[OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading

[superbit]

Something needs to be done with TH1 ASAP, there is going to be a disaster shortly when people that shorted on day 1 are now unable to renew or close position because there is zero liquidity!!

This asset needed to be added through a variety of market makers, not one that can manipulate the whole market!

[nrd525]

TH1 - Even if there are multiple market makers, someone can still buy up all (or almost all) the contracts and manipulate the market. 

[deebosch]

TH1 is a joke and Bitfinex doesn't respond to emails on TH1. Get out while you can

[QwertyCore]

I've come to really dislike the Flash Return Rate. I'll try and be articulate about why...

The problem as I see it, is that it's currently the only option for offering swaps at a variable rate, and the only option to offer automatically at a rate that adjusts (somewhat) to market conditions. If you want to be fairly hands-off and automated about things, it's kind of the only game in town. It's normally nowhere near an optimal rate to be offering at - being either too high when rates are decreasing and everyone jumps in front of it, or far too low when rates have headed back up (see also: right now), but without any other auto-rate options it gets heavily used.

So we get, most of the time, an enormous wall of offers all placed at the single FRR, making it very difficult for the rate to rise higher - the FRR keeps slipping down as the average diminishes, until there's enough pressure to chew through it all at once (or possibly by 30-day swaps being taken over the head of the FRR-wall) and the rate suddenly spikes upwards, dragging the FRR reluctantly upward with it.

So that's my thesis - FRR is a magnet for a giant heap of offers from those who don't have the free time required for manual management, or who want to avoid being stuck in a poorly placed fixed-rate swap, and its effect on the market is to produce that weird sawtooth pattern in swap rates, with sharp increases followed by slow deteriorations. I really wish there were better options for an automated rate. Or even just more options so as to spread the pile out a bit more. If we could set offers at a fixed offset away from the FRR, or have fixed-rate offers that are automatically placed at a certain 'depth' into the book of offers, or have a tracker rate that's slightly more responsive (a weighted moving average of recent fixed-rate swaps rather than a simple average rate?)... then I would be so happy.

Completely agree. I've wrote about that as well. The swap order book is so thin that these out of the blue 200 k to 500 k offers churn through the order book completely because nobody bothers to put in any offers above a +1 mio sometimes +3 mio wall that the FFR inevitably creates as soon as long demand decreases. When the rate is high then the lagging FFR comes up and puts offers far, far below the lost offer at that time which doesn't make sense at all.

Hi, All,

My name is Phil and I am also associated with Bitfinex, and though I never post on btctalk, I wanted to address this issue and get more feedback.  FRR is calculated as the volume weighted rate of all the open fixed rate swaps, so naturally it will lag the inside market and this, of course creates problems for liquidity as it's the only real mechanism we have for auto renewing swaps.  We have spent some time thinking about how to improve this, but frankly haven't arrived at anything that we like better.  I will say, though, that we can certainly make it better by offering various embedded algos with user specified parameters, the problem is that we don't want to make it overly complicated, either.  So, the right solution has to be one that is simple and easy to understand.    So I will ask all of you.  Specifically, how would you improve it?  We recognize the need for improvement - so your suggestions are welcome!  

Hello Phil,

I've personally seen good use of FRR feature in the past, but these days I would agree with noggin-scratcher regarding the issue of "an enormous wall of offers all placed at the single FRR" and the resulting huge spikes (like today, to 0.7%!!!) when this wall is gone. I do not think however that FRR feature needs to be eliminated entirely.

To your list of simpler solution suggestions, I would propose to limit the total volume of FRR offers to a certain percentage of total offers on the order book. I don't know what percentage allocated to FRR will be optimal, but I guess you could start from some high value and go down over time, to ensure smooth transition.

It basically comes to the (optional) requirement for users to specify the rate when they are placing FRR offer. We already have a box for this entry, but currently it gets ignored by the system, if user clicks on FRR option, so perhaps we should try to enable that.
Under simplest implementation of this feature, user's offer will be placed at FRR, or at specified by him/her rate if FRR quote is already taken.

Slight modification of the above will be the availability of additional options, when placing the swap offer, such as the following:
1. Place offer at FRR, or if not available - at user specified rate (this is the same as described above)
2. Place offer at FRR, or if not available - at equal to then current FRR rate (this can be useful, for those using auto-renewal option)
3. Place offer at FRR, or if not available - do NOT place any fixed rate offer, wait until FRR offer CAN be placed.

Note that the option 3 above is very similar to what we have right now (meaning that your offer will "stand in line" for placement at FRR). For this reason, option 3 can be made a default setting. Options 1 and 2 will create much thicker order book and prevent big spikes.

Other than the above, availability of some algos would be ideal and by the way, if you do not want to make the whole platform "overly complicated" (this is of course understandable), perhaps you can make algos available only to those who wants to use them, leaving simpler solution for the rest. I guess BFX will run into problem when people would just "enable" the algos and then annoy the hell out of support team asking basic question instead of reading some sort of a "how to" . To avoid this, a comprehensive "How to" section can be created and users wishing to use the "algo system" would have to pass a simple quiz, before it is enabled on their account for them.  

What do you (and all) think?

None of these ideas will solve the problem, all they will do is hide it.  If a lender is allowed to queue up for the FFR, the wall is still there, but now it is hidden. 

Take scenario 1. If the FRR is full and a lender puts an offer in below the current FFR, his offer will be taken before the FRR and drive the FRR down until it is equal to his offer.  Other lower offers will probably pull the FRR down to or below his offer.  If his offer is not fully taken, we will now effectively have scenario 2 or 3.

If a lender has an offer equal to the FFR, we are right back where we started, if the offer is greater, we have a worse situation.  As the FRR offers are taken and the FRR limit is depleted, the waiting offers will be converted to FRR to fill it back to the limit.  This will continue until all waiting FRR offers are exhausted.  Since other lenders will not know how much is waiting to be converted to FRR, the wall will still be there but they will not be able to see it.

As an example, let the FRR limit be 100k and be currently filled.  A lender or group of lenders put 1m in the FRR queue.  All we can see in the swap book is 100k at FRR.  If a swap of 50k is taken, the system now has space to add 50k from the queue and does so.  The swap book still shows the same, 100k at FRR.  This will continue until all 1.1m in offers is exhausted.  The 1.1m wall is still there but it is now invisible.  To make matters worse, if the FRR engine is fast enough, a lender will not even be able to tell that FRR offers are being taken and it will just appear that the no offers are being taken at FRR.

[mjr]

Hi all,

I am wrapping up a long trip (30 days) in which I got to see a good friend, Erik Voorhees, get married in Denver. It was a great event and I got to talk to some of the coolest people in the bitcoin space. I then went to NY, after a brief stop in LA, to work on some exciting features which are in the pipeline. NYC is still as much of a vibrant hub of bitcoin activity as ever. I spoke at the BitDev meetup group, which is one of the most interesting meetup groups in the whole space. I also visited the Bitcoin Center to check out my baby, Satoshi Square, which is still kicking and bringing bitcoins to the average joe on the street.

Sorry I haven't been around very much lately, I am headed home to Panama tomorrow morning, and I will be posting more regularly. It is pretty tough to keep up with this forum while on the road (especially given how terrible this forum software is for searching, etc).

I do want to add, however, that this is not the primary way to receive an answer to a question. I saw some examples of people asking questions, which are already answered on our site, and then having this pointed out to them by more knowledgeable posters. This is the way this forum works, and while we are happy to engage with the community, and are always listening to suggestions, complaints and compliments, if you need help, your best bet is always going to be support@bitfinex.com (after reading the FAQ and our Announcements, of course).

I see this forum as a place to address large scale issues, engage in conversation on the direction of Bitfinex, and where we can post announcements of new features or policies. It is not our support system, although I do love seeing our customers engage with each other to share tips on how to get the most out of our platform.

Happy Trading,

Josh Rossi

I've sent support@bitfinex.com several emails in the past 3 weeks and gotten no reply.

Please include your username or email and I will look into this.

[BitBits]

Hello Phil,

I've personally seen good use of FRR feature in the past, but these days I would agree with noggin-scratcher regarding the issue of "an enormous wall of offers all placed at the single FRR" and the resulting huge spikes (like today, to 0.7%!!!) when this wall is gone. I do not think however that FRR feature needs to be eliminated entirely.

To your list of simpler solution suggestions, I would propose to limit the total volume of FRR offers to a certain percentage of total offers on the order book. I don't know what percentage allocated to FRR will be optimal, but I guess you could start from some high value and go down over time, to ensure smooth transition.

It basically comes to the (optional) requirement for users to specify the rate when they are placing FRR offer. We already have a box for this entry, but currently it gets ignored by the system, if user clicks on FRR option, so perhaps we should try to enable that.
Under simplest implementation of this feature, user's offer will be placed at FRR, or at specified by him/her rate if FRR quote is already taken.

Slight modification of the above will be the availability of additional options, when placing the swap offer, such as the following:
1. Place offer at FRR, or if not available - at user specified rate (this is the same as described above)
2. Place offer at FRR, or if not available - at equal to then current FRR rate (this can be useful, for those using auto-renewal option)
3. Place offer at FRR, or if not available - do NOT place any fixed rate offer, wait until FRR offer CAN be placed.

Note that the option 3 above is very similar to what we have right now (meaning that your offer will "stand in line" for placement at FRR). For this reason, option 3 can be made a default setting. Options 1 and 2 will create much thicker order book and prevent big spikes.

Other than the above, availability of some algos would be ideal and by the way, if you do not want to make the whole platform "overly complicated" (this is of course understandable), perhaps you can make algos available only to those who wants to use them, leaving simpler solution for the rest. I guess BFX will run into problem when people would just "enable" the algos and then annoy the hell out of support team asking basic question instead of reading some sort of a "how to" . To avoid this, a comprehensive "How to" section can be created and users wishing to use the "algo system" would have to pass a simple quiz, before it is enabled on their account for them.  

What do you (and all) think?

None of these ideas will solve the problem, all they will do is hide it.  ...

This was just one idea and you are pointing out at only one minor sub-point of everything, going on and on about it and saying that the whole idea cannot work. You simply missed it.

Forget FRR queuing, you are right on that, cancel that option 3, make it as following:
...
3. Place offer at FRR, or if not available - do NOT place any fixed rate offer. (send email notification).

Look, everybody agrees that huge wall at FRR is a bad thing these days, right? It was then suggested to get rid of FRR feature completely. What I suggested is to make a step "in between" and that is, to limit the maximum volume for FRR offers on order book.

[Sukrim]

I'd rather have other options for variable rates than FRR. Limiting FRR arbitrarily with "magic" values (100k USD? 500k USD? 50k?) is not really useful imho.

[QwertyCore]

Hello Phil,

I've personally seen good use of FRR feature in the past, but these days I would agree with noggin-scratcher regarding the issue of "an enormous wall of offers all placed at the single FRR" and the resulting huge spikes (like today, to 0.7%!!!) when this wall is gone. I do not think however that FRR feature needs to be eliminated entirely.

To your list of simpler solution suggestions, I would propose to limit the total volume of FRR offers to a certain percentage of total offers on the order book. I don't know what percentage allocated to FRR will be optimal, but I guess you could start from some high value and go down over time, to ensure smooth transition.

It basically comes to the (optional) requirement for users to specify the rate when they are placing FRR offer. We already have a box for this entry, but currently it gets ignored by the system, if user clicks on FRR option, so perhaps we should try to enable that.
Under simplest implementation of this feature, user's offer will be placed at FRR, or at specified by him/her rate if FRR quote is already taken.

Slight modification of the above will be the availability of additional options, when placing the swap offer, such as the following:
1. Place offer at FRR, or if not available - at user specified rate (this is the same as described above)
2. Place offer at FRR, or if not available - at equal to then current FRR rate (this can be useful, for those using auto-renewal option)
3. Place offer at FRR, or if not available - do NOT place any fixed rate offer, wait until FRR offer CAN be placed.

Note that the option 3 above is very similar to what we have right now (meaning that your offer will "stand in line" for placement at FRR). For this reason, option 3 can be made a default setting. Options 1 and 2 will create much thicker order book and prevent big spikes.

Other than the above, availability of some algos would be ideal and by the way, if you do not want to make the whole platform "overly complicated" (this is of course understandable), perhaps you can make algos available only to those who wants to use them, leaving simpler solution for the rest. I guess BFX will run into problem when people would just "enable" the algos and then annoy the hell out of support team asking basic question instead of reading some sort of a "how to" . To avoid this, a comprehensive "How to" section can be created and users wishing to use the "algo system" would have to pass a simple quiz, before it is enabled on their account for them.  

What do you (and all) think?

None of these ideas will solve the problem, all they will do is hide it.  ...

This was just one idea and you are pointing out at only one minor sub-point of everything, going on and on about it and saying that the whole idea cannot work. You simply missed it.

Forget FRR queuing, you are right on that, cancel that option 3, make it as following:
...
3. Place offer at FRR, or if not available - do NOT place any fixed rate offer. (send email notification).

Look, everybody agrees that huge wall at FRR is a bad thing these days, right? It was then suggested to get rid of FRR feature completely. What I suggested is to make a step "in between" and that is, to limit the maximum volume for FRR offers on order book.

I didn't mean to come across as nit-picking, I was just trying to show that all the scenarios degrade to the same state.

My main point is that I think the whole concept of the FRR is fatally flawed.  It is a coalescent point for laissez faire lenders.  If you allow spreads to the FRR such as FRR±x% or FRR±x you might not have a wall, but you are going to have a very steep hill around the FRR that will function the same way.

I thought about applying the same tools that the trader have (stop loss, training, etc) to swaps but swaps and trading are not the same animal.  With trading, when you buy, the deal is done, you own what you traded for.  The is not the same with swaps and I think why that is why the FRR exists at all.

What is causing the FRR to exist/be debated is the fact that the trader is not committed holding the swap for the entire term (and I'm not suggesting that they should).  If a lender could place a swap for 5 days and know that it will be held the full 5 days, I think the FRR would be less widely used and the wall would fall.  A lender would be more likely to hold out for a higher rate if that would be locked in for 30 days.  As it is, a lender can put an FRR offer in and know that if the swap is closed early he still has and offer on the books at a competitive rate.  It might not be a good rate, but getting some return is better than nothing.

I do not have a solution to fixing the FRR wall, but I know the wall is bad for active lenders. In my opinion the FRR should never have existed and should be removed until a better way is found.  Personally, I don't think a better way exists that not favour either the active or passive lender over one another or favour the lenders or traders over each other.

[BitBits]

I'd rather have other options for variable rates than FRR. Limiting FRR arbitrarily with "magic" values (100k USD? 500k USD? 50k?) is not really useful imho.

Not at all. As it has been said , it should be a percentage (say 25%...?).

FRR used to work well in the past, at a time when total available volume for lending was much less than today. Back then, the FRR "wall" was very rarely above some $200K, it was gone several times a day, and this was on the "background" of about some $500K in total offers.
It was exactly this fact, that the "wall" was frequently gone, which allowed lenders to try placing their offers outside of the FRR rates and it WORKED!!!.
This is what limiting order book's FRR to a defined fraction of total offers will recreate.

There is no arguing that there is always going to be much more offers around current FRR rates and this is the case with trading order books too, this is just human nature. But, a smooth bell-shaped set of offers, which are spread over adjacent values to some degree is much better for proper rate/trend discovery, than a huge, single point value WALL.

[Sukrim]

Well, if you can't predict how the rates will be in the future AND you can't predict how long your offers will be used, using the only available variable rate is not a bad move imho.

A different suggestion would be to make FRR ONLY available for 30 day offers. Then rate discovery could happen with shorter timeframe loans while FRR would still not have to be capped.

I do not have a solution to fixing the FRR wall, but I know the wall is bad for active lenders. In my opinion the FRR should never have existed and should be removed until a better way is found.  Personally, I don't think a better way exists that not favour either the active or passive lender over one another or favour the lenders or traders over each other.

What did you think about my suggested combination of "smaller interest if position = negative + larger share of profit if position is positive" a few posts back?

[noggin-scratcher]

I fall towards the "very active" end of the spectrum for swaps - using email notifications as a trigger to go and re-offer funds, sizable spreadsheet recording it all to predict the daily payment and do various other maths to things, using fixed rates somewhat religiously. So I'd be happy to see the FRR simply scrapped but I can understand that being a source of irritation for anyone who's aiming for a more "set it and forget it" approach.

So I guess a replacement would need to recreate the advantages of the FRR - it's automated and it follows the market rate... but ideally without recreating the disadvantage of it being a distorting force unto itself. Needs to be a way to have automated rates set without having everyone pile onto exactly the same rate. Which might be impossible... there's always going to be some bulk of uninterested providers that don't care to change the default setting.

But hopefully if more options were created to set auto-rates at different price points, the normal incentive to try and undercut others would spread the heap out at least a little bit. I'd be interested to see the effect of an offset field - let people specify "FRR + 0.1%" or whatever. Hopefully we'd get a bell curve centred on the FRR, which would at least offer the opportunity for fixed rates to be mixed in amongst the variable rates, rather than the current binary of "Above FRR: Doesn't get taken all week" vs "Below FRR: might get taken so long as the FRR doesn't move down first".

[QwertyCore]

Not at all. As it has been said , it should be a percentage (say 25%...?).

I think this would be prone to manipulation.  If it's a percentage of active swaps and the swaps offers go down, what do you do? Drop people from the FRR?  If I was a big lender I would place a large high value swap, wait for the FRR to fill and then rescind it.  If I was big enough, that would kick a number of offers out of the FRR until they re-offered.

I think that we all need to realize the landscape has changed somewhat.  IIRC, it was DoubleDipper who posted that more and more lenders where treating the swaps like a 'savings account', and I think he is correct.  The FRR enables that behavior.

A different suggestion would be to make FRR ONLY available for 30 day offers. Then rate discovery could happen with shorter timeframe loans while FRR would still not have to be capped.

I was under the impression that some traders will pay a premium for 30 day terms.  What if the term had to be 30 days and FRR offers locked in at the rate it was taken and did not float during the swap's duration? 

What did you think about my suggested combination of "smaller interest if position = negative + larger share of profit if position is positive" a few posts back?

I'm not a trader, but I would have to imagine that this would be interesting to them.  I would like to hear what other lenders think.  My first impression is that this would be more risky for the lender.  If the lender is negative, the position is more likely to be closed.  What do you think would happen during a flash crash?

I fall towards the "very active" end of the spectrum for swaps - using email notifications as a trigger to go and re-offer funds, sizable spreadsheet recording it all to predict the daily payment and do various other maths to things, using fixed rates somewhat religiously. So I'd be happy to see the FRR simply scrapped but I can understand that being a source of irritation for anyone who's aiming for a more "set it and forget it" approach.

I think you hit the nail on the head.  The FRR serves the passive lenders and works against the active ones.  The tide seems to have turned to where there are now more passive lenders than active.

If there was someway to de-incentify the FRR, it might be able to be saved.  What if the fee was 10% for fixed rate swaps and 15-20% for FRR?  What if FRR swaps floated down but only up to the rate it was taken (altough this might cause even more trader demand for FRR swaps)?

[mjr]

Hey guys,

We are discussing a lot of these suggestions. I just want to discuss a little bit, and propose my suggestion.

The goal of FRR is to offer a variable return rate, and that is valuable. The issue that some people have is that all the offers cluster around one price, causing a huge queue to get filled.

My suggestion is not to get rid of the FRR, but rather simply use it as an index. If you could offer a swap at FRR+1% or FRR-1%, where the delta from the FRR is set by the user, you would allow everyone who wanted a variable rate to still be able to choose different rates. If you want to be filled quickly, you could price it more aggressively, and if you wanted higher returns, you could wait longer for your offer to be reached.

I personally think that this maintains the reason behind the FRR, while allowing the offers to be more spread out, and allowing for better price discovery, as each party can still use the index, while competing in the market as normal.

I think any limit of FRR offers won't work, as then it just becomes a race to get in, and some people are left out. I think it is worthwhile to allow everyone to have the benefit of a variable rate (so they can take partake in better market rates, while also allowing the benefits of the ability to offer at a competitive rate).

Any thoughts on possible downsides to this? I'm glad for all the comments, and keep suggestions coming in.

[mjr]

I'd rather have other options for variable rates than FRR. Limiting FRR arbitrarily with "magic" values (100k USD? 500k USD? 50k?) is not really useful imho.

This is basically what I would suggest, the problem is not a variable rate, it is that there is only ONE variable rate.

I don't think it will be a very complex UI change, and should not increase the difficulty very much. What I imagine is something like
FRR + x

Where x is a user specified value. At first, if everyone leaves it as the default value of 0, we have an identical system as we have today, but over time, as some people use negative values and others use positive values, the offers should start to scatter around the FRR.

[nrd525]

You could have a FRR that reacts quickly to shifts in interest rates and one that reacts slower.

[BitBits]

... What I imagine is something like FRR + x...

Is the team ready to implement this?
If so, just do it then, because this is pretty much exactly what people have been asking for.
It just that Phil earlier made a point that creating any kind of algorithms is not desirable.
BTW, this could also be made as an "activatable" module.

[mjr]

... What I imagine is something like FRR + x...

Is the team ready to implement this?
If so, just do it then, because this is pretty much exactly what people have been asking for.
It just that Phil earlier made a point that creating any kind of algorithms is not desirable.
BTW, this could also be made as an "activatable" module.

I believe, if I remember his post correctly, that Phil said an algorithm should not increase difficulty or complexity of the UI for users. Our system is pretty advanced as it is, and any new feature has to be weighed against the increase in complexity. I think that a very simple algorithm (if it even deserves that name) of a delta applied to a known variable would be somewhat simple, and I think that as long as you maintain a default value of 0, users who want the additional functionality could use it, while those who are content with the current system should not have to do anything additional.

As I said, this is just one suggestion, but I think it addresses the issue in the most straightforward way. And I agree, that if you further have this as a feature that a user can "enable" for their account, they will have even less of a learning curve.

[mjr]

Also, one other announcement.

I am very happy to announce that Bitcoin Paranoid, one of the most popular android price apps, has added Bitfinex! If you upgrade the app, you should now be able to monitor the prices from your phone.

I am always trying to discuss with people what they would like to see, and this was a request that had been outstanding, so a big thank you to Bitcoin Paranoid for including us in their app.

[2586]

My suggestion is not to get rid of the FRR, but rather simply use it as an index. If you could offer a swap at FRR+1% or FRR-1%, where the delta from the FRR is set by the user, you would allow everyone who wanted a variable rate to still be able to choose different rates. If you want to be filled quickly, you could price it more aggressively, and if you wanted higher returns, you could wait longer for your offer to be reached.

As a lender, I only care about having my swap offers filled quickly insofar as it increases my overall returns. I'm not necessarily opposed to the FRR+delta idea, but it seems to me that rather than allowing for people to express a range of preferences, the deltas that people choose will just end up converging on a single ideal value. That ideal value will move around due to changing market conditions, and people will put in varying amounts of effort to adjust to those changes.

My point is that this ends up looking a lot like what we had before FRR was introduced: You could spend a lot of time watching the swap demands and offers and adjusting your rates, or you could pick a number that seemed reasonable and leave it at that.

[Bit N Roll]

Also, one other announcement.

I am very happy to announce that Bitcoin Paranoid, one of the most popular android price apps, has added Bitfinex! If you upgrade the app, you should now be able to monitor the prices from your phone.

I am always trying to discuss with people what they would like to see, and this was a request that had been outstanding, so a big thank you to Bitcoin Paranoid for including us in their app.

Anyone here use this app? So is it ok? No problem?