BitShare Simulation Game Discussion (theory / economics in old thread)

[greBit]

I would like to try and do a self-issue of cUSD.

So firstly I will make a buy order a little bit bigger than the maximum one,

Buy 20 @ 0.51 BS  (greBit)

Then a block later,

I want to mint 20 crypto-USD in response to the highest bid

[bytemaster]

Ok, I will add that to the books and think it over.

[bytemaster]

greBit placed a buy order for 20 cUSD at 0.51BS
Then he decides to mint 20 crypto-USD at that price.
No one with cUSD is willing to sell at 0.51BS... so his mint order goes through.

[bytemaster]

Transaction log updated, please double check that I updated all balances accurately.

As a result of your new issuance, you just caused cUSD to pay a lower interest rate... 

[bytemaster]

Ok... the problem with getting into the numbers is that it makes your head spin.... I am trying to resolve nomailing desire to sell 10 cUSD for 1 BS  with your desire to Buy 20 @ .51..

So the real question is what happens now when someone wants to cash out.

[nomailing]

Buy 20 @ 0.51 BS  (nomailing)
Mint 20 cUSD (backed by max 0.51 mBS)

[bytemaster]

So here is what happens next... another round of dividends comes around...

greBit and nomailing both 'lost' money (opportunity cost) on their cUSD holdings because they minted at an interest rate lower than the interest rate paid by holding BS and didn't sell their cUSD to anyone for real dollars....

meanwhile, bytemaster is still earning 10% on his sUSD and his BS.  

[bytemaster]

I didn't actually apply that interest to the shares... though I think what we need to do is have a regular interest application... because interest is what drives this whole idea.   So, I will give you all time to make any last transactions you want to make before the next interest payment is issued.

[nomailing]

greBit and nomailing both 'lost' money (opportunity cost) on their cUSD holdings because they minted at an interest rate lower than the interest rate paid by holding BS and didn't sell their cUSD to anyone for real dollars....

why did a 'lost' money? In my opinion I get interest for my cUSD, which you issued to me @.55BS which is more than the current exchange rate. So I should have made a profit, or am I wrong?

in other words, I anticipated the rise of cUSD value...

[bytemaster]

If you own 1 BS you get .1 BS / year or 10% return on investment.
If you own 1 cUSD you get  .052 BS / year which when converted at the last exchange rate .51 to cUSD err... I was wrong you are earning 10.1%... crap, that means I need to buy some cUSD!  *edit.. fixed math*

[bytemaster]

I am starting to think that to keep these things 'straight' we need a computer to track all of the orders and display in real time what all prices/interest rates are.

I am making too many math errors by hand to accurately play the market.

So I tell you all what, give me a day or 2 and I will get a simple web-app up that will allow us to experiment with the result.

I am thinking when you 'login' you get an account with 100 sUSD.
It allows you to place all of the orders and tracks all interest rates.

It will then automate the 'interest' process and you can watch your balances update.

We can then track each of our 'networths' in real time to see who is getting ahead and who is falling behind..

[bytemaster]

And most importantly, it will track the price of BS vs sUSD  vs cUSD

[bytemaster]

Without accurate accounting I do not know that any of us can trust the outcome of this simulation.

[greBit]

I am starting to think that to keep these things 'straight' we need a computer to track all of the orders and display in real time what all prices/interest rates are.

I am making too many math errors by hand to accurately play the market.

So I tell you all what, give me a day or 2 and I will get a simple web-app up that will allow us to experiment with the result.

I am thinking when you 'login' you get an account with 100 sUSD.
It allows you to place all of the orders and tracks all interest rates.

It will then automate the 'interest' process and you can watch your balances update.

We can then track each of our 'networths' in real time to see who is getting ahead and who is falling behind..

Yeah this is a much better idea.

I know you won't want to spend weeks developing the app but it would be nice if ....

• enough data be kept so we have the option of seeing a 'replay' of the game - so as to examine the behaviour of different players - and how it affects the market
• an API could be exposed so I could create a simple bot to try and win the game!

Also how do you plan on simulating the BS / USD market price ? It would be nice to see how the currency works in times of crazy volatility.

If you want a hand with development, I have some time available...

[nomailing]

I am starting to think that to keep these things 'straight' we need a computer to track all of the orders and display in real time what all prices/interest rates are.

I am making too many math errors by hand to accurately play the market.

So I tell you all what, give me a day or 2 and I will get a simple web-app up that will allow us to experiment with the result.

I am thinking when you 'login' you get an account with 100 sUSD.
It allows you to place all of the orders and tracks all interest rates.

It will then automate the 'interest' process and you can watch your balances update.

We can then track each of our 'networths' in real time to see who is getting ahead and who is falling behind..

Yeah this is a much better idea.

I know you won't want to spend weeks developing the app but it would be nice if ....

• enough data be kept so we have the option of seeing a 'replay' of the game - so as to examine the behaviour of different players - and how it affects the market
• an API could be exposed so I could create a simple bot to try and win the game!

Also how do you plan on simulating the BS / USD market price ? It would be nice to see how the currency works in times of crazy volatility.

If you want a hand with development, I have some time available...

I could also help with development if needed (depending on which language you use).
Now I am really curious about the simulation and the resulting data. Hopefully it will help us to better understand the concept and maybe improve it if there are some weaknesses/flaws.

I have one question: Isn't there a problem to implement the closing of a short position in the blockchain? Let's look at our simulation so far and hypothetically continue it in a way that you want to redeem your short position:

1) Bytemaster minted 10 cUSD with 5.5 MortgagedBS for cUSD @ .55 BS
2) greBit minted 20 cUSD with 10.2 MortgagedBS for cUSD @ .51 BS
3) Bytemaster sold 10 cUSD to nomailing
4) Bytemaster buys 10 cUSD from greBit
5) Bytemaster redeems his short-position (minted 10 cUSD @ .55 BS) with the bought 10 cUSD from greBit (minted 10 cUSD @ .51 BS).

As I understand so far you would have to implement #5 somehow like this:
In the blockchain you would have to annotate the tx-out of your newly bought 10 cUSD as now having the native currency unit BS again. But the underlying value of the tx-out is 10x0.51 BS in comparison to the 10x0.55 BS, which you would like to receive. So you have to redistribute all tx-outs, which are annotated in cUSD, in the blockchain. Only if the blockchain somehow redistributes the tx-outs you can redeem your 5.5 MortgagedBS by reminting the bought cUSD to BS. Otherwise you would only get 5.1 BS back, because you bought cUSD which were minted at a different rate.

I am not familiar enough with all bitcoin internals to know if this is easy to implement... But, is my reasoning in the example above correct? Is this redistribution of MBS neccessary when you want to close your short position?

[greBit]

I have one question: Isn't there a problem to implement the closing of a short position in the blockchain? Let's look at our simulation so far and hypothetically continue it in a way that you want to redeem your short position:

1) Bytemaster minted 10 cUSD with 5.5 MortgagedBS for cUSD @ .55 BS
2) greBit minted 20 cUSD with 10.2 MortgagedBS for cUSD @ .51 BS
3) Bytemaster sold 10 cUSD to nomailing
4) Bytemaster buys 10 cUSD from greBit
5) Bytemaster redeems his short-position (minted 10 cUSD @ .55 BS) with the bought 10 cUSD from greBit (minted 10 cUSD @ .51 BS).

As I understand so far you would have to implement #5 somehow like this:
In the blockchain you would have to annotate the tx-out of your newly bought 10 cUSD as now having the native currency unit BS again. But the underlying value of the tx-out is 10x0.51 BS in comparison to the 10x0.55 BS, which you would like to receive. So you have to redistribute all tx-outs, which are annotated in cUSD, in the blockchain. Only if the blockchain somehow redistributes the tx-outs you can redeem your 5.5 MortgagedBS by reminting the bought cUSD to BS. Otherwise you would only get 5.1 BS back, because you bought cUSD which were minted at a different rate.

I am not familiar enough with all bitcoin internals to know if this is easy to implement... But, is my reasoning in the example above correct? Is this redistribution of MBS neccessary when you want to close your short position?

Does it not work in the other way ... so in 5) Bytemaster redeems his cUSD(minted @ .55 BS) with cUSD(minted @ .51 BS) giving him a loss.

So on minting cUSD, Bytemaster is really hoping that in the future he will be able to buy back cUSD at a lower cost (i.e. the value of BS decreases against cUSD)

Whereas the holders of BS are doing the opposite, hoping that BS will increase against dollar

Edit: im talking bollocks

[bytemaster]

I will be honest I haven't done the math to analyze your posts yet... (I'll get to it) but I did discover the coving of a short position "issue" in my work on the theory behind this.

If I mortgage 10 BS  for 5 cUSD  then it is only profitable for me to cover my position if I can buy 5 cUSD for less than 10 BS.

If the exchange rate goes the other way... and it now costs 100 BS to buy 5 cUSD then I will never be able to close my short position at a profit.  In fact my 'losses' could be infinite!

Fortunately, there is a HUGE difference between shorting in my system and traditional banks.  All losses are merely OPPORTUNITY LOSSES and not DEBTS.   This does not represent a problem for the network because the short position is still providing backing / insurance against the price moving back the other way.

An analogy to this is that you sold 1 BTC at $0.05. .. and now you have the option to buy BTC with $0.05 but because the market price is now $130 you "lost money" by being short.   You were never in debt, yet it was still a 'dumb' move.

[kodo]

I like this game a lot