Playing in the Margins: bitUSD and BitShares on Open Ledger

in bitshares •  last year

Yesterday I posted an altcoin story about getting into PIVX and BitShares. Today I've been learning more about BitShares and its decentralized exchange or "DEX" called Open Ledger.

You can create your own Open Ledger account here: https://bitshares.openledger.info. It's a full wallet and exchange built for the browser. If you do set it up, be sure to back up your wallet regularly and secure it with a strong password created by a password manager like 1Password. And by "back up" I mean store the file somewhere other than your hard drive. One trick I use with 1Password is to store secrets there which can include backup files and encryption keys. The encrypted 1Password file is then saved to the cloud via Dropbox.

The first thing I did last night to learn more about BitShares was to watch these five BitShares 101 videos by Max Wright for BitShares TV (thank you @kenny-crane for the recommendation):

I also read a bit from Dan Larimer's blog talking about how Pegged Assets work along with Price-Stable Cryptocurrencies and User Issued Assets (UIAs) from bitshares.org. I also really enjoyed this video from Jonathan Harrison on how to create bitUSD:

The BitShares 101 videos goes into greater detail about what distributed autonomous companies are and how the pegged assets work. Now that I was all "learned up", I wanted to actually try things out.

Doing the Thing

Today I created a $200 loan in bitUSD using 110,668 BTS as collateral (at a 3 to 1 collateral ratio). This created $200 in value, essentially out of nothing and with no central party's approval. I then bought 37,119.58 BTS with that bitUSD and if the price of BitShares continues to rise, at some point my sell order will hit to obtain $200 worth of bitUSD at a lower price in terms of BitShares to repay the loan and release my collateral. Best case scenario, it will only make me about $10 worth of BitShares (though, of course, the price could go the other way as well and I'd lose money), but the point was to learn something.

I highly recommend the video above which walks through how to do it, but the basic idea is to hit this "Burrow USD" button in the exchange for the bitUSD market:

You can then use your BTS as collateral to borrow bitUSD into existence.

You can see my open order here along with my margin call:

So why care about any of this? Why does it matter?

For far too long central bankers, "auditors," and corrupt multinational hedge funds have been manipulating centralized financial systems for their own gain. Today we have the technology to provide things like derivatives (which are actually really important for global trade) without having to trust any third party or auditor. The market failures of the past were driven in many ways by greed, corruption, and human error.

Time and time again, if we have to trust people, we see a breakdown in expectations.

Governments get around these failures by using the threat of force and stealing from tax payers to keep the whole faulty system going. In the future, "too big to fail" banks will put their depositors on the line with bail-ins and negative interest rates.

We now have the power to stop this and chart a new path. The multi-trillian dollar derivatives market could be run openly, honestly, and securely on a platform like the BitShares Open Ledger DEX. We don't have to trust systems built on fiat currency made out of nothing or fractional reserve systems with almost no collateral.

Here's how you can start helping:

Don't just trade currencies on the big exchanges. Use Use Open Ledger and enjoy the tiny fees (only small amounts of BTS worth less than a penny) while having all the results already directly in your secure wallet with no need to pay withdrawal or deposit fees.

The biggest challenge is just getting the liquidity there. With enough people using it and talking about it, Open Ledger could get some serious attention from companies who are sick of playing by corrupt rules for corrupt people.

The future is open.

The future is decentralized.

Even though I've been involved in crypto for a while, I still feel like I know nothing because there's so much more to learn.

I get excited about this stuff because I think it represents some of the best practical answers to how we can actually make the world a better place without the need for government violence.

I hope you'll join me.


Luke Stokes is a father, husband, business owner, programmer, voluntaryist, and blockchain enthusiast. He wants to help create a world we all want to live in.

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One thing that I like about Bitshares - and also what makes it so hard to bootstrap - is that there is no artificial incentives or mechanisms that makes it unstable, or which favor a certain group of people . Holders get no interest on anything, there's no inflation, and the required collateral for backing the derivatives is very high. There's no mining just for the sake of mining, just extremely efficient witnesses with some skin in the game. All this makes it a little uninteresting for people used to the 40% collateral on Poloniex (2.5x leverage) and naturally bubbling coins, but at the same time it guarantees long term viability.

I'm glad you made the effort to learn Bitshares. I bet you look at the cryptoworld with different eyes now :-)

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Very well said. It not only gives me a different view of the crypto world, but a larger view of humanity as well. Here's this tool to solve the problems so many people complain about with regards to issues like the 2008 financial crises and yet most people know nothing about it and have no interest in learning about it. In some ways it's like we enjoy complaining about greed and corruption in the world but if we're not directly rewarded immediately by potential alternatives, we have no incentives to change anything.

I fall into this trap as well. It's rational self-interest. That said, I love how these new systems are about aligning incentives. "Skin in the game" indeed.

I am a total neophyte when it comes to most things crypto, so I really appreciate articles like this. The one thing I do know I am in alignment with, is something I see every time I leave a comment on one of your posts: "He wants to help create a world we all want to live in." That... is important, and if we all do our bit, I feel like we can eventually get there. If not in our time, in our kids' time.

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Okay, now I'm just embarrassed.
Why are you stalking Luke?
I AM STALKING LUKE
mutters ... I was supposed to tell you new and groovy things first

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NO SERIOUSLY
I did not see your comment.

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Hahah, you all are hilarious.

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Thanks. :)

What other choice do we have but to try?

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And try, we shall. If nothing else, it's a good lesson in staying true to ourselves and not following the sheeple.

You said, "The future is open.
The future is decentralized."

And I gave myself a high five for having a Open Ledger account before you told me to.
I'ma go run downstairs and tell @Denmarkguy he needs to be cool like us.

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High five! ✋

Hey @lukestokes, I just posted something today related to A Day In The Clouds, please try and check it out, I'm sure you can definitely appreciate it. https://steemit.com/originalmusic/@verbal-d/m-m-m-29-sliver-s-edge-of-ledd-s-silver-lining-collaborative-art-journey-with-everlove-original-beat

I thought I would share this with everyone who follows the series along with the Silver Lining.

BTW I Upvoted your post, didn't want to comment unrelated material on your post but your comments on @jedau's posts were over a month ago and I can't continue the conversation there

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Thanks :)

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You're most welcome, thank you very much for the up vote I appreciate the gesture and your precious time

Thanks for sharing..
Good luck.!!
@lukestokes

Very interesting. I'll have to give this a try even though I'm a bit of a latecomer. I saw the recent headlines that are creating some FUD around Tether and have been looking to understand bitUSD a little better. I just created a Bitshares account about a week ago and only recently been active on Steem. I'm fascinated by the Bitshares and Steem ecosystems. Thanks for the info!

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Excellent!

i have lost o.5 btc with bittrx. i always lose the passwords.

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Get a password manager. Seriously.

Now.

There's no excuse not to use a password manager at this point in time.

you can make a video about it ,, how about that?

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I could, but I linked to videos which probably do a better job explaining it than I could. Check them out.

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I did, watched all 5, actually traded some of my altcoins with bitshare , the videos were pretty much convincing about future of bitshare and its products.thanks for sharing the info

Awesome article, I would love to learn to do this borrowing and learn more about Margins in general.

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Thank you! It can be a little tricky, but as with anything, practice and experience helps a lot. Start slow, only risk what you're fine losing, etc, etc. Good luck!

If you do set it up, be sure to back up your wallet regularly and secure it with a strong password created by a password manager like 1Password. And by "back up" I mean store the file somewhere other than your hard drive. One trick I use with 1Password is to store secrets there which can include backup files and encryption keys. The encrypted 1Password file is then saved to the cloud via Dropbox.

What do you mean by that last sentence? The encrypted 1Password file is then saved to the cloud via Dropbox? I have been trying out 1Password, since the android and chrome os ports of keepass leave a lot to be desired. But I don't see any way to export your data from 1Password... I might try to find another option that gives me a little more control over my data, and peace of mind that I won't lose critical information and files if the company folds or discontinues the service...

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Hit the Sync tab in the preferences:

There are also backup and restore options in the File menu:

And you can export (but you have to have a single vault selected):

hey luke, i also bought some bitshares some days ago. I think it's a great technology and it will be worth far more in the future but for now I'm a bit confused with all the possibilities that come with openledger and this trading platform. You explained what you did to make some profit. Maybe you could do some more posts on what to do there and why? :)

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I haven't even made a profit yet. It's more about learning how things work. The "why" part is that this technology, if widely adopted, could greatly improve the world. A decentralized, open, secure exchange with a built in encrypted wallet is really useful. Sometimes it just takes some familiarity to poke around things and learn them.

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I'm reffering to this part: "Today I created a $200 loan in bitUSD using 110,668 BTS as collateral (at a 3 to 1 collateral ratio). This created $200 in value, essentially out of nothing and with no central party's approval. I then bought 37,119.58 BTS with that bitUSD and if the price of BitShares continues to rise, at some point my sell order will hit to obtain $200 worth of bitUSD at a lower price in terms of BitShares to repay the loan and release my collateral. Best case scenario, it will only make me about $10 worth of BitShares (though, of course, the price could go the other way as well and I'd lose money), but the point was to learn something."
This is just something that I as an unexperienced user would never do because it doesn't come to my mind that I can do this. But then I didn't even use an exchange before so I should probably start searching for materials that explain to me what I can do on an exchange platform.
The thing is tough that with all these new blockchain techs we also need people that bring it to the rest of the world and it has to be understandable for everyone. I just thought that you could do this very well :) I think cronos video series is a start

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Ah, the potential for $10 profit. Gotcha. Yeah, that's unrealized at this point. I could end up losing bitshares if the price of bitshares doesn't eventually go up.

Yeah, it's tricky stuff. I'm still learning what I can, but I'll try to explain it as best I can as well along the way.