, in general, any asset available for borrowing.

-MarkM-

I have had it running for days now, and was up to four connections some of the time, though at this moment I only have two.

-MarkM-

I don't see a credit check being a necessity if you hold assets of theirs. Basically their credit is equal to the amount of their assets you have in hand to draw from to cover their losses.

I thought that is what margin calls are all about: any time they seem to be running short of collateral you tell them you will close the position unless they deposit more collateral.

You can limit the losses by never lending more than half your stockpile of an asset.

For example if some LiTeCoin bull wants to short DeVCoin, you only lend him, at maximum, half of your DeVCoins; the rest you put on the market at a high price to guarantee there will be DeVCoins for sale for him to buy come time he is to repay the loan.

Or, you can stretch more by buying what he is shorting. Loan him DeVCoin to short, and buy those same DeVCoin from him as fast as he puts them on the market. If you put back on the market, at a higher price, each and every DeVCoin that you loan him, you can loan him every DeVCoin you started with while still ensuring he will be able to buy enough to pay you back at any time.

So provided you have enough DeVCoin to loan him, and never loan him more than can be bought back with the number of LiTeCoins of his that you have in escrow, all should be good. You get to choose, by placing on the market as many DeVCoins as he owes you, the limit of his losses; you simply do not loan him more than you are willing to buy his escrowed LiTeCoins for.

Leverage of course complicates matters but even with leverage you know how much collateral he has and you know the max price he will have to pay to buy back the asset that he borrowed (because even if no one else will sell him any you stand ready to sell them to him yourself).

Thus far I do not see a big problem, as market-maker you are always in a position to know exactly how much you will charge him for what he is short if no one else will sell it to him, thus you are always able to limit his loss.

-MarkM-

Hmm so they were a bucket-shop but just not a totally self-contained one? The use of MtGox was just a way of helping keep the bucket shop from getting caught out a little longer by at least sometimes actually buying or selling actual assets?

I have been testing Open Transactions for a year or so now and am very pleased with its progress so I am very interested in figuring out a "right" way of implementing leverage and shorting. But if "doing it wrong" is what the customers want, as evidenced by their flocking to those who "do it wrong" to avoid the costs involved in "doing it right" maybe having floods of MyBitcoinica sites springing up all over the place is going to be inevitable?

-MarkM-

Yes indeed. Being able to short any coin type against any other coin type would be very interesting and is where I will be heading with Open Transactions if I can actually figure out how shorting is woth implementing at all. I am still not clear on why anyone would loan an asset to someone else knowing the someone else is going to use it to lower its value so as to ideally be paying back less value than they borrowed...

Also I worry about how to ensure there are enough on the market to buy come payback time. It seemed to me there is a double cost in shorting if secured by a marketmaker who puts aside enough of what someone borrowed from someone to ensure there will be enough left on the market at payback time for the borrower to buy to pay back the loaned assets.

The more "alt" the asset the more need, it seemed to me at first glance at least, there is for a marketmaker like that because if there are none of the borrowed thing on the market there is no price available to determine how much value needs to be paid back in some different type of thing.

(If you short 1968 Coupe de Villes, and there are not Coupe de Villes on the market come payback time, how can anyone figure out how much dollars or gold or something you'd need to pay to make up for having defaulted on paying back the loan of Coupe de Villes?)

-MarkM-

I am concerned about security holes in the code. Web can be a scary attack-surface. I was thinking it might not therefore be a good idea even if I disconnect it from the money, using it just as a glorified calculator to tell me how much of what to move where and do the actual handling of the funds in Open Transactions.

However I am many years out of date on secure coding of CGI scripts and never did move on from securing CGIs to securing PHP. (And have never touched Ruby.) If someone who is really really up to date on how (or is that still "whether") PHP or Ruby can be secure can fix it up for security I expect to see lots of little MyBitcoinica sites spring up.

The suggestion of using it as a local app behind one's firewall ("everyone runs their own clone locally")  sounds cool but presumably loses the ability to bucketshop the players off against each other thus losing what is likely a huge part of how it makes money. Actually come to think, if you are the only player on your instance who are you to bet against?

I was afraid the thing would be too easily attacked thus maybe not worth in effect paying $350,000 for the code in the form of making whole the victims of Bitcoinica.

If the code is really good or can have its holes plugged pretty certainly then maybe Gox themselves might find it a good springboard to adding the functionality to their own suite of services.

-MarkM-

If they cannot even just cover the loss and move on, what is the percentage fee per transaction even for?

Open Transactions does not even implement a per transaction percentage fee, you pay a usage point per API call whether that API call is "send Mr X a million bitcoins" or "show me the inbox of my bitcoins account".

If the huge percentage fees everyone charges aren't actually enough to cover the running costs (such as insuring customers against incompetence of staff and suchlike costs of doing business) then the claim it is profitable is a red herring; what is profitable is getting out quick with a quick buck leaving the customers to hold the bag...

-MarkM-

<sarcasm>Ya think?!?!</sarcasm>

s/Yes, its already been decided, remember? I saw it announced in one of these threads./<sarcasm>Yes, its already been decided, remember? I saw it announced in one of these threads.</sarcasm>/

Better?

-MarkM- (And yes, I know, I shoulda used a separator other than / ... oops my bad.)

Yes, its already been decided, remember? I saw it announced in one of these threads.

MyBitcoinica.

-MarkM-

Actually no its not Genjix I think did it at all. Zhou Tong and Genjix could easily just be dupes of the lets buy up a trusted site and rape it gang. They both seem [pathetically? naively? childishly? charmingly? can haaz hamburger?] lacking in streetwise.

-MarkM-

Google battered wife syndrome fergoshsakes willya?

EDIT: My bad, maybe try Stockholm Syndrome or somesuch? Apparently battered person syndrome doesn't mean officially what it colloquially used to denote: the victim who keeps going back to to the abuser hoping all will be better, batterer promised not to do it again etc etc. Chronic return to batterer syndrome maybe?

-MarkM-

Hmm I'm not the only one waiting to be the hacked guy rather than the guy holding the bag it seems...

-MarkM-