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[bsip18] new proposal

oxarbitrage-patch-1
Fabian Schuh 2017-06-06 09:21:18 +02:00
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README.md
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# Available BSIPs
Number | Title | Owner | Type | Status
------------------ | ---------------------------------- | -------------- | -------------- | -------
[1](bsip-0001.md) | BSIP Purpose and Guidelines | Fabian Schuh | Informational | Draft
[2](bsip-0002.md) | Refund Create Order Fees on Cancel | Daniel Larimer | Protocol | Accepted
[3](bsip-0003.md) | Maker / Taker Market Fees Flag | Daniel Larimer | Protocol | Deferred
[4](bsip-0004.md) | Distribute Market Fees on Core Asset to Referral Program | Daniel Larimer | Protocol | Draft
[5](bsip-0005.md) | Expiring Votes for Witnesses | Daniel Larimer | Protocol | Draft
[6](bsip-0006.md) | Market Maker Incentivization | Daniel Larimer | Protocol | Draft
[7](bsip-0007.md) | Fee Backed Assets (FBA) | Daniel Larimer | Protocol | Installed
[8](bsip-0008.md) | Privacy (STEALTH) Mode | Daniel Larimer | Protocol | Installed
[9](bsip-0009.md) | Benefit Society | Fabian Schuh | Protocol | Draft
[10](bsip-0010.md) | Percentage-based transfer fee solution based on CER | Jakub Zarembinski | Protocol | Accepted
11 | On Demand Voting | Daniel Larmier | Protocol | Draft
12 | Hardfork Procedure Proposal | Fabian Schuh | Informational | Draft
13 | Contract for Difference (CFD) trading | Frank Ahrens | Protocol | Draft
14 | Annual Membership price determined by the registrar | Jakub Zarembinski | Deferred
[15](bsip-0015.md) | Disable negative voting on workers | Daniel Larimer | Protocol | Installed
[16](bsip-0016.md) | Optimization to Force Settlement Parameters of BitCNY | Jerry Liu | Protocol | Installed
[17](bsip-0017.md) | Revive BitAssets after global settlement | Peter Conrad | Protocol | Draft
Number | Title | Owner | Type | Status
-------------------|----------------------------------------------------------|-------------------|----------------|--------
[1](bsip-0001.md) | BSIP Purpose and Guidelines | Fabian Schuh | Informational | Draft
[2](bsip-0002.md) | Refund Create Order Fees on Cancel | Daniel Larimer | Protocol | Accepted
[3](bsip-0003.md) | Maker / Taker Market Fees Flag | Daniel Larimer | Protocol | Deferred
[4](bsip-0004.md) | Distribute Market Fees on Core Asset to Referral Program | Daniel Larimer | Protocol | Draft
[5](bsip-0005.md) | Expiring Votes for Witnesses | Daniel Larimer | Protocol | Draft
[6](bsip-0006.md) | Market Maker Incentivization | Daniel Larimer | Protocol | Draft
[7](bsip-0007.md) | Fee Backed Assets (FBA) | Daniel Larimer | Protocol | Installed
[8](bsip-0008.md) | Privacy (STEALTH) Mode | Daniel Larimer | Protocol | Installed
[9](bsip-0009.md) | Benefit Society | Fabian Schuh | Protocol | Draft
[10](bsip-0010.md) | Percentage-based transfer fee solution based on CER | Jakub Zarembinski | Protocol | Accepted
11 | On Demand Voting | Daniel Larmier | Protocol | Draft
12 | Hardfork Procedure Proposal | Fabian Schuh | Informational | Draft
13 | Contract for Difference (CFD) trading | Frank Ahrens | Protocol | Draft
14 | Annual Membership price determined by the registrar | Jakub Zarembinski | Protocol | Deferred
[15](bsip-0015.md) | Disable negative voting on workers | Daniel Larimer | Protocol | Installed
[16](bsip-0016.md) | Optimization to Force Settlement Parameters of BitCNY | Jerry Liu | Protocol | Installed
[17](bsip-0017.md) | Revive BitAsset after Global Settlement | Peter Conrad | Protocol | Draft
[18](bsip-0018.md) | Revive BitAsset through buying Settlement Pool | Fabian Schuh | Protocol | Draft

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BSIP: 00018
Title: Revive BitAsset through buying Settlement Pool
Authors: Fabian Schuh
Status: Draft
Type: Protocol
Created: 2017-06-05
Discussion: FIXME
Worker: FIXME
# 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.
# 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
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.
# Rational
When a market-pegged assets undergoes a black swan event, 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.
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.
# Proposal
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.
# Specifications
## `obtain_settlement_funds_operation`
This operation is all that is needed empty the settlement pool and re-enable price feeds.
It has the following payload:
* `fee` (asset_type): The operation requires a fee to be paid
* `symbol` (asset_id_typ): Symbol that has a settlement fund to be claimed.
* `account` (account_type): This account obtains the collateral **as well** as
the debt (i.e. call position) and has to either pay additional collateral,
provide shares of the BitAsset to reduce the outstanding debt, or a combination
of both.
* `additional_collateral` (asset_type): Collateral paid by the account in
order to support the call position
* `additional_debt` (asset_type): Debt that is paid by the account in order to reduce the
debt (while keeping the full settlement pool as collateral)
* `obtain_settlement_funds` (asset_type): The amount of settlement funds the
account is willing to obtain
The operation works as follows:
1. It pays a fee
2. It reduces the account's balance by `debt`.
The debt is used to reduce the outstanding shares of the globally settled BitAsset.
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.
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.
The required checks for the operation are:
* Has the asset globally settled?
* Are funds in the settlement pool?
* `debt` > 0 or `collateral` > 0
* `obtain_settlement_funds` <= `settlement_pool`
# Discussion
## 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.
## Partially Obtaining Settlement Funds
In the case a widely used BitAsset is globally settled, the costs of providing
the collateral can be shared among multiple participants by means of only
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.
## Committee funded BitAsset Recovery
## Cost vs. Profit
This operation opens an interesting cost vs. profit trade-off for those willing
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
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**.
# 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.
# Copyright
This document is placed in the public domain.