Trading on the Bitshares PlatformsteemCreated with Sketch.

in #bitshares3 years ago

I am sure you can find plenty of opinions here on steemit and elsewhere about trading cryptocurrencies. I feel my perspective is a bit distinct for a few reasons. I am the type that normally sites facts and figures. But this post contains plenty of opinion. Please do not blindly believe everything.

My perspective is unique because:

  1. I am a developer - My whole career (1990ish to present) I have written software. I wrote software before my 7th year of school. I am currently part of the Bitshares core team. That makes me biased (pride of authorship), but also gives me some "behind the curtains" access to how the technology is written. The code is open source, so you too can see this. But I understand most do not have the time.

  2. I am a trader - I have been a trader for a long time. I'm no HFT hedge fund (nor want to be). I also do not consider myself a quant. But I do automate my strategies. I have experience trading US stocks, bonds, futures and options.

Coming from those perspectives, I can evaluate where Bitshares is as a trading platform.

As a trader, I want access to markets. For US exchanges, I have used Interactive Brokers for many years. Their front-end for trading is not very user-friendly, but provides access to almost all the features a trader could ask for, including some algorithms that the bigger boys use. I occasionally use their front-end to monitor my positions. But for day-to-day use, I rely on automation. Interactive Brokers provides an Application Programming Interface (API) so that I can write code that monitors positions, enters, adjusts, and cancels orders, and all the other stuff that I don't want to stare at a screen to do.

Now, compare that to Bitshares. With Bitshares, I have access to many trading pairs. If I want to trade BTC for LTC, I can. If I want to trade BTC for USD, I can do that too. And then I can withdraw how much I want when I want (some important exceptions to this, see below).

The front-end to Bitshares is also not very user friendly. But just like Interactive Brokers, Bitshares has an API. I can automate my trading strategies by writing code. I only need to use the front-end occasionally.

Now, trading cryptocurrencies is not like trading US securities. Within the US borders, exchanges and brokers are required to be licensed. They also must state if they are insured. Nobody wants to take money from their insured bank account and place it in the account of a broker that is not insured. So uninsured brokers do not make it in the US market.

In the cryptocurrency world, users (hopefully?) choose a broker that has some staying power. That is usually a big name. That often works, but not always (I'm looking at you guys, MtGox, BTC-e).

So how big is the Bitshares company? The answer is: It doesn't exist as a company. There are some legal entities under and around it. But they are there to help with regulatory issues and such. The actual running systems are spread across the globe, and watched over by systems that the community members elect. The systems are paid for by the trading fees you (as a community member) pay. So you have a say in where your money goes. That is quite a unique concept, right?

But that raises many questions. But do not worry. Most have documented answers. I won't go further into that here.

Now, how does trading on Bitshares compare to other exchanges? In some respects, it is more like US exchanges than say Coinbase or other crypto exchanges.

US exchanges are often aggregates. Trading AT&T (T) on the BATS exchange is pretty much like trading T on the NYSE exchange. Their order books are combined, to give the trader one view. For the traders that only want the best price, they do not even need to choose which book they will trade in. Their broker does that for them.

Bitshares only has 1 book. But all the brokers "aggregate" into that book. So if you are looking at the book provided by, say OpenLedger, and someone else is looking at the book from another broker, you are seeing the same book.

Now, Coinbase only has 1 book as well. But it only contains trades for their customers and their in-house algorithms.

Let me be clear. The Bitshares order book is not an aggregate of all exchanges that trade that pair in the world. But it does aggregate all orders within the Bitshares ecosystem.

Speed is another differentiator with Bitshares. With something like Coinbase, you will see your balance reflected almost immediately. But the details of the transaction are hidden from you. There is no access to the "coinbase chain" that shows the transaction flow. They traded transparency for speed.

US Exchanges also hide the details. The trade happens extremely fast. But the details (if you want them) are not available for 3(!) days.

Bitshares is not as fast at executing trades. But it is still very fast. And, as soon as the trade happens, you can get proof. That means you can prove that a particular trade took place on the permanent blockchain. That lowers the trust you must have in middlemen.

Now, I must include some items that are different in Bitshares. I wanted to say "that are bad", but it doesn't quite fit here.

  1. Fiat - Bitshares has the concept of fiat. You can trade BTC for USD. USD is backed by the system, and matches the value of the real USD. You can even trade USD for CNY like it was a FOREX exchange. But at the moment, you cannot withdraw fiat. That may change in the future. But for now, you must buy a cryptocurrency, and then go to a Bitshares "broker" (they are called "gateways") to have them deposit it in your account. I hear whispers that using fiat directly is in the works, but I have not seen it yet.

  2. Spreads - Many markets have a large gap between their bid and ask price. This is a function of the members of the community. As the community grows (especially the community of active traders), the spreads will reduce. You can see proof of that by looking at the spreads of the popular books (i.e. USD/CNY) vs. the unpopular ones.

Both of these issues can be improved. The fiat issue requires technical and business innovation, and I am sure there are several teams working on it. To fix the spread problem requires growth of the ecosystem. And I hope this article helps spur that along in a small way.

For those wanting to create a cryptocurrency, Bitshares should certainly be on your list for a place to host it. I (of course) would say it is the best place to launch it. But that's not my area of expertise, so I'll let other people talk about that.

I do not write articles for a living, but I would like to hear how you view this article (don't worry, I'm thick-skinned), or trading on the Bitshares platform. If you have questions, comment below. Perhaps that will stir me to write more.


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