[bsip18] replace black swan by global settlement where applicable

bsip-0018.md

@@ -10,47 +10,49 @@
 # Abstract
 
 BitAssets, i. e. market-pegged assets (MPA) like bitUSD in BitShares can suffer
-a "global settlement" event also known as "black swan". After global
-settlement, the asset is effectively rendered useless. This BSIP proposes a
-protocol change to enable resolving a global settlement so that affected assets
-can be continued and put to good use again.
+a "global settlement" event. After global settlement, the asset is
+effectively rendered useless. This BSIP proposes a protocol change to
+enable resolving a global settlement so that affected assets can be
+continued and put to good use again.
 
 # Motivation
 
 Market-pegged assets, aka SmartCoins are among the core features of the
 BitShares blockchain and as such provide one of our unique selling points.
 
-MPAs can suffer a "black swan" event. A black swan occurs when the least
-collateralized short position has insufficient collateral to buy back the
-borrowed SmartCoins at the current feed price. What happens then is that the
-MPA is tagged with a "settlement price", defined as the collateral ratio of the
-least collateralized short. All short positions are closed automatically, by
-collecting sufficient collateral into a settlement pool and paying out the
-remainder to the short's owners. MPA holders can use the forced settlement
-operation to receive their share from the settlement pool in exchange for their
-MPAs. Even after global settlement, market-pegged assets can still be
+MPAs can suffer a "global settlement" event. A global settlement occurs
+when the least collateralized short position has insufficient collateral
+to buy back the borrowed SmartCoins at the current feed price. What
+happens then is that the MPA is tagged with a "settlement price",
+defined as the collateral ratio of the least collateralized short. All
+short positions are closed automatically, by collecting sufficient
+collateral into a settlement pool and paying out the remainder to the
+short's owners. MPA holders can use the forced settlement operation to
+receive their share from the settlement pool in exchange for their MPAs.
+Even after global settlement, market-pegged assets can still be
 transferred or traded, but they can no longer be borrowed.
 
-Currently, in BitShares, there is no actual way to resolve the black swan, but
-eventually, all significant holders will have to settle their positions to
-obtain BTS for their black swan long position. Some dust will remain scattered
-all over the place, where the value of the dust position is lower than the fees
-required to get rid of it.
+Currently, in BitShares, there is no actual way to resolve the global
+settlement, but eventually, all significant holders will have to settle
+their positions to obtain BTS for their long position. Some dust will
+remain scattered all over the place, where the value of the dust
+position is lower than the fees required to get rid of it.
 
 # Rational
 
-When a market-pegged assets undergoes a black swan event, one of the crucial
+When a market-pegged assets undergoes a global settlement, one of the crucial
 mechanisms that support the peg (namely "margin calls") is no longer available.
 However, other mechanisms, such as the "face-value", trading and settlement
 still exist and, unless the valuation of BTS decreases significantly, the
 outstanding debt (the BitAsset long positions) are still collateralized by
-approximately 100% through the settlement pool at the fixed black swan price.
+approximately 100% through the settlement pool at the fixed settlement price.
 
-This means, if a black swan event happened on USD at a price of 1 bitUSD/BTS, then
-an outstanding debt of 1000 bitUSD would be backed by 1000 BTS in the
-settlement pool of the bitUSD asset and no other call positions would be open
-by anyone else. Every bitUSD long position could, in this case, claim BTS from
-the settlement pool at a rate of 1:1.
+This means, if a global settlement event happened on USD at a price of 1
+bitUSD/BTS, then an outstanding debt of 1000 bitUSD would be backed by
+1000 BTS in the settlement pool of the bitUSD asset and no other call
+positions would be open by anyone else. Every bitUSD long position
+could, in this case, claim BTS from the settlement pool at a rate of
+1:1.
 
 # Proposal
 
@@ -59,13 +61,14 @@ All that is needed for the asset to be *revived* is:
 * empty the settlement pool
 * re-enable price feeds
 
-Since after a black swan, the collateral for the outstanding long positions are
-stored in the settlement pool, we here propose to **obtain the funds in the
-settlement pool and it's outstanding debt from the network**. Since the
-collateral ratio of the settlement pool after a black swan is 100%, obtaining
-the settlement funds in order to convert it into an open call position
-**requires to also provide additional collateral or reduce the debt** in order
-to not cause another black swan or margin call right away.
+Since after a global settlement, the collateral for the outstanding long
+positions are stored in the settlement pool, we here propose to **obtain
+the funds in the settlement pool and it's outstanding debt from the
+network**. Since the collateral ratio of the settlement pool after a
+global settlement is 100%, obtaining the settlement funds in order to
+convert it into an open call position **requires to also provide
+additional collateral or reduce the debt** in order to not cause another
+global settlement or margin call right away.
 
 # Specifications
 
@@ -95,8 +98,8 @@ The operation works as follows:
  3. It reduces the account's balance by `collateral`.
     The collateral is used to initially support the accounts' call position.
     However, technically, only little additional collateral is required (if the
-    valuation of the collateral hasn't change since the black swan event) if the
-    owner accepts a margin call.
+    valuation of the collateral hasn't change since the global
+    settlement) if the owner accepts a margin call.
  4. The global settlement flag is removed from the asset.          
  5. The asset is re-enabled such that price feeds can be produced again.
  6. After sufficient price feeds, the asset can be borrowed again.
@@ -112,12 +115,13 @@ The required checks for the operation are:
 
 ## Sufficient Collateral
 
-Given that at the time of claiming the settlement funds, the blockchain cannot
-know the valuation of the collateral, the user needs to ensure that sufficient
-collateral is provided to support the call position **after** the price feeds
-are refreshed. Otherwise, the asset will either experience another black swan
-event right away, or the call position will be margin called.
-In any way, it is up to the user of the above operation to take that risk.
+Given that at the time of claiming the settlement funds, the blockchain
+cannot know the valuation of the collateral, the user needs to ensure
+that sufficient collateral is provided to support the call position
+**after** the price feeds are refreshed. Otherwise, the asset will
+either experience another global settlement event right away, or the
+call position will be margin called.  In any way, it is up to the user
+of the above operation to take that risk.
 
 ## Partially Obtaining Settlement Funds
 
@@ -127,13 +131,13 @@ obtaining a fraction of the settlement pool.
 
 ## BitAssets using BitAssets as collateral are unaffected
 
-One huge advantage of this approach is BitAssets that are collateralized by
-other BitAssets are not directly affected by this proposal. Even though the
-*economical debt* of such asset may be argued about if the collateral asset
-experienced a black swan event, the *technical debt* is unaffected. Converting
-the settlement pool into a regular call position through this proposal would
-not only restore the original BitAsset, but also reset the collateral of the
-derived BitAsset.
+One huge advantage of this approach is BitAssets that are collateralized
+by other BitAssets are not directly affected by this proposal. Even
+though the *economical debt* of such asset may be argued about if the
+collateral asset experienced a global settlement, the *technical debt*
+is unaffected. Converting the settlement pool into a regular call
+position through this proposal would not only restore the original
+BitAsset, but also reset the collateral of the derived BitAsset.
 
 ## Committee funded BitAsset Recovery
 
@@ -144,8 +148,8 @@ to take the risk of using this operation that we would like to discuss. Keep in
 mind that
 
  * the valuation of the collateral may be volatile (e.g. in case of BTS)
- * after black swan, the long positions can settle and thus reduce the debt as
-   well as the settlement pool
+ * after global settlement, the long positions can settle and thus
+   reduce the debt as well as the settlement pool
 
 Market participants that are willing to take risk may want to obtain a larger
 chunk of a settlement pool as it means an **instant short position**.
@@ -153,9 +157,9 @@ chunk of a settlement pool as it means an **instant short position**.
 # Summary for Shareholders
 
 This proposal presents a flexible way of reviving a BitAsset that has
-experienced a black swan event. The blockchain or shareholders do not need to
-take any risk as the proposal only offers a new way for market participants to
-(partially) revive the BitAsset.
+experienced a global settlement event. The blockchain or shareholders do
+not need to take any risk as the proposal only offers a new way for
+market participants to (partially) revive the BitAsset.
 
 # Copyright
 This document is placed in the public domain.