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Author Topic: BTCFM - Bitcoin Futures Market [Testing] - 2 BTC Prize Pool  (Read 1486 times)
btcfm
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June 11, 2011, 09:44:01 AM
 #1

BTCFM

Our platform is running on Tor. It is accessible from:
Web: https://j45pr27zssfi6jb4.tor2web.org/   (less secure)
Tor: http://j45pr27zssfi6jb4.onion/ (You need the Tor Browser Bundle)

When you create an account, you will be given 100 BTC in fake play money, commission is set to 0% for testing mode. We've accelerated the launch date of our Bitcoin Futures Trading platform, and we're now in the testing phase, it's a little earlier than expected so please bear with us as we fix any bugs. Currently we only have one order/clearing/routing/execution pipeline running, so if you see "ROUTING/CLEARING" for a long time, we may be debugging something and it'll go back up within 12 hours. Please help test our platform, we will give out the following prizes when we conclude the test:
  • 1 BTC for the largest gain in play money account value
  • 0.5 BTC for second place
  • 0.2 BTC for third
  • 0.1 BTC for 3 random participants - must have at least one order executed to qualify.

Please report any bugs to the contact form, we may give out further prizes for the first to report bugs. We will bring down the system every so often for minor updates. We do not have any finalized launch date but it should be in under a week. Any cheating is automatic disqualification. We won't disqualify cheaters until AFTER the contest is over.


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Questions


What am I looking at here?
BTCFM is an exchange for futures contracts, which let you lock in prices of Bitcoins and expected difficulty in the future. Currently we only have one contract available per contract type, we will add more when we go live. Futures contracts are useful to hedge against changes in the exchange rate of Bitcoins (whether you will deliver Bitcoins in the future because you are mining or because you will need more to pay bills priced in Bitcoins). Difficulty contracts are designed so that miners can reduce their risk of difficulty rising at a greater than expected rate in the future when purchasing new hardware today. BTCFM offers a margin system with daily limit-up and limit-down moves that are similar to any major Futures exchange.

Sounds interesting, I'm a miner, how would I hedge new mining rigs?
We have an example on our Help page:
Web: https://j45pr27zssfi6jb4.tor2web.org/help
Tor: http://j45pr27zssfi6jb4.onion/help

How does the margin system work?
Our margining algorithm works similarly to any other margin trading system, and complies relatively closely to futures trading platforms with some minor differences. Every night a trading range is set by the system based on the last trade at 20:00 UTC. When trading during the day, initial margins are greater the further you are away from the previous settlement price to ensure 100% coverage, so you won't bear risk of BTCFM defaulting. Essentially, the percentage you are allowed to margin is equal to the allowed trading range. In the event that there's a change greater than the trading range at 20:00 UTC during the nightly check, the system will mark-to-market at the limit price, close all positions and pay out, and all contracts will be considered settled. This is to ensure that there is minimal systemic risk and is much, much more conservative than many global exchange rules. This means that these futures contracts will NOT cover you against a 90% change in value of Bitcoins, as well as you should ensure that you are well capitalized in case of extreme moves. All you really need to know is that you have to keep all margin accounts below your account's Net Asset Value at all times. If it doesn't, the system will automatically close out positions for you (possibly at unfavorable prices), this is to ensure that the system is fully solvent at all times.

Why is it priced in BTC/USD instead of USD/BTC? I'm more comfortable with BTC/USD
We thought about this long and hard. The fundamental reason we did not do this was because any foreign exchange transaction has a non-linear payoff, and its non-linearity is determined by which currency is in the numerator/denominator. One has to account for the non-linear payoff when calculating the volatility of a forex pair. Our models show that BTC/USD has lower risk for all parties, although there is the possibility of an extreme event occurring that may tip the scales the other way. We will review this choice periodically, however this is absolutely not just a cosmetic change. We have provided the USD/BTC exchange rate on the order page when conducting BTC/USD, however, for your convenience. If you want more information, take a look at this wikipedia article. You can switch between them by calculating 1/rate. For instance if it is $23 USD/1BTC, it would be an exchange rate of 0.04347 on BTCFM.

Why are you running on Tor? This is suspicious.
We have several reasons. First, we wish to remain anonymous. We have some experience in trading execution platforms (lots of experience in algorithmic trading, less so on clearing, so it's something we're working on very carefully) and would prefer our colleagues not know we're working on helping Bitcoins succeed. It's certainly true that a scammer could set up an anonymous server with a prepaid credit card, a public website alone leads no credence to authenticity. Second, this maximises security for the user. A more anonymous platform makes it substantially more difficult to hack, it also ensures that anyone snooping in cannot observe their trading patterns. Third, and this is ideological, we believe that Bitcoins should operate on secure networks by default. We believe that all legitimate services should default to operating on Tor. The advantages have been beaten to death, so we won't bother explaining further. If you are suspicious, think of this from a pragmatic perspective. We stand to gain a greater amount by operating legitimately, as we charge 1.1% and 0.9% commission fees. That's 2% per trade (for both buyer and seller). Developing an execution platform and exchange with margining is not easy, however BTCFM stands to make a lot more from operating legitimately, as daily trading volume is often more than 10% of total open interest in many markets. We don't need the bitcoins, I have enough, this is more of a fun project to help bitcoins succeed and to show the benefits of futures markets, possibly getting a few academic papers out of it. We stand to make much, much more by operating a successful exchange to help build the future for bitcoins. We also will not be trading our own bitcoins on the platform for fairness, we may revise this in the future, but if we do, we will provide advance notice and publish our trades publicly before we place our orders.

What are your plans for an API?
We will have a full API out which will be able to replicate any activity on the website within one week after going live. It's built, but we just don't want to release it now, because a set of eyeballs allows validation of all trading activity. We encourage algorithmic trading. Our platform is not designed for sub-second HFT, nor would it be profitable to do so. We do not offer liquidity providing rebates, only a discounted rate of 0.9%. In the future, with greater market trust in our system (and with system upgrades), we intend on lowering commission fees, even to a negative commission structure for liquidity providers in the long run, as is standard in many electronic markets (Direct Edge, BATS, etc.)

What effect would a futures exchange have on the Bitcoins market?
Futures markets help individuals lock in changes in price, but more importantly futures markets stabilize prices. It lets market participants know about future demand, and to adjust present-day supply accordingly. Its social gain from price discovery cannot be understated. We hope that bitcoin pricing will move in a more predictable fashion as a result. Further with mining difficulty contracts, miners will have a full difficulty curve across durations, letting miners know whether to expand or contract capacity. Furthermore, it allows one to short the bitcoin market. Short selling has been proven to reduce market volatility, exchanges that do not permit short selling are often volatile exchanges, often overshooting in both upside and downside. It also permits one to conduct downside statistical arbitrage. One example of this is the weekend bitcoin trading market. Our models show that there is substantial autocorrelation within a timeframe of one week. This needs to be arbitraged out as soon as possible. Someone is already obviously playing this (we promise it's not us), as the massive unloading on Friday shows. Allowing short selling will permit market participants to competitively sell off on earlier and to buy bitcoins back earlier, to the point where there is no massive weekend drop.

BTCFM - Bitcoin Futures Trading [TESTING]
Web: https://j45pr27zssfi6jb4.tor2web.org/
Tor: http://j45pr27zssfi6jb4.onion/
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reifi
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June 11, 2011, 05:03:54 PM
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I've been trying it out and the first problem is that when I register or submit an order it pushes me from the tor2web > onion address after completing the action so I get an error as I don't have tor.

Secondly, it would help if the quotes went to more decimal places as I didn't understand why my order wasn't being matched.

Good luck with this as I'd really like a futures market.
btcfm
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June 11, 2011, 07:40:59 PM
 #3

Looks like it's only showing up on POST commands, and seems to be an issue with tor2web (not sure though). It's an interesting bug, as BTCFM detects what URI you're hitting and will send a link based on that, but I suspect it's because tor2web will rewrite the headers to be .onion when making the POST command but doesn't rewrite redirects when sending it back. A fix will be updated today which will send the full URI when using tor2web will be implemented. Please use the Tor Browser Bundle in the meantime (or be willing to press the back button whenever signing up/ordering).

BTCFM - Bitcoin Futures Trading [TESTING]
Web: https://j45pr27zssfi6jb4.tor2web.org/
Tor: http://j45pr27zssfi6jb4.onion/
btcfm
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June 11, 2011, 08:47:17 PM
 #4

Tor2web should be working now. It looks like tor2web manually rewrites the HTTP host value and checking for forwarding flag fixes it. Please give me a heads up if it still isn't working for you.

BTCFM - Bitcoin Futures Trading [TESTING]
Web: https://j45pr27zssfi6jb4.tor2web.org/
Tor: http://j45pr27zssfi6jb4.onion/
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