Creating metacoin for a decentralized exchange?

[tee-rex]

BitShares is a decentralied exchange.  The only difference between it and what you describe is it doesn't trade altcoins (yet), just BTC, fiat, gold and silver.

It doesn't trade *actual* fiat, gold or silver just IOUs - or am I incorrect?

(does it even actually trade real BTC - I think not)

Yes you are incorrect. BitShares is a derivatives exchange- it doesn't trade IOUs as you are claiming, it trades assets that peg the value of their real world counterpart. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

[Cryddit]

Yes you are incorrect. BitShares is a decentralized exchange- it doesn't trade only IOUs as you are claiming, it trades assets that peg the value of their real world counterpart, also known as market pegged assets or bitassets. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

These market-pegged assets are pegged by whom exactly?  Who takes the loss if the relative value of assets changes and then someone wants their asset back? If they cannot be restored to the real world from the block chain, then they are not two-way pegged.  And a one-way pegged asset is indistinguishable from an IOU.  Someone took the real-world asset and manipulated the block chain to create the "pegged" asset - but if he did not keep the real-world asset at some actual place in the real world where you can trade in your "pegged" asset to get it back, then your pegged asset does not have its value.

This is just plain wrong. Market pegged assets like bitUSD, bitGOLD are a new type of asset... not user issued IOUs. Read more about them here: http://whatisbitusd.com/whitepaper/

DANGER WILL ROBINSON!!!  When someone tells you something is a new type of asset, there is a 99% chance they are trying to scam you!  This has been true for thousands of years! 

We use these terms because the bitasset has the same buying power as the real world counterpart. AND it is not because someone is promising to redeem it as such (as with an IOU)! The value is frozen on the blockchain when a short order is matched to create the new bitasset. And technically the proper term is BitGOLD, BitUSD, etc.

If the same set of merchants who accept the real-world counterparts are willing to accept the bitasset on the same terms, then it has the same value.  But they aren't.  And they won't, because, as you admit, there is no one who is willing to exchange the bitasset for the real-world asset they value.  Also, the "value" frozen on the block chain is measured in what units?  Hint:  There IS NO unit of value that does not constantly shift in its exchange rate relative to other units of value.  Even if there were, there is no way anyone can guarantee that unit of value is retained, unless there is a way to exchange the bitasset for that asset -- which would mean that the real-world assets are, in fact, stored someplace where you can get them back. 

[robrigo]

BitShares is a decentralied exchange.  The only difference between it and what you describe is it doesn't trade altcoins (yet), just BTC, fiat, gold and silver.

It doesn't trade *actual* fiat, gold or silver just IOUs - or am I incorrect?

(does it even actually trade real BTC - I think not)

Yes you are incorrect. BitShares is a derivatives exchange- it doesn't trade IOUs as you are claiming, it trades assets that peg the value of their real world counterpart. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I mentioned in my previous post that the backing collateral is BTS. So, all bitasset markets start at supply 0. Bitshares uses DPOS to secure the ledger which involves BTS holders electing delegates to sign blocks via approval voting. The 101 delegates with the most stake voting for them are the active signers. Another task for the delegates to perform is publishing feed data for registered market assets. New bitassets can be shorted into existence after 51 delegates are publishing feeds, the median of which is used for the short price.

To create the asset and increase the supply, an order must be filled. That means there must be a buyer on the other end of the trade looking to hold said asset. The short must put up 2x the value of whatever asset they are shorting in terms of BTS. The long puts up 1x, for a combined total of 300% collateral. This collateral is held by the market in the bitshares protocol itself, as if it were taken out of supply. It becomes liquid again when the short order is covered. This can be triggered by a margin call if the price of BTS falls past a certain point, which means the short position is automatically covered. The short will also automatically cover after 30 days pass as an expiration date is built in to guarantee liquidity. Lastly, the short position could cover by buying bitUSD or whatever asset they are shorting off the free market, then using it to cover. The act of covering frees the collateral again and destroys the bitasset used to cover, shrinking the supply. So the market caps for bitassets are actually proportional to their demand in this respect.

Read this whitepaper for a better understanding: whatisbitusd.com/whitepaper

[robrigo]

Yes you are incorrect. BitShares is a decentralized exchange- it doesn't trade only IOUs as you are claiming, it trades assets that peg the value of their real world counterpart, also known as market pegged assets or bitassets. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

These market-pegged assets are pegged by whom exactly?  Who takes the loss if the relative value of assets changes and then someone wants their asset back? If they cannot be restored to the real world from the block chain, then they are not two-way pegged.  And a one-way pegged asset is indistinguishable from an IOU.  Someone took the real-world asset and manipulated the block chain to create the "pegged" asset - but if he did not keep the real-world asset at some actual place in the real world where you can trade in your "pegged" asset to get it back, then your pegged asset does not have its value.

This is just plain wrong. Market pegged assets like bitUSD, bitGOLD are a new type of asset... not user issued IOUs. Read more about them here: http://whatisbitusd.com/whitepaper/

DANGER WILL ROBINSON!!!  When someone tells you something is a new type of asset, there is a 99% chance they are trying to scam you!  This has been true for thousands of years! 

We use these terms because the bitasset has the same buying power as the real world counterpart. AND it is not because someone is promising to redeem it as such (as with an IOU)! The value is frozen on the blockchain when a short order is matched to create the new bitasset. And technically the proper term is BitGOLD, BitUSD, etc.

If the same set of merchants who accept the real-world counterparts are willing to accept the bitasset on the same terms, then it has the same value.  But they aren't.  And they won't, because, as you admit, there is no one who is willing to exchange the bitasset for the real-world asset they value.  Also, the "value" frozen on the block chain is measured in what units?  Hint:  There IS NO unit of value that does not constantly shift in its exchange rate relative to other units of value.  Even if there were, there is no way anyone can guarantee that unit of value is retained, unless there is a way to exchange the bitasset for that asset -- which would mean that the real-world assets are, in fact, stored someplace where you can get them back. 

When I said new kind of asset, I meant in crypto-space. These assets are similar to contracts for difference outside of the crypto-space, yet they are fungible and divisible.

The short and long positions are at risk for the potential loss when they take their voluntary position.

The collateral is BTS (for the 3rd time).

Also there are people willing to exchange bitassets for their "real world" asset. You can convert between BTC:bitBTC on metaexchange.info, and another startup Cryptosmith is working on a bitSilver:physical silver offramp so you can receive physical silver in exchange for bitsilver.

Fiat gateways are more difficult, but the Chinese have a CNY:bitCNY bridge over at tradebts.com, and bitUSD:USD fiat gateways are in exploratory phase.

Just because the stream is calm now doesn't mean that the dam won't burst in the future. Bring on the liquidity, baby.

[tee-rex]

BitShares is a decentralied exchange.  The only difference between it and what you describe is it doesn't trade altcoins (yet), just BTC, fiat, gold and silver.

It doesn't trade *actual* fiat, gold or silver just IOUs - or am I incorrect?

(does it even actually trade real BTC - I think not)

Yes you are incorrect. BitShares is a derivatives exchange- it doesn't trade IOUs as you are claiming, it trades assets that peg the value of their real world counterpart. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I didn't understand what you wrote after that part (in fact, I don't quite understand even this part), but how is the user protected from the exchange robbery or the exchange deciding to just run away with their clients funds? In short, who actually owns or, rather, controls the money?

[robrigo]

BitShares is a decentralied exchange.  The only difference between it and what you describe is it doesn't trade altcoins (yet), just BTC, fiat, gold and silver.

It doesn't trade *actual* fiat, gold or silver just IOUs - or am I incorrect?

(does it even actually trade real BTC - I think not)

Yes you are incorrect. BitShares is a derivatives exchange- it doesn't trade IOUs as you are claiming, it trades assets that peg the value of their real world counterpart. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I didn't understand what you wrote after that part, but how is the user protected from the exchange robbery or the exchange deciding to just run away with their clients funds? In short, who actually owns or, rather, controls the money?

The exchange is baked into the bitshares blockchain protocol... hence it is decentralized. There isn't counterparty risk as with the traditional exchange when trading on the Bitshares DEX; only systemic risk insofar as the integrity of the software from irrecoverable hacks or exploits. Each user with assets in a bitshares wallet control their own keys to their bitshares accounts and hence, to their money.

You can play around with the newly released web wallet here: wallet.bitshares.org.

The web wallet doesn't have trading enabled yet (hopefully soon) so you'll have to grab the desktop client if you want to see how it works: https://github.com/BitShares/bitshares/releases/tag/bts%2F0.6.2

[tee-rex]

Yes you are incorrect. BitShares is a derivatives exchange- it doesn't trade IOUs as you are claiming, it trades assets that peg the value of their real world counterpart. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I didn't understand what you wrote after that part, but how is the user protected from the exchange robbery or the exchange deciding to just run away with their clients funds? In short, who actually owns or, rather, controls the money?

The exchange is baked into the bitshares blockchain protocol... hence it is decentralized. There isn't counterparty risk as with the traditional exchange when trading on the Bitshares DEX; only systemic risk insofar as the integrity of the software from irrecoverable hacks or exploits. Each user with assets in a bitshares wallet control their own keys to their bitshares accounts and hence, to their money.

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

[Somekindabitcoin]

I recall a coin that tried to do it, but was a false prophet and dumped their coins on us.

As far as I know, you can't really make a decentralized exchange with all these guys who have harden themselves from coin IPOs. If you want that to happen, you would have to try really hard to convince people that your coin will make it.

[robrigo]

Yes you are incorrect. BitShares is a derivatives exchange- it doesn't trade IOUs as you are claiming, it trades assets that peg the value of their real world counterpart. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I didn't understand what you wrote after that part, but how is the user protected from the exchange robbery or the exchange deciding to just run away with their clients funds? In short, who actually owns or, rather, controls the money?

The exchange is baked into the bitshares blockchain protocol... hence it is decentralized. There isn't counterparty risk as with the traditional exchange when trading on the Bitshares DEX; only systemic risk insofar as the integrity of the software from irrecoverable hacks or exploits. Each user with assets in a bitshares wallet control their own keys to their bitshares accounts and hence, to their money.

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

Bitshares has a lot of new and interesting stuff going on that makes it hard to follow at first until you've grokked it. I'd recommend reading some of bytemasters posts to understand some of the concepts better.

http://bytemaster.bitshares.org/article/2015/01/05/The-Future-of-Crypto-Currency-Exchanges/
http://bytemaster.bitshares.org/article/2015/01/07/The-Worlds-First-Decentalized-Exchange/

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

It's worth noting that you get paid a variable % yield for holding bitassets as well out of fees collected by the market.

http://bitsharesblocks.com/assets/market

BTC cannot be stored directly on the bitshares blockchain- it is its own native chain (BTS). There are some very interesting ideas from bitsapphire about how to use DPOS + OT to achieve what you are thinking though... I imagine we will see some ideas for that type of thing in the coming year.

[tee-rex]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them? And how is this bitBTC different from an IOU then?

[DecentralizeEconomics]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

"The Bitshares Foundation" claims all their "bitassets" are "backed" by their physical counterparts.  This is categorically false.  I don't know whether they claim this because they have absolutely no idea what they are doing or because they are intentionally trying to mislead investors.  "The Bitshares Foundation" claims that because you can sell your bitUSD for Bitshares and then sell your Bitshares for BTC and then sell your BTC for USD that bitUSD is backed by USD.  Obviously, that is the most ludicrous thing I have ever heard.  On that same logic I can claim bitGold is backed by tomatoes because I can sell my bitGold for Bitshares, then sell my Bitshares for BTC, then sell my BTC for USD and then take my USD and go to the grocery and buy tomatoes.  GENIUS!

Of course none of this stops Bitshares(TM) from claiming that Bitshares is "Safer than a Swiss Bank account!".  I'd still like to hear the explanation on how BTS derivatives are "safer" than physical assets in a vault.

[tee-rex]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money. And it doesn't actually matter whether their "bitassets" are backed by their physical counterparts. What matters here is who controls the real assets (if they exist at all, of course).

[DecentralizeEconomics]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money.

They aren't IOUs.  "Bitassets" are derivatives.  An example of an IOU is a Ripple token which is directly redeemable for the physical asset via its respective gateway.

[tee-rex]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money.

They aren't IOUs.  "Bitassets" are derivatives.  An example of an IOU is a Ripple token which is directly redeemable for the physical asset via its respective gateway.

This doesn't make them more reliable, right?

Derivative is a promise to give you some quantity of the underlying asset. IOU is a document that acknowledges debt, that is a promise to pay you some amount of money (and money is an asset too). Don't see much difference between them in respect to their reliability. Six of one, and half a dozen of the other.

[DecentralizeEconomics]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money.

They aren't IOUs.  "Bitassets" are derivatives.  An example of an IOU is a Ripple token which is directly redeemable for the physical asset via its respective gateway.

This doesn't make them more reliable, right?

Derivative is a promise to give you some quantity of the underlying asset. IOU is a document that acknowledges debt, that is a promise to pay you some amount of money (and money is an asset too). Don't see much difference between them in respect to their reliability. Six of one, and half a dozen of the other.

If the IOU's respective gateway isn't fractionally reserved, then the IOU is actually redeemable for the physical asset.  The issue with "bitAssets" is that they are a derivative which can ONLY be settled in BTS.  There aren't any dollars, euros, bitcoins, bars of gold, barrels of oil, etc in the Bitshares ecosystem.  "bitAssets" are not redeemable for what they are supposed to represent.  Even if there are "bitAsset Offramps", companies that purchase bitassets and send out their physical counterparts, there will never be a 1-to-1 correlation between physical assets available and derivative contracts open on the market.  Bitshares' claims their "bitAssets" remove "counterparty risk" but what they really do is expose individuals to extreme systematic risk.

Imo, no convertibility, no parity.  IOUs are much safer and reliable than derivatives.  I'd much rather have a digital representation of a physical asset that is directly convertible requiring trust than a digital representation of a physical asset which requires no trust because it has no convertibility, therefore no value.

[DecentralizeEconomics]

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money. And it doesn't actually matter whether their "bitassets" are backed by their physical counterparts. What matters here is who controls the real assets (if they exist at all, of course).

They don't exist.

[CIYAM]

Imo, no convertibility, no parity.

This is exactly my issue with these "products" - if it is called xBTC then I expect to be able to exchange it for actual BTC.

So if you are able to actually exchange 1 bitCNY for 1 CNY somewhere then that is fine (and the name makes perfect sense) but if there is nowhere you can do that then the name is about as meaningful as bitXYZ.

Whilst I don't think that there is any intention to deceive it "seems" deceptive to name something xBTC if you can't exchange it with actual BTC (i.e. why are you using that name?).

I am quite familiar with options trading (used to do some of that years ago) and although options are often never exercised they always *can* be if the conditions are met (i.e. the underlying share ownership will be transferred).

Trading something that with a name that doesn't have an actual matching asset is just something I'd never do (but perhaps that's just me).

[DecentralizeEconomics]

Imo, no convertibility, no parity.

This is exactly my issue with these "products" - if it is called xBTC then I expect to be able to exchange it for actual BTC.

So if you are able to actually exchange 1 bitCNY for 1 CNY somewhere then that is fine but if there is nowhere you can do that then the name is about as meaningful as bitXYZ.

"So if you are able to actually exchange 1 bitCNY for 1 CNY somewhere and there is enough CNY held in reserve to cover all outstanding CNY debts then that is fine but if there is nowhere you can do that then the name is about as meaningful as bitXYZ."

I added the bold part because without 100% reserves you simply have a fractional debt scheme.

[CIYAM]

I added the bold part because without 100% reserves you simply have a fractional debt scheme.

Yes - very good point.

This is why a Ripple BTC is not worth a real BTC (as you can't be sure that all the issued "tokens" can be redeemed).

Constantly posting links to large blog entries or papers (rather than giving a simple explanation) is another problem I have with these "products". Typically this is the "snake oil" sales approach in the financial world.

We all saw (and many have felt) the result of Credit Default Swaps (which were also very complicated "derivatives").

[robrigo]

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

"The Bitshares Foundation" claims all their "bitassets" are "backed" by their physical counterparts.  This is categorically false.  I don't know whether they claim this because they have absolutely no idea what they are doing or because they are intentionally trying to mislead investors.  "The Bitshares Foundation" claims that because you can sell your bitUSD for Bitshares and then sell your Bitshares for BTC and then sell your BTC for USD that bitUSD is backed by USD.  Obviously, that is the most ludicrous thing I have ever heard.  On that same logic I can claim bitGold is backed by tomatoes because I can sell my bitGold for Bitshares, then sell my Bitshares for BTC, then sell my BTC for USD and then take my USD and go to the grocery and buy tomatoes.  GENIUS!

Of course none of this stops Bitshares(TM) from claiming that Bitshares is "Safer than a Swiss Bank account!".  I'd still like to hear the explanation on how BTS derivatives are "safer" than physical assets in a vault.

Please cite these references.  What is "The Bitshares Foundation"? I don't think that entity even exists.

I haven't seen anyone claiming that bitassets are backed by their physical counterparts... in fact that is the beauty of it. You can hold and trade a cryptographic token that closely approximates the value of its real world counterpart. You can send the purchasing power of gold, usd, etc. across the globe for fractions of a penny. This opens a new venue for use cases that hasn't been possible before & lowers counterparty risk. So you would prefer to hold an IOU... don't use bitassets. I however would like to minimize trust as much as possible with my money... hell I barely trust myself with it even.

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them? And how is this bitBTC different from an IOU then?

All bitassets are backed by BTS as collateral. Period. Nobody is trying to say that the physical counterpart is backing it as DecentralizeEconomics claims. This is why it is not an IOU and is in fact a type of derivative... but instead of trusting Wall Street bankers who are collateralizing the asset with junk mortgages (the bad derivatives), you are trusting a blockchain protocol to secure the underlying BTS and keep the asset collateralized. This is why the assets will automatically unwind if BTS is falling in price when the median feed price matches the call price for a short position an automatic cover is triggered.

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money.

They aren't IOUs.  "Bitassets" are derivatives.  An example of an IOU is a Ripple token which is directly redeemable for the physical asset via its respective gateway.

This doesn't make them more reliable, right?

Derivative is a promise to give you some quantity of the underlying asset. IOU is a document that acknowledges debt, that is a promise to pay you some amount of money (and money is an asset too). Don't see much difference between them in respect to their reliability. Six of one, and half a dozen of the other.

If the IOU's respective gateway isn't fractionally reserved, then the IOU is actually redeemable for the physical asset.  The issue with "bitAssets" is that they are a derivative which can ONLY be settled in BTS.  There aren't any dollars, euros, bitcoins, bars of gold, barrels of oil, etc in the Bitshares ecosystem.  "bitAssets" are not redeemable for what they are supposed to represent.  Even if there are "bitAsset Offramps", companies that purchase bitassets and send out their physical counterparts, there will never be a 1-to-1 correlation between physical assets available and derivative contracts open on the market.  Bitshares' claims their "bitAssets" remove "counterparty risk" but what they really do is expose individuals to extreme systematic risk.

Imo, no convertibility, no parity.  IOUs are much safer and reliable than derivatives.  I'd much rather have a digital representation of a physical asset that is directly convertible requiring trust than a digital representation of a physical asset which requires no trust because it has no convertibility, therefore no value.

Sorry, I will take bitUSD over MtGoxUSD anyday. Different strokes for different folks.

BitAssets are a new use case- want to have an asset with minimal trust that approximates the value of its counterpart and exposes you to yield? Hold a bitasset. Want to trust the assurance that a company will redeem your IOU, while being exposed to the risk of default, hacking or bankruptcy? Then go for the IOU.

I added the bold part because without 100% reserves you simply have a fractional debt scheme.

Yes - very good point.

This is why a Ripple BTC is not worth a real BTC (as you can't be sure that all the issued "tokens" can be redeemed).

Constantly posting links to large blog entries or papers (rather than giving a simple explanation) is another problem I have with these "products". Typically this is the "snake oil" sales approach in the financial world.

We all saw (and many have felt) the result of Credit Default Swaps (which were also very complicated "derivatives").

BitAssets aren't collateralized by fractional reserves. In fact, they start at a 300% reserve, and margin call well before it gets anywhere near 100%. For uncollateralization of a bitasset to occur (a systemic risk), a black swan event would need to happen. Read about what those are here and ways they can be handled: http://bytemaster.bitshares.org/article/2015/01/27/BitAssets-and-Black-Swan-Events/

I've explained a lot of these things here before. There is a lot of content to digest- why wouldn't you want to read it from the horses mouth? I see no problem with linking people to useful resources. It isn't snake oil that instead of writing a blog posts worth of information I point you to a sufficient article. You can judge yourself whether or not it has merit; that is not for me to decide.

Imo, no convertibility, no parity.

This is exactly my issue with these "products" - if it is called xBTC then I expect to be able to exchange it for actual BTC.

So if you are able to actually exchange 1 bitCNY for 1 CNY somewhere then that is fine (and the name makes perfect sense) but if there is nowhere you can do that then the name is about as meaningful as bitXYZ.

Whilst I don't think that there is any intention to deceive it "seems" deceptive to name something xBTC if you can't exchange it with actual BTC (i.e. why are you using that name?).

I am quite familiar with options trading (used to do some of that years ago) and although options are often never exercised they always *can* be if the conditions are met (i.e. the underlying share ownership will be transferred).

Trading something that with a name that doesn't have an actual matching asset is just something I'd never do (but perhaps that's just me).

bitBTC approximates the value of BTC, but can be traded on the bitshares decentralized exchange. Simple as that. It pegs the value of BTC.

You can trade bitBTC/BTC on this market: https://metaexchange.info/markets/bitBTC/BTC

There are use cases that bitassets can fulfill that nothing else in the space is capable of atm. I wouldn't be so quick to dismiss it all as "snake oil" because you haven't taken the proper time to research it for yourself and are making assumptions instead.

Oh and for the record, DecentralizeEconomics has an excellent & entertaining thread filled with propaganda FUDing bitshares over here that had me laughing and has some great back and forth dialogue about contested bitshares topics... check it out!

https://bitcointalk.org/index.php?topic=916696.0