[Bitshares] bitUSD discussion

[CoinHoarder]

Am I right in understanding that with BTS is there is no guarantee that you can redeem 1 BTSX for 1 USD because you do not need to deposit a USD somewhere to create a BTS in the first place?

But is that not the very definition of pegging?

I don't think so, there is a difference between pegging the value of something to something else, and saying that it is back by that other thing.

Exactly. That is bitassets versus the Nxt asset exchange (as it exists today).

Generally, to peg the value to the dollar they would have to buy and sell bitUSD to keep it at a value of $1. That means there is a central bank and the value of bitUSD is being manipulated, right?

BitUSD can be manipulated in the same way anything traded on the free market can be manipulated (Bitcoin, stocks, Etcetra.) In Bitcoin's case, there is financial incentive for people to trade against manipulation due to things like arbitrage or perceived value by the public for instance. With bitUSD, the incentive for people to trade against manipulation is that they will likely make a profit on it by going long or short against the manipulative trader(s).

If a bad actor tries to manipulate BitUSD by dumping on the bitUSD market below the value of the actual value of the dollar, then there is an economic incentive for someone to scoop up those cheap bitUSDs. They will likely profit from the inevitable price swing that will incur when the honest actors come in and bring the bitUSD market back it equilibrium with the actual value of the US dollar. The opposite incentive is there if someone tries to pump the value of bitUSD greater than the actual value of a dollar.

As soon as market depth is established, a certain amount of volume is achieved, and skepticism bitassets will work dies down, bitUSD should very closely resemble the value of the US dollar.

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[FandangledGizmo]

If you meet everyone just trying to understand with such accusations then your community will not grow.

The problem here is that this thread is attacking BTSX based on massive lack of understanding, claiming BitShares would aim at "mirroring the FED", rambling about fractional reserve lending etc. I've been with NXT since December '13 but this is nothing short of embarrassment. As far as I see there were no accusations or attacks coming from the BitShares community as this was clearly initiated by ChuckOne.

I think questions and due diligence are a good thing, but yeah the provocative thread title, picture and baseless content by someone with some standing in NXT is quite embarrassing.

I used to hold a lot of NXT and still thinks it's quite good. I've sold recently as there has been very limited demand since the bter hack, which wasn't their fault at all. I won't let a couple of bad apples change my opinion of NXT though and may buy back a little stake at a later stage depending.

[ChuckOne]

If a bad actor tries to manipulate the BitUSD market by dumping on the bitUSD market way below the value of the actual value of the dollar. Then there is an economic incentive for someone to scoop up those cheap bitUSDs, and profit from the inevitable price swing that will incur when the honest actors come in and bring the bitUSD market back it equilibrium with the actual value of the US dollar. The opposite incentive is there if someone tries to pump the value of bitUSD greater than the actual value of a dollar.

As soon as market depth is established, a certain amount of volume is achieved, and skepticism bitassets will work dies down, bitUSD should very closely resemble the value of the US dollar.

Now, I think I understand a bit.

But that raises the next question: why should a bad actor act bad? I assume because he gains something from it, right?

If so, why do honest actors do not act bad? What is their gain?

[chanc3r]

If you meet everyone just trying to understand with such accusations then your community will not grow.

The problem here is that this thread is attacking BTSX based on massive lack of understanding, claiming BitShares would aim at "mirroring the FED" etc. I've been with NXT since December '13 but this is nothing short of embarrassment. As far as I see there were no accusations or attacks coming from the BitShares community as this was clearly initiated by ChuckOne.

Maybe I see questioning differently - I don't see this as embarrassing and as threads go this one is actually asking questions not just making accusations.

I see this as useful in understanding and I agree the questions could be asked more considerately but these forums are often short on that.

There are not just nxtTers in this thread,although as you point out one started it and in fact the discussion on nxtForum has been more considered.

It is also becoming clear that BTSX is just one implementation from the toolkit so its not BitShares that is being questioned but this specific implementation of pegging to the USD as I understand it.

This kind of discussion brings visibility and with visibility people will do their research not just on these posts but read some of the excellent material at the end of the bitShares links and make up their own mind - so I believe its always best to welcome these debates if you want something to be explored and through that process gain acceptance.

There is plenty of room for more innovative platforms that are not simply carbon copies of BTC and there is no need for either community to attack the other...

[instacalm]

I think questions and due diligence are a good thing, but yeah the provocative thread title, picture and baseless content by someone with some standing in NXT is quite embarrassing.

+1

I used to hold a lot of NXT and still thinks it's quite good. I've sold recently as there has been very limited demand since the bter hack, which wasn't their fault at all. I won't let a couple of rotten apples change my opinion of NXT though and may buy back a little stake at a later stage depending.

I can only agree with you. I hold some and sold some. NXT indeed is a great project, as is BitShares, and attacks such as these are extremely superfluous. If anything, one, as a rational being interested in this field of technology, ought to be enthusiastic to learn more about the concepts behind the very projects that shape this field instead of spreading counterproductive negativity, attacking and name-calling...

[ChuckOne]

If a bad actor tries to manipulate the BitUSD market by dumping on the bitUSD market way below the value of the actual value of the dollar. Then there is an economic incentive for someone to scoop up those cheap bitUSDs, and profit from the inevitable price swing that will incur when the honest actors come in and bring the bitUSD market back it equilibrium with the actual value of the US dollar. The opposite incentive is there if someone tries to pump the value of bitUSD greater than the actual value of a dollar.

As soon as market depth is established, a certain amount of volume is achieved, and skepticism bitassets will work dies down, bitUSD should very closely resemble the value of the US dollar.

Now, I think I understand a bit.

But that raises the next question: why should a bad actor act bad? I assume because he gains something from it, right?

If so, why do honest actors do not act bad? What is their gain?

[Tradingriver]

in any market you cannot prevent manipulation!

look at the huge Gold market. the big banks manipulated the price for years, so in the small coin markets (a total market cap of 6.8 billion USD) is manipulation really cheap. the nice point in blockchain technology - we will hopefully see this kind of manipulation much earlier.

i am really happy about this kind of threads, because the only lacking point in BTSX is the "none" existence in forums like bitcointalk.org . we are lacking in marketing so i take this as an opportunity to get some people interested in BTSX.

[ChuckOne]

source https://nxtforum.org/general-discussion/bitshares-the-great-satan-on-the-blockchain/msg89646/#msg89646

https://bitcointalk.org/index.php?topic=752258.msg8492118#msg8492118

The problem here is that this thread is attacking BTSX based on massive lack of understanding, claiming BitShares would aim at "mirroring the FED" etc. I've been with NXT since December '13 but this is nothing short of embarrassment. As far as I see there were no accusations or attacks coming from the BitShares community as this was clearly initiated by ChuckOne.

It was initiated by 2Kool4Skewl.

Seriously, I'm not the only one that thinks BitShares is "mirroring" the Federal Reserve.  Even their own users believe they are "investing in the Fed in 1920."

They are like a mini-Fed and their delegates are like mini-FOMC members.

In order to clear that up.

[ChuckOne]

in any market you cannot prevent manipulation!

look at the huge Gold market. the big banks manipulated the price for years, so in the small coin markets (a total market cap of 6.8 billion USD) is manipulation really cheap. the nice point in blockchain technology - we will hopefully see this kind of manipulation much earlier.

I think that thread is not about manipulation but understand how this pegging is supposed to work (at least for me).

2Kool4Skewl is further interested in the issue of delegates being like mini-FOMC members of a mini-FED. I personally have no real imagination about those concepts but I would be good for me and others to know before investing, do you not think so?

i am really happy about this kind of threads, because the only lacking point in BTSX is the "none" existence in forums like bitcointalk.org . we are lacking in marketing so i take this as an opportunity to get some people interested in BTSX.

Ah, you, too?

[CoinHoarder]

If a bad actor tries to manipulate the BitUSD market by dumping on the bitUSD market way below the value of the actual value of the dollar. Then there is an economic incentive for someone to scoop up those cheap bitUSDs, and profit from the inevitable price swing that will incur when the honest actors come in and bring the bitUSD market back it equilibrium with the actual value of the US dollar. The opposite incentive is there if someone tries to pump the value of bitUSD greater than the actual value of a dollar.

As soon as market depth is established, a certain amount of volume is achieved, and skepticism bitassets will work dies down, bitUSD should very closely resemble the value of the US dollar.

Now, I think I understand a bit.

But that raises the next question: why should a bad actor act bad? I assume because he gains something from it, right?

If so, why do honest actors do not act bad? What is their gain?

It works much the same that it does in any free market. Manipulators are taking a risk by manipulating the market. The manipulators are taking a risk that the public recognizes the manipulation and the market immediately corrects, causing the manipulator to lose a considerable amount of money. If they do not recognize this manipulation and see it as a normal market movement, then they stand to profit from it.

You question as to what would someone stand to gain from manipulating the bitUSD market is exactly why I think bitassets will work, because there is really no incentive at all. Unlike Bitcoin being traded in the free market, people can easily look up exactly what the value of the US dollar (or Btcoin, gold, etcetra) is relative to BitsharesX by comparing the current market value of the BitsharesX/USD (or BitsharesX/BTC/USD) trading pairs on other exchanges. It will be much easier to detect manipulation of a bitasset when you know almost exactly what that asset is worth in the real world markets from thing like data aggregators and market feeds which are sourced directly from those markets.

You cannot prevent manipulation in the gold, Bitcoin, Or FIAT markets, but the fact it will be so easy to tell if bitassets do not equal the current value of a real world commodity is the reason why I think it is unlikely to be manipulated. Manipulation will likely be very unprofitable in bitassets due to the obvious value of the commodities traded which people can get from many 3rd party services and data feeds which come directly from those markets. Therefore, bitassets will closely resemble the value of their real world counterparts.

[PilotofBTC]

Am I right in understanding that with BTS is there is no guarantee that you can redeem 1 BTSX for 1 USD because you do not need to deposit a USD somewhere to create a BTS in the first place?

But is that not the very definition of pegging?

I don't think so, there is a difference between pegging the value of something to something else, and saying that it is back by that other thing.

Exactly. That is bitassets versus the Nxt asset exchange (as it exists today).

Generally, to peg the value to the dollar they would have to buy and sell bitUSD to keep it at a value of $1. That means there is a central bank and the value of bitUSD is being manipulated, right?

BitUSD can be manipulated in the same way anything traded on the free market can be manipulated (Bitcoin, stocks, Etcetra.) In Bitcoin's case, there is financial incentive for people to trade against manipulation due to things like arbitrage or perceived value by the public for instance. With bitUSD, the incentive for people to trade against manipulation is that they will likely make a profit on it by going long or short against the manipulative trader(s).

If a bad actor tries to manipulate BitUSD by dumping on the bitUSD market below the value of the actual value of the dollar, then there is an economic incentive for someone to scoop up those cheap bitUSDs. They will likely profit from the inevitable price swing that will incur when the honest actors come in and bring the bitUSD market back it equilibrium with the actual value of the US dollar. The opposite incentive is there if someone tries to pump the value of bitUSD greater than the actual value of a dollar.

As soon as market depth is established, a certain amount of volume is achieved, and skepticism bitassets will work dies down, bitUSD should very closely resemble the value of the US dollar.

BTW: I am not attacking, just asking question and trying to understand.

So, you are saying that bitUSD is only pegged to the dollar by the market rather than by some central entity like Bitshares corp or whatever. If the expectation is that the market will keep the value of bitUSD equivalent to the $ I can't see how that will happen. The Chinese government and bank is what keeps the Yuan pegged to the $, not the market.

[ChuckOne]

It works much the same that it does in any free market. Manipulators are taking a risk by manipulating the market. The manipulators are taking a risk that the public recognizes the manipulation and the market immediately corrects, causing the manipulator to lose a considerable amount of money. If they do not recognize this manipulation and see it as a normal market movement, then they stand to profit from it.

You question as to what would someone stand to gain from manipulating the bitUSD market is exactly why I think bitassets will work, because there is really no incentive at all. Unlike Bitcoin being traded in the free market, people can easily look up exactly what the value of the US dollar (or Btcoin, gold, etcetra) is relative to BitsharesX by comparing the current market value of the BitsharesX/USD (or BitsharesX/BTC/USD) trading pairs on other exchanges. It will be much easier to detect manipulation of a bitasset when you know almost exactly what that asset is worth in the real world markets from thing like data aggregators and market feeds.

You cannot prevent manipulation in the gold, Bitcoin, Or FIAT markets, but the fact it will be so easy to tell if bitassets do not equal the current value of a real world commodity is the reason why I think it is unlikely to be manipulated. Manipulation will likely be very unprofitable in bitassets due to the obvious value of the commodities traded which people can get from many 3rd party services and data feeds which come directly from those markets. Therefore, bitassets will closely resemble the value of their real world counterparts.

Ah, wait. You are talking about manipulation... Let me get this straight:

1) bitUSD is pegged to the USD basically means that traders are encouraged to trade bitUSDs according to the prices of real-world goods and services in USD

2) corrections are done by: traders simply agree on how much a bitUSD should be worth by looking at the prices of those real-world goods and services in USD

3) therefore, speculators speculating on higher or lower prices of bitUSD are not able to bring down or up the price BECAUSE the honest majority of the traders simply agreed on a fixed price

=> there will be huge sell and buy wall right below and right above the agreed upon price

Is that correct?

[ChuckOne]

If not 100% correct, is it at least a starting point to understand how trader-pegging should work?

[CoinHoarder]

BTW: I am not attacking, just asking question and trying to understand.

So, you are saying that bitUSD is only pegged to the dollar by the market rather than by some central entity like Bitshares corp or whatever. If the expectation is that the market will keep the value of bitUSD equivalent to the $ I can't see how that will happen. The Chinese government and bank is what keeps the Yuan pegged to the $, not the market.

No problem, this is new territory for most of us, we are all learning. I am not sure I understand it fully myself, but I think I have a pretty good idea of how it works. Anyone feel free to jump in and correct me if I am wrong about something.

Exactly, bitUSD is pegged to the US dollar by the market. The expectation certainly is that it will very closely resemble the value of the US dollar. bitUSD will closely resemble the value of the US dollar because people will be able to easily profit from it if it doesn't. The incentive for people to go long or short if someone is trying to manipulate the market will keep it in check. People like money, even more so, they like to make easy money. It will be very easy to see if someone is manipulating bitUSD and someone can come in and profit from that attempt of manipulation. I think going long or short on bitUSD when someone is obviously manipulating the price would be really easy money.

I suppose there is one potential thing that could screw it up, and that is if someone had much more money than the market could bare IE. if the bad actors had more money than the good actors. I think this becomes less of a problem as deep market depth is established, and I don't even think there would be an economic incentive to do so as the market would eventually eat it all up. I'm not so sure about this point though.. I'll have to think about it more, but I am certain when I say it won't be nearly as big of a deal as market depth is established.

[ChuckOne]

@CoinHoarder

You said "bitUSD will closely resemble the value of the US dollar because people will be able to easily profit from it if it doesn't."

Could you elaborate more on this?

[CoinHoarder]

It works much the same that it does in any free market. Manipulators are taking a risk by manipulating the market. The manipulators are taking a risk that the public recognizes the manipulation and the market immediately corrects, causing the manipulator to lose a considerable amount of money. If they do not recognize this manipulation and see it as a normal market movement, then they stand to profit from it.

You question as to what would someone stand to gain from manipulating the bitUSD market is exactly why I think bitassets will work, because there is really no incentive at all. Unlike Bitcoin being traded in the free market, people can easily look up exactly what the value of the US dollar (or Btcoin, gold, etcetra) is relative to BitsharesX by comparing the current market value of the BitsharesX/USD (or BitsharesX/BTC/USD) trading pairs on other exchanges. It will be much easier to detect manipulation of a bitasset when you know almost exactly what that asset is worth in the real world markets from thing like data aggregators and market feeds.

You cannot prevent manipulation in the gold, Bitcoin, Or FIAT markets, but the fact it will be so easy to tell if bitassets do not equal the current value of a real world commodity is the reason why I think it is unlikely to be manipulated. Manipulation will likely be very unprofitable in bitassets due to the obvious value of the commodities traded which people can get from many 3rd party services and data feeds which come directly from those markets. Therefore, bitassets will closely resemble the value of their real world counterparts.

Ah, wait. You are talking about manipulation... Let me get this straight:

1) bitUSD is pegged to the USD basically means that traders are encouraged to trade bitUSDs according to the prices of real-world goods and services in USD

2) corrections are done by: traders simply agree on how much a bitUSD should be worth by looking at the prices of those real-world goods and services in USD

3) therefore, speculators speculating on higher or lower prices of bitUSD are not able to bring down or up the price BECAUSE the honest majority of the traders simply agreed on a fixed price

=> there will be huge sell and buy wall right below and right above the agreed upon price

Is that correct?

Yes, that seems correct. That is how the correct value of a bitasset is determined, and is likely to resemble the true value of that asset in the real world.

There is another layer on top of that though, as people can bet on the price rising or falling relative to the value of BitsharesX, and make money that way as well. So, it is not only for determining the value of an asset in the real world, but it is also for people whom would like to profit on market movements.

[robrigo]

BitUSD Trading Guide by the BitShares communiy for the interested: https://docs.google.com/document/d/1fVyf5oVsLZCrjkptNi2I-GPldIp-QM3vmTKpyy_2ZVU/edit

[Gentso1]

I spent a 1 hour the other night to learn about nxt. The assets are back by reputation alone.......that doesn't work for me

Our asset's are backed by that ever growing market cap of btsx (right now$ 55,612,604) it is this that is used as collateral to "print" the bitUSD.

Think of bitUSD as a alt coin that holds its value to the dollar and is backed by shares in btsx.

the Bitshares forums are a mess but the people you find their genuinely want to help. Take the time to read and ask questions thats all most of us want.   

[ChuckOne]

I spent a 1 hour the other night to learn about nxt. The assets are back by reputation alone.......that doesn't work for me

Our asset's are backed by that ever growing market cap of btsx (right now$ 55,612,604) it is this that is used as collateral to "print" the bitUSD.

Think of bitUSD as a alt coin that holds its value to the dollar and is backed by shares in btsx.

the Bitshares forums are a mess but the people you find their genuinely want to help. Take the time to read and ask questions thats all most of us want.   

Hmm. I think I will need to sleep one night or two over this. That system looks a bit fragile if you ask me.

(btw. there will be NXT backed assets shortly in the next major feature release, so, not back by reputation alone anymore.)

[From Above]

LOL nxt-noobs hating on dem bitsharez-noobs

what a festival ! where is the beer and popcorn.

~CfA~