[Announce] Project Quixote - BitShares, BitNames and 'BitMessage'

[bytemaster]

Alice doesn't need to hold collateral, because if BitUSD goes down in value Sam can buy it cheaper.   BitUSD could go to 0 (if the dollar hyper-inflated) and Sam would receive a 2x return on his investment.

The dividends paid to Sam's BitShares held as collateral are redistributed to all BitUSD holders equally.   The dividend rate on BitUSD is therefore always 1.5 to 2.5x the dividend rate on BitShares.

Sam occurs opportunity cost by maintaining his short position.

Alice can sell her BitUSD to anyone, not just Sam.   If she is willing to sell it cheap, then Sam can profit by covering. 

Something to consider, if Sam never covers then the max return he can get is 2x.  However, if he covers, takes some profit, and then re-shorts he can get a fully compounded return with no limits.

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[cunicula]

You should force him to use bitBTC or bitGOLD as an example.
The ponzi scheme arises when the bitASSETS pay a higher rate of return than their real world counterparts.
Assuming that parity holds at least on average, this causes bitASSETS to dominate the real world assets they are supposed to track.

Why invest in gold when you can invest in interest paying gold? This leads to unlimited demand for bitASSETS. Which is a problem. Mismatch in interest rates is how fixed exchange rate regimes collapse. The following instructional video may be helpful:
http://www.khanacademy.org/economics-finance-domain/macroeconomics/forex-trade-topic/currency-reserves/v/math-mechanics-of-thai-banking-crisis
Eventually, so much of the market cap of bitshares is denominated as bitGOLD or bitBTC that a small downward price movement in bitshares makes it impossible for holders of bitGOLD and bitBTC to be made whole. There values plummet as people rush to get their money out of the system. The value of bitshares plummets too, reinfocing the downward spiral.

[bytemaster]

BitAssets are like interest rate swaps, one person takes the volatility risk and another gets the stability. 

The value of BitUSD includes the value of the revenue stream from its rate of return.  So it is non-sensical to claim that the market wouldn't be able to factor in the revenue stream when doing pricing.

Your understanding of the market dynamics is so far off base.  You ignore some very large counter-forces that prove that all value will not end up in the BitAssets.   Namely, as more people wish to acquire BitAssets the value of BitShares has to grow to always be at least 2x the value of all bitassets based upon the requirement for 2-1 reserves at the creation of the BitAsset.  This means that if people expect more and more demand for BitAssets then there is HUGE opportunity to buy and hold BitShares which will rise in value against all other BitAssets.   Many of these actors will not want to go short BitUSD so they will just stay long BitShares.   

Your conceptual understanding of the market forces at play is lacking so much information and perspective that your conclusions are worthless.   

[cunicula]

BitAssets are like interest rate swaps, one person takes the volatility risk and another gets the stability.  

The value of BitUSD includes the value of the revenue stream from its rate of return.  So it is non-sensical to claim that the market wouldn't be able to factor in the revenue stream when doing pricing.

Where did I say the market will fail to factor in the revenue stream when doing pricing? Of course it will.

The problem is that you will receive persitent inflows of capital from people seeking to buy and hold bitBTC and bitGOLD.
Accumulation of these assets will lead to overleveraging (overissuance of bitBTC relative to bitshares). Once overleveraging occurs, the system will suffer a high risk of catostrophic collapse. Net inflows will stop as investors perceive these risks to be too high to justify continued investment. Eventually a small adverse shock will cause the whole edifice to collapse like a house of cards.

Of course, you will have sold out your holdings well before this point as will other sophisticated investors. Greedy naive investors will get raped in the collapse. This is your agenda.

Note to audience: if you are confused, watch the video explaining the math behind financial crises. I linked to it in my last post.

[bytemaster]

BitAssets are like interest rate swaps, one person takes the volatility risk and another gets the stability.  

The value of BitUSD includes the value of the revenue stream from its rate of return.  So it is non-sensical to claim that the market wouldn't be able to factor in the revenue stream when doing pricing.

Where did I say the market will fail to factor in the revenue stream when doing pricing? Of course it will.

The problem is that you will receive persitent inflows of capital from people seeking to buy and hold bitBTC and bitGOLD.
Accumulation of these assets will lead to overleveraging (overissuance of bitBTC relative to bitshares). Once overleveraging occurs, the system will suffer a high risk of catostrophic collapse. Net inflows will stop as investors perceive these risks to be too high to justify continued investment. Eventually a small adverse shock will cause the whole edifice to collapse like a house of cards.

Of course, you will have sold out your holdings well before this point as will other sophisticated investors. Greedy naive investors will get raped in the collapse. This is your agenda.

Note to audience: if you are confused, watch the video explaining the math behind financial crises. I linked to it in my last post.

It is impossible to over-leverage the system because to issue BitBTC 2x the value in BitShares are held in escrow.  Thus demand for BitBTC will drive up the price of BitShares.   However, anyone concerned about BitShares being overpriced will switch to holding BitBTC or BitGold and thus bid them up relative to BitShares.    All risks are known to all parties and the rules of the network are defined.  

Your argument is like claiming Bitcoin is a ponzi backed by nothing and the sophisticated investors will get out early before the whole thing collapses.  

Show me how BitBTC will be over issued relative to BitShares... the leverage is 'fixed' in the system so how can there be 'overleveraging'?     I suppose you are considering a BitShare bubble where the value of BitShares rises quickly to $275 and then falls rapidly to $90 like bitcoin did.    Well, in this case those who hold BitBTC doubled the number of BitShares they started with while those who were short BitBTC lost everything.    Ultimately demand for BitBTC factors in the backing (BitShares).  BitBTC is a hedge against 99% of risks.    The owner of BitBTC knows that they are not protected from a 50% rapid fall (hours) in the value of BitShares and they assume all extra risk.   In exchange for assuming the extra risk they receive twice the dividends as BitShares.

Now the Short is only going to issue new BitBTC if they expect the value of BitShares to rise by more than 2x the dividend rate discounted for risk.  As a result, no one in their right mind would short BitBTC after a 100% run up in the value of BitShares within a short period of time.   Hence, market forces already factor in all of the risks you mention and more than you can possibly think of.  

If you don't like BitShares then sit this one out.  There is no scam, the market will price things and the rules of the system are clear.  Every trade is voluntary.  Everyone trades based upon their own understanding of market dynamics and if you are so smart to see how this will crash then put your money where your mouth is and play the markets.

[cunicula]

BitAssets are like interest rate swaps, one person takes the volatility risk and another gets the stability.  

The value of BitUSD includes the value of the revenue stream from its rate of return.  So it is non-sensical to claim that the market wouldn't be able to factor in the revenue stream when doing pricing.

Where did I say the market will fail to factor in the revenue stream when doing pricing? Of course it will.

The problem is that you will receive persitent inflows of capital from people seeking to buy and hold bitBTC and bitGOLD.
Accumulation of these assets will lead to overleveraging (overissuance of bitBTC relative to bitshares). Once overleveraging occurs, the system will suffer a high risk of catostrophic collapse. Net inflows will stop as investors perceive these risks to be too high to justify continued investment. Eventually a small adverse shock will cause the whole edifice to collapse like a house of cards.

Of course, you will have sold out your holdings well before this point as will other sophisticated investors. Greedy naive investors will get raped in the collapse. This is your agenda.

Note to audience: if you are confused, watch the video explaining the math behind financial crises. I linked to it in my last post.

It is impossible to over-leverage the system because to issue BitBTC 2x the value in BitShares are held in escrow.  Thus demand for BitBTC will drive up the price of BitShares.   However, anyone concerned about BitShares being overpriced will switch to holding BitBTC or BitGold and thus bid them up relative to BitShares.    All risks are known to all parties and the rules of the network are defined.  

Your argument is like claiming Bitcoin is a ponzi backed by nothing and the sophisticated investors will get out early before the whole thing collapses.  

Show me how BitBTC will be over issued relative to BitShares... the leverage is 'fixed' in the system so how can there be 'overleveraging'?     I suppose you are considering a BitShare bubble where the value of BitShares rises quickly to $275 and then falls rapidly to $90 like bitcoin did.    Well, in this case those who hold BitBTC doubled the number of BitShares they started with while those who were short BitBTC lost everything.    Ultimately demand for BitBTC factors in the backing (BitShares).  BitBTC is a hedge against 99% of risks.    The owner of BitBTC knows that they are not protected from a 50% rapid fall (hours) in the value of BitShares and they assume all extra risk.   In exchange for assuming the extra risk they receive twice the dividends as BitShares.

Now the Short is only going to issue new BitBTC if they expect the value of BitShares to rise by more than 2x the dividend rate discounted for risk.  As a result, no one in their right mind would short BitBTC after a 100% run up in the value of BitShares within a short period of time.   Hence, market forces already factor in all of the risks you mention and more than you can possibly think of.  

If you don't like BitShares then sit this one out.  There is no scam, the market will price things and the rules of the system are clear.  Every trade is voluntary.  Everyone trades based upon their own understanding of market dynamics and if you are so smart to see how this will crash then put your money where your mouth is and play the markets.

Bitcoin does not attempt to peg prices to those of real-world assets. The exchange rate floats. Much to its credit, bitcoin bears no resemblance to bitshares.

Bitshares is obviously a scam. I won't allow you to con people without stepping in to offer a warning. It is not reasonable to expect that of me.

[bytemaster]

The lets not call BitBTC a 'peg' but an insurance policy with a maximum payout.   BitBTC insures the value BitShares against a fall in price against BTC by paying you enough BitShares to make up for lost purchasing power.   However, there is a worst-case payout of 2x as many BitShares during a rapid change in value that is too quick for the insurance provider to recapitallize.  It is also likely short-term vs permanent. 

The price of BitBTC will reflect the value of such an insurance policy and will float on the market.  

Sure the policy cannot fully protect against black swans, but it is better than no insurance policy.  

[AnonyMint]

bytemaster, your rebuttals to cunicula make sense to me.

What is not yet certain is whether the pricing will stabilize around a dynamic equilibrium that is meaningful w.r.t. to the designated external asset.

Also the complexity of the mining of these bid/ask transactions is a concern and unproven yet.

[cunicula]

Overleveraged here refers to self-reinforcimg effects of a loss in confidence in bitBTC on the price of bitshares.

Suppose 1% of bitshares are tied up as backing for bitBTC. Do to some random panic half the holders of bitBTC sell off their holdings, so the fraction of bitshares tied up in bitBTC drops to 0.5%. This corresponds to a 0.5% increase in the supply of bitshares. No big deal.

Suppose 50% of bitshares are tie up in bitBTC and we have the same panic. This results in a 50% increase in the supply of bitshares and is likely to cause a substantial drop in the price of bitshares relative to BTC. The drop in value of bitshare collateral reinforces the loss of confidence in bitBTC. Causing more people to sell bitBTC causing the price of bitshares to drop further. You have a full on panic. Everyone rushes for the exit at once. Poof bitshares are worthless.

Stability requires limited outstanding stocks of bitBTC. You are building a system in which outstanding stocks of bitBTC tend to grow over time (because they offer above market interest a la Charles Ponzi). This will lead to increasing instablility and eventual catostrophic collapse.
Of course, you will be sitting pretty with all your assets in real BTC, gold, etc. When the day of reckoning comes.

It is just the people who trusted you who will receive the shaft. Just like you planned it from day one.

[bytemaster]

It is just the people who trusted you who will receive the shaft. Just like you planned it from day one.

This is where you lose all credibility.  I have been entirely open and transparent about my goals and from before the very first (and broken) concept for BitShares was conceived in May.   I have paid people to find flaws with my system.    But apparently you are able to read minds and draw unfounded conclusions regarding my intentions.   Your knowledge of economics is about as well founded as your ability to read the minds and intentions of those you have never met.   

Anyway... your hypothetical panic is not well founded.

1) You claim a lack of confidence in BitBTC as the 'trigger event' which implies that for some reason 'market consensus' changes regarding what BitBTC should be priced at.    Your handwaving didn't give any potential causes.   So could you clarify whether it is a crisis in the valuation of BitShares or BTC that triggers the distrust.  Because from what I can see BitBTC is a derivative that will remain sounds as long as the other to remain relatively sound.    Of course, a huge 'unexplained' loss of faith in the soundness of BitShares due to a break in encryption could be one event that would devalue BitShares suddenly.   

2) The 'sell off' of BitBTC would give opportunity for those who were short BitBTC to cover and thus take BitBTC off of the market without putting any BitShares on the market.  After all those Short BitBTC were already LONG BitShares and their act of covering would not change the demand for BitShares. 

So given you don't even understand the full economic picture, you wrongly conclude it will not work, and then you use that erroneous conclusion to call me a scammer. 

[AnonyMint]

It is just the people who trusted you who will receive the shaft. Just like you planned it from day one.

This is where you lose all credibility.  I have been entirely open and transparent about my goals and from before the very first (and broken) concept for BitShares was conceived in May.   I have paid people to find flaws with my system.    But apparently you are able to read minds and draw unfounded conclusions regarding my intentions.

Anyway... your hypothetical panic is not well founded.

Judging your intentions is so subjective. Perhaps you should not allow it in YOUR thread.

I would stop replying to him. And I would make a self-moderated thread, and link from this one to it.

And not allow him to waste your time with baseless allegations which forces you into wasteful noise "discussion".

You know I have my doubts on some technical aspects mentioned upthread and your strategic marketing concept that Invictus Innovations, Inc will fix socialism by promoting a collective society-wide understanding, yet they are not 100% certain doubts (I am not omniscient) yet also not entirely without merit.

[bytemaster]

I have started a bounty to create ProtoShares which will allow the mining and speculation on the potential value of BitShares while they are still under development.

See this thread:
https://bitcointalk.org/index.php?topic=315973.0

[bytemaster]

More information about Project Quixote... youtube video and discussion here: https://bitcointalk.org/index.php?topic=317462.0

[becoin]

BitAssets are like interest rate swaps, one person takes the volatility risk and another gets the stability. 

That is more accurate comparison. However, interest rate differential between fixed and floating interest rates sometimes can be a negative number while dividends are always positive.

[cosurgi]

this thread is a bit old now, but I wanted to ask: did it work?

[bytemaster]

this thread is a bit old now, but I wanted to ask: did it work?

Under development.

[Financisto]

We have to build the communication and identity management backend first with a secure and easy to use client alongside a good wallet to store the funds. Keyhotee will be released with the ID and communication system in beta in November and the wallet beta will released in December.

The Keyhotee trading system, the data visualization and BitShares backbone will be released in stages starting with the first release in march to April of next year and then every two-three months thereafter until the quality and economic alignment makes sense for the scale we are trying to accomplish.
[...]

Invictus is in good hands and now I've moved on to other things. BitShares is going to be a great project and I have total faith in all parties involved.

Are those dates mentioned by Mr. Hoskinson before quitting still valid?

Any modifications so far?

[charleshoskinson]

To be clear, I didn't quit

[Financisto]

To be clear, I didn't quit

Sorry for the misunderstanding.

But that's what I understood at that time.

[charleshoskinson]

daniel and the core development team of both BitShares and keyhotee are working very hard to meet all deadlines. As with all feature rich products, release dates are connected to the set of features that are practical with the development resources. Protoshares is on schedule and mining will begin November 5th. Keyhotee is on schedule for December.

The scope and scale obviously depends upon a lot of factors; however, I have total faith in Dan to deliver something amazing and innovative.