BitShares - A Peer­ To­ Peer Polymorphic Digital Asset Exchange (P2P­PDAE)

[caveden]

Not anyone can issue BitUSD... the only time BitUSD can be issued is when a long and a short agree on a price.   Each posts an equal number of BitShares resulting in a short position with 200% collateral and a long position.    If the price moves against the short, the collateral will be used to repurchase the long position on the open market (all BitUSD is fungible) and the short position loses money.  If the price moves against the long position then when they sell their position they end up with less BitShares than when they started.   It would be like selling BTC for USD and then watching the price of BTC jump $30 in one week when you repurchase BTC you end up with less than you started.  

Thank you for your answer.

Just bear with me a few more, please. Let me see if I got how this works.

• Mr S believes the price of BitUSD (not USD!) will fall in relation to BitShares. Mr L believes the opposite.
• They settle for a short vs long agreement. Let's suppose there's no leverage (can there be?). Let's also suppose the agreed price is 1 BTS = 1 BitUSD.
• Each one puts in 1k BTS, so a 2k BTS reserve in total, which, if I understood correctly, is the short collateral.
• Is Mr L now granted the right to issue 1k BitUSD? Would he be able to issue (X*Y)k BitUSD if the agreed price was 1BTS = X BitUSD and leverage was Y:1?
• If the price of BitUSD goes down, then MrL is already losing money as his stash is going down. But how much exactly will Mr S win? Can Mr L force the collateral to be used when selling his position? Let's say by selling his 1k BitUSD against the collateral, he recovers 800 BTS. Mr S now has 1,2k BTS, and Mr L only 800BTS. That's how it works? What happens to the sold BitUSD, goes on to circulate on the open market? There's our inflation of BitUSD? Wouldn't that make the supply of BitUSD proportional to the volume of short vs long positions made on the system?
• If the price of BitUSD goes up in relation to BTS then Mr L is already a winner as his stash will be worth more than before. The collateral of MrS would have to be sold in order to buy BitUSD in the open market you say. What happens to the BitUSD bought? Is it destroyed, to account for the previous issuance? Or is it given to MrL? The fact that the collateral was twice the money MrS had put himself would give him an advantage, unless of course we assume his leverage to be twice as large. I'm a bit lost here.

I still don't see why would the price of BitUSD track that of USD though. That would only happen if people on the open market would be willing to trade 1 USD for an amount of BitUSD that's almost always the same (no need for parity but you need a almost-fixed exchange rate), but where does this guarantee come from?
And how would BitUSD be bootstrapped? If it can only be issued when there's a long vs short position, which would be the price reference of the very first position?

Thank you for your patience.

[bytemaster]

Not anyone can issue BitUSD... the only time BitUSD can be issued is when a long and a short agree on a price.   Each posts an equal number of BitShares resulting in a short position with 200% collateral and a long position.    If the price moves against the short, the collateral will be used to repurchase the long position on the open market (all BitUSD is fungible) and the short position loses money.  If the price moves against the long position then when they sell their position they end up with less BitShares than when they started.   It would be like selling BTC for USD and then watching the price of BTC jump $30 in one week when you repurchase BTC you end up with less than you started.  

Thank you for your answer.
Just bear with me a few more, please.

Assumption: BitShares has non-0 value.   
Therefore there exists a ratio between USD and BitShares, lets assume the initial condition is $1 per BitShare

Mr. S Owns  1000 BitShares and believes they will go up in value relative to USD
Mr. L Owns  1000 BitShares and believes they will go down in value relative to USD

They enter a transaction on the block chain that takes 2000 BitShares as input and creates 2 outputs.

Mr. S receives a BitUSD short Position that allows him to Recover 2000 BitShares provided he buys 1000 BitUSD. 
Mr. L receives a BitUSD long Position that he owns until he chooses to sell.

Time passes and the price of BitShares vs USD goes to $2 per BitShare.  This means that Mr. S was right to short USD.  Mr. S now believes the price is too high so decides to exit his short position.  To do so he must buy 1000 BitUSD on the market which now costs 500 BitShares.    He places a bid in the market, when it is accepted 1000 BitUSD is destroyed, Mr. S walks away with 1500 BitShares and the seller of BitUSD walks away with 500 BitShares.   

In an alternate reality, time passes and the price of BitShares vs USD goes to $0.66 per BitShare and Mr. S's collateral will only cover 1500 BitUSD so a miner performs a margin call by using the 2000 BitShares held as collateral to accept the lowest ask $0.65 per BitShare and as a result Mr. S is given (say) 462 BitShares while the seller of the 1000 BitUSD is given 1538 BitShares. 

What we can conclude here is that even though no USD changed hands, Mr. L retains the purchasing power of $1000 USD regardless of which way the market moved.  Mr. S assumed the risk of BitShares going down in value, while Mr. L assumed the risk of BitShares going up in value.   By exchange risk exposure the result is the creation of an asset (BitUSD) that is market-pegged to USD.

So how do we know BitUSD will be market pegged to USD?   Because it can only be created when a long and short agree on the ratio and they have opposite incentives.  The Long wants as low a price as possible while the Short wants as high a price as possible.    How do they know that what they are trading is really a bet on USD other than the Name?   Because the market depth will establish market consensus as the bid/ask spread starts wide and gets narrower until there is enough depth that someone is willing to make the first trade.   

How do we know that the price will track?  This comes down to making a prediction about how future market participants will judge BitUSD vs BitShares and the only rational way to make this prediction is to assume future actors will bid according to the future USD vs BitShares.  The price tracks for the same reason that centralized prediction markets can price the probability of an event. 

[caveden]

Thank you again for your detailed explanation.

Time passes and the price of BitShares vs USD goes to $2 per BitShare.  This means that Mr. S was right to short USD.  Mr. S now believes the price is too high so decides to exit his short position.  To do so he must buy 1000 BitUSD on the market which now costs 500 BitShares.    He places a bid in the market, when it is accepted 1000 BitUSD is destroyed, Mr. S walks away with 1500 BitShares and the seller of BitUSD walks away with 500 BitShares.   

Ok, so here there's no BitUSD inflation, as the amount given to Mr. L is the same amount that will be destroyed.

In an alternate reality, time passes and the price of BitShares vs USD goes to $0.66 per BitShare and Mr. S's collateral will only cover 1500 BitUSD so a miner performs a margin call by using the 2000 BitShares held as collateral to accept the lowest ask $0.65 per BitShare and as a result Mr. S is given (say) 462 BitShares while the seller of the 1000 BitUSD is given 1538 BitShares. 

Are the 1000 BitUSD destroyed too?

In this case, no new BitUSD remain. There's only BitUSD in circulation while there are open short positions. The supply of BitUSD is proportional to the amount of people willing to hold short positions in BitUSD.

By exchange risk exposure the result is the creation of an asset (BitUSD) that is market-pegged to USD.

So how do we know BitUSD will be market pegged to USD?   Because it can only be created when a long and short agree on the ratio and they have opposite incentives.  The Long wants as low a price as possible while the Short wants as high a price as possible.    How do they know that what they are trading is really a bet on USD other than the Name?   Because the market depth will establish market consensus as the bid/ask spread starts wide and gets narrower until there is enough depth that someone is willing to make the first trade.   

How do we know that the price will track?  This comes down to making a prediction about how future market participants will judge BitUSD vs BitShares and the only rational way to make this prediction is to assume future actors will bid according to the future USD vs BitShares.  The price tracks for the same reason that centralized prediction markets can price the probability of an event. 

This all sounds weird to me. Price is a function of supply and demand. I can understand how currency boards peg their currencies because they manipulate the supply. Here you have a supply that's linked to the number and appetite of speculators betting against the asset. Why would such a supply adjust itself to the demand in order to maintain a peg is something that goes beyond my understanding of financial instruments. I guess I'll just have to follow and see how it works out.

I keep my suggestion though: please consider implementing the possibility of setting up a currency-board-like structure in your development. You have an interesting set of features there, this one would add nicely.

[bytemaster]

Thank you again for your detailed explanation.

Time passes and the price of BitShares vs USD goes to $2 per BitShare.  This means that Mr. S was right to short USD.  Mr. S now believes the price is too high so decides to exit his short position.  To do so he must buy 1000 BitUSD on the market which now costs 500 BitShares.    He places a bid in the market, when it is accepted 1000 BitUSD is destroyed, Mr. S walks away with 1500 BitShares and the seller of BitUSD walks away with 500 BitShares.   

Ok, so here there's no BitUSD inflation, as the amount given to Mr. L is the same amount that will be destroyed.

In an alternate reality, time passes and the price of BitShares vs USD goes to $0.66 per BitShare and Mr. S's collateral will only cover 1500 BitUSD so a miner performs a margin call by using the 2000 BitShares held as collateral to accept the lowest ask $0.65 per BitShare and as a result Mr. S is given (say) 462 BitShares while the seller of the 1000 BitUSD is given 1538 BitShares. 

Are the 1000 BitUSD destroyed too?

In this case, no new BitUSD remain. There's only BitUSD in circulation while there are open short positions. The supply of BitUSD is proportional to the amount of people willing to hold short positions in BitUSD.

By exchange risk exposure the result is the creation of an asset (BitUSD) that is market-pegged to USD.

So how do we know BitUSD will be market pegged to USD?   Because it can only be created when a long and short agree on the ratio and they have opposite incentives.  The Long wants as low a price as possible while the Short wants as high a price as possible.    How do they know that what they are trading is really a bet on USD other than the Name?   Because the market depth will establish market consensus as the bid/ask spread starts wide and gets narrower until there is enough depth that someone is willing to make the first trade.   

How do we know that the price will track?  This comes down to making a prediction about how future market participants will judge BitUSD vs BitShares and the only rational way to make this prediction is to assume future actors will bid according to the future USD vs BitShares.  The price tracks for the same reason that centralized prediction markets can price the probability of an event. 

This all sounds weird to me. Price is a function of supply and demand. I can understand how currency boards peg their currencies because they manipulate the supply. Here you have a supply that's linked to the number and appetite of speculators betting against the asset. Why would such a supply adjust itself to the demand in order to maintain a peg is something that goes beyond my understanding of financial instruments. I guess I'll just have to follow and see how it works out.

I keep my suggestion though: please consider implementing the possibility of setting up a currency-board-like structure in your development. You have an interesting set of features there, this one would add nicely.

Supply of BitUSD increases anytime the market value of BitUSD rises above the USD/BitShare ratio enough to motivate new shorts to enter the market.   
Supply of BitUSD decreases any time the market value of BitUSD falls below the USD/BitShare ratio as shorts cover for a profit.

As a result there is a self-regulating supply of BitUSD and the ratio used during its creation mean

Manipulating the supply of a currency is a VERY sloppy way to control the price because adjustments in supply take time to percolate through the market and reflect in prices.  In this case, the market can function with just a few players because of the tension between shorts and longs results in heavy liquidity and constant demand for BitUSD.

[ruletheworld]

Dan, are you still on track for December launch after Charles left?

[bytemaster]

Dan, are you still on track for December launch after Charles left?

December with Keyhotee with ID/Mail yes.  

BitShares beta will be out Q1 if all goes well.   I have had to spend more time managing the company, legal, marketing, etc since Charles left.   Fortunately, we have people in the wings and things are picking up steam.

You will be able to start mining BitShares (but not trading BitUSD) within a month.  

[favdesu]

Dan, are you still on track for December launch after Charles left?

December with Keyhotee with ID/Mail yes.  

BitShares beta will be out Q1 if all goes well.   I have had to spend more time managing the company, legal, marketing, etc since Charles left.   Fortunately, we have people in the wings and things are picking up steam.

You will be able to start mining BitShares (but not trading BitUSD) within a month.  

if I get this right you'll just need ram/cpu to mine? would be perfect for people with shitty pcs (like mine )

[bytemaster]

Dan, are you still on track for December launch after Charles left?

December with Keyhotee with ID/Mail yes.  

BitShares beta will be out Q1 if all goes well.   I have had to spend more time managing the company, legal, marketing, etc since Charles left.   Fortunately, we have people in the wings and things are picking up steam.

You will be able to start mining BitShares (but not trading BitUSD) within a month.  

if I get this right you'll just need ram/cpu to mine? would be perfect for people with shitty pcs (like mine )

See this thread: https://bitcointalk.org/index.php?topic=313479.msg3363346#msg3363346  for details on the Momentum Proof of Work that I am working on.

[ruletheworld]

Dan, are you still on track for December launch after Charles left?

December with Keyhotee with ID/Mail yes.  

BitShares beta will be out Q1 if all goes well.   I have had to spend more time managing the company, legal, marketing, etc since Charles left.   Fortunately, we have people in the wings and things are picking up steam.

You will be able to start mining BitShares (but not trading BitUSD) within a month.  

That's sweet! Where will it first be announced? Is there any newsletter or announcement to subscribe to, for both Keyhotee and BitShares mining?

[bytemaster]

Dan, are you still on track for December launch after Charles left?

December with Keyhotee with ID/Mail yes.  

BitShares beta will be out Q1 if all goes well.   I have had to spend more time managing the company, legal, marketing, etc since Charles left.   Fortunately, we have people in the wings and things are picking up steam.

You will be able to start mining BitShares (but not trading BitUSD) within a month.  

That's sweet! Where will it first be announced? Is there any newsletter or announcement to subscribe to, for both Keyhotee and BitShares mining?

You can give us your email address at http://invictus-innovations.com/contact/  and we will add you to our mailing list and send you our first news letter.

[bytemaster]

I have posted a new video regarding how BitShares works:  http://www.youtube.com/watch?v=5BV55IrZi7g   

[cunicula]

I have posted a new video regarding how BitShares works:  http://www.youtube.com/watch?v=5BV55IrZi7g   

If anyone is interested in a post explaining why BitShares is sure to fail...
https://bitcointalk.org/index.php?topic=279771.msg3339710#msg3339710

I've repeated this so many times, it is much easier to post links.

[manicminer]

I have posted a new video regarding how BitShares works:  http://www.youtube.com/watch?v=5BV55IrZi7g  

Am I dumb if I do not understand this? I usually understand educating instructional videos or texts.

Sure you understand what you were talking about in the video but did you test it on an audience how clear have you managed to convey your message? Thanks.

[brekyrself]

BitShares might be made liquid this week!

https://bitsharestalk.org/index.php?topic=3812.msg47872#msg47872

Should be well worth the wait.

[MiningViking]

BitShares might be made liquid this week!

https://bitsharestalk.org/index.php?topic=3812.msg47872#msg47872

Should be well worth the wait.

"might be this week", i do think we have heard that one before to be honest.
Invictus is good at pukeing out pointless tweets, attending conferences and making videos that
makes cats puke, also good at spending the AGS funds on blow and blowjobs i guess..

[lzr1900]

BitShares might be made liquid this week!

https://bitsharestalk.org/index.php?topic=3812.msg47872#msg47872

Should be well worth the wait.

"might be this week", i do think we have heard that one before to be honest.
Invictus is good at pukeing out pointless tweets, attending conferences and making videos that
makes cat pukes, also good at spending the AGS funds on blow and blowjobs i guess..

This week?LOL..I3 was suck with the time estimate.

[brekyrself]

BitShares might be made liquid this week!

https://bitsharestalk.org/index.php?topic=3812.msg47872#msg47872

Should be well worth the wait.

"might be this week", i do think we have heard that one before to be honest.
Invictus is good at pukeing out pointless tweets, attending conferences and making videos that
makes cat pukes, also good at spending the AGS funds on blow and blowjobs i guess..

This week?LOL..I3 was suck with the time estimate.

https://bitsharestalk.org/index.php?topic=4480.0

Test network has been launched.  Why is everyone so harsh?  Sure they are a little late from early timelines however they are doing something no one else has done yet...  People are in support of new scam coins everyday yet BitShares is shaping up to be the real deal.

[brekyrself]

Official launch site with wallet downloads:

http://www.dacsunlimited.com/index_en.html


DPOS with 10 second blocks looks to be working as planned along with the TITAN privacy features.
https://bitcointalk.org/index.php?topic=687251.0

[Sharpless512]

Hi,

I'm one of the developers behind a new app called "BitShares Checker". We ourselfs have Bitshares (duh) and we wanted to easy see how much our bitshares are worth at this very moment.
We searched on the Google Play but there was no app, so we created it ourself. We have the concept of making it super light and easy to use.

https://play.google.com/store/apps/details?id=com.igdb.bitshareschecker&hl=en

Hopefully you guys can also use it aswell Let me know what you guys think!