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

[0x3d]

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.
[...]

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

@mjr: Well finally Thanks BFX and Bitcoin Paranoid.

@Bit n Roll: Been using it for ages, it's a nice little "go watch your charts, they're moving"-notifier in your pocket that doesn't drain the battery too much. Some little downsides though: You only have a limited set of choices for "update every x minutes" and "notify on x %-change", these would better be text-fields or sliders but the included values are also kiiinda useful defaults. Also it has a limited choice (3 sets) of alert-sounds available.

@FRR-discussion: The best solution I've read so far seems to get rid of the flash-rate entirely and only leave fixed rates available. The swap-market wasn't meant to be a savings account after all. Imho, if one can't spare a few minutes every day (or week) to adjust to the market conditions one shouldn't be earning that much free money.

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

An example: For simplicity ignore the user's margin balances for now and say there's 20m USD in open long positions and 40m USD available in total on the swap market. That would put the "load" on the swap market to 50%. Now we would take 50% of every single user's swap-balance to finance the trades and those users would all be earning between 0 and some to-be-defined $MaxSwapRate % per day. Say $MaxSwapRate = 1% then every user at that time would be earning 1% * 50% = 0.5% per day on their total swap-balance (not only the lent-out part, that might simplify some calculations).

Now as another example if there were still 20m in longs and there would only be 20m on the swap market the users would earn 100% (load) * 1% ($MaxSwapRate) = 1% per day.

Finally, this should come with the advantage of a swap-market that can't run dry because consider still having 20m in longs but only 17m in available swaps: Load = 117% so basically lenders would earn more than $MaxSwapRate earning the missing money in the process of lending out 100% (obviously can't lend out more than you have) of the swap balance + 17% of trader's gains. That would mean 17% less gains for the margin traders in this case of an overloaded swap-market so this also acts as an incentive to keep the swap-market liquid.

Too lazy to do some real calculations now and I'm not too sure I didn't mess up somewhere along the line but I think this just might do the trick.

Thoughts?

Edit: $MaxSwapRate should probably be called $NominalSwapRate as it can go above 100%. This to-be-defined number could as well be a dynamic number, that is to say it could be it's own tradable pair/market like TH1BTC is right now.

[noggin-scratcher]

Too lazy to do some real calculations now and I'm not too sure I didn't mess up somewhere along the line but I think this just might do the trick.

Thoughts?

Moving to an "Everyone throws funds into a single bucket and receives the same rate" model is... one way of doing things I suppose, but it makes it tricky to set what the rate should be. I'm not convinced your proposed rate-setting method would work well - seems exploitable that depositing funds into the bucket would immediately lower the rate paid/received by everyone.

I guess the equivalent on the current market would be if someone came along with a substantial sum of money and dropped it at "Whatever I can get" rates... which would indeed pull rates down, but it would at least cease to have influence once they're fully lent out. Having it continue to affect the rate that everyone else gets just kills other providers ability to express unwillingness to go below some particular rate - their only choices would be to accept what they're given or get out of the pool.

[0x3d]

Too lazy to do some real calculations now and I'm not too sure I didn't mess up somewhere along the line but I think this just might do the trick.

Thoughts?

Moving to an "Everyone throws funds into a single bucket and receives the same rate" model is... one way of doing things I suppose, but it makes it tricky to set what the rate should be. I'm not convinced your proposed rate-setting method would work well - seems exploitable that depositing funds into the bucket would immediately lower the rate paid/received by everyone.

I guess the equivalent on the current market would be if someone came along with a substantial sum of money and dropped it at "Whatever I can get" rates... which would indeed pull rates down, but it would at least cease to have influence once they're fully lent out. Having it continue to affect the rate that everyone else gets just kills other providers ability to express unwillingness to go below some particular rate - their only choices would be to accept what they're given or get out of the pool.

Yep, have to agree with that. There's still some form of "riches getting richer" baked right into it but as long as we're using silly numbers in some database as a measurement of [wealth/ability to leverage/influence/grow more money out of money/you name it] I guess we can't really ignore the symptoms of a system which is truly broken in the first place... I mean it's not as if any current system (not only BFX) wouldn't prefer whales at any and all time, using a "common bucket" just wouldn't completely cut out all the overshoots who put out swap offers of 3% per day when the rate reaches 2.9% on the peak of a rally. It'd be just a somewhat more predictable and profitable system for everyone involved. But of course: whales will be whales.

Then again... Raise the taxes for the riches they say. Of course, they don't like seeing their wealth melt away.. and who does? But as long as it's not a loss on a previously realized gain but rather a reduced gain they should be fine, now wouldn't they? So what about adding another variable to the individual users? Some form of multiplier which gets lower the higher your investment in the "common swap bucket" is. So for example someone with 100$ invested in swaps will yield 2 times the "swap-load" as his daily percentage gain, someone with 10.000$ invested will have a multiplier of 1 and a whale with a million to spare still get's his 0.5% or whatever formula we may end coming up with. Of course numbers out of thin air again but you get the idea. That multiplier might as well be some floating/flowing number, in its simplest form that may be some linear progression between the smallest and the biggest investor where only the high and low values are set in stone in BFX's rules. It would be a nice win dollar-wise for anyone in the swap-game anyways and I think then we'd have a truly self-regulating auto-pilot money-maker with no-one left behind. Sure, it would still somewhat prefer the whales dollar-wise (c/f first paragraph) but they wouldn't be able to influence the swap-rate as easily anymore.

Correct? Or am I still missing something?

[QwertyCore]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

[QwertyCore]

Correct? Or am I still missing something?

No, you are not missing anything.  You are calling out the swap market for what it now is or what it is becoming.

[0x3d]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

[QwertyCore]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

I stand corrected.

I don't necessarily agree with the idea of the big money getting penalized but that's just a personal opinion.  What I think is pertinent is that if this were to be adopted the swaps "market" if no longer a market, it is a fund.  You put X in and you get Y out.  The fact that we are even discussing it indicates that the swaps, as a market, is near death.

[mjr]

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.

I disagree, for all of them to converge on a new single point, everyone would have to share the same preference for returns. In the same way that the bitcoin market allows people to choose to sell more quickly by undercutting the other people, I believe you would see people start setting their swaps to more aggressive values, like FRR-(10% of FRR), or FRR-(.01%)

Basically, it allows people to choose to accept less return in order for a greater chance to have their swap taken. This should hopefully make the FRR just an indicator, and the delta value is what people set, in order to compete with one another.

[0x3d]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

I stand corrected.

I don't necessarily agree with the idea of the big money getting penalized but that's just a personal opinion.  What I think is pertinent is that if this were to be adopted the swaps "market" if no longer a market, it is a fund.  You put X in and you get Y out.  The fact that we are even discussing it indicates that the swaps, as a market, is near death.

If you put it that way: Agreed, a fund with a slightly user-influencable yield is what would be left... not too different to what we've had for some time now except that it should be way easier on the backend. The swap-market was a nice idea to get the whole project BFX off the ground, once a novel feature in Bitcoin-land, yes, but on a larger scale it seems to converge to a fund all by itself so why not give these servers a little more idle-time by simplifying a big chunk of what BFX consists of?

Big money on BFX doesn't get penalized (HODL and SODL!) but big money in BFX's new swap-"market" should have to, otherwise, well see mjr's "complaints" from a few posts ago.

[mjr]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

I stand corrected.

I don't necessarily agree with the idea of the big money getting penalized but that's just a personal opinion.  What I think is pertinent is that if this were to be adopted the swaps "market" if no longer a market, it is a fund.  You put X in and you get Y out.  The fact that we are even discussing it indicates that the swaps, as a market, is near death.

If you put it that way: Agreed, a fund with a slightly user-influencable yield is what would be left... not too different to what we've had for some time now except that it should be way easier on the backend. The swap-market was a nice idea to get the whole project BFX off the ground, once a novel feature in Bitcoin-land, yes, but on a larger scale it seems to converge to a fund all by itself so why not give these servers a little more idle-time by simplifying a big chunk of what BFX consists of?

Big money on BFX doesn't get penalized (HODL and SODL!) but big money in BFX's new swap-"market" should have to, otherwise, well see mjr's "complaints" from a few posts ago.

I think you fundamentally are misunderstanding how a market works, sure,  active lenders are now going to have to have to put in offers at FRR-0.010, unless someone wants to get ahead of them, in which case, they would simply use -0.020 and if someone wanted to get ahead of him, he could use -0.030...and so on.

I think that people are mixing up what they want this to be, with what it is. There is no "fund", it is a market for swaps. The reason why we are even discussing this, is that there is not enough price competition, because using the FRR as a default means that everyone can't differentiate their offer. I think one issue is that people think that there is a required return or something, there is not, again that is the point of a market. If people do not want to offer swaps, you will see the rate for swaps increase until people want to offer them again. This is just the most basic parts of any market. There is nothing inherently wrong with everyone choosing the same value, that is a possible outcome, what could be better, is allowing people to choose a different value.

[QwertyCore]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

I stand corrected.

I don't necessarily agree with the idea of the big money getting penalized but that's just a personal opinion.  What I think is pertinent is that if this were to be adopted the swaps "market" if no longer a market, it is a fund.  You put X in and you get Y out.  The fact that we are even discussing it indicates that the swaps, as a market, is near death.

If you put it that way: Agreed, a fund with a slightly user-influencable yield is what would be left... not too different to what we've had for some time now except that it should be way easier on the backend. The swap-market was a nice idea to get the whole project BFX off the ground, once a novel feature in Bitcoin-land, yes, but on a larger scale it seems to converge to a fund all by itself so why not give these servers a little more idle-time by simplifying a big chunk of what BFX consists of?

Big money on BFX doesn't get penalized (HODL and SODL!) but big money in BFX's new swap-"market" should have to, otherwise, well see mjr's "complaints" from a few posts ago.

I think you fundamentally are misunderstanding how a market works, sure,  active lenders are now going to have to have to put in offers at FRR-0.010, unless someone wants to get ahead of them, in which case, they would simply use -0.020 and if someone wanted to get ahead of him, he could use -0.030...and so on.

I think that people are mixing up what they want this to be, with what it is. There is no "fund", it is a market for swaps. The reason why we are even discussing this, is that there is not enough price competition, because using the FRR as a default means that everyone can't differentiate their offer. I think one issue is that people think that there is a required return or something, there is not, again that is the point of a market. If people do not want to offer swaps, you will see the rate for swaps increase until people want to offer them again. This is just the most basic parts of any market. There is nothing inherently wrong with everyone choosing the same value, that is a possible outcome, what could be better, is allowing people to choose a different value.

I don't think anyone is currently is arguing that the swap market is currently a fund, more that it is morphing into something fund like due to the influence of the FRR and passive lenders.  You say that there is nothing wrong with everyone choosing the same value, and you are correct, but when Bitfinex provides, and to a point, encourages a majority to select the same value, there is a problem and that is what the FRR does. 

Take what Sukrim said: "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."  He is correct and that logic encourages lenders to use the FRR.

It is the existence of the FRR that is the problem.  If it were to be removed, would a majority make offers a the same rate?  How would they know what that rate would be?  Do you think there would (as there was at one point) be 3m in offers at the same rate?  They would have to look at the order book, make whatever calculations they has decided upon and then make an offer.  I would be hard pressed to come up with a scenario where 3m be offered at a single value. 

The FRR influences the market to where it doesn't behave like a market.  I hate to state it this way due to the negative connotations, but when you combine the FRR and passive lenders, Bitfinex starts to look a awful lot like a bank.  You put your money in Bitfinex's fund (the FRR) and Bitfinex will take care of lending it out (adjusting the FRR).  In return Bitfinex will give the lender a average return after they take a 15% cut.  The only time this fails is when when the market is dead and no loans are being made or when the FRR fund runs out of money. 

The FRR also has an tremendous advantage over the fixed rate lender - Bitfinex can change the rate during the life of the swap.  If a fixed rate lender makes a swap for 10 day at .05 the get their money in play and the rate go to .5, they are out of luck for 10 days. Not so with the FRR, Bitfinex will just increase the rate to take advantage of the improved market.  That's an advantage that fixed rate lenders do not have and it something they have to compete against.  On the other side, if the rate drops, the FRR goes down thus increase the odds that the borrower will keep the swap.  The fixed rate lender's swap will most likely be closed a replaced by a lower rate swap which is now (ironically) automatically done by Bitfinex via a bot.

Yes, the swap market is a market, but it is not a free market.  It is greatly influenced by the FRR which comes with institutionalize advantages.  So, as a fixed rate lender how do you fight the system that's rigged against you? You don't.  You put your money in the FRR like everyone else.  When the majority do so, the "market" is no longer a market, it is a fund - brought to you by the FRR.

[0x3d]

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 do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

I stand corrected.

I don't necessarily agree with the idea of the big money getting penalized but that's just a personal opinion.  What I think is pertinent is that if this were to be adopted the swaps "market" if no longer a market, it is a fund.  You put X in and you get Y out.  The fact that we are even discussing it indicates that the swaps, as a market, is near death.

If you put it that way: Agreed, a fund with a slightly user-influencable yield is what would be left... not too different to what we've had for some time now except that it should be way easier on the backend. The swap-market was a nice idea to get the whole project BFX off the ground, once a novel feature in Bitcoin-land, yes, but on a larger scale it seems to converge to a fund all by itself so why not give these servers a little more idle-time by simplifying a big chunk of what BFX consists of?

Big money on BFX doesn't get penalized (HODL and SODL!) but big money in BFX's new swap-"market" should have to, otherwise, well see mjr's "complaints" from a few posts ago.

I think you fundamentally are misunderstanding how a market works, sure,  active lenders are now going to have to have to put in offers at FRR-0.010, unless someone wants to get ahead of them, in which case, they would simply use -0.020 and if someone wanted to get ahead of him, he could use -0.030...and so on.

I think that people are mixing up what they want this to be, with what it is. There is no "fund", it is a market for swaps. The reason why we are even discussing this, is that there is not enough price competition, because using the FRR as a default means that everyone can't differentiate their offer. I think one issue is that people think that there is a required return or something, there is not, again that is the point of a market. If people do not want to offer swaps, you will see the rate for swaps increase until people want to offer them again. This is just the most basic parts of any market. There is nothing inherently wrong with everyone choosing the same value, that is a possible outcome, what could be better, is allowing people to choose a different value.

I'm not saying the swap-market *is* a fund, all I'm saying is that it *resembles* a fund, yes, because of the swap-walls and swapper's "me first" mentality, I get that and we're on the same page there. I also agree with you that I'm pretty much restating "what it is" but that's only because we haven't seen this market in any other form than ineffective in the past but I think we won't agree anytime soon when I don't see why this market would need to be anything but just that: ineffective and slow, like a savings account on a bank, ahem... It doesn't really make any sense for maker or taker alike to put up or take 0.2% for 30 days when they both can have 0.1% for less days as this market is basically a coma-patient most of the time and you can lend or borrow for 0.1% again and again like 98% of the time. Just look at the current "USD swap offers": about 40 lines of text ranging from 0.0936 to 0.1948% - nobody's interested in keeping this a market, everybody loves FRR.

As a maker you can't cancel swaps you have lent out for too low and as a taker you ruin it for any maker by returning expensive swaps as soon as cheaper ones become available and on the charts that produces just see-saw nonsense with an FRR-magnet on a pretty constant line. I'd love to leave my trades running for months without having to check every other day if I didn't accidentally catch a slightly too expensive swap-rate. Taking swaps for 30 days is no option either bacause of the 98% thing above, it's costly and especially time-consuming to catch good ones, they disappear as fast as they come. Now what if the swaps were a variable/liquid rate for everyone involved equally for as long as any party wants? Wouldn't that be so much more relaxed, both for traders and the backend servers alike? As a sidenote: In any other forex market the leverage is just a feature you receive by signing up for their service, you as a customer aren't involved in managing swaps for them.

[BearGod]

Hi, I had an open margin long with 363 coins from 482, and I had one sell order for 50 coins at 394.  My order got hit and it closed most of my margin long coins down to 192, and only lowered my base for the 50 coins that were hit.  There are reported errors all across the board, BFX please help, wth happened?

[mjr]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

In general though, one person wrote about how typically a broker will just give you margin with your account, and you don't have to deal with margin, but you also can't provide liquidity and get a return on your funds. No one has to participate in the swaps market, but for those who like doing it, it is a pretty awesome feature. Furthermore, as in most things in life, the more effort you put in, the more you get out. So, of course, the more time and energy you spend managing your positions, the better your results should be.

[mjr]

Hi, I had an open margin long with 363 coins from 482, and I had one sell order for 50 coins at 394.  My order got hit and it closed most of my margin long coins down to 192, and only lowered my base for the 50 coins that were hit.  There are reported errors all across the board, BFX please help, wth happened?

Have you emailed support@bitfinex.com? That would be the quickest way to get this investigated, but if you give me your username or email, I can forward it along to support.

[2586]

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.

I disagree, for all of them to converge on a new single point, everyone would have to share the same preference for returns. In the same way that the bitcoin market allows people to choose to sell more quickly by undercutting the other people, I believe you would see people start setting their swaps to more aggressive values, like FRR-(10% of FRR), or FRR-(.01%)

Basically, it allows people to choose to accept less return in order for a greater chance to have their swap taken. This should hopefully make the FRR just an indicator, and the delta value is what people set, in order to compete with one another.

All lenders do share the same preference for returns: We want them to be as high as possible.

Where we differ is on risk tolerance and need for funds availability. For FRR swaps, these are are partly addressed by the ability to set the term length of a swap offer. They could be further addressed by adding a minimum interest rate option, where if the FRR drops below the lender's specified minimum, their offer will be suspended until the FRR rises.

The FRR±delta option doesn't give us anything that we didn't already have with fixed rate swaps. It creates a variable that we have to proactively manage if we want to avoid suboptimal interest rates or idle funds, just like when manually specifying rates on fixed-rate swaps. The whole reason that lenders use FRR is so that we don't have to proactively manage our interest rates. You may as well just remove the FRR option instead of introducing another layer of complexity.

In order to still cater to set-it-and-forget-it lenders (of which I am one), you'd have to add an option to offer swaps which track the (volume-weighted) average delta value of all current FRR loans. That just reintroduces the problem that we currently have with FRR. Perhaps then someone will propose to allow lenders to offer swaps at FRR±averagedelta, plus or minus another manually-specified parameter. And so on, ad infinitum.

I'm not necessarily opposed to the FRR+delta idea

In case it isn't obvious, I've changed my mind as a result of thinking through this, and am definitely opposed to FRR±delta.

[BearGod]

Hi, I had an open margin long with 363 coins from 482, and I had one sell order for 50 coins at 394.  My order got hit and it closed most of my margin long coins down to 192, and only lowered my base for the 50 coins that were hit.  There are reported errors all across the board, BFX please help, wth happened?

Have you emailed support@bitfinex.com? That would be the quickest way to get this investigated, but if you give me your username or email, I can forward it along to support.

Username: Herojuana

Thanks for quick reply, I sent support an email already, if you could get me ahead of the line, that would be great.

[nrd525]

Should I manipulate the price of the TH1 contract and increase its price to 2 BTC and the suck dry the people stupid enough to short it (by offering them swap at one interest rate for the next 30 days, and then doubling or tripling it for the last 30 days)?  Or is Bitfinex going to take action and reverse trades on this badly constructed contract.

[greyphilosophy]

Should I manipulate the price of the TH1 contract and increase its price to 2 BTC and the suck dry the people stupid enough to short it (by offering them swap at one interest rate for the next 30 days, and then doubling or tripling it for the last 30 days)?  Or is Bitfinex going to take action and reverse trades on this badly constructed contract.

I don't think they are going to take action.  There isn't enough swap or asks to support all the contracts running out on Wednesday.  The smart thing to do is to use this knowledge to your advantage.  Even if you don't, it seems someone has planned this for a couple weeks now and the short squeeze will happen anyway.

[nrd525]

There is enough swap, as when the contracts run out - it frees up a lot of swap (unless the lender refuses to renew).  The question is whether they'll try a short squeeze, or a swap squeeze. I'm thinking a swap squeeze is more profitable and we'll see 1% interest rates.