BitShares SmartCoins - the SCAM continues

cyrano.witness (57)in #bitshares • 8 years ago

History

Several weeks ago a group of BitShares users decided to modify two significant parameters of the bitCNY asset on the BitShares blockchain. BitCNY is one of several #SmartCoins with a decentralized peg to CNY. As described here and here, the parameter change leads to a direct devaluation of bitCNY, robbing 1% of value from bitCNY holders in favor of bitCNY shorters.

I'm sure this behaviour violates existing laws regarding fincancial securities almost everywhere in the world, in particular because all existing documentation on BitShares' SmartCoins continues to make the following false promise:

SmartCoins are guaranteed to be worth at least their face value

In my view, the only adequate word for deliberately selling stuff with a false guarantee is #SCAM.

Latest events

Meanwhile, the same users who are scamming bitCNY holders and buyers, intend to expand their activity to #bitUSD. A proposal has been created to apply the same parameter modification to the bitUSD asset. As justification, they claim

the community now strongly support to modify bitUSD

(a support which consists of 26 forum members, not shareholders, at the time of writing).

Most likely the same will also happen to other SmartCoins. bitBTC will probably be next.

Conclusion

Stay away from BitShares' SmartCoins if you care about your money!

If you're looking for a USD-pegged SmartCoin, check out #Steem SBD. It has two distinct advantages over bitUSD:

There are no modifiable parameters associated with it. Unless steem hardforks, SBD will always be converted to STEEM at the median price of the seven days preceding the conversion.
SBD pays interest (10% per year at the time of writing)

#SmartCoins #SCAM #bitUSD #Steem

8 years ago in #bitshares by cyrano.witness (57)

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xeroc (70) 8 years ago

IMHO your title is a tad too sensational. It's not the smartcoins
per se that are scammy it's rather the way the committee deals with
committee-owned smartcoins.

Smartcoins created by individuals (so called privatized smartcoins) are
not affected and the committee can't tune it's parameters but the
issuer.

Furhter I believe that there is something in between "scam" and "fine
funing of an experiment".

As for your conclusions ... recall that STEEM is still in beta
(whatever that means) and that the peg can still be changed if the
witnesses approve it more quickly than shareholders can vote them down.

Whether the 7 day window was a good decision or a reduction to 3 days
would make sense is a topic that needs to be discussed still. BTW, there
is an issue on github that proposes a force settlement for SBD if the
debt grows to high. So you are not safe from potential changes in Steem
either.

$7.25

18 votes

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logic (67) 8 years ago

Well, that quite debunked the assumptions...

$0.00

1 vote

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cyrano.witness (57) 8 years ago

I believe the word SCAM is appropriate because SmartCoins continue to be advertised with the settlement guarantee, which is no longer in place for bitCNY, and will soon cease to exist for bitUSD (and most likely others).

The attitude of the committee (including your label "fine tuning of an experiment") show complete lack of respect for other people's property. IMO that's catastrophic for a blockchain that ultimately tries to sell trust.

All market pegged assets (aka SmartCoins or MPA) in BitShares are affected by the underlying problem, i. e. the issuer can modify crucial parameters after the fact. In that regard, MPAs created by individuals are even more vulnerable, in the sense that committee-owner assets cannot be modified at the whim of an individual.

$0.00

1 vote

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jademont (68) 8 years ago

Well, could you please explain why do you think that " the parameter change leads to a direct devaluation of bitCNY, robbing 1% of value from bitCNY holders in favor of bitCNY shorters"?

$0.00

2 votes

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cyrano.witness (57) 8 years ago

BitShares SmartCoins are pegged to their counterpart indirectly in the same way that SBD is pegged to USD. The peg is based on the guarantee that a smartcoin can be exchanged for an equivalent amount of the backing asset. I. e. 1 SBD can be exchanged for 1 USD worth of STEEM, 1 bitUSD can be exchanged for 1 USD worth of BTS (BitShares).

When the proposed parameter change comes into effect, 1 bitUSD can only be exchanged for 0.99 USD worth of BTS. That means that effectively bitUSD is not longer pegged to USD but to 99 US-cents instead, which means a devaluation of 1%.

Note that the modification of the settlement "guarantee" does not only affect the settlement as such. It will be priced in by market participants, which means that bitUSD will also trade 1% lower on average.

$0.00

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