[font=arial][size=small]I've issued tokens that will pay a BTC distribution (between 0 and 0.1 BTC) determined by a future BTC price.[/size][/font]
[font=arial][size=small]It's a small scale test. I auction off only three units of each asset. More may be sold through the DEx.[/size][/font]
[font=arial]Full description here : [size=small]http://jpja.net/2014/09/bull-and-bear-contracts-for-bitcoin/[/size][/font]
[font=arial]Auctions end with blocks 319,650 and [/font]319,656 (Monday Sep 8 2014)
[font=arial][size=small]The distribution is determined by the BTC price on [/size][/font]18 Sep 2014 23:00 UTC.
[font=arial]Obviously this is NOT trustless betting, but I believe such contracts have potential. They are closely integrated with Bitcoin (XCP isn't used and Counterwallet is not required although recommended). The DEx opens for a second hand market, which is very good for contracts with expiry far into the future.[/font]
[quote]Remember to cancel any outstanding orders before 11pm UTC on Sep 18.[/quote]
I'm curious about what happens if orders are still live? Did you make these assets callable?
[font=verdana]After I pay the distribution (or expiry "out of the money") the token is worthless. If you have a bid and someone sells to you after this point, you buy a worthless token.[/font]
[font=verdana]How does a callable token work? Can I pay the distribution and then immediately call back the token? Or will I need to pre-set the date/time? In the latter case I fear not being able to pay the distribution in time, e.g. due to Internet being down.[/font]
[quote author=JPJA link=topic=563.msg3327#msg3327 date=1409992148]
[font=verdana]After I pay the distribution (or expiry "out of the money") the token is worthless. If you have a bid and someone sells to you after this point, you buy a worthless token.[/font][/quote]
That makes sense. It's not something enforceable by the blockchain which is why I mentioned the prospect of a callable token.
[quote author=JPJA link=topic=563.msg3327#msg3327 date=1409992148]
[font=verdana]How does a callable token work? Can I pay the distribution and then immediately call back the token? Or will I need to pre-set the date/time? In the latter case I fear not being able to pay the distribution in time, e.g. due to Internet being down.[/font]
[/quote]
With a callable token, you specify at issuance an XCP price and date by which you reserve the right to buy back the tokens. You could set a date a couple weeks past the end of your game and a price of zero to be able to take the tokens out of circulation at no cost(except the btc fee). Having them out of circulation makes the next game easier and reduces the chances that the tokens may be sold post-game.
[quote author=weex link=topic=563.msg3331#msg3331 date=1410022914]
With a callable token, you specify at issuance an XCP price and date by which you reserve the right to buy back the tokens. You could set a date a couple weeks past the end of your game and a price of zero to be able to take the tokens out of circulation at no cost(except the btc fee). Having them out of circulation makes the next game easier and reduces the chances that the tokens may be sold post-game.
[/quote]
+1
This is truly a captivating experiment. Can you ELI5? Assuming I know nothing at all, how do traders profit in this scheme? As the issuer, how does JPJA profit?<br />/* JPBULL value proposition */<br /><br />- if (btcPrice > $600):<br /> - JPJA distributes 0.100 BTC to each owner of 1 JPBULL<br />- else if (btcPrice > $500):<br /> - JPJA distributes 0.001 BTC per dollar above $500 to each owner of 1 JPBULL<br />- else:<br /> - No distribution<br /><br />/* JPBEAR value proposition */<br /><br />- if (btcPrice < $400):<br /> - JPJA distributes 0.100 BTC to each owner of 1 JPBEAR<br />- else if (btcPrice < $500):<br /> - JPJA distributes 0.001 BTC per dollar below $500 to each owner of 1 JPBEAR<br />- else:<br /> - No distribution<br />
Really interesting stuff here.
JPJA is offering these tokens for sale that work like options. His risk is capped at 0.3 btc in the case of a massive moves either to $400 or $600 minus the total amount he is able to sell the options for.
As a buyer of one of these options, you would be putting money where your expectations are. Say you think at the end of it, the price will be $520. Then you would be willing to pay something like than 0.02 btc (minus a little risk/profit premium) for JPBULL and JPBEAR is worthless to you. JPJA also reserved the right to participate so if the best offer is 0.001 btc for each token, then he can set a reserve to manage his own risk.
This becomes interesting if after all tokens are issued, they are resold. The new sales price may in that case reflect a change in sentiment. It's hard to draw any conclusions though because volume would be quite low as to be statistically insignificant.
Hopefully JPJA can fill in the details because I'm not completely sure if that covers each of his intentions with this.
Weex: Correct.
XCP90: What is ELI5?
Regarding profitability; for a given contract it is up to chance whether I profit or lose, as Weex explained. Over the long run I could make a steady profit only if there is a bias among the bidders. For example, if people are risk-seeking they may willingly pay much for a small chance of winning a lot. They may also pay much for another reason; the BEAR contract works like an insurance. I'd make money for the same reason casinos and insurance companies do.
The auction is completed. My notes are here : http://jpja.net/2014/09/notes-from-jpbull-and-jpbear-auctions/
Instead of an initial auction followed by trading on the DEx, I think a vending machine would work very well for these contracts. A robot would constantly update the prices derived from the underlying BTC price.
Thanks for writing up those notes. It's good for people like me who are not familiar with these kinds of offers.
UPDATE: The BTC price at expiry was $424.05901. This means that JPBULL expired worthless, while the holders of JPBEAR received a distribution of BTC 0.075’940’99 each. I’m excited by how easy it was to arrange the experiment. No programming was required. I did everything within Counterwallet.
[quote author=JPJA link=topic=563.msg3471#msg3471 date=1411109084]
UPDATE: The BTC price at expiry was $424.05901. This means that JPBULL expired worthless, while the holders of JPBEAR received a distribution of BTC 0.075’940’99 each. I’m excited by how easy it was to arrange the experiment. No programming was required. I did everything within Counterwallet.
[/quote]
That's great to hear and a good point about being able to do things from CW…