I was offered a bounty by abit to deploy an automated market maker that sets the price to the current implied value.
From https://github.com/steemit/steem/issues/175:
abitmore commented 7 hours ago • edited
...
When you have your bot up and ready to keep 0.001 spread around the median feed, I'll donate 10k STEEM for running it as promised. I appreciate your efforts and willing to help, however, it's not wise to play against the market.
You can read my other posts to find the interesting and heated history between abit and myself. I was surprised at this offer of a bounty. Then again:
abitmore commented 6 hours ago
Yes adm is my account. I set a wall up just now after saw a wall setup by others.
TBH the offer for trading around peg is not really an offer. If you come up with better idea, I'm wiling to provider another offer.
So at this point I am not sure if he was just making false bounty offers, or if he will honor it (or maybe he will edit the github comments and deny it?). UPDATE: I have received a partial bounty of 100 STEEM! maybe there are some language issues that make me misunderstand abit a bit
Anyway, I said I would write an automated market maker around the implied price today. So I did. It is now live and making 0.777 STEEM bids and asks around the implied market price. I explain in https://steemit.com/steem/@jl777/sbd-at-0025-btc-how-is-this-making-any-sense-i-explain-what-happened-with-the-pricings-today about the SBD premium that is not exactly as it seems and I use this to calculate the effective implied price, after adjusting for the cross market arbitrages.
For now it is running at low frequency and low volume of 0.777 STEEM, but so far it is doing a decent job in tracking what the market is actually doing. Unfortunately, I have nowhere near the capital required to have it slew to the 1 SBD == $1 level, but I will use whatever upvote reward I get from my posts to finance the automated market maker.
For now it is once per 5 minutes at 0.777, which is 1111 STEEM per day max exposure, so this is within what I have already earned and I am content to just leave old quotes there. I am paying zero attention to the liquidity points as abit always is clearing out all by bids anyway and I dont use sybil accounts. this means the automated market maker will self-trade as it is not very smart, but that doesnt get any credit for the points, so even though I could put the bids and asks in different accounts to weasel these points, I am not.
Since it is running at low volumes, I dont have any setback conditions. But to protect the bot from fast moving markets and rapid changes in the implied values I would need to make it suspend its new offers during unstable markets. this can be detected when significant arbitrages are available in the SBD or STEEM markets. With such protections, it would become much safer to have significantly higher volumes for the bids and asks.
My interest is in creating and maintaining a fair and orderly market with a tight spread and maintaining a 1:1 peg. I cant do the latter until I get financing, either from a whale who would loan me the STEEM to enable this, or if I qualify for liquidity awards, or if a special market maker contract is awarded to me that grants 1 of the hourly rewards per day. I do not need to make money from the market making and am willing to do it on a non-profit basis, but I cannot put in any more than the 100 BTC that I have put into STEEM already.
Maybe there will be enough upvotes to make up for the promised bounty. At that level I will be able to increase the frequency to once per minute and probably boost the volumes. I have a bias setting that allows me to make the market maker bid more (or less) than the adjusted implied pricing. By setting that at 1%, it would push the price up until it reaches the $1 per SBD. If I can get the financing to achieve this, then it will make SBD equivalent to $1 in realtime. At the level of liquidity rewards, it would be possible to support the peg in all but the fastest moving markets
James
P.S. If you are a whale and interested in enabling the realtime peg you can contact me via jl777 on bitcointalk
The more engagement (whether humans or bots) there is in the liquidity market, the better.
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I highly recommend looking at the logic I use in my trading bot at https://github.com/pontifier/rebalancer
It trades using the idea of balancing the trades on either side of the market based on the amount in it's account. The more money it has, the tighter the spread. It is basically guaranteed to not loose money, or make bad trades unless the price crashes to nothing... IE it is always better off after a price change that returns to the current value.
I'm just afraid this is the absolute top, and I would never deploy it here.
The version in the public repo is old and I've made several improvements since then when I ported it to coinbase exchange.
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thanks. I use a cost averaging effect in the current version to achieve similar result. The advantage is that it is nearly stateless and like your bot after the price retraces, it will be in profit. The reason is that if its theoretical price is above the current market, the buy side fills immediately and the sell side sits on the books at the theoretical value. Similarly, if the theoretical price is below the current market, the sell side fills immediate and the buy side sits on the books at the theoretical value.
So when the price reaches the theoretical value, the difference is locked in. Since it is maket making in a derivative market I dont think it matters so much even if the current price is the alltime high (I highly doubt that!) as the premiums fluctuation to positive and negative against the theoretical values.
Granted this might be a special situation, but I like to keep things as simple as possible that gets the job done
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made a new account called "taker" which never takes, only makes:
https://steemd.com/@taker
1 minute frequency, 7.77 STEEM, offers expire after 1 hour
still no points
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reduced spread from 1% to 0.1%
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deployed version that is once per minute jl777
and another version increased ordersize to 7.77 STEEM
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I still have ZERO liquidity points!
https://steemd.com/tools
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I didn't see your bot on the top bid or ask list. What's the account you're using for trading?
//Edit: just saw it. lets see..
By the way you created too many posts with similar topics and made many cross references among them, too hard to follow. I even suspect, are you trying to game the voting bot for more content reward?
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I dont know about any voting bot. I am writing a series of posts on the same topic, so it cant help but overlap. The content rewards are insignificant (other than the intro one which was a special case) and with you downvoting me, I will probably just get pennies from the posts.
Bsteem 0.006672 -> 0.006645, implied SBD 4.422193 adjusted 3.347785
Bsteem 0.006305 -> 0.006375, implied SBD 4.263183 adjusted 3.167674
big drop just now
current theoretical value is 3.34, so my bot will do a pair of orders a bid and ask 0.1% away from the theoretical value. One of them will fill right away, the other stays on the books until the market gets to the theoretical value.
After running for the first hours, it isnt losing money and maybe making a little bit, but at such a small ordersize in the main account it is hard to get exact stats
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Looks like you're spamming the order book. If you leave too many orders on the book, you'll certainly run out of fund.
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what are the limits? or do you mean just running out of capital?
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Yes, the capital. By the way it seems nobody has hit the bandwidth limit so far. There is a new proposal or issue about bandwidth on github.
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I cleared out some bids to balance my capital and make some room for my bot. now it should be able to handle longer than 10hrs of unattended operation, maybe 24/7, at the 7.77 STEEM ordersize
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hi @jl777, please check my latest post out. I wrote it to you and the other whales. Maybe you will agree with it :)
https://steemit.com/steemit/@steemitpolitics/6rqxnc-to-the-whales-get-your-head-out-of-your-ass-and-vote-good-content-up-you-are-harming-steemit
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i am not a whale at all, not even a dolphin here
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well, 12.000 Dollars in your wallet are pretty much. Thank you for the up vote :)
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pushed a version that only submits either bid or ask, whichever one wont get immediately filled. So no takings, getting a bit late for messing with new accounts
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Great post. I'll be keeping my eye on your material . I hope we can all create lasting Steemit relationships that are mutually beneficial! :)
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Great post. I'll be keeping my eye on your material . I hope we can all create lasting Steemit relationships that are mutually beneficial! :)
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