Quote from: franky1 on February 09, 2016, 08:04:40 PM

Quote from: Fuserleer on February 09, 2016, 07:58:57 PM

Quote from: franky1 on February 09, 2016, 07:32:54 PM

thus even in a stable exchange. your supply buffer would not be the same. and because there is lack of supply. people can abuse that. by arbitraging. and only using your exchange as a temporary 'flip' rather than a permanent store

That is they buy at the buffers lowest bid, and sell at its highest ask, but the buffer doesn't post trades that other traders can see, it only reacts to trades that others posted. The rules that define how much it will buy/sell are strictly enforced but easy to calculate what the buffer will buy and sell at in any given moment.

no!

they sell at a higher price elsewhere... and then deposit fiat into emunie to buy your cheap controlled coins.. then withdraw.

basically the users dont hoard coins long term in your "buffer" they just use your exchange as a quick 2 minute flip.
im guessing your economics doesnt extend to flips and arbitrage of the open market.

so maybe its best you stick to your strengths of the centralised single exchange economy. as your theories fall flat and dont work out on bitcoins open market. but i do hope you get some fame in centralised markets and (utopian dream hope) that you become the person to solve world fiats issues.

Ok now I understand! If you had explicitly stated 5+ posts ago that these were external exchanges we could have saved some time, as with your mentioning of the buffers and such, I wrongly assumed you meant the internet exchange. Basically then your argument is the same as monsterers below?

Quote from: monsterer on February 09, 2016, 08:25:37 PM

There are two chief issues in play here, I think:

1. I believe CIYAM's point is that there is nothing backing the stabilisation of the currency, except for the currency itself, which is the same way bitshares works. If demand crashes, there could be a downward spiral of devaluation causing a black swan. This is largely a fair point, which can only be resolved by having the backing currency off chain, which is hard to say the least.

Indeed, and again, I never suggested that it could indefinitely prevent this from happening, but that it simply postpones the "crash" in case the cause is actually a whale/s colluding as per an agenda. But the same can work in reverse surely, if the backing currency crashes, then the value of the asset it is backing is also in jeopardy.

Quote from: monsterer on February 09, 2016, 08:25:37 PM

2. Having the blockchain as a market maker subjects the currency itself to the adverse selection problem due to 'informed traders', which all marker makers face. This scenario manifests itself as traders buying from you when you ask is too low and selling to you when you bid is too high. There are a proportion of informed traders present in any market, alongside 'noise traders' who buy/sell at any price. Your simulation won't have included the effect of informed traders because it only manifests itself in live forward testing. However, you can add it to your simulation - informed traders know with certainty the future direction of the price after time period X, so they profit from your pricing mistakes.

Right so that brings me to the crux of the issue that needs to be addressed. You are right, these informed traders were not accounted for in the test, I considered it and maybe wrongly determined that their effect would not be great enough to deplete the buffers.

However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it. Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?