The easy case is: Alice owes Bob 1.0 BTC in year 2020. Between then and now, BTC forks into BTC and BTZ -- and so now Alice Owes bob 1.0 "new" BTC and zero BTZ. On net, does this mean that whatever fork retains the legal position of BTC is going to be in more demand than hypthetical BTZs?
Given that, will it create a incentive for forkers to fight for legal recognition such that debts can be / have to be payed in their own currency. And if they do this with some success, what happens when instead of having a clear BTC/BTZ split, you have a BTC_forkA and BTC_forkB for paying debts in.
The reference bitcoin index for futures is well-defined: http://www.cmegroup.com/trading/files/bitcoin-reference-rate...
I would guess that this was done in collaboration with the relevant exchanges. So forks are pretty much a don't-care for the futures that begin trading in the next two weeks.
Exchanges are incentivized to quickly converge on one or the other so it may not be a problem.
Bitcoin and others like it I feel are going to become far more centralized than people think, otherwise I don't see who the hell is going to use their computing power to verify transactions...which is really what miners are doing.
Maybe I'm missing something.
If you tried to start a fork built off of older blocks with a bunch of your miner buddies, it would essentially be a 51% attack. You’d have to convince a quorum of miners and users to treat ledger entries in your fork like real Bitcoin transactions. If you have the power to do that, you have successfully attacked the network, and you may as well have just sat your new blocks with mining rewards on top of the extant main chain. It’s not like mining older blocks gives you more BTC in some mathematical sense - you’re always just earning whatever you think the network will let you get away with, based on the schedule that has been agreed upon a priori.
Hopefully this makes it clear that the question of whether a fork has a separate supply is confused. Neither the main nor the fork have a true finite supply - just a finite amount people will in practice agree to letting you mine. In the case of the fork, it doesnt’t matter whether you can convince them to let you go back to increased mining reward, because you have a much larger problem - nobody considers any transaction in the fork money in the first place. If at any time they do, you’ve attacked the network. Miners and users both equally dislike a state of the world where there is more than 1 version of history - it calls into question whether any wealth they have in chain A is real now that chain B is more popular. In practice they will quickly coalesce into considering one chain the true one, and changing everybody’s mind, especially long after the transactions have settled, would be a monumental task. Because everybody understands this, nobody would even try it, since it’s a waste of precious mining resources. This is why you didn’t see rogue forks forming when the reward decreased from 50 to 25 BTC.
I know that’s a wall of text, but feel free to keep asking questions if you’re interested.
...which is a fancy word for a speculative bubble.
Nothing is “worth” something unless people say it is. There are plenty of problems with Bitcoin as a currency, but the fact that its value is derived from speculation is not one of them. All currency is like this.
Bitcoin is designed with transaction fees for miners which in principle can replace block rewards as an incentive for hashing.
Could someone say what "clearing the trades" mean here?
"Clearing brokers" (like Goldman) vet the clients who send transactions to the exchange. If the client defaults on a trade, Goldman is likely liable to the clearing house for the default amount, so it is in their interest to clear only those clients with sufficient collateral to provide margin.
Note that a clearing broker is different from a clearing house. The clearing house serves as a back end settlement layer to an exchange, which serves as a front-end matching engine.
Edit: There must be a bona fide finance guy here on HN to answer this knowledgably?
Aside from the difference between the clearinghouse and the clearing broker, the difference between the executing broker and the clearing broker is also interesting.
For example you might have bank A as your executing broker and they give up the trade to bank B which is your clearing broker. You might even have your own exchange membership and bank B clears the trade for you.
Where even though this net transfer happened, all of A, B, C, and D think that it was fair and what they wanted? (I call them "pretend bitcoins" because they don't need to be reflected in the blockchain - the transaction of 25 million pretend bitcoins in motion aren't reflected in the blockchain.)
feel free to correct me if I'm very wrong.
This is internalization, which is different from clearing.
To clarify, Goldmans are offering to buy* futures their clients want to sell, if they can line up one of their other clients/counterparties to buy it from Goldmans at the same time. Goldmans is acting only as an intermediary or a broker. The key idea for clients is that if you want to sell, you want to get a quick and good bid from your trading partner. Goldmans are not offering to do that. They won’t make a price straight away for their client, they will only broker trades, so they will need to call up others to find out what their price is, hold them on the line and then offer the price to the client. At the end of the trading day, all Goldmans will do is net off trades between their own counterparties. Goldman clients expect the company usually to act as market maker for futures trades. As a former sell-side trader, what that means is I can make my own prices for the client, buy their futures off them, hold them, and later in the day I can sell them myself, possibly to the exchange. I hold my own position, I assume my own risk, on a short term/daily basis. This is better for the client because they can get an immediate market, they don’t have to wait for me to call someone else.
In a way Goldmans are saying they won’t trade against their own clients. Given their history with the CDOs (think The Big Short), and given how opaque the underlying Bitcoin market is, this seems to me to be a covert reassurance that they won’t be working against their clients.
* or sell obviously.
> To clarify, Goldmans are offering to buy* futures their clients want to sell, if they can line up one of their other clients/counterparties to buy it from Goldmans at the same time.
This is not what clearing means. You're talking about execution. They'll still clear the trades even if you execute away. There's not really anything else I can add to this discussion.
An imperfect analogy is that you're buying the futures with a credit card and Goldman will step in and pay the bill if you can't.
It will be interesting to see if shorting will be possible.
There will be some slippage, but it'll be relatively bound.
May be a silly question, but I know little about this stuff.
At my first job I had a project that involved looking at the actual order book for various stocks on the NASDAQ. There's always some asshole who puts in a limit buy for $0.01 on the hopes that if liquidity dries up, they'll be the best bid and get the stock for literal pennies on the dollar (I've been that asshole, though I've never actually had an order filled at that price). Normally all these orders are completely irrelevant because they're nowhere close to being the best bid, so other buyers get the stock and they just sit there on the order book.
In a flash crash scenario where everybody runs to the exits at once, it's possible for liquidity to completely dry up. The market gets hammered by so many sell orders that they burn through all the people willing to buy at reasonable prices. Then the exchanges dutifully match you up with whoever's left in the order book...which is usually the jokers who are like "Well, I'll put in a limit order for $0.01, leave it there, and see if it ever fills." Because your stop is actually a market order, you take whatever price the market gives you, which is...$0.01. You've just sold your $18K bitcoin for one cent.
This actually happened with the flash crash of 2010, but because market manipulation was proven, NASDAQ halted trading and invalidated the trades that occurred at those prices. There are no such failsafes or means of recovery with Bitcoin.
Stop limits have the problem you mentioned - they just won't get filled in a flash crash, leaving you with Bitcoin that you can't get rid of.
Why doesn't everyone do this constantly if it's a possibility? Low chance of such a windfall, but what's the downside?
With regulated exchanges like the major stock ones, you also have to worry about your transactions being invalidated, eg. in the 2010 flash crash nobody who did this actually got paid out because the exchange said "Oops, software glitch" and canceled all transactions before settlement (with the stock market, you don't actually receive the stock until 3 days after you make the transaction).
A stop limit order doesn't have unlimited slippage, but may not get filled at all; there is no foolproof stop order.
Because to do that with funds in a GS account that you use for trading other things, you have to take the money out, which adds friction?
If the broker was a market maker, he would keep an inventory of that stock and your order would be filled by the broker directly. Who would then report and clear the transaction on the exchange.
There's not really a great analogy, but the idea is that Goldman is on the hook if one of their customers can't maintain the margin/haircut.
> I've always laughed watching the cultist end of the crypto community up on their imaginary moral high horses talking about how much "better" crypto was than banks and regulated markets..
> given the fact that crypto markets basically represent all of the shady shit manipulators in regulated markets would love to do but can't.
> +1. It's laughable. Segregated accounts, position limits, circuit breakers, margin limits, spreads across duration to reduce risk, etc are all GOOD things. The counter party risk in the exchanges right now is HUGE in the bitcoin world. Pass on that.
OK, let's hear a few of the stories. Or at least a few links.
(And I promise my pockets aren't deep enough to execute on them.)
Going long on high market cap coins with a longer timeline is a relatively safer bet.
I see the margin lending rates on some exchanges right now being 0.003% daily. This is for coins that move 10% a day.
Probably fair to assume fees aren't what the traders lose sleep over.
Hopefully people will read those contracts and understand how delivery actually works and realize that COMEX or whoever can halt delivery and settle in cash if they want to, etc.
 - https://www.cnbc.com/id/100630626
The current status quo is that large bitcoin holders can muck with crypto prices however they choose.
Crypto is always in the headlines and will constantly occupy the headspace of trader's colleagues and peers, so it's just human nature that they will not be able to resist having a taste.
How can you be diligent at identifying risks in bitcoin derivatives? O_o
Is there any reason to consider this statement inaccurate?
Not necessarily my POV that it'll happen, I'm just arguing that those two views aren't contradictory. (Even if they were, it is not unusual for a community of humans to hold diverse, and even incompatible, views.)
I think you are saying "futures reduce volatility for the trader" but I'm not sure.
However one needs some pretty steel-made cojones to short a bubble....
With futures, however, you can put together positions that will provide a known limit on your downside for short positions. This provides a more appealing avenue for shorts to get in with much less risk.
With respect to the latter, my own personal theory for why this is is that more liquidity means more individuals actively trading the asset, and that translates to more non-correlating factors affecting the price. This makes it less likely that a shock somewhere in the economy will have a significant impact on the price.
Modern economic scholarship properly offers a better explanation.
Thus proving that whatever he thinks about Bitcoin, Michael Bloomberg is clueless about the blockchain.
He is being confusing though and you could be right so...
Edit: a quick google lead me to Bloomberg's consul deployment cookbook: https://github.com/bloomberg/consul-cluster-cookbook/blob/ma...
A blockchain is a solution to the problem of establishing consensus without relying on an authority. If your systems relies on trust in an authority, adding a blockchain is good for one thing: marketing.
Whether or not it is something you think of as a good reason, “marketing” is a real reason things get done in businesses.
Projects like Ethereum, Hyperledger, and IOTA have a more long term focus. Full Disclosure: I have no positions in any crypto but have been reading a lot. Also, in the midst of two courses that go that cover crytpocurrencies and blockchain tech.
#1 gives a very good history of what a blockchain is, and how is implemented by bitcoin. This is enough to keep me away since I have learned about all the technical flaws:
#2 discusses blockchains, and consensus algorithms. This project shows lots of promise. They just added code that allows the consensus algorithm to actually be changed via a transaction, without a hard fork.
Bitcoin gets all the credit for introducing the world to the blockchain concept, but its far from a sound solution as a cryptocurrency.
Hyperledger meanwhile is not a distributed cryptocurrency project. It's software for building consortium blockchains, meaning blockchains run by trusted third parties.
I agree with you on Ethereum. It's now processing more transactions than all other decentralized blockchains combined, including Bitcoin.