Quote from: the joint on August 28, 2011, 08:27:24 AM

And what would you deem the optimal bid wall price to be?

This is not my decision. This should (and will) be determined mathematically by the bot and a combination of votes by people running the bot.

Quote from: norulezapply on August 28, 2011, 12:48:10 PM

An entity to game the free market, what a great (and original) idea!

It's ironic that someone called "norulezapply" thinks I am trying to game a system.

People are quick to jump to conclusions, as usual. Let's get started on the truth here, instead.

A little background on me

I'm an old school gamer, and I love to game systems. I have loved doing it since I was a kid playing JRPGs on the PS1. Finding a loophole that you can exploit for personal benefit has always been a personal challenge to me when playing games. I'm of the belief that the best games are (nearly) perfectly balanced, to make it fair to all players. This is generally either accomplished through very simple rules (See also: chess, poker) or very flexible, but well-arbitrated rules (See also: Mage: The Ascension, Amber).

This is one of the main things that attracted me to Bitcoin initially - it is a way to escape a misbalanced system (central banking) and be on a level playing field as a player.

Game balance

A game that isn't well-balanced results in a play experience that is frequently unsatisfactory. If one player (or most commonly The House) has an inherent advantage over another player, there will soon come a time when one player consistently wins, and all other players lose. This is usually followed by overturned game boards, thrown controllers, people claiming a game is rigged (often correctly), and most importantly, people not playing the game in the future (which would manifest as massive long-term sell-off in this example, thereby destabilizing the price, the exact opposite of the goal).

To say that you exploit a system is incorrect, or at least incomplete. Really you exploit badly formed rules within a system.

Exploiting imbalanced systems

In order to exploit a system, the system must have a set of rules that are reliable enough to build a strategy on, and poorly formed enough to have a loophole large enough to exploit at a rate of (subjective) benefit greater than the amount of effort required to exploit the rules. The exploiting player must be in a position to utilize these poorly formed rules.

The rules of BitCoin

Unlike traditional fiat currency, the value of a BitCoin is determined by the Bitcoin community as a whole. In the BitCoin market, there is virtually no regulation of any kind, there are no real indicators of who controls what percent of the market, and no reliable pattern to base your strategy on. Therefore, no truly successful way to "game the system" exists. The closest thing we have to a reliable pattern to exploit is that BitCoin is extremely volatile, which is the antithesis of a reliable pattern.

Exploiting BitCoins's system of rules

Which isn't to say people can't try, or even succeed at such a goal. Simply that it hasn't happened yet, and that the BitCoin market is a poor system to try in - not that it will stop people from trying. So called "price regulation" bots are already functional on mtgox. All they do is generate volume at a certain range to throw off the weighted close indicator. Functionally "scalping" bots have a similar result by virtue of similar behavior. Mining pools, Bid/Ask strategies, stop-loss order bots, and in fact, almost everything done on the exchanges right now besides buying for a long position, (and maybe even that too,) are forms of attempting to game the system semi-successfully.

Fundamentally, all of us who are creating BitCoin businesses, speculating on an exchange, mining, or even buying for a long position are gamblers, and maybe investors. To say that any one group or individual has enough leverage in the BitCoin economy to successfully game the system is a fallacy. The closest thing we have to someone capable of gaming the system right now is the deep bit mining pool, or the mtgox exchange itself. They control large portions of the economy in terms of production and pricing, respectively, which are two of the most relevant facets of any economy.

This closely mirrors what happens on other currency/commodity exchanges and markets. The NYSE is traded by bots all day long. The entire concept of a broker on the floor of a stock exchange is just a bot that has to go to the bathroom sometimes, or sleep, or can make decisions you didn't tell him to. The inherent weaknesses of stock brokers is one of the reasons bots are so prevalent in that market.

One could easily utilize a bot that is designed to manipulate the market force graphs as they appear on mtgoxlive.com and pull or push the market price over time. One could easily utilize a bot that is designed to only accept standing orders as they are offered at a certain price point, but never to place a standing order. One could easily utilize a bot that is designed to pump-and-dump BitCoins over a certain period of time or price range. One could easily utilize a bot to track market depth and automatically even out the bid/ask curves (a far less transparent attempt at market stabilization). Every one of these is an obvious attempt to game the system.

Successfully gaming a system is a result of manipulating the rules (I'm looking at you norulezapply) which are malformed within that system to form reliable beneficial results for one player above the rest of the pack.

What this bot will do

I theorize that a bot can be used to set artificial low and high points for the market depth charts by automatically generating a pool of bids and asks by a distributed network of individuals contributing whatever amount of buying or selling power they like of their own volition, to a system that is designed to neither make actual bid orders or actual ask orders go off (unless the price skyrockets or plummets, in which case the bot is the least concern of anyone in the market, and it buys some time for the entire market at both ends).

So rather than create an environment where the rules benefit exploitation, the result of this bot is to create an environment where the rules obstruct exploitation via limiting risk across the board to all participants in the environment, (even those who don't run the bot or are unaware of it's existence).

Is this bot an attempt to game the system?

I guess this a form of gaming the system, in that it is an attempt to control the market - to get that control away from people who currently try to exploit it. It is an attempt to game the system in that it represents an attempt to use meta-game information to manipulate the playing field - to make it more level to all players. It is an attempt to game the system in the sense that all price blocs are - only this one isn't controlled by a few people who control all the supply, it's distributed across a pool of anonymous individuals. It is an attempt to game the system by virtue of being a strategy to utilize in a market - like every strategy in every market.

At the core of this concept is a desire to add a stable pattern at the extreme ends of the BitCoin exchange market (where it is hardest to successfully exploit) for the stated and transparent goal of minimizing the ability of the system to be gamed. This protocol is designed to eliminate the profitability margins for scalping, pump-and-dump, and the other traditional gaming strategies that currently dominate many (not just BitCoin) markets. The result of this bot is insulation to the market from people attempting to game it.