Sure, there would be a USD price for BS, and a USD price for Q. There would also be a BS price for Q, and arbitrage would make sure the three were in equilibrium. But there appears to be no convincing mechanism to make sure the USD price for Q would track the USD.
So the focus should be on disproving this point in a concise manner to convince the OP (+ other interested parties
) to stop wasting their time on an unworkable idea
Start with "Q would not track USD because ..."
The proponents seem to think that it would follow USD simply because people want it to. LOL! See below
So I create a '0-sum' game between BS and Q. To create crypto-Q you must give up current market value of Q in BS.
Let's stop right there. Right at "you must". Who enforces that?
And in fact if your crypto-Q really worked it should be able to start at any backing (value) and be pulled towards the valuation of Q in BS.
I think you want to research control algorithms. Look up "PID" proportional-integral-derivative control.
What drives price parity while the value of Q is rising and the value of BS is falling is the demand of depositors to receive equal value.
What drives price parity while the value of Q is falling and the value of BS is rising is shorts competing to buy BS (which is appreciating) at a discount.
As I've shown in my examples and was shown in the first round of the game, there is NO first force. Nobody will buy crypto-Q above the average BS backing of the original buyers. There is only the 2nd force which will cause crypto-Q to slowly fall to zero. Owners of crypto-Q cannot stop this fall, because of the "minting" rule. The minting rule was that if the top bid is not filled, it is "minted".
I think I have given many, many examples of how the price stabilizes. I would like to see one example that causes the price to not follow parity assuming:
1) No buyer accepts crypto-Q in exchange for Q unless it has equal value.
2) No one can short new crypto-Q so long as there is someone with existing crypto-Q willing to sell at that price.
3) There is a large market for crypto-Q with many competing shorts, buyers, and sellers.
4) All parties are profit seeking / maximizing.
Lets construct one trade sequence at a time... and demonstrate the instability. So far all I see is a lot of handwaving and straw-man that violate the rules of the blockchain. Lets stick to the rules. Propose a sequence of transactions that you would execute and if they conform to the rules of the blockchain and yet result in easy manipulation by a single party then it clearly will not work.
The worst-conceivable-outcome that I can contrive involves the complete disappearance of all depositors seeking crypto-Q paying interest. In this event, the value of crypto-Q gradually falls until the very last crypto-Q reaches parity with the short-issuer with the lowest basis. But this outcome is so out-there that I cannot conceive of a single reason why all of a sudden no one would care about getting a high-yield crypto-Q revenue?
How come you are the only one who does not understand this obvious strategy? It is even WORSE with lots of buyers. They just offer bids with a lot of volume but always with less backing then current owners. If the current owners sell, they are selling at a loss. If they do not sell, the currency is minted at the lower backing, so the buyer gets some of the dividends from your backing. Next iteration someone does the same thing AGAIN. The only thing stopping this process is if ALL the buyers run out of BitShares which is why it works better if there are lots of buyers.
But in fact the strategy is so easy to use (now that I discovered it) that nobody would touch crypto-Q with a 10 foot pole. Because as soon as they buy some, they'd lose $ to a lower bid in the next round.
Here is the biggest challenge I see so far, without something like Mt. Gox how does one establish paper-USD vs BS from which all other prices are derived. It would appear that initially the price discover of paper-USD vs BS would be OTC and thus have wide-spreads and some liquidity challenges (like early bitcoin days). But gradually the value of BS would become known my market participants even without a Mt. Gox.
Exactly, and I asked this of you 4 days ago:
Questions:
1. How does information about the price of USD in THC enter the system?
But you still don't "get" it. Which is that the information must enter the system in a way that is provably honest even with dishonest participants. Or just give up and use an "Oracle" -- an exchange like Gox or 1 million of them ARE "oracles" if they simply "report" how much fiat Q was paid to buy/sell X BitShares.
And I asked this:
2. When I was talking about anyone creating their own currency... you said at one point that "we" will start with just the major currencies. Who is "we" here?
And so now you've moved to a system where anyone can mint a currency.
And this:
3. How does crypto-USD enter the system? I get that someone buys it for USD, but I mean technically how is it actually created?
Which has turned out to be a critical Achilles heel of the entire system (see above).
4. How does your dividend system cause crypto-USD to approach USD value?
And here's the point we are debating now. And in fact, the dividend system does NOT apply any control algorithm to drive the price of crypto-Q toward Q. As I showed above (and several other times), it simply drives the price down.
Clearly this 'value' would not be in the software, it would exist outside the software on other (less efficient) decentralized exchanges or even perhaps on a (more efficient) centralized exchange.
Once this 'price' is known
That's it right there. It is NEVER known. Because anyone holding crypto-Q wants to lie and trick crypto-Q to rise relative to Q. And anyone not holding crypto-Q wants to trick crypto-Q to fall relative to Q (so they can buy it cheap). And finally, any "disinterested" party is by definition an "oracle" and additionally its impossible to prove that they are truly "disinterested" and haven't bought crypto-Q on the sly.
...
Given that information the user can trade between GLD, SLV and USD.
So all that remains is to tie the client to a public 'ticker' the user trusts. This ticker would not be used by the blockchain, but instead to allow the user to see prices in terms of $USD or EUR or any other currency instead of expressed as percentage rates of return.
Yup that's it that's "ALL" that remains, LOL! But not an "oracle" that the "user" trusts -- its got to be one the entire network trusts. You'll understand once you learn about PID control algorithms and apply them to your dividend in order to actually force the price of crypto-Q towards the price of Q. In order to do that, the network as a whole needs to agree on a particular dividend rate for every moment in time. To pick this rate, it needs to apply a PID control algorithm with the following inputs: crypto-Q per BS over time, and Q per BS over time.
You cannot report Q per BS without an oracle because Q is a fiat currency that is completely external to the network.
It's not a new argument, both Thezerg and I have mentioned it before. I can see the exchange system between Q and BS establishes prices, but not how it gives reliable information about USD vs BS. You started with an ingenious and superficially attractive argument about interest rate differentials, but unfortunately it appeared not to survive closer scrutiny. The rules of the system were unclear, and despite ongoing tweaks you have not persuaded me exchange rate parity is at all likely. In fact, it now seems positively unlikely to me, much as I would want it to be otherwise. Mere reputation doesn't appear to do the trick, and the exchange system doesn't give reliable data about the price of USD vs BS, it gives information between Q and BS, which unfortunately need not be the same thing.
I don't think you're ready to give up on it yet, and that's fine, but it now does look to me as if you're wasting your time. Other interesting tricks may be possible with your idea for interest rates, but crypto-USD doesn't appear to be one of them.
The sad truth of the matter is we're doing all the work, first off by refining the idea to the point where it is actually understandable to the majority from a vague set of "for instances". And second by pointing out the flaws. And we were seduced by a carrot of 20k for dev and when that wasn't enough to garner interest 10btc to prove the flaws. Which we've done time and time again.
We've refined the rules to the system to the point where they succeed except for a single data point -- the value of Q in BS. Its obvious.
You can't drive a car blindfolded. You can't execute a control algorithm if you don't know the target price.
I'm going to give bytemaster a few days to understand these concepts and play his simulation, etc. But after that, payment or scammer tag.
Even though his heart was in the right place we can't let people promise bounties and not pay if we want to keep this forum even vaguely a marketplace. I'm sorry that the result is not what was wanted. I would also have preferred to be implementing a FOSS system with the properties that bytemaster originally claimed. But that is unfortunately not reality.
I hope you readers will support me on this (by affirming that BitShares has been proven unworkable) when/if a determination needs to be made by theymos.
