Topic: [OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading - page 136. (Read 723861 times)

I think you fundamentally are misunderstanding how a market works, sure,  active lenders are now going to have to have to put in offers at FRR-0.010, unless someone wants to get ahead of them, in which case, they would simply use -0.020 and if someone wanted to get ahead of him, he could use -0.030...and so on.

I think that people are mixing up what they want this to be, with what it is. There is no "fund", it is a market for swaps. The reason why we are even discussing this, is that there is not enough price competition, because using the FRR as a default means that everyone can't differentiate their offer. I think one issue is that people think that there is a required return or something, there is not, again that is the point of a market. If people do not want to offer swaps, you will see the rate for swaps increase until people want to offer them again. This is just the most basic parts of any market. There is nothing inherently wrong with everyone choosing the same value, that is a possible outcome, what could be better, is allowing people to choose a different value.

If you put it that way: Agreed, a fund with a slightly user-influencable yield is what would be left... not too different to what we've had for some time now except that it should be way easier on the backend. The swap-market was a nice idea to get the whole project BFX off the ground, once a novel feature in Bitcoin-land, yes, but on a larger scale it seems to converge to a fund all by itself so why not give these servers a little more idle-time by simplifying a big chunk of what BFX consists of?

Big money on BFX doesn't get penalized (HODL and SODL!) but big money in BFX's new swap-"market" should have to, otherwise, well see mjr's "complaints" from a few posts ago.

I disagree, for all of them to converge on a new single point, everyone would have to share the same preference for returns. In the same way that the bitcoin market allows people to choose to sell more quickly by undercutting the other people, I believe you would see people start setting their swaps to more aggressive values, like FRR-(10% of FRR), or FRR-(.01%)

Basically, it allows people to choose to accept less return in order for a greater chance to have their swap taken. This should hopefully make the FRR just an indicator, and the delta value is what people set, in order to compete with one another.

I stand corrected.

I don't necessarily agree with the idea of the big money getting penalized but that's just a personal opinion.  What I think is pertinent is that if this were to be adopted the swaps "market" if no longer a market, it is a fund.  You put X in and you get Y out.  The fact that we are even discussing it indicates that the swaps, as a market, is near death.

Probably just an honest mistake from re-re-quoting but that second quote didn't come from mjr

Also it's not as simple as just "formally" turning the current swap-market into a some-rate savings account because without any market at all there's nothing to base a "the same for everyone" FRR on so no way of telling what we should earn. So that's where my (not entirely new or ingenious but fitting) idea steps in and I'll try to compress that into a single paragraph now just so it doesn't get buried on the bottom of the last page

That which is currently called FRR should be what every single user's swap-wallet earns on a daily basis as long as it's balance is above 0. The FRR should be dependant on the "load" of the "BFX-wide common swap bucket" meaning the more swap there is available / the less from it gets used, the less daily earnings lenders get and vice-versa. Each user also gets a multiplier on it's daily earnings depending on that particular user's swap-wallet balance so that the more you have in your swap-wallet the less your daily earnings will be percentage-wise and the less disturbing you get for the overall calculation of the FRR -> whales still earn a lot while plankton still has a chance to grow considerably without risking everything in the trading-wallet.

No, you are not missing anything.  You are calling out the swap market for what it now is or what it is becoming.

I do think this will work.  No matter how you try to "fan out" the passive offers they are all going to be centered on the FRR or index.  Right now we have a wall of offers at the FRR. If you allow lenders to apply a variance to the FRR all that you are going to do is spread the same amount of offers over a small range surrounding the FRR.  What is the practical difference between having 1m at the FRR and having 1m at the FRR±0.010?  The wall is still there and active lenders are now going to have to have to put in offers at FRR-0.010 if they want them taken.  I don't see how this will improve the situation.

The main issue is not the the FRR per se, but the mind set of the lenders using it.  You are not going to find a technological solution to it. 

And I stand corrected.  You have found a technological solution.  Formally turn the swap market into what it is with the FRR: a investment account.

Yep, have to agree with that. There's still some form of "riches getting richer" baked right into it but as long as we're using silly numbers in some database as a measurement of [wealth/ability to leverage/influence/grow more money out of money/you name it] I guess we can't really ignore the symptoms of a system which is truly broken in the first place... I mean it's not as if any current system (not only BFX) wouldn't prefer whales at any and all time, using a "common bucket" just wouldn't completely cut out all the overshoots who put out swap offers of 3% per day when the rate reaches 2.9% on the peak of a rally. It'd be just a somewhat more predictable and profitable system for everyone involved. But of course: whales will be whales.

Then again... Raise the taxes for the riches they say. Of course, they don't like seeing their wealth melt away.. and who does? But as long as it's not a loss on a previously realized gain but rather a reduced gain they should be fine, now wouldn't they? So what about adding another variable to the individual users? Some form of multiplier which gets lower the higher your investment in the "common swap bucket" is. So for example someone with 100$ invested in swaps will yield 2 times the "swap-load" as his daily percentage gain, someone with 10.000$ invested will have a multiplier of 1 and a whale with a million to spare still get's his 0.5% or whatever formula we may end coming up with. Of course numbers out of thin air again but you get the idea. That multiplier might as well be some floating/flowing number, in its simplest form that may be some linear progression between the smallest and the biggest investor where only the high and low values are set in stone in BFX's rules. It would be a nice win dollar-wise for anyone in the swap-game anyways and I think then we'd have a truly self-regulating auto-pilot money-maker with no-one left behind. Sure, it would still somewhat prefer the whales dollar-wise (c/f first paragraph) but they wouldn't be able to influence the swap-rate as easily anymore.

Correct? Or am I still missing something?

Moving to an "Everyone throws funds into a single bucket and receives the same rate" model is... one way of doing things I suppose, but it makes it tricky to set what the rate should be. I'm not convinced your proposed rate-setting method would work well - seems exploitable that depositing funds into the bucket would immediately lower the rate paid/received by everyone.

I guess the equivalent on the current market would be if someone came along with a substantial sum of money and dropped it at "Whatever I can get" rates... which would indeed pull rates down, but it would at least cease to have influence once they're fully lent out. Having it continue to affect the rate that everyone else gets just kills other providers ability to express unwillingness to go below some particular rate - their only choices would be to accept what they're given or get out of the pool.

@mjr: Well finally Thanks BFX and Bitcoin Paranoid.

@Bit n Roll: Been using it for ages, it's a nice little "go watch your charts, they're moving"-notifier in your pocket that doesn't drain the battery too much. Some little downsides though: You only have a limited set of choices for "update every x minutes" and "notify on x %-change", these would better be text-fields or sliders but the included values are also kiiinda useful defaults. Also it has a limited choice (3 sets) of alert-sounds available.

@FRR-discussion: The best solution I've read so far seems to get rid of the flash-rate entirely and only leave fixed rates available. The swap-market wasn't meant to be a savings account after all. Imho, if one can't spare a few minutes every day (or week) to adjust to the market conditions one shouldn't be earning that much free money.

But what if we do the opposite? What if we do indeed turn the swap-market into a constantly-earning savings account meaning every single user's swap-balance is constantly financing open positions and the return-rate varies in function to the "load" of the swap-market as a whole?

An example: For simplicity ignore the user's margin balances for now and say there's 20m USD in open long positions and 40m USD available in total on the swap market. That would put the "load" on the swap market to 50%. Now we would take 50% of every single user's swap-balance to finance the trades and those users would all be earning between 0 and some to-be-defined $MaxSwapRate % per day. Say $MaxSwapRate = 1% then every user at that time would be earning 1% * 50% = 0.5% per day on their total swap-balance (not only the lent-out part, that might simplify some calculations).

Now as another example if there were still 20m in longs and there would only be 20m on the swap market the users would earn 100% (load) * 1% ($MaxSwapRate) = 1% per day.

Finally, this should come with the advantage of a swap-market that can't run dry because consider still having 20m in longs but only 17m in available swaps: Load = 117% so basically lenders would earn more than $MaxSwapRate earning the missing money in the process of lending out 100% (obviously can't lend out more than you have) of the swap balance + 17% of trader's gains. That would mean 17% less gains for the margin traders in this case of an overloaded swap-market so this also acts as an incentive to keep the swap-market liquid.

Too lazy to do some real calculations now and I'm not too sure I didn't mess up somewhere along the line but I think this just might do the trick.

Thoughts?

Edit: $MaxSwapRate should probably be called $NominalSwapRate as it can go above 100%. This to-be-defined number could as well be a dynamic number, that is to say it could be it's own tradable pair/market like TH1BTC is right now.

Anyone here use this app? So is it ok? No problem?

As a lender, I only care about having my swap offers filled quickly insofar as it increases my overall returns. I'm not necessarily opposed to the FRR+delta idea, but it seems to me that rather than allowing for people to express a range of preferences, the deltas that people choose will just end up converging on a single ideal value. That ideal value will move around due to changing market conditions, and people will put in varying amounts of effort to adjust to those changes.

My point is that this ends up looking a lot like what we had before FRR was introduced: You could spend a lot of time watching the swap demands and offers and adjusting your rates, or you could pick a number that seemed reasonable and leave it at that.

Also, one other announcement.

I am very happy to announce that Bitcoin Paranoid, one of the most popular android price apps, has added Bitfinex! If you upgrade the app, you should now be able to monitor the prices from your phone.

I am always trying to discuss with people what they would like to see, and this was a request that had been outstanding, so a big thank you to Bitcoin Paranoid for including us in their app.

I believe, if I remember his post correctly, that Phil said an algorithm should not increase difficulty or complexity of the UI for users. Our system is pretty advanced as it is, and any new feature has to be weighed against the increase in complexity. I think that a very simple algorithm (if it even deserves that name) of a delta applied to a known variable would be somewhat simple, and I think that as long as you maintain a default value of 0, users who want the additional functionality could use it, while those who are content with the current system should not have to do anything additional.

As I said, this is just one suggestion, but I think it addresses the issue in the most straightforward way. And I agree, that if you further have this as a feature that a user can "enable" for their account, they will have even less of a learning curve.

Is the team ready to implement this?
If so, just do it then, because this is pretty much exactly what people have been asking for.
It just that Phil earlier made a point that creating any kind of algorithms is not desirable.
BTW, this could also be made as an "activatable" module.

You could have a FRR that reacts quickly to shifts in interest rates and one that reacts slower.

This is basically what I would suggest, the problem is not a variable rate, it is that there is only ONE variable rate.

I don't think it will be a very complex UI change, and should not increase the difficulty very much. What I imagine is something like
FRR + x

Where x is a user specified value. At first, if everyone leaves it as the default value of 0, we have an identical system as we have today, but over time, as some people use negative values and others use positive values, the offers should start to scatter around the FRR.

Hey guys,

We are discussing a lot of these suggestions. I just want to discuss a little bit, and propose my suggestion.

The goal of FRR is to offer a variable return rate, and that is valuable. The issue that some people have is that all the offers cluster around one price, causing a huge queue to get filled.

My suggestion is not to get rid of the FRR, but rather simply use it as an index. If you could offer a swap at FRR+1% or FRR-1%, where the delta from the FRR is set by the user, you would allow everyone who wanted a variable rate to still be able to choose different rates. If you want to be filled quickly, you could price it more aggressively, and if you wanted higher returns, you could wait longer for your offer to be reached.

I personally think that this maintains the reason behind the FRR, while allowing the offers to be more spread out, and allowing for better price discovery, as each party can still use the index, while competing in the market as normal.

I think any limit of FRR offers won't work, as then it just becomes a race to get in, and some people are left out. I think it is worthwhile to allow everyone to have the benefit of a variable rate (so they can take partake in better market rates, while also allowing the benefits of the ability to offer at a competitive rate).

Any thoughts on possible downsides to this? I'm glad for all the comments, and keep suggestions coming in.

I think this would be prone to manipulation.  If it's a percentage of active swaps and the swaps offers go down, what do you do? Drop people from the FRR?  If I was a big lender I would place a large high value swap, wait for the FRR to fill and then rescind it.  If I was big enough, that would kick a number of offers out of the FRR until they re-offered.

I think that we all need to realize the landscape has changed somewhat.  IIRC, it was DoubleDipper who posted that more and more lenders where treating the swaps like a 'savings account', and I think he is correct.  The FRR enables that behavior.

I was under the impression that some traders will pay a premium for 30 day terms.  What if the term had to be 30 days and FRR offers locked in at the rate it was taken and did not float during the swap's duration? 

I'm not a trader, but I would have to imagine that this would be interesting to them.  I would like to hear what other lenders think.  My first impression is that this would be more risky for the lender.  If the lender is negative, the position is more likely to be closed.  What do you think would happen during a flash crash?

I think you hit the nail on the head.  The FRR serves the passive lenders and works against the active ones.  The tide seems to have turned to where there are now more passive lenders than active.

If there was someway to de-incentify the FRR, it might be able to be saved.  What if the fee was 10% for fixed rate swaps and 15-20% for FRR?  What if FRR swaps floated down but only up to the rate it was taken (altough this might cause even more trader demand for FRR swaps)?

I fall towards the "very active" end of the spectrum for swaps - using email notifications as a trigger to go and re-offer funds, sizable spreadsheet recording it all to predict the daily payment and do various other maths to things, using fixed rates somewhat religiously. So I'd be happy to see the FRR simply scrapped but I can understand that being a source of irritation for anyone who's aiming for a more "set it and forget it" approach.

So I guess a replacement would need to recreate the advantages of the FRR - it's automated and it follows the market rate... but ideally without recreating the disadvantage of it being a distorting force unto itself. Needs to be a way to have automated rates set without having everyone pile onto exactly the same rate. Which might be impossible... there's always going to be some bulk of uninterested providers that don't care to change the default setting.

But hopefully if more options were created to set auto-rates at different price points, the normal incentive to try and undercut others would spread the heap out at least a little bit. I'd be interested to see the effect of an offset field - let people specify "FRR + 0.1%" or whatever. Hopefully we'd get a bell curve centred on the FRR, which would at least offer the opportunity for fixed rates to be mixed in amongst the variable rates, rather than the current binary of "Above FRR: Doesn't get taken all week" vs "Below FRR: might get taken so long as the FRR doesn't move down first".