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October 23, 2011, 11:51:02 PM |
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Operation Acquire Bitcoin And Screw Bear Shorts
Overview:
This is a system for a small group of people (as in 4 or 5) to achieve two simultanious goals.
1) Acquire BTC for long duration holding. The author hopes that eventually such a possition can be put to use in furthering the goals of the Bitcoin project if they are indeed benevolent.
2) Give bear shorts another thing to worry about and an occasional haircut if it can help facilitate #1.
*Note: This system would be useful to any group who wanted to join forces to manipulate markets. I offer the idea in this form (and forum) because I sense that it would be diffcult to find more than two 'bear shorts' who would cooperate on a project without exploiting it for personal gain and thus ruining the effect.
Participation:
The low number is choosen because it is difficult to agree on things and get things done with a higher number of people. Although the described system seeks to limit these, there are significant risks and trust relationships which need to work, and that is exponentially difficult with more people involved.
The low number of participants indicates a relatively high degree of capitalization.
One member of the group is elected as the 'trader'. This person will need to be very knowledgeable about trading and have his/her finger on the pulse of the market. I'll call this participant the 'server' which happens to also represent a piece of software under his/her control.
The remaining participants would be what I will call 'clients'.
Stack:
The 'server's job is to 'play' the markets accourding to a strategy which will ultimatly achieve the desired goals of the project. The software he runs will have the ability to understand the resources available for trading and execute trades with coordination and precision.
A client keeps his own account and changes the amount of capital involved at his descression. The trades are made _by the client_ from his current capital pool, but at the direction of the 'server'.
Periodic meetings are held to communicate broad strategies and expectations. This will give the clients some level of compfort as they watch their trades occur, and the server can understand better the kinds of resources he can expect as well.
The IP and port upon which the server listens could shift at will, though it would need to be communicated to the participants of course. This could provide some way to mitigate against DDOS if somehow the addy in use was leaked. Downtime should not impact the system greatly if it were to occur.
Protocol:
The client pings the server once per unit time (5 min, 1 min, whatever) with a unique, per-hit, URI. Part of the URI is a random hash which is generated from a key issued to that particular client (think two-factor auth.) In this way the server can have confidence which client he is talking to, and that the client is legit. Various algorithms can also detect and respond to fraudulent use as well.
A message would include information about the current funding pool which the operator of the client has set. In this way, the server can understand the resources at it's disposal and the client can make real-time djustments to the funding as well.
Occasionally the server will provoke a trade as a response to the URI hit. In this case, it would be an instruction to execute a certain trade at a certain time in the future. Say, thirty seconds past the minute, and a follow-up one 32 seconds past the minute.
I would anticipate that sophisticated trades would involve both a high degree of coriography, and also a desire to do different things with different clients in case things are being monitored. I believe that the system I've described could implement this.
Risk:
The biggest risk is that the server could execute some really bad trades and the clients end up with loss. Accruing a large loss would take some time, so attentive clients could mitigate the damage by withdrawing support. Some strategies might entail a period of loss, but they could be communicated as describe above, and disproportionate outcomes as a result of deliberate mis-syncs between clients could be settled at that time.
Another risk is that participants would set up their own side-bets taking advantage of the knowledge gleened from being a member of the group. I suspect that if a gentelmans agreement about this was not sufficient, then such abuse would become apperent over time should it deter the success of the system generally.
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