The Whale, the Liquidity King and Wash Trade Expert -- a Deeper Anlysis of STEEMIT Internal Market Using Market Insight by Steemprices.com
The Whale, the Liquidity King and Wash Trade Expert -- a Deeper Anlysis of STEEMIT Internal Market Using Market Insight by Steemprices.com
Steemians!
It's @jasonmcz again form Firstblood.io, I am writing this post along with my co-worker @zackcoburn ! If you missed my last blog on the topic of our internal market and market making last time, here is a link to the post.
Read this post can certainly get you caught up on some of the topics I will be discussing today.
site: http://steemprices.com/market/
The whole thing about whales gaming the liquidity reward caught a lot of attention from the community last week but most people only know the stuff above the surface and today in this post, we will dig deeper into the following areas: algo wars, true liquidity, why is this happening and lastly introducing the new tool of ours.
The State of STEEMIT Internal Market
1. Monopoly: Appears to be lots of players but really just two (big ones) and all small players.
2. King of wash trade: @abit's 'A Clan' aced the liquidity game.
3. No real liquidity after gaming the ladder: Whales seem to be inactive after they ensure they have the top spot of liquidity ladder secured.
4. Algo Wars: Robots are getting more and more flexible and they learn from each other (good and bad).
5. Rise of @jl777: Jl777 have been trading with his sub account @taker and have been rising to the top of liquidity ladder.
The Great Wall of @abit's
A big shift in this dynamic (kind of) is how market makers change their strategies accordingly to the fork so they could ensure they will be getting the reward most of time or 95.45454545% of time to be exact, in the last 88 payouts according to the data we get from our scanner.
@abit is one of the early gamers in this liquidity market. He is nice guy. We talk sometimes on the slack and the #marketmaking channel. He typical use one of his a'clans account to set up a wall for protecting the underlying liquidity he's pinging on the book just for over 30 minutes. Then he will use his taker account @abit to eat all the liquidities on the book until all of his liquidity is taken out and his points are earned on the liquidity ladder.
[Wash Trade] Taker Account @abit --> Maker Account @alittle @aton @alod @adeal @abunch and etc..
He normally does this once every half hour but sometimes he does more because of the other players .
Breaking the wall & Our dynamic strategy
Thanks to my co-worker @zackcoburn devoting extra time after work to improve our little robot, we actually build something quite amazing.
A dynamic market making robot that self-adjust to whales order and liquidity pressure.
Like I mentioned in my last article, one of the 5 strategies our robot is able to deploy is detecting whales orders, however whales are adjusting their strategies as well, SO we must play flexibly and cover all scenarios.
One of our dynamic strategies this time is to detect Whale's Wall so we can create a dynamic spread in between the walls @abit set between bid and ask -- and pick profits off him. Some other participants figure the same thing out and they are doing the same as well which causing @abit, I assume, to adjust his orders every now and then so it doesn't get too costly for his to eat up the liquidity on the book.
Rise of @jl777
@jl777 has been quite heavily involved in this market making mayhem by protesting and making a market himself successfully (most recently). He's climbing the ladder fast by using a simple and elegant strategy.
Populating the 0.2 penny wide orderbook by 77.77 Steem (7.77 steem) at a time
note: shown as @taker -- that's his maker account
This strategy is so elegant that everyone from retail to whale has to go through his orders thus more steady liquidity points! He actually provides liquidity on different levels on the orderbook.
The Liquidity King of King of Wash Trade?
@abit has been known for making the market and gaming the liquidity among the community and less successful peers of his, but how much, to be exact, does he earn a day? by doing this?
Username Payouts
- nirvana 12
- alittle 11
- adeal 9
- abunch 9
- alot 9
- aload 8
- thebeatles 7
- aton 7
- zztop 6
- theguesswho 6
- thewho 4
- inbamn10 1
- anonbtc2 1
- wednesday 1
- tuesday 1
- tinfoilfedora 1
- xeldal 1
- inbamn11 1
Last 3.5 days (88 payouts total) he has secured 53 payouts
How much will that be?
53 * 1200 * Avg(Steem/SBD*) = $ 209,880 *assume the average price trailing 3 days is about $3.30/Steem
Release of Steemprices's Market Insight
Special thanks to @xeroc @svk31 (https://github.com/svk31/steem-rpc)
We want to use this chance to open all the data piping work we've done to ourself for our robot to the community by releasing this awesome tool to inspect the orderbook and liquidity distribution.
You will be able to view :
1. who's placing orders on the current orderbook
2. who has gotten the last liquidity reward in the past 3 days
3. liquidity reward distribution chart
[Steem Market Insight]
What's next?
@zackcoburn and myself @jasonmcz will be busy for a while because our project -- the upcoming eSports DAPP - Firstblood.io is releasing an alpha in the coming weeks and we are working extra hard to bring it out to the community.
But we will keep working on Steemprices.com and next version we make the following improvements:
- We are planning on adding more data insight to this site such as historical & implied volatility, prices from more data source, daily volume, avg. daily volume, weighted market cap and etc..
- Make it more MOBILE FRIENDLY, we want this web app to be THE app for our community to check prices at
- Maybe we can do more interesting stuff with it! Shoot me a message on the slack @JasonMcz
- @pinartemiz brought up more currency support! We will add other currency as well (it will be normalized using spot FX rate)
- @steemgrindr brought up about chart! We will see if we could aggregate multiple exchanges historical data into one chart in next version.
As always, thanks for reading!
Upvote will be much appreciated!
my puppy lulu when she was 12 weeks old!
great report!
I want to make clear that my bot never does any self-trading. The only time I ended up selftrading was when I actually needed to buy some STEEM with SBD and, well, its hard to not buy from "taker"
It looks like taker is either creating the tightest spreads for real purchasers or forcing the other bots to tighten their spreads, and taker is getting about 2% of the rewards and the selftrading bots get 98%.
While getting even 2% of the rewards is nice, I am glad the broken reward points are suspended until it can be fixed. Will be interesting to see if the selftrading bots will continue to provide liquidity using the ample rewards they already received.
You might be interested in https://steemit.com/steem/@jl777/steem-price-forecast-usual-weekend-slowdown-and-then-the-quartering-of-supply-will-explained-in-post
also contrary to its name, taker never takes, it only gives liquidity.
I just update to reflect how takers never take liquidity. Neither do I, I am pretty sure we are the ones here on the ladder who don't wash trade.
You should rename it to "giver" :P
Genius @jasonmcz
I'd like to point out that a concerted group of whales / witnesses are really behind the capital with the "daily band clan." Centralization of the rewards due to a poorly designed algorithm (although testing was done now, and the 'bug bounty' goes to participants, as @dantheman would argue) is, at least, in my opinion, disadvantageous to any decentralized network.
I would also like to point out that we began to discuss the issue in the inability for actual competition within a day or two. Then, "The Hack" occurred and much of the development (which included improving an arbitrary precision floating point for price as a function) was put on hold while the Steemit team rolled that out.
In the meantime, rewards were still being printed for those who knew how to use the cli_wallet or write scripts.
Basically, the idea was to make a ruckus about there not being any competition due to concentration of capital due to the design of the algorithm while at the same time "band" together and pool resources to attempt to spread the liquidity rewards.
https://steemit.com/steem/@jl777/a-non-gameable-liquidity-points-system
The liquidity reward will soon be gone according to the latest release notes:
https://github.com/steemit/steem/releases/tag/v0.12.0
So the liquidity rewards are gone already, or will be gone on July 26th?
My understanding is they will be gone after the next hard fork on Tuesday, July 26th.
From @theoretical 's comment above:
Thank you for your first post on this subject -- it helped us decide to remove liquidity rewards in the next blockchain update. Just because we don't comment on something doesn't mean we're not out there listening to what people have to say about improving the platform.
Redesigning liquidity rewards is a possibility in the future, but it seems like a hard problem, because the blockchain basically has no way [1] to detect wash trades or other forms of self-dealing.
[1] People can anonymously create sock puppet accounts for under $5 via mining, or by buying Steem with bitcoin from an exchange.
If there's some signal that says "these two guys are trading with each other too often" or some other statistical "suspicious trade" signature, that logic would be public in the blockchain source code, and someone looking to game the system would simply examine the code and design their trading bot to stay just under the threshold for being penalized.
I have repeatedly suggested incorporating DISTANCE from the price feed as a factor in the reward.
If something is worth $4 what value is there for bids of $3? Granted the ask of $3.1 has value, but if the bid is for 100000 STEEM at $3 and ask $3.1 with another 100000 STEEM, then regardless of what the theoretical value is, the price will be $3/$3.1
The old points system did not take into account value provided properly and it awarded points regardless of the risk taken. What risk is there to selftrade 100000 STEEM over a short period? Adding duration is alway gameable with enough capital. Just put "corks" as the inside spread and the aging ones just outside. Wait for time to pass and wash all the trades, make tens of millions of points.
DURATION is risk, so the more DURATION the more points makes sense to some degree. An order on the books for 3 seconds is not much risk, especially as a washtrade can be queued up right behind it, so clearly for a 3 second duration, the reward should be low. But a 3 day duration that is far from the market price is also not taking risk. So DURATION by itself is not enough.
I am sure @theoretical could make some fancy calculable function of DISTANCE and DURATION that is much, much better than the old method. Simplistically it would be DURATION/DISTANCE integrated over time. But I am sure having it purely linear like that is too simple and would have some gameable aspects.
So we add a third factor ORDERSIZE, I mean what benefit is a 100000 STEEM bid at any price? There is barely enough SBD in existence to fill that amount! With the vast disparity between the SBD and STEEM that is available extremes are being used.
So one solution is to limit the size of bids and asks that qualify and also rate limit the number of orders that can be done (otherwise we will get rapid fire 100,000 orders per minute just so people get the points).
And that gets me back to my idea of having both an automated rewards system and a human moderated one. It is pretty hard to be making a market without being noticed, so like http://steemprices.com/market/ does, if most of the volumes can be properly tagged as to who is controlling the order, then we can actually do a good job of determining washtrades!
Like making a spam filter purely algorithmic is a very hard problem, but people can tell what is and isnt spam. Oh, like curating, get the people involved!
https://steemit.com/steem/@jl777/a-non-gameable-liquidity-points-system
@theoretical, are you on slack? Could you join our channel #market-making
IMO wash trading is really irrelevant. What is relevant to liquidity is when orders are on the book and offering liquidity, not when or how they come off the book. The problem with the current algorithm primarily stems from the awarding of points based on executed trades rather than time on the book and spread offered.
I think the steemprices.com is great, but it seems to be missing some data. taker did win 2 awards over the last 2 days, also there are several 77.7 orders on the orderbook listed as "retail trader". Odds are low that it isnt taker
Ending posts with puppy pics is despic.... adorable!
Wow, your post found me as I was wondering about liquidity and the whales. I'm new to the crypto economy and the learning curve has been steep but completely enjoyable. Thanks for the hard work and I look forward to using the service !
@prufarchy thanks for the support! Make sure you check the site:
http://steemprices.com/market
I don't know much about trading, but thank you so much for weaving the news into such a vivid narrative! Your work is becoming the "Moby Dick" of steemit - the story of a whale hunt :)
bahahaha @akareyon this is literally the best thing I've heard today!
what a cute dog !
nice read like usual. Thank you, Jason ;)