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Author Topic: securties pegged ot dollar not btc possible?  (Read 940 times)
jackc
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August 30, 2012, 08:04:38 PM
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since btc is so volatile it doesn't really make sense to measure most performances in btc?
because in a way the investor speculator is making two bets on long positions.
1) the security will go up
2) bitcoin will not go down and maybe even go up.


the perverse implication is that when BTC is riding high trade volume shrinks and investors cant bear to look at your IPO.

would it be possible at all to have a security in dollars with BTC merely being the transmission medium to the virtual brokerage? [glbse]

what about issuing shares in Real life on otcbb and having equivalent contracts on glbse?


the most plausible situation i can see is bond contracts with a promise to  buy back at initial dollar face value ?

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TangibleCryptography
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August 30, 2012, 08:13:57 PM
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Yes you certainly can.  It isn't on GLBSE but we have a Line of credit denominated in dollars.  BTC is used as a payment processor for funding, interest payment, and eventually principal repayment however the obligation is in USD.  For example if the interest payment is $100 USD it is always $100 USD however the quantity of BTC to make that payment will change.

Quote
the most plausible situation i can see is bond contracts with a promise to  buy back at initial dollar face value ?
Just to be clear everything should be dollar denominated.  The IPO should launch at BTC equivalent of dollar face.  The interest should be issued in USD equivelent based on the dollar face (yes that means if BTC quadruples the interest payment is going to be 1/4th).  All the terms, the par value, the buybacks, and any bid/ask "walls" should be in USD equivalents.

However an investor who has BTC but purchased an asset denominated in USD is essentially taking a BTC short position.  If the asset yields 10% but BTC rises 20% the net-net the investor made less compared to simply holding BTC.  This limits its appeal.  There are investors looking to either hedge or take a BTC short position but it isn't going to be as popular (mass appeal) as a BTC denominated one.


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August 30, 2012, 08:15:46 PM
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There were ideas in the past of making cryptocurrencies that would try to somehow stick to fiat prices, but the idea tended to get shot down.

The Brits and the Canucks, however, actually tried it, with UKB (United Kingdom Britcoin) and CDN (Canadian Digital Notes).

Unfortunately though it did indeed fail to work. It just didn't turn out to be practical to try to push the value down to be one to one par with fiat, maybe because fiat can be printed in arbitrary quantities whereas UKB and CDN, like BTC, are limited to only 21,000,000 total quantity of each.

However, I have started keeping archives from which to generate HTML tables ( http://galaxies.mygamesonline.org/digitalisassets.html ), and looking at those tables it seems to me that maybe being one for one exchange against fiat might not be as important as simply being pretty darn stable in value, albeit, it seems, with a slow drift upward in value.

I think if people want to specifically hedge against, or long, or short, a specific type of fiat the Long+Short baskets idea might work, but where the concern is really about volatility rather than the exchange rate versus a specific individual fiat currency, simply using something a lot less volatile than BTC, yet that is not fiat, might suffice?

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jackc
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August 30, 2012, 08:45:14 PM
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Yes you certainly can.  It isn't on GLBSE but we have a Line of credit denominated in dollars.  BTC is used as a payment processor for funding, interest payment, and eventually principal repayment however the obligation is in USD.  For example if the interest payment is $100 USD it is always $100 USD however the quantity of BTC to make that payment will change.

Quote
the most plausible situation i can see is bond contracts with a promise to  buy back at initial dollar face value ?
Just to be clear everything should be dollar denominated.  The IPO should launch at BTC equivalent of dollar face.  The interest should be issued in USD equivelent based on the dollar face (yes that means if BTC quadruples the interest payment is going to be 1/4th).  All the terms, the par value, the buybacks, and any bid/ask "walls" should be in USD equivalents.

However an investor who has BTC but purchased an asset denominated in USD is essentially taking a BTC short position.  If the asset yields 10% but BTC rises 20% the net-net the investor made less compared to simply holding BTC.  This limits its appeal.  There are investors looking to either hedge or take a BTC short position but it isn't going to be as popular (mass appeal) as a BTC denominated one.




thank you for reply, i often times feel a little dumb around here.

so is your recommendation not to offer dollar backed/pegged IPOs?
i just think it's unfair to my potential investors.
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August 30, 2012, 08:48:37 PM
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There were ideas in the past of making cryptocurrencies that would try to somehow stick to fiat prices, but the idea tended to get shot down.

The Brits and the Canucks, however, actually tried it, with UKB (United Kingdom Britcoin) and CDN (Canadian Digital Notes).

Unfortunately though it did indeed fail to work. It just didn't turn out to be practical to try to push the value down to be one to one par with fiat, maybe because fiat can be printed in arbitrary quantities whereas UKB and CDN, like BTC, are limited to only 21,000,000 total quantity of each.


I think if people want to specifically hedge against, or long, or short, a specific type of fiat the Long+Short baskets idea might work, but where the concern is really about volatility rather than the exchange rate versus a specific individual fiat currency, simply using something a lot less volatile than BTC, yet that is not fiat, might suffice?

-MarkM-


that is a fascinating answer thank you.

i take it you use your own transaction server for minting your own digital certificates for in game currency in your MMO?
TangibleCryptography
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August 30, 2012, 08:52:34 PM
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so is your recommendation not to offer dollar backed/pegged IPOs?
i just think it's unfair to my potential investors.

No I am not offering advice.  As indicate we issued USD denominated promissory notes funded and repaid using BTC.  I am just saying that most people who have BTC have it because they are bullish.  There is nothing "unfair" or "fair" about issuing USD denominated assets but given the only people who can buy it are ones who have BTC and thus are bullish on BTC the popularity of such offerings is going to be limited.
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September 01, 2012, 05:17:33 AM
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Welcome to the world of currencies. Since converting between BTC and dollars (and other currencies) is easy and fast, there is not much of an advantage of denominating securities in dollars. Furthermore, why dollars? Why not denominate everything in euros or yen? You see, no matter what the denomination is, somebody will need to do a conversion.

I think in the end it makes most sense to denominate securities the dominant currency. American securities are in dollars. European securities are in euros. Bitcoin securities are in bitcoin.

Also, you say that the value of BTC is very volatile. That is how it appears from the dollar perspective, but from the BTC perspective, the dollar is very volatile.

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September 01, 2012, 05:39:53 AM
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Also, you say that the value of BTC is very volatile. That is how it appears from the dollar perspective, but from the BTC perspective, the dollar is very volatile.
The difference, though, is that BTC is much more volatile from the perspective of a diversified collection of goods.

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September 01, 2012, 10:47:36 PM
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So buy options and hedge your risk.

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