Market Pegged Asset (MPA) backing collateral layers?

in bitshares •  18 days ago

Market Pegged Asset (MPA) backing collateral layers

In the recently updated Hertz whitepaper, the possible layers of MPA backing collateral were defined as the following, accounting for their level of publicly proven backing collateral.

MPA LayerBacking CollateralExamplesMPA Layer Justification
0UIAN/A – e.g. USD MPA backed by UIAUIA backing lacks proof of collateral on the blockchain
0L0 MPA (UIA backed MPA)N/A – e.g. Index MPA backed by L0 MPAL0 backing lacks proof of collateral on the blockchain
1ACCT UIAN/A – ACCT is a future planned featureACCT has proven backing collateral, thus it’s trustless unlike EBAs.
1BTS (Core token)bitUSD, bitCNY, Hertz, HeroBTS backing collateral proven on blockchain.
2L1 MPAXCD (backed by bitUSD)MPA backing which has proven BTS backing

What does each layer mean?

These layers are not defined in the Bitshares reference docs on MPA, rather an unofficial community created definition. If you disagree with the layer definitions then do reply with suggestions for improvement.

The following sub-sections will describe each layer.

Layer 0

MPA which are backed either by an User Issued Asset (UIA) or an UIA backed MPA do not have publicly proven backing collateral; they require trust to be placed in the hands of gateway services and for this reason they are categorized as layer 0 MPA.

Layer 1

Once Atomic Cross Chain Transfers (ACCT) are implemented on the BTS DEX in manner that's fully trustless then we can assume a level of confidence in the existence of the relevant backing collateral on the blockchain.

Bitshares (BTS) when used as backing collateral for an MPA provides full proof of collateral on the blockchain once borrowed into existence.

For an MPA to be categorized as layer 1, there needs to be proof of backing collateral on the blockchain.

Layer 2

MPA which are backed by any layer 1 MPA (ACCT|BTS backed) have proven backing collateral double locked on the BTS DEX. Layer 2 MPA experience greater separation from BTS' price volatility as they are

The reason that MPA backed by L0 MPA aren't L2 is that despite the UIA backing being double locked, proof of backing collateral doesn't exist on the blockchain for the UIA.

Triple+ locked MPA?

We've mentioned L2 MPA and MPA backed by UIA backed MPA, however we haven't provided any further layer definitions nor triple+ locked MPA collateral. The reason for this is that you "May not create a bitasset backed by a bitasset backed by a bitasset." - the triple locked MPA is not permitted.

UIA backed MPA's are allowed on the BTS DEX?

It's always been possible to create an MPA which is backed by an UIA (L0), but it's only been possible via the CLI not through the UI, which has prevented users from experimenting with such MPA configurations. Soon UIA will be a permitted MPA backing type within the UI!

After the above change is in place, I believe we'll begin to see more L0 MPA being created on the BTS DEX which is great for the reserve pool but perhaps not great if used maliciously.


Any thoughts?

Post below & I'll respond to any questions you have 👍

CM

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A little deep technical for my knowledge.

All I know is anything that advances the BTS platform and secures my stake I have in BTS and other coins on that exchange is good.

Good to see the smart people have this on lockdown and are evolving.

Thanks for the specs.

I read the github thread and I get what you're saying CM. I also understand the potential use cases, as @abit outlined, as well.

And while adding that feature to the user-interface may certainly give it more exposure to potential "bad actors", it could also provide greater awareness for a feature that is already available on bitshares (and readily accessible to those savvy enough to use it).

That said, I think the "feature" definitely warrants greater disclosure to clarify and highlight the differences between regular UIAs, and ones backed by another UIA, as was also discussed in the github thread.

Perhaps showing something to the effect of "UIA collateralized UIA" (with a little circle showing "what does this mean?" and a hint window further explaining it, along with the additional inherent risks) when pulling up the asset for trading, and on the asset description page, could go a long way to further clarify the additional risks such tokens may represent.