Competing pegged currencies - bitUSD

Economics
#20

Wow, what’s going on? The BTS market cap has gone up in recent weeks, but I don’t really pay attention to that community anymore. Is the inability to hold a peg being addressed? Is it even acknowledged as a problem? Do they simply ascribe it to not enough market makers? If so, how many more do they need?

I understand you are not in a position to defend them, but this strikes me as nothing short of a crisis that is evidently not being dealt with. Perhaps @chronos can provide some insight as he is/was a paid Bitshares delegate.

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#21

Price and volume are anticipating that BitShares 2.0 will soon be released.
It will be awesome!
They plan to have a testnet that is continuously available!

People who know how BitShares work can explain why bitUSD is way above $1:

But it will be hard to explain the lost peg after March 2014 with BTS price surge:
http://imgur.com/6GkC2m4

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#22

I have yet to see a good reason why BitUSD should ever sell for anything close to a dollar. I understand fully why it’s always >$1, basically because BitAssets in effect buys back any BitUSD being sold for less than $1 using BitShares as collateral. So the question is if I sell at price x and use the money to make more BitUSD, how high about $1 does x have to be before I make out on the deal? That gives us the expected spread.
So how are BitUSD made? I’ve tried to figure this one out thoroughly, but I always have a hard time with it. As far as I understand, to create BitUSD I basically need to put up 200% BTS collateral and someone betting against me puts up 100% collateral. So that’s the real issue: not only do I need to buy BTS on an open exchange and put them up on the internal market to get the BitUSD, I also need to lock an equivalent amount of funds and have another party also lock funds. So not only is there the slippage and exchange fees of going USD->BTS->BitUSD, there’s also this kind of ephemeral fund locking that goes on.
For Nu, on the other hand, the theoretical expense once we get seeded auctions going is solely USD->NSR->NBT (again using exchange for USD->NSR and network mechanisms for NSR->NBT) without the extra fund locking. In addition, we pay some of our marketcap to fund liquidity operations which tighten up the peg and create a virtual x based on buy and sell liquidity rather than having a real x. So the Nu Network doesn’t make much money off the spread like BitAssets does. Basically, their whole operation is really funded by the spread that they take directly from their users while our operation is funded by god knows what.

We offer a better service (we certainly pay for it) and everyone should NBT over BitUSD as long as the NSR marketcap is above the NBT marketcap.

4 Likes
#23

It doesn’t appear to concern the BTS community. @Filippo made the same request for pricing information on both our forum and bitsharestalk for a stable cryptocurrency thesis he is working on. Our forum pointed him towards coinmarketcap price data and other useful metrics. Bitsharestalk spent their entire time talking about how BitAssets in BTS 2.0 will be way better than their failed BitUSD design:

  1. I would not recommend to take a closer look at historical prices … unless you also add a remark that the BitAsset 2.0 scheme will be much different.
  1. Or maybe, even if it still has to be released, directely make your thesis on BitShares 2.0. It would be a shame to put so much work in something that will belong to the past in 20 days
  1. BitShares basically hasn’t come out yet with its product. You could write quite a bit about its context and its trailblazing nature in terms of economics and cryptocurrencies. It has the potential to accomplish a great deal in the future. But any research about prices so far would be useless; this product has been in beta testing and the market trading volumes have been low because it’s still in development.

And one interesting comment from a user who was among the most vocal anti-NuBits, pro-BTS posters when we first released:

  1. bitAssets in 9.x make me angry anytime I look or think of them. I am angry even when I short them at 30% premium knowing full well it will likely be big % all profit. I am angry when this fool continues to put his overpriced bids for bitUSD and I am all out of BTS to short…It makes me angry cause it was so easy to improve the situation with several hours of coding…instead the time was spent to get us the poop-colored nonsense asset.

BitUSD was aggressively marketed as a stable cryptocurrency that was superior to NuBits, and most of us remember the antagonistic remarks of the BitShares development team. BitUSD has been a complete failure with almost no adoption. Seeing as how “the next big thing” always seems to be just around the corner for BitShares I would suggest that @Filippo focus his analysis on what has already happened, rather than the promise of future performance that the BTS community continually hopes for. To bring this story back to @sportscliche’s main question, Bitsharestalk doesn’t seem overly concerned with its perpetually broken products; new better things are (always) on the way.

4 Likes
#24

[quote=“tomjoad, post:23, topic:2628”]
BitUSD was aggressively marketed as a stable cryptocurrency that was superior to NuBits, and most of us remember the antagonistic remarks of the BitShares development team.[/quote]

I think this BitShares/BitUSD thread won’t be complete without some links to threads on Reddit where they continually ripped on our team for our design.

It’s funny to think about now that enough time has passed. Now we have a record of past performance for both. One is proudly showing off their record while the other is attempting to sweep it under the rug.

3 Likes
#25

Thank you @tomjoad for your elaboration.
I was trying to put the everlasting hope for the next thing to be the most awesome thing the world has seen in the tongue-in-cheek comment

I mean, seriously, there’s no continuously available testnet? How do they test protocol changes, new client versions, etc.?

But there seems to be more trouble related to upgrade.
If I read comments like

I wonder how that is not controlled by the BitShares holders.
At Nu there would at least be the chance to have the terms defines by the NuShares holders.

Having that in mind I admire @JordanLee’s continuous efforts to decentralize Nu even further. The motions are a very powerful feature to guide this development.

Despite all the bad feelings the bashing from parts of the BitShares community, but especially Dan Larimer, brought the Nu community:
the assertion Nu were a ponzi scheme improved Nu.
I’m not saying the assertion was ever right. But this assertion fueled the development of NSR grants.

With NBT and NSR grants (and hopefully seeded auctions somewhen) Nu is in the perfect position to scale.
The relation between NBT and NSR is very much like the one between bitUSD and BTS, just more efficient and agile like @Nagalim pointed out.

The trouble some of those who shorted bitUSD1, 2 now have would not trouble those who provide liquidity for Nu.
If Nu were to make a radical change that made liquidity providers want to get rid of their NBT before, they could sell all their NBT for $1 of value each.

If BitShares seriously wants to evolve, it’d do well to look at competitors and at what they do - especially if that works well - and try to build on that and improve it.
I feel Nu did that when they tied NBT “irrevocably” (until NSR holders decide something different :wink: ) to NSR - but in a more efficient way than bitUSD are tied to BTS.
Thank you, BitShares for helping Nu!

1 https://bitsharestalk.org/index.php/topic,18585.msg238673.html#msg238673

2 https://bitsharestalk.org/index.php/topic,18585.msg238703.html#msg238703

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#26

well said MoD!
cooperation and healthy competition is the key to make and evolve something successfully. one must learn from the other.

1 Like
#27

bitusd is over $2 today.

2 Likes
#28

Lol. What a joke.

#29

I shoulda bought a bunch of BitUSD back when they were somewhat close to 1 USD. The only currency where you measure how much it has failed by how much money you’d make hodling it.

1 Like
#30

lol, how true.
+50% in little time for holding bitUSD.
That’s what I call deflation!

It took some time, but now I get it - it’s because of BitShares 2.0.
The move from BitShares 1.0 to 2.0 moved the “peg” of bitUSD from $1 to $2 (it’s just not straight $2, because it was most of the time not $1…)!

Pasted image754×581 22.1 KB

#31

Lol, we really need a page on the website showcasing the failure of our competitors that we can point people to.

#32

I thought it was because they forced people to close out on BitUSD and free the 200% collateral, hence 200% price. I think it’s still supposed to peg $1 and will go back there when BitShares 2.0 has deployed later today. Just sucks for anyone looking to actually use bitUSD for any purpose other than shorting BTS, not that those people exist anyway…

1 Like
#33

So when BitShares 3.0 is announced we should all pile into BitUSD expecting it to go to $3! :smiley:

1 Like
#34

In all seriousness, and to educate the public on the difference – what it is it about BitShares / bitUSD that has allowed the price to drift away (and upwards) from $1?

NuBits can be easily explained – buy walls / sell walls on exchanges bound the buy and sell in a very clear, visible way.

But what is it with the BitShares contract model that drives price towards $1 (or in this case has not performed optimally and caused a drift?)

#35

It’s a $1 price floor, enforced by the same mechanism that gives us tier 6, but over the top to the point where it’s next to useless. Basically, you make a 200% down payment on bitUSD in order to create them.

BitShares 2.0 fixes this in some mysterious way that I’m sure will be very elucidating (variable down payment, in some way or another). However, this release is apparently just a bootstrap and not for popular consumption, so I doubt we’ll see high volumes of a properly pegged BitUSD anytime soon, especially outside of their virtual exchange.

#36

Looks like Bitshares 2.0 launched today as a hard fork. I wouldn’t expect the peg to hold while the transition takes place. If you peruse their forum postings today you’ll notice that the peg issue is not even on the radar. I assume things are anticipated to settle down over time. That said, I don’t understand what improvements – if any – have been made in 2.0 to specifically address the bitUSD price drift that has been observed in recent months. The price-stability link on bitshares.org only talks about the existing/current implementation using contracts-for-a-difference. Perhaps @chronos understands this and can quickly educate the nubits community?

#37
#38

This:

I’m not aware of additional improvements, but I don’t follow the BitShares development - this “peg” is just too frustrating.

#39

@Nagalim thank you. There is a paragraph at the bottom that describes privatized smart coins. A key snippet relevant to the peg is here:

User-issued SmartCoin managers can experiment with different parameters such as collateral requirements, price feeds, force settlement delays and forced settlement fees.

This suggests a more flexible, market driven system where existing rigid rules such as the 200% collateral requirement may be relaxed. It seems like they’ll still need a critical mass of participants to make it work.