[GLBSE] (discontinued) Anti-Pirate: Bonds for negative BTCST investments

[Meni Rosenfeld]

Ok, now I know you're just trolling.

Let me point out to you, Meni Rosenfeld, that throughout this thread I have been speaking as to facts. You have been speaking as to persons.

I think you'll find that most of your posts in this thread contain personal attacks, including the first and the latest.

A number of people have suggested that your behavior is unacceptable. There are two possibilities, either we're all wrong and you should stop wasting your time on us, or you're wrong and you should stop wasting our time.

You are no longer welcome in this thread.

[Meni Rosenfeld]

Meni, instead of responding to trolls on this thread, why don't you just create your offering on GLBSE, announce it here and start selling shares?

Creating assets on GLBSE requires planning. I wrote the OP when I was ready to write the OP, not when I was ready to create the asset. If all goes well it should be a matter of days.

Rest assured that MPOE-PR's objections are not holding me back.

[ribuck]

This is another very interesting offer! But one thing doesn't seem quite right...

The issuer has the right to buy back the bonds at 160% of their face value. This cannot be exercised if there is substantiated suspicion that a default has already taken place.

If you make the buy-back price 200% of face value, there will be no need for people to trust that you will not buy back the bonds just in advance of a default.

Your provision regarding "substantiated suspicion" sounds reasonable, but it won't feel very satisfactory to the few outliers who are convinced the default is about to happen then lose their bonds for 160%. At 200%, no-one can complain.

[Meni Rosenfeld]

This is another very interesting offer! But one thing doesn't seem quite right...

The issuer has the right to buy back the bonds at 160% of their face value. This cannot be exercised if there is substantiated suspicion that a default has already taken place.

If you make the buy-back price 200% of face value, there will be no need for people to trust that you will not buy back the bonds just in advance of a default.

Your provision regarding "substantiated suspicion" sounds reasonable, but it won't feel very satisfactory to the few outliers who are convinced the default is about to happen then lose their bonds for 160%. At 200%, no-one can complain.

This makes sense, I'll think about this.

[nrd525]

But that's not even the main point, there's something much more basic that you're missing. Suppose I want to take a long position of X BTC on Pirate. I can do this by either depositing in his program or by offering X BTC worth of bonds. Assume the worst case that Pirate buys them all. Then this increases his incentive to default by X BTC, and if I deposited in his program I would also have increased his incentive by X BTC. So choosing to offer these bonds has no effect on the incentive to default, and that's assuming the worst case - if people other than Pirate buy bonds, his incentive to default decreases (when compared to the case that I obtained my position by depositing).

What you're really saying is that depositing in Pirate's program is a very bad idea as it encourages default. Which may be true, but has nothing to do with this. This bond allows people to deposit negative amounts which discourages default, unless pirate deposits a negative amount in his own program which makes this neutral.

I don't understand your reasoning and would appreciate a better explanation  (I'm not saying you are wrong, just that I'd like to understand your arguments better). 

In my mind, what you are doing is creating a new market for Pirate. Previously he had to rely upon people investing (a decision that he doesn't control), but now he can take action himself (either by an internet proxy/fake identity or an accomplice) and make money off of you.  I guess so long as this is a small amount of money it won't exercise a big influence on his decisions, but I also really don't know what kind of sums either party is dealing with.

Now when you and other people (the pass-through bond for instance) create new markets for Pirate you are creating new inflows that allow the Ponzi scheme to grow larger - this will probably allow it to last longer, get larger, and hurt more people when it collapses.

[Meni Rosenfeld]

But that's not even the main point, there's something much more basic that you're missing. Suppose I want to take a long position of X BTC on Pirate. I can do this by either depositing in his program or by offering X BTC worth of bonds. Assume the worst case that Pirate buys them all. Then this increases his incentive to default by X BTC, and if I deposited in his program I would also have increased his incentive by X BTC. So choosing to offer these bonds has no effect on the incentive to default, and that's assuming the worst case - if people other than Pirate buy bonds, his incentive to default decreases (when compared to the case that I obtained my position by depositing).

What you're really saying is that depositing in Pirate's program is a very bad idea as it encourages default. Which may be true, but has nothing to do with this. This bond allows people to deposit negative amounts which discourages default, unless pirate deposits a negative amount in his own program which makes this neutral.

I don't understand your reasoning and would appreciate a better explanation  (I'm not saying you are wrong, just that I'd like to understand your arguments better).  

In my mind, what you are doing is creating a new market for Pirate. Previously he had to rely upon people investing (a decision that he doesn't control), but now he can take action himself (either by an internet proxy/fake identity or an accomplice) and make money off of you.  I guess so long as this is a small amount of money it won't exercise a big influence on his decisions, but I also really don't know what kind of sums either party is dealing with.

Now when you and other people (the pass-through bond for instance) create new markets for Pirate you are creating new inflows that allow the Ponzi scheme to grow larger - this will probably allow it to last longer, get larger, and hurt more people when it collapses.

If I didn't offer the bonds, it is likely that I would have instead invested funds in BTCST. He is "making money off me" due to the fact that I chose to take a long position, but he is not making any more money due to the fact that I obtain this position by offering bonds rather than investing. In fact he will be making less money because he has to pay a fee on top of the face value. All of this is of course under the assumption that he does in fact have malicious intents.

Positive bonds such as PPT.X, on the other hand, do allow more cash to flow into Pirate, but I still believe the effect is small.

[Meni Rosenfeld]

This is happening. Get your Anti-Pirate bonds (initially 500 at 1.1 BTC) on Tuesday, 24 April 2012 at 03:45 UTC.

IPO page: https://glbse.com/ipo/26

[OgNasty]

So the million dollar question seems to be...

Will Bitcoin Savings & Trust default?

[Meni Rosenfeld]

So the million dollar question seems to be...

Does Pirate really have that much in deposits?

Will Bitcoin Savings & Trust default?

I had a thought about doing this asset in the form of a prediction market (note: betsofbitco.in is not a prediction market), but what I have here is much more inline with the underlying.

[copumpkin]

(note: betsofbitco.in is not a prediction market)

I wish it were please make us a prediction market!

[Meni Rosenfeld]

(note: betsofbitco.in is not a prediction market)

I wish it were please make us a prediction market!

Nefario said he would add prediction market functionality to GLBSE, and advised against using the current functionality for this (though I have had quite a few ideas how to do the latter). If neither Nefario nor anyone else do this in a timely manner, I will seriously consider becoming involved in a project to create a Bitcoin prediction market platform (both using Bitcoin for payments and being rich in Bitcoin-related predictions).

[copumpkin]

So the million dollar question seems to be...

Will Bitcoin Savings & Trust default?

Looks like 10 bitcoins say no Who wants yes?

[Sukrim]

Nefario said he would add prediction market functionality to GLBSE, and advised against using the current functionality for this (though I have had quite a few ideas how to do the latter). If neither Nefario nor anyone else do this in a timely manner, I will seriously consider becoming involved in a project to create a Bitcoin prediction market platform (both using Bitcoin for payments and being rich in Bitcoin-related predictions).

Maybe you can collaborate with him on that even, I'm not sure if a prediction market is the real main issue on GLBSE right now - if they do some serious work with some HCI people on the interface, they might get more money flowing than adding another complexity to the mix atm. If they release an extensive API soon or allow you to work with them somehow maybe, it could work side by side though.

About the bet:
It's not defined how a "default" looks like - even MPOE shares are worded more strictly!

[copumpkin]

Nefario said he would add prediction market functionality to GLBSE, and advised against using the current functionality for this (though I have had quite a few ideas how to do the latter). If neither Nefario nor anyone else do this in a timely manner, I will seriously consider becoming involved in a project to create a Bitcoin prediction market platform (both using Bitcoin for payments and being rich in Bitcoin-related predictions).

Maybe you can collaborate with him on that even, I'm not sure if a prediction market is the real main issue on GLBSE right now - if they do some serious work with some HCI people on the interface, they might get more money flowing than adding another complexity to the mix atm. If they release an extensive API soon or allow you to work with them somehow maybe, it could work side by side though.

About the bet:
It's not defined how a "default" looks like - even MPOE shares are worded more strictly!

I think there will be plenty of noise if anything remotely close to a default happens, so I doubt we'll have to resort to technicalities in describing it. betsofbitco.in clearly seems to think they have enough information to go on in judging. I wonder if whoever submitted the original statement (OgNasty?) can amend it, though.

[OgNasty]

So the million dollar question seems to be...

Will Bitcoin Savings & Trust default?

About the bet:
It's not defined how a "default" looks like - even MPOE shares are worded more strictly!

I think there will be plenty of noise if anything remotely close to a default happens, so I doubt we'll have to resort to technicalities in describing it.

+1

EDIT:  It is literally the textbook definition of what a "default" looks like...

[1] Default may occur if the debtor is either unwilling or unable to pay their debt.

This statement is true if Bitcoin Savings and Trust is unwilling or unable to pay out requested deposits on or before July 4th, 2012

[stochastic]

I don't know what kind of bubble you live in

If your defense is "oh but I didn't know cause I don't read the forums or mpex or go on IRC or anything else" that means YOU are the one in the bubble. Good luck with that.

I read the forum plenty, please direct me to a place where you announced your offering prior to my own proposal, preferably in a relevant section.

You may be right that I am missing out on IRC, but it doesn't seem like a very productive medium to me. I can usually be found in #bitcoin-il though.

I don't follow mpex closely, nor do I see a reason why I should.

Meni can you create a negative MPEx bond instead? That is, a bond allowing us to short the continued existence of MPEx. I would invest heavily in such a bond

That's... Interesting, I guess.

Meni, you need to cite your sources.  Who invented shorting?

Joking aside, I was thinking of offering an asset like this.  I even emailed nefario asking if it was OK to offer this kind of asset but he never contacted me back.  I figured since he was going to install some kind of prediction market on GLBSE that my offering would be voided after that, which was my reason for contacting him.  I see a slight problem with your asset but you can find out when I create my own 

[Meni Rosenfeld]

Joking aside, I was thinking of offering an asset like this.  I even emailed nefario asking if it was OK to offer this kind of asset but he never contacted me back.  I figured since he was going to install some kind of prediction market on GLBSE that my offering would be voided after that, which was my reason for contacting him.  I see a slight problem with your asset but you can find out when I create my own 

Clearly there are various ways to bet on or against Pirate. Predictions on the probability of a default in a given timeframe (which sounds like what you were trying to do) are certainly a possibility, but are too artificial. The currently offered Anti-Pirate bond, and the yet-to-exist publicly traded perpetual pass-through bond which pays weekly dividends, are commensurable with the underlying instrument of investing in BTCST.

But if you think there is something wrong with my offering, please do share.

[Nefario]

GLBSE prediction market launched

[Meni Rosenfeld]

500 bonds are now being offered for 1.1 BTC each.

Asset page: https://glbse.com/asset/view/ANTI-PIRATE

GLBSE prediction market launched

That was fast. But two major problems:

1. "a prediction market for GLBSE events." What's that about? It should be a prediction market for any event, or perhaps any Bitcoin-related event.
2. Apparently this uses Inkling which 'uses an "automated market maker" to control trading.' I don't know if I like this, we should have the possibility to place bids and asks. (Well, at least the algorithms were inspired by Robin Hanson who is pretty cool.)
3. Why is the currency $?

Looks like Nefario's goals with this are completely different from what I had in mind.

[stochastic]

500 bonds are now being offered for 1.1 BTC each.

GLBSE prediction market launched

That was fast. But two major problems:

1. "a prediction market for GLBSE events." What's that about? It should be a prediction market for any event, or perhaps any Bitcoin-related event.
2. Apparently this uses Inkling which 'uses an "automated market maker" to control trading.' I don't know if I like this, we should have the possibility to place bids and asks. (Well, at least the algorithms were designed by Robin Hanson who is pretty cool.)
3. Why is the currency $?

Looks like Nefario's goals with this are completely different from what I had in mind.

Thanks for pointing that out, I totally missed what algorithm it is using.  From the Inkling site:

Unlike the real stock market or most other prediction markets, Inkling Markets uses an "automated market maker" to control trading.

In typical stock markets, a human buyer must be matched with a human seller of stock. For example, if Joe is selling 50 shares at $50/share, there must be a buyer willing to pay that price and vice versa. The price of the stock itself is based on the supply and demand of the finite number of shares in play. In a real stock market and even most prediction markets in existence today, these transactions are all handled by computers, enabling millions of transactions like this to take place automatically each day.

In Inkling Markets, we do not force a buyer to be matched with a seller, and vice versa. From a trader's perspective, Inkling Markets is always the buyer and seller of shares and there is no limit to the number of shares in play. Inkling Markets also sets the stock price according to demand or lack there of. If a trader buys shares, there is demand for the stock and its price goes up. If a trader sells, there is a lack of demand and the price goes down.

The principles behind our algorithms originate from research by Professor Robin Hanson at George Mason University. Here is some background about Hanson's automated market maker:

I replied to one of nefario's posts linking to this paper: A Practical LIquidity-Sensitive Automated Market Maker.

In the paper it states:

Current automated market makers over binary events suffer from two problems that make them impractical. First, they are unable to adapt to liquidity, so trades cause prices to move the same amount in both thick and thin markets. Sec- ond, under normal circumstances, the market maker runs at a deficit.

It goes on to state:

The amount of liquidity in LMSR [Hanson's logarithmic market scoring rule] is a parameter set a priori before the market maker knows what bets traders will place. Setting the liquidity is more art than science—a constant dilemma for almost everyone who has implemented LMSR. Too little liquidity makes prices fluctuate wildly af- ter every trade; too much makes prices barely budge even following large bets. Exacerbating the problem, the amount prices move for a fixed bet in LMSR is a constant. The 1,000,001st dollar moves the price as much as the first, counter to intuitive notions of liquidity.
Higher liquidity is good for traders but comes at the cost of increasing the market maker’s worst-case loss. In general, an LMSR operator can expect to lose money in proportion to the liquidity it provides (Pennock and Sami, 2007). The cost is rationalized as payment for traders’ information. Yet subsidized markets are the exception rather than the rule. The vast majority of markets run at a profit. It’s no coin- cidence that most examples of LMSR in practice are games based on virtual currency rather than real money.

I was waiting for the bond buyback feature and the contract changes to come into effect on GLBSE before making my type of insurance bonds.  I was also hesitant because GLBSE was going to make its own speculative market.  The GLBSE speculative market does not look viable and I think I could go with my plans.