BitShares "Black Swan Event" - analysis by Dan Larimer

[masterOfDisaster]

I’m glad to see that Bitshares’ Daniel Larimer is critical about BitShares to a certain degree:
http://bytemaster.bitshares.org/article/2015/01/27/BitAssets-and-Black-Swan-Events/

While I come to a different conclusion than Dan I honor the will to make an analysis of the “Black Swan Event”.
I don’t share the assessment “As of this writing a Black Swan event will simply halt the market[…]”.
If the “Black Swan Event” undermines the business model of Bitshares it will not only “simply halt the market”, but lead to a loss for those still owning bitUSD, because there will be no market to sell them.
Is my assessment to pessimistic?

[sportscliche]

It’s hard to say with certainty how the market will react to such an event, but when there is widespread realization that every Bitasset is just repackaged Bitshares, there is a reasonable probability that the system will implode. This was articulated in a series of blog posts by Preston Byrne (now with the Eris project) in August 2014.

It’s good that they are being more up-front about the risks. At that time, Bitshares was being advertised as “Better than a Swiss bank”, but that has since been removed from their marketing.

[creon]

I think he assumes that the BTS value remains stable. Under these conditions it in fact would only halt the market, because the value will persist in form of BTS. It is however very unlikely that the chain reaction of a black swan event doesn’t affect the BTS price.

[tomjoad]

At that time, Bitshares was being advertised as “Better than a Swiss bank”, but that has since been removed from their marketing.

There’s a reason we’ve been careful in ensuring that our marketing language is conservative: the internet never forgets. Anyone who is considering using BitShares has to read that “Swiss Bank” phrase and wonder if BitShares actually understands legacy banking systems, or if they’re a group of untrained developers making empty promises.

[masterOfDisaster]

Right. If those bitUSD that are in case of that “Black Swan Event” converted to BTS which keep their value everything is fine.

I just doubt that this happens.
It’s at least no safe assumption that the BTS price level would remain unaffected in such a case. Dwindling BTS price is possible or even likely in such an event. Why should those who couldn’t sell their bitUSD not try to get rid off the BTS as soon as possible (even at loss)?
That would create sell pressure and a falling BTS price level.
That is what leads me to the conclusion that no matter how high the leverage between the collateral and the currency is: significant (or even total) loss is possible - that is true for bitsUSD owners as well as for BTS holders.

The same is true for NuBits; in case of ultimate fail, it will not save from losses for owners of NBT. Even if you burn NBT like hell, there might be NBT left in the wallets of users which can’t be bought by the Nu network due to a lack of funds.

The difference is: Nu never claimed it could!

Dan Larimer at least started to talk about unlikely and unfriendly scenarios.

I will not judge his intention, because I don’t want to start a flame war - this was not my intention when posting this link and like expected it wasn’t misused in that way. This community is awesome!

[mhps]

The same is true for NuBits; in case of ultimate fail, it will not save from losses for owners of NBT.

I don’t know about bitUSD, but after dust settles with the black swang event, if Nu is still useful, it could cranck up the original blockchain, get new capital, and resume the network operations again. Nubits in the wild can still be honored at $1. Then what didn’t kill Nu would make it stronger.

[desrever]

what didn’t kill Nu would make it stronger

I’ll get a tatoo soon

@assistant tip 1 @mhps

[masterOfDisaster]

What I meant with “ultimate fail” is: peg broken, trust forever gone, adoption 0, no recovery.
That would make it impossible to honor NBT at $1.

If NBT can be honored at $1, then NBT has not ultimately failed.
I hope I won’t see that failure happen; I bet I won’t

btw. http://www.reddit.com/r/CryptoCurrency/comments/2txxv0/bitusds_reaction_on_a_black_swan_event/

[cryptog]

The difference is: Nu never claimed it could!

This is linked to the 0% reserve policy of Jordan Lee.

[mhps]

What I meant with “ultimate fail” is: peg broken, trust forever gone, adoption 0, no recovery.

peg broken: pegged crypto is here to stay. If it’s not Nu it’s something new. So far there is little evidence that “that something new” will not be using the same design as Nu (i.e. It’s a new Nu)

trust forever gone: the old trust model could be gone. Trust won’t be gone.

adoption 0, no recovery: that could happen to the current Nu, when a better Nu comes around, as described in the White Paper. But honoring current Nubits allows the new pegged cryptocurrency to brag that its history goes way back to the heady year of 2014.

[masterOfDisaster]

Nu (the implementation) can fail.
The trust in Nu can be destroyed.
That doesn’t mean there can’t be descendants.
If there are (improved) descendants Nu (the design) could still succeed.