Topic: Pirate v2.0: Unravelling the Bitshares Ponzi - page 2. (Read 12706 times)

They are market pegged each BitAsset class floats against BitShares based upon supply and demand factors alone.  Of course BitUSD can only be borrowed into existence and is destroyed when the loan is repaid to the blockchain.

Transaction fees will pay the miners and dividends.

No the value of BitUSD will decrease without any change in the supply.  Value is not based upon supply alone.

Prediction Market dynamics long and short have to agree on the price and have opposing incentives which force an accurate price.   After all the short has to repurchase in the future from someone to free his collateral and the long has to agree to the new price or he will sell to someone else.

If you buy 1 BitUSD then you will accrue additional BitShares as dividends like earning interest at a bank.  You can sell your dividends for more BitUSD and end up with 1.1 BitUSD or you can sell your 1 BitUSD for BTS and end up with 1.1 dollars worth of BitShares.


Why do people go short rather than long?   People disagree about which way the price of BitUSD vs BitShares will move in the future.  If there is high demand for BitUSD then it will cause the value of BitShares to rise in order to meet the demand for BitUSD.  Anyone who expects there to be high demand for BitUSD due to price stability and ROI will want to short BitUSD relative to BitShares.   Demand for BitUSD causes the price to rise above parity with USD until someone decides to create more by shorting it.  At nearly all times there is 1.5 to 2.5x the value in BitShares relative to BitUSD.   

Me personally, I would short BitUSD and go long BitShares to maximize my return.

Well, can you answer my following questions?
1. How can you guarantee 1BitUSD ≈ 1USD?
2. If I buy 1 BitUSD by USD, I can receive BitShare Dividend, and as a dividend, the value of my BitUSD will become say 1.1 BitUSD, then I can get 1.1 USD, am I right?
3. Why not people choose to by BitUSD rather than BitShares?

You keep thinking that.   But this is not how BitShares works.  BitShares create USD the same way banks do, by lending it into existence against a collateralized loan.   BitUSD is just an IOU for one dollar worth of BitShares.  The block chain is able to honor that request.


BitBTC is an IOU one BTC in BitShares.   The IOU is collateralized with 2 BTC worth of BitShares and is automatically enforced when the collateral falls to 1.5 BTC worth of BitShares

If you set up a straw man, then of course it would never work, but what you describe is NOT how this works.  I am not maintaing a peg by controlling supply of the currency.

Excellent Work！I feel something is wrong with bitshare but I cannot figure it out. You have reminded me of one important point!

Bitshare is definitely impossible.

Sorry , i dont trust bitshares !

1.bitshares 白皮书去掉了最后一章（和Ripple、Local Bitcoins、Colored Coins的对比）。相对于建立在矿工节点上非信任机制上的去中心化(bitshares)，我个人还是倾向于建立在对gateway信任机制上的去中心化模式（coloredcoin、ripple）。coloredcoin是构建在BTC协议上的，而bitshares完全推倒重来。

2.至于bitshares所强调的金融杠杆功能，coloredcoin在信任机制模式上能够轻易构建，如同796一样，而不需要矿工来维护。coloredcoin构建的资产是基于比特币的，而bitshares构建的资产基于BTS，就像ripple系统中的xrp一样。我们是否需要一种新的虚拟货币来替代BTC呢？

3.在bitshare白皮书15页case里说“He buys his BitUSD by posting an ad on craigslist saying that he is looking to buy some.” 难道，交易BitUSD还需要使用场外交易方式 ？为什么bitasset中经常提到的资产是BitUSD 和 BitGold 而不是BitBTC？要知道 Coloredcoin协议中的资产确实是完全用BTC背书的。

4.另外，bitshares的高额分红完全是吸引新玩家的做法，让人感觉很可疑。我个人认为，就好像http是建立在tcp协议上一样，比特币用户希望看见一个基于BTC协议上的P2P多态智能资产协议框架。而不是一个以P2P 交易所为诱饵的，实际损害比特币价值的”新协议“。

This is not an absolute. Everyone should believe in their product, that doesn't mean they are implying that it will cure cancer. They could have worded the Coindesk article with a bit more grace, but you are overreaching. More likley the author misunderstood what they were trying to say (he got some facts wrong to begin with). Considering the product hasn't even been released (the final draft of the white paper isn't even done yet!!!) there is ample time to mold the message.

Misrepresenting a highly risky investment as extremely low risk or risk free is illegal.

e.g. recall the coindesk article


Recall the CEO's statement

These have now been acknowledged to be false statements.

If anyone happens to lose money all they have to do is dredge up these quotes. US courts will hold these guys liable.

 

This whole system is geared around speculators.  To take speculators out of the equation is like having a debate about whether a car will work and then say don't tell me that some 'magic' wheels are going keep me rolling.

It depends upon what percent of the BitShare market cap was tied up backing that 1 BitBTC and how many traders are in the market and why the price fell 50%.  With a lot of traders in the market you would still be safe because new short positions would be issued the whole time the price of BitSHares relative to BitBTC was falling.  

This is only a problem if  near 75% or more of BitShares are placed in a short position against BitBTC, but if only 10% of the BitShares are used to back BitBTC then the price would have to fall by more than 95% before anyone risked losing money due to this particular scenario.

This system will launch like bitcoin, it will have to prove itself.    

Mate, it's over now. Give it a rest. All your arguments could be made against Bitcoin (as has been said two times now). There is risk, but that risk != ponzi. If you do in fact report this to the SEC, shame on you. What a filthy thing to do. Paints a grim picture of your character.

What about issuing a new coin to bail out underwater investors at that time ?

"QE-coin" - a truly faith based coin.

Let's put this in simple terms, so that everyone understands.

I purchase 1 BTC worth of bitBTC today. I plan to convert this back into BTC exactly one month from today.
As long as the next month's price of bitshares in terms of BTC is at least 50% of the current price, I will get my 1 BTC back.

However, if next month's price is less than 50% of the current price, I will not be able to recover my initial investment in full. (i.e. I will get back less than 1 BTC)

Correct? (please don't tell me that some magic speculator is going to come in and bail me out)

Cunicula,
      I walked through your latest example of how BitBTC could in theory become under collateralized.   I want to address this because it was a solid use case that has not been addressed by any of our white papers directly. 

      1) It is theoretically possible for your scenario to occur, and in such a scenario everyone who was  Short BitBTC would be entirely wiped out and everyone who was long BitBTC would end up with twice as many BitShares as they started with (assuming they sold).   It is even possible for the result of this catastrophic loss of value in BitShares to result in BitBTC being on the books without any corresponding short positions backing it up.   Such an event would be terrible for those long BitShares, even worse for those Short BitBTC... but those who are impacted the least would be those who are Long BitBTC... they doubled their BitShare holdings.

      2) This market does not eliminate all risk, it merely transfers a large percentage of ordinary risk from the longs to the shorts.  It is impossible to eliminate all risk even with traditional financial markets.  For example, a US treasury is not a 'risk free' investment, the interest rate fluctuates, the dollar can be debased, and the government could default or be taken over.  You do not consider US treasuries to be a Ponzi or a scam despite the fact that they pay the returns with the investors own tax money or via inflation.   So, if even US treasuries are not 'risk free' then your argument against BitShares is a logical fallacy because you are holding them to an impossible standard and pointing to any risk at all as signs of a scam.

      3) The situation you present is very unlikely to occur for the following reasons:
          a) No savvy investor would short BitBTC against BitShares after a major run up in the market because they know BitShares behave like Bitcoin.  As a result, savvy investors would sell their BitShares and buy BitBTC so that they could make money when the price corrects.  This counter-market force would actually fend off Bitcoin style price volatility.  Because selling BitBTC is cheaper than shorting it, very few if any new BitBTC would be issued at the market peak and most trades would occur as trades in long positions.   
          b) If the BitShare price is heading to the moon, then most people would be swapping out of BitBTC and buying BitShares.  This will reduce the demand for the creation of new BitBTC.
     
       4) Assuming the event was only a case of extreme short-term volatility then anyone who held their BitBTC through the correction and allowed the market to clear would find that once again their BitBTC would recover near parity.   

       5) In the event that BitShares become worthless, clearly BitAssets are worthless and all parties accept this risk.

I would like to make one final statement regarding your claim about miners not having 'authority' to perform a margin call.   This would be like claiming that your stock broker doesn't have authority to perform a margin call.   When you entered into the short position, the network rules stated the terms under which a margin call could be executed and all miners must follow those rules or their block will not be confirmed by the network.  So, if you do not want to risk a margin call, don't enter a short position.   You can buy BitShares or your can Buy BitBTC... but you cannot short BitBTC.     Allowing someone to Short BitBTC and then calling foul when their margin is called would be like allowing someone to mortgage their house and then crying foul when the loan is called when the value of the house falls.   You are using borrowed money, you have no right to keep your short position without sufficient collateral.


Thank you for clarifying your position, your definition of a ponzi applies to every crypto-currency and every corporation that issues stock.    If this is what you think then there is no point in arguing.   

On the other hand it appears that 100% of your claims could be resolved provided we educate all parties to as many risks as we can think of and in this case you have been most helpful in identifying areas where our users must understand the risks.

In conclusion, BitShares allows users to mitigate to a large extent the vast majority of risks associated with crypto-currency price volatility.  However, every holder of BitX is only ever guaranteed to receive the collateral backing their position (2x as many BitShares) in the most extreme cases.   If you are willing to accept that risk, then you can buy BitBTC and earn dividends for taking that risk.   If you are not willing to accept that risk then keep your BTC and forfeit the opportunity cost of lost dividends.     Either way, you as the user of the system are responsible for assessing the risk/reward of using the system.

It is my belief that there is enough utility and corrective market forces to both justify the value of BitShares as non-0 and to prevent the most extreme market events from occurring.   It is also my belief that because BitShares are deflationary, income-producing assets they will on-average rise in value just like Bitcoin and therefore any extreme movements are only temporary in nature.   

So I am more than happy to put as much information in the hands of individuals to make educated investment decisions.

If anyone has any questions I am more than happy to address the concerns via Skype: macman2k. 

No, of course not.

The miners can only enforce margin calls on bitBTC they own. They cannot enforce margin call's on other people's bitBTC. That would be confiscation. Reread the thread if you are unclear on this. BitBTC cannot be removed from your wallet and replaced with bitshares without your consent.

Therefore, unless 1) The savers sell off their bitBTC to miners and 2) The miners decide to enforce margin calls, the 100,000 bitBTC remain outstanding even if the currencies market cap is just a few pennies. Once this is happens there is no backing left to reclaim. All you have are bitBTC c/o your trust in God and the Bank of Zimbabwe.

The whole thing becomes dies permanently. The early miners of bitshares are laughing all the way to the bank (which is full of BTC and USD; late game only marks hold bitshares, bitBTC, or bit*).

Let's go through another concrete example describing exactly what will happen to bitshares in the future. The example shows that 1) bitshares is a simple ponzi 2) bitshares is nothing at all like bitcoin

1) Suppose that bitshares experiences a bubble just like bitcoin's first bubble. At the peak of the bubble, the market cap of bitshars reaches 1 million in terms of bitcoins. (Recall that the market cap is just the bitcoin denominated price of a bitshare × the total quantity of bitshares in existence)
2) Suppose also that bitshares has issued 100,000 bitBTC at the peak of the bubble. At the peak of the bubble, this is fine. Bithshare's market cap is sufficient to back these 10 times over.
3) Recall that bitBTC cannot be involuntarily confiscated once they are issued. So if the price of bitshares drops the BTC denominated debt (100,000 bitBTC) do not just disappear. Instead bitshares just falls deeper in debt.
4) Suppose that bitshares market cap drops to 1/15  of its bubble peak (as in the 1st btc bubble). This leaves a bitshares market cap of 66 thousand BTC. But wait a minute, bitshares has 100, 000 units of bitBTC outstanding. Liabilities exceed assets. The system is bankrupt.

Let's ask some questions:

1) The bitshares creators tell us that a bitBTC will never fall below 1 BTC. Apperently some kind of price "floor" exists at this level. But ask yourself, would you pay face value for a bitBTC when the bithsares backing them trade for at most worth 0.66 BTC (and in all probability an order of magnitude less)
2) What about bithsares themselves? How much would you pay for a bitshare in this context? Bitshares are effectively equity. If the creditors holding bitBTC are to be repaid, bitshares will have to appreciate by 50% before the equity holders go into the black again. We do not normally see shares in bankrupt companies trading above 0 unless a gov't bailout is expected.
3) Assuming the gov't doesn't bailout bitshares, how is it that the market cap of bitshares could still be as high as 66 thousand BTC? What does this tell us? The value of a bitshare will keep dropping. Sending the system further and further underwater. It will not stop until it hits 0.

Who profits from the ponzi? Anyone who mined bitshares and got out before the bubble burst.

How is the scheme different from other bubbles; why call it a ponzi? The bubble is driven by purchasers of bitBTC from marks hoping for high returns and trusting in the creators' claims that a bitBTC is a completely safe investment. This makes the scheme not just a bubble, but a ponzi. It is no different from pirate ensuring his victims that he will never default, while luring them in with high returns.

What about the prediction market? A sideshow. The bitBTC come out of the prediction market as some kind of by product. The prediction market never needs to generate any value for the ponzi to work. All it has to do is spit out bitBTC to bait in naive, greedy people. If the prediction market does generate massive value, bitBTC still goes to 0. The prediction market is just irrelevant.

Why does the SEC need to get involved? 1) Because this is a predatory scheme designed to rob stupid people. 2) Because the scheme will inflict massive damage on cryptocurrency's reputation. Better to put a stop to it early, then wait for people to lose huge amounts in a cryptocurrency ponzi. Can you imagine how bad the press will be if the protocol itself runs the ponzi? The average Joe already believes cryptocurrency = ponzi. Proving him correct in one instance will not help matters.

It's not a Ponzi, it is just an alt-coin promising superior return, and we know that all the alt-coins will introduce inflation...