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Author Topic: To all those who hate speculators:  (Read 2425 times)
zhoutong
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January 18, 2012, 03:25:41 PM
 #21

Such a thing already exists with Bit-Pay... They hedge every sale, so that they don't lose money on price fluctuations (That's why Bitcoinica is IMO a good thing, they allow hedging! Although they shouldn't allow such a high leverage to prevent shit like what happened today.). They allow merchants to quote their prices in USD and receive USD. Although it requires a 3% fee, it's still a much better than the fees associated with credit cards, and there's no risk of chargebacks!



Ah, got you. Glad bitpay has it down.

Regarding Zhoutong's point about adverse selection, I'd guess here's how a transaction would work:

Say, the merchant wants 3k. You display an ever-updating (say, once a minute quote) in btc.  So far, your quote is good only for 1 minute, not 1 hour.

It's when the customer accepts and hits PAY on your quote that the 6-confirmation-guarantee of my quote.

Let's say the customer hits PAY, and sends btc.

The btc will reach you in 6 confirmations, 

Once they reach me in 6 confirmations, I owe the merchant 3k.

My risk is now that when they reach me, their value could be 2k or 4k.

Now, how could the customer misuse it? The only way would be for the customer to wait a few minutes, see which way the btc price goes, and try to reverse a previous send.

That is, hopefully, much harder than the simple 3-hour picture painted above.

By the time the customer has waited 10 minutes, there has even been a confirmation, making it even harder.

And, with all this hard work, the best the customer can do is cancel a car purchase unless it really cost him 2.5k (+/- what happens in another 50 minutes) instead of the quoted 3k. But, if a customer attempts that, even that could be detected, hopefully. - and the customer blacklisted.

----

Regarding bitcoinica, I don't know.  Restricting what the customer can or cannot do **for the sake of customer's own good** sounds like the Govt. of UK telling me that vitamins are verboten and not good for me. I mean, may be they are not, but let me decide for myself. 

 




 





The Bitcoinica is part is irrelevant. We don't limit anything. It's just that big customers have to deposit more to enjoy the tradable balance.

But well, this is how we can hedge:

When the transaction has received without any confirmations, it's already very hard to reverse it. So it's safe to do a short sale on Bitcoinica. After 6 confirmations, liquidate the short position and sell the Bitcoins. The risk is limited to the market movement (only the difference) when the customer reverses it, which is negligible.

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January 18, 2012, 03:30:23 PM
 #22

[zhoutong writes]

But well, this is how we can hedge:

When the transaction has received without any confirmations, it's already very hard to reverse it. So it's safe to do a short sale on Bitcoinica. After 6 confirmations, liquidate the short position and sell the Bitcoins. The risk is limited to the market movement (only the difference) when the customer reverses it, which is negligible.
[..]

+1. 


Hedging makes it even better. That is, why wait 6 confirmations? Sell (say, at bitcoinica) as soon as you see a deposit coming through.



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