Topic: [OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading - page 133. (Read 723903 times)

mjr
I have been thinking about the statement above and what 0x3d has proposed and I'm having a difficult time finding a flaw in the logic.  Why doesn't Bitfinex convert the Swap market into a fund?

Let's disregard the FRR for a minute and look at the swap market as it is.  Lenders can do three things, choose to offer swaps or not, set rates and set terms.  Choosing to not to offer swaps is not relevant to the discussion since at that point they are not participating in the market.  A lender sets a term to limit his exposure to the market and to meet his need for personal liquidity.  The rate is set to offset what the lender feels is the risk he is exposed to.  This is all well and good.  Now, throw in the perceived or implied lack of risk that Bitfinex has promoted.  If the lender feels that the risk is almost negligible, the rate, as long as it's greater than what he can get someplace else, has no significance (risk wise).  The term has also no longer has any risk management element to it, just the liquidity element.

Add one more element, the FRR (which is this case is a good thing).  The lender's money is being "managed" by the FRR, selecting an attractive rate and making sure it always available for use.  

So, when using the FRR, we now have a safe or relatively risk free place to park money and get above average returns.  Fundamentally, how is what I just described any different than a savings account? Your money might be unavailable for 2 days but that just makes it look more like a CD.  

If the above is true and the majority of the swap money is currently being managed by the FRR, what we have is a fund masquerading as a market. Some lenders exists outside the system, but you could almost consider them the Pay Day lenders of the swap market.

Why not just call it what it is and be done with it?  Also, managing it like a fund would provide some significant advantages:

• It is still "crowd-funded".
• Since the rate would be set by Bitfinex, traders would have a consistent and fair interest rate.
• With a constant rate, traders could more easily calculate what their position needs to be to turn a profit
• Lender's accounts are zero maintenance, just log in once a week to see your profits (the micro-managers among us can check once a day).
• Swaps could be (with some additional work) virtually term free.
• The swap interest could be distributed equally to all lenders participating in the fund.
• Any true risk would be shared by all lenders equally.
• Risk could be further managed by creating tranches.
• Returns would be relatively consistent for all lenders.
• The return rate could be protected since Bitfinex is the only lender and cannot be undercut.
• The swap market engine could be removed entirely, thus reducing the complexity on Bitfinex's side.
• The entire swap management system could be streamlined since there is only one pool of money to account for.
• Bitfinex could hire a fund manager and create a job to help the global economy.

Wouldn't the above benefits be better for both the lenders and traders than what we have now?

I know that I'm leaving out the regulatory issues which could be onerous, but if your trading engine is as good as it's been made out to be at protecting lenders during a flash crash, why not do it?  Personally, if I was getting a daily return rate of 0.1%-0.2%, I would invest in it.  Matter of fact, I would probably double what is currently in my lending wallet.

You are not missing anything, I was aiming at exactly the "convenience" factor, nothing more. If he says that it is "annoying" I assume that means it is less attractive to him. And as I wrote I don't really like this idea much anyway.

I have question for you, if the swap market was converted to a fund (no individual offers allowed), what would you use to determine the interest rate?  Would you raise it as the funds available for use decrease or would you just keep it at a fixed rate?

I like your security consciousness, but don't you have 2FA enabled? Even with your password, they wouldn't be able to withdraw anything without your OTP, and only withdrawals that use 2FA are automatic.  In general, we are constantly monitoring all the security blogs and listening for new attacks to defend against.

Agreed but this is an important security fix and people should know about it, otherwise in an ideal world (ideal but for the lack of any announcement), everyone would have preventively withdrawn their coins and the exchange would grind to a halt.

Anyway thanks for the confirmation that it's ok.

Full disclosure: I'm angry because I closed a short in order to withdraw, missing on the last downwards move .

Why do you think a 2 day term would be less attractive to traders?  I thought that traders could just keep replacing one swap with another for as long as they wanted.  One trader posted that he could keep a position open with 2 day swaps for as long as he wanted. He said that it was annoying but that he does it all the time.  Could you tell me what I'm missing?

Good idea! I will look into this.

It is not our policy to announce every bug that we fix. POODLE was fixed the day it came out. Disabling SSLv3 is not an ideal solution, because it introduces compatibility issues, that is why you are still able to see SSLv3 as shown above.

See this blog post, from google, for a more thorough explanation.
http://googleonlinesecurity.blogspot.com/2014/10/this-poodle-bites-exploiting-ssl-30.html

Maybe we could introduce a bug fix section or add this information to the page about security? I feel like it will clutter up the announcements section.

Bit of an edge-case need, but are there any pages on 'Finex that display the live-updating spot price (preferably including it in the tab title), and that remain accessible when you switch your account to 'deposit only' mode? I'm only aware of the Exchange tab as having that information but maybe I'm missing something...

Why is there no statement about this exploit anywhere? You should put something up on the homepage right after it became known.

@bitfinex,

Any updates on POODLE? I just emptied my account just in case, and checked that SSLv3 is enabled in your site:

no answer ? you always can tell me about future changes, anything, i closed my positions becouse i was rly scared about loosing all, and bitfinex 14 days silent didnt help me

I am going to guess that you did not receive an answer to your question because we had no answer.  We are certainly aware of potential problems and have sought to mitigate them, but we do not control the supplier or the market maker.  It may be a sub-optimal arrangement, which is why we continue to tweak the terms for TH1.  That is why we refer to it as a BETA product.

Hello
my bitfinex nick : lg1500

i sent couple mails to bitfinex support about th1, without any respond,



i was forced to close my 4*th1 short positions, above buying prize.
i shorted 4xth for prize 1.30 from 1.10.2014, i had set close prize for 0.9102 before i made decision to close positions this mean 1.56 btc profit, instead i made 20 % lost
i closed my positions at 1.32 becouse i was afraid to loosing all in high swap and forced liquidate.

1. bitfinex not added new assets from 15 day
2. i never get any respond about th1 from support.
3. someone on forum write, bitfinex not responding to mail about th1
4. I don't think we should be punished for figuring out that the market was poorly designed and taking our own actions in response to Bitfinex's inaction.


8.10.2014
"when you will do something with th1 market ? new contracts ?, prize is ridiculous high, i dont want end with margin call on prize 1.5 after swap cost and divident cost eat my balance.ę

10.10.2014
"are you abandoned th1 ? from 11 days we dont have more th1 assets, i feel like i can end rly bad with high swap cost and high prize soon."

12.10.2014
"Hello

i shorting th1/btc, from 13 days you not adding more assets, you made great market for manipulation, there is no more swap left, people will be forced to liquidation, or big losses, i never expected you will stop adding more assets, if i know that i would never short that th1. Who will be responded for all shorterst losses if this market will fail becouse this ?"

Are you Bitfinex will reimburse our losses ?

I'm convinced. The FRR should be removed. I like having my swap offers automatically managed, but screw it, I'll write a bot.

I still have to agree with qwerty and his lengthy post: mjr's FRR +/- some percent would only convert the current flat line (swap rate over time) into a sine-wave slightly wobbling around the still flat FRR-"magnet". It wouldn't eliminate the occasional see-saw spike during times of high demand either. My proposal which my PR-dept. decided to call "active-to-inactive swap-ratio adjusted common bucket fund" should average rallies out smoothly because, well, no walls at all plus neither longs nor lenders get left behind during rallies (meaning no FRR-wall-frustration induced re-balancing of wallets out of the blue leading to WTF-charts), only shorts and borrowers (= the longs, yes) need to suffer if swap demand grows above swap offer but this then is the auto-regulating loop (an effective market) we seem to be looking for so badly, is it not?

With FRR +/- n the other spike we have today (the FRR on the orderbook) would also only be smoothed into a most certainly left-pulling bell shape because people still want their USD to be lent out as soon/much/often/long as possible underbidding each other in the process. It doesn't really matter if the FRR is a spike on a single point on a line or if it's a "hill" spread out over a few promille around such a point, it's still just a wall with the exact same surface area and that's why your proposal doesn't change a thing in the end. It's not as if we couldn't do exactly what you're proposing for like forever by adjusting one's offer below the FRR manually. Arguably, your proposal seems to include automation but why would that make any difference? Going below is going below.

Having 2 or more different FRR-formulas to choose from (one using a 7-day average, another using 30 days or whatever) will, over time, only flip-flop swaps. One week one group's swaps would be the cheapest and earn the most, next week it could be the other one. Boils down to "choose your moving average and if your's on top, you win". Sure one could flip-flop the flip-flopping market but with min. and max. durations and the now talked about penalties for early repayments this doesn't make much sense either.

I for one would be happy with less insane but more constant and predictable gains. Trading = badass looping pilot, swap lending = smoothly gliding autopilot, mkay? So is that just me or do you guys seriously need two intertwined cocaine'esque markets on a single platform?

Sorry, I thought you were referring to the current FRR.  A FRR based on the current swap orderbook will be easy to manipulate if it not designed very carefully.  DoubleSwapper manipulating the rate isn't something I would worry about, he one one of the first (and loudest) to call for the head of the other manipulator I referred to.

The way the FRR currently works is that the rate is only included if it is an active swap, so the swap has to be taken before it affect the FRR.  The FRR need to run dry before the higher rate comes into play.  Someone did figure out how to do this at one point.  If I remember correctly, they figured out a way to take a swap for less then one hour that they did not have to pay interest on.  They took out a swap big enough to drain the FRR and then the higher offers started to be taken.  Another Bitfinex user (I think he was a lender) figured out what he was doing and informed Bitfinex.  They shut it down very quickly.  The funny part is, it's possible the manipulator didn't know about the fixed and might have got hit with the interest for a multi-million dollar loan.

About early swap termination:
Usually if you pay back a credit earlier than it expired you have to pay an extra fee.
This could be used for swaps too. It doesn't need to be high, just enough to discourage swap-hopping if a slightly more attractive swap appears than the one you're currently borrowing.


About FRR:
I think the "delta" stuff would make everything more complicated for lenders, but effectively change nothing about the "wall" effect of FRR and it's manipulative effect on the market. In short: It's pointless and only adds annoyance.

I like two other approaches:
Maybe make FRR only available for the shortest possible lending period, which would be 2 days. So if the wall of "easy route" lenders appears at FRR, it will still allow "real" (custom) rates for all those who need more reliable swap periods. However, I don't like this somewhat arbitrary approach that affects the short-period part of the market negatively. Instead:

I like the suggestion that has been made to change the adjustment speed of the FRR.
A couple days ago when BTC started to rise the FRR was repeatedly the lowest rate by far in the list. This should NEVER happen, it shows that the FRR adjusts not well enough. In general, since the FRR is the "most convenient" feature, it should always appear at a "premium" to make it less attractive and not drive rates down.
So, as someone suggested, FRR should adjust upwards quickly and downwards slowly, and if you make it an average of market offers, it should not be in the middle but in the upper third! Because this way it gives breathing room for a true market to form below it.

Thanks for reading^^

why don´t all big guys start inserting ridiculously high offers?
this will push up the FRR and afterwards they can simply remove them from the orderbook and take advantage of the rise in interest rates.

This looks very easy to manipulate in my opinion if you are a large lender, like DoubleSwapper.