Quote from: greyphilosophy on October 12, 2014, 05:08:48 AM

I feel your pain. I closed my position today at a total loss of .77 btc, and I count myself lucky it wasn't worse. I think if bitfinex does this again they should offer unlimited swap contracts at a rate of 1.11% (rate of depreciation). If they suddenly add more liquidity now though then I'll be pissed.

I don't think they can offer naked swaps. The swaps need to be backed up by something.

They could possibly sell a set of two contracts for $0.
1. A short position
2. A long position

So you would spend $0 and receive one of each contract. Then you could buy and sell them - letting everyone be market makers. If they aren't able to instantly add/remove mining capacity (and I think they lack this magical ability) then the "dividend" could be based on the mining of a pool - without actually doing any mining. This "fake mining" has the tiny advantage of making you more money as you aren't adding to the mining hash rate. And you shouldn't need to pay the pool fee =)

I think this removes the need for swaps and might solve the manipulation problem. Do you see any problems with it?

The University of Iowa Electronic Market (http://tippie.uiowa.edu/iem/) uses a similar approach. They sell contracts for political events like who will win the US presidential election (somehow this isn't seen as gambling). For $1, they issue three contracts 1) Democrat wins, 2) Republican wins, 3) Other wins. One of these three contracts will be worth $1. They also sell contracts based on a percent (Ex. percent of vote a political party will get in an election).