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Author Topic: [GLBSE] (discontinued) Anti-Pirate: Bonds for negative BTCST investments  (Read 8434 times)
stochastic
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April 24, 2012, 04:37:29 AM
 #61

500 bonds are now being offered for 1.1 BTC each.

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:

Quote
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:

Quote
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:

Quote
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. 

Introducing constraints to the economy only serves to limit what can be economical.
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April 24, 2012, 04:44:20 AM
 #62

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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.
Wow. Completely useless algorithms then.


On the other hand, it looks like one of Nefario's goals is similar to one use case I have for prediction markets.

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April 24, 2012, 04:51:04 AM
 #63

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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.
Wow. Completely useless algorithms then.


On the other hand, it looks like one of Nefario's goals is similar to one use case I have for prediction markets.

Here is a link to a quick and easy synopsis to the automated market maker paper that I linked to earlier.

http://www.bayesianinvestor.com/blog/index.php/2010/06/21/an-improved-automated-market-maker/

Quote
It starts out by providing a small amount of liquidity, and increases the amount of liquidity it provides as it profits from providing liquidity. This allows markets to initially make large moves in response to a small amount of trading volume, and then as a trading range develops that reflects agreement among traders, it takes increasingly large amounts of money to move the price.

I was really sad to see that GLBSE put in a pre-made prediction market from some 3rd party.  Not only is it not viable but make some modifications to their code could potentially create vulnerabilities in the system to hacking.  Hopefully something better will come out of this as it is only a test.

Introducing constraints to the economy only serves to limit what can be economical.
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April 24, 2012, 01:38:43 PM
 #64

stochastic, using Inkling (who I've known since they launched) was a very efficient use of my time, I'm still hacking away on the next update to GLBSE, but this gets the ball rolling for working out what will and won't work and what is useful.



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May 01, 2012, 09:48:14 AM
 #65

A week has passed since the IPO, and not a single bond was sold, officially making this a spectacular failure.

Judging by the demand so far, handling the bond will not be worth the trouble, and hence I have retracted the ask orders and discontinued the offering indefinitely.

If anyone wishes me to reinstate this offering or a similar one, they are welcome to contact me.

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May 01, 2012, 12:03:33 PM
 #66

I didn't buy in because I rather have some more calculable risk with fewer income % (mining bonds and shares for example) than betting on something where I have barely insight in how this stuff is run (pirateat40 owns GPUMAX and his "trust" - whatever it's called now). While quite a few things seem to indicate that it is a Ponzi scheme, it could also be that he's just laundering money big time for silkroad and these people are willing to pay these premiums? To make sure I gain something from buying anti-pirate bonds, I'd need to investigate and potentially give an anonymous tip to the police in whatever country he's living in within a few weeks... or he needs to default quickly (unlikely, considering the 2k BTC he gets at least per week from the PPT.X bonds alone).

All this to earn ~50 USD worth of "internet funny money"? Nah...

Hope it's clearer now on why at least I didn't invest as a consideration for people that want to give out similar bonds in the future.

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May 01, 2012, 12:23:04 PM
 #67

Yes I would have a difficult time investing in a mining operation based on the upkeep alone.

With the costs of individual mining so high its almost hard to understand how popular mining is as it is.

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May 01, 2012, 12:26:50 PM
 #68

Oh look, nobody really wants to short pirate at all Grin

Where are you, terrytibbs/popescu?

(BFL)^2 < 0
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May 01, 2012, 12:44:45 PM
 #69

Where are you, terrytibbs/popescu?
I believe there is still enough momentum to keep the scheme up for a while.
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May 01, 2012, 12:53:21 PM
 #70

When I first invested in pirate, I figured that I'd get my principal back in interest in just over three months, so anything after that is then risk-free profit.

That dynamic makes pirate hard to short. You may be right about him defaulting, but if you are out with your timing, you could still lose--unless you keep doubling-down as time goes by--but the Ponzi may last longer than you stay solvent.

Thus, the most rational thing to do for someone who thinks Pirate's a scam is to just watch from the sidelines.

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May 01, 2012, 01:23:24 PM
 #71

A perfect Bayesian agent would have a probability distribution over the time of default. For mere humans this information can be approximately condensed into a single "typical time of default" value.

For a person who believes the typical default time is 9 months (and is ok with supporting whatever Pirate is doing), the expected payout from investing in Pirate outweighs all other factors, and so he should invest at least some amount.

For a person who believes the typical default time is 1 months, the expected payout from investing in Anti-Pirate outweighs all other factors, and so he should invest at least some amount.

For a person who believes the typical default time is 3 months, the expected payout from investing in Pirate is close to zero, and is outweighted on one hand by the variance in investing in Pirate, and by the variance, fee, collateral, and counterparty risk with myself in investing in Anti-Pirate, and so he shouldn't invest in either.

I think the conclusion is there aren't people who have sufficient confidence there will be a default in the 1-2 months timeframe.

Yes I would have a difficult time investing in a mining operation based on the upkeep alone.

With the costs of individual mining so high its almost hard to understand how popular mining is as it is.
I'm not sure what this is a reply to.

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May 03, 2012, 11:51:47 PM
 #72

watching

It's discontinued...

(BFL)^2 < 0
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May 04, 2012, 01:31:50 AM
 #73

https://bitcointalk.org/index.php?topic=76594.msg855299#msg855299

And you can tell the sockpuppet above that provided he manages to get an OTC rating of any weight or otherwise makes a deposit he can easily borrow MPOE shares to sell short on MPEx.

I have finally figured out what PR stands for.  It is "Pretty Rude".  Am I correct?

I suspect it stands for Sock Puppet, only in Romanian.

Both Mircea and MPOE-PR share the same gentle, diplomatic
and thoughtful style when they communicate.
Dude, you are like 2 weeks late to the party. Fortunately, MPOE-PR seems to have dried up and blown away for the most part.

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May 04, 2012, 04:25:39 AM
 #74

Doesn't mean there can't still be interesting discussion of it. Or a future reinstatement announcement.

Fortunately, MPOE-PR seems to have dried up and blown away for the most part.
I think they are simply honoring my request not to further comment on this.


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July 06, 2012, 10:45:18 AM
 #75

I think there's enough interest in this now to reinstate the bond if you've a mind to, Meni.

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July 06, 2012, 02:36:39 PM
 #76

I would certainly be interested in reinstating this, but I'm just too busy at this particular point in time, and anyway I wanted to design the model more than I wanted to be publicly associated with these affairs. If someone else wants to offer his own bonds after this model I don't mind. If there's demand (which I'm not really sure) maybe I'll do this too.

One thing that could make the bond more attractive is, instead of taking a fee and keeping the raised funds as reserve for bids, keep only a partial on-call reserve, invest the rest in some safe program, and offer the bonds at exactly face value.

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