Price Discovery, that is an honest, fair prices offered or bid, backed up with commitment to the transaction, is hard.
Really hard in fiat technically, even harder to find in crypto.
Consider the price one just paid for their crypto and how that price "got there". Was it an honest, transparent, truthful transaction price?
Do we really play in a Zero-Sum Game, "I win, you snooze, you lose" culture of pricing?
One simple acid test Question?
"Was Naked Shorting ever involved in manipulating the price of your crypto before you bought, pushing the price up or down?"
Answer? Yes, in most all cases.
If you are a Community Fund/Treasury Manager making investments to prop-up Community Treasury growth, ahead of pension plan payouts as employees retire, well then, honest price discovery is paramount (mandatory).
Does the same Community Fund Manager get that price discovery protection in fiat stock and bond markets, where most all there investments go these days?
Answer? Sort of...
In the US people go to jail(sometimes) for pulling off 'naked shorts', that is bid/as a price of
Nice? Not.
Fair? Hardly.
The Path to Honest Price Discovery for Crypto- INMEMDB AND Immutable Distributed LEDGER Stores of Price Data Points
Having an oracle feed on exogenous Price data streams, that is the oracle placing external price data into an In Memory Database "INMEMDB" (Redis or Hazelcast take your pick cuz I don't to G stuff) is one approach and definitely part of the legacy equation of fetching market prices in the land of fiat and also crypto these days.
The problem with using just the INMEMDB model is data in the key value pair store of the INMEMDB is well, mutable, that is someone can CRUD a clone, redirect traffic and make you think it is the right source for price discovery, pretty easily. There are human hands all over INMEMDB as well.
So lots of known attack surfaces which can be exploited, in weird and wonderful ways.
But wait a minute INMEMDBs have timestamps, isn't that all I need?
To protect against inaccurate price discovery, one might think the next step is sift through it all ordered by time stamps to determine the current price of the digital asset, then present.
Sounds easy and, well in principal, it is.
The hard part, as an investor, is figuring out who to trust, before you buy or sell a digital asset at some price you feel is fair, real.
Is the system or exchange, central or distributed, accurately reflecting the current market price, drawn on from adjacent sources and average to present the current market price, based on actual transaction prices or on the current Bid/Ask positions? And if its the latter, which ones are best trusted?
The investor dilemma with price discover is as always, Who do you trust to believe these 3rd party published prices?
What is behind the actual bid or ask price, beyond the issuer's whim or wish?
Is it a naked short play, or an honest bid or ask offer, ' actually there, when the bid/ask walls converge to, acutally trigger the buy or sell transaction settlement?
Well if there is not staking with a penalty for existing the trade contract window behind either the bid and ask, any sort of shinanigans or skullduggery can happen in the world of crypto and, does, more often than not.
What's Poor Pension Fund Manager to do, when they set up their own Order Router or , may the heaven's forbid, configure the rule sets in some quasi-automated Trading Desk attached to a few exchange services?
The Road to Honest Price Discovery of Digital Assets aka Crypto: Clouded in Smoke?
"Trust us, work with us, we will do a good job, just stake your store of value hear, we will wrap it and secure you a return"
That my friends is the Mutual Funds Sales Person spin, re-spun for Crypto... de-risking your investment by spreading risk via exchange coins and yield farming or DEFI if you like the umbrella statement. all the exchanges out there spin the same story...
"Sounds Great!. how do I sign up and get my guaranteed returns?"
The unspoken thought rattling around in one's noggin when one first hears the above spin.
Well let's look under the hood a a few popular exchange coins and yield farming DEFI offers to see how good their price discovery setup really is and what they do about making sure their investors in such nifty financial crypto instruments don't get unduly 'stung' by a Naked Short Play
Consensus: Up to the task of Honest Price Discover, IF the Quorum Agreement is 90%+
Consensus in Crypto comes in many creative forms, not all of them suitable for determining honest price discovery, especially ones like BTC or ETH where 51% is good enough (for crypto block protection, if they can defeat the culprits from controlling 51% of the nodes per block creation epoch shuttling around transactions to complete settlements between parties).
IOTA's ability within one of their two schemes to dial-up or down the consensus and for a particular epoch and even a community geographically or logically organized shows so me promise, especially if price discovery efforts ran on a parallel side chain with its own genesis and history. Mixing the transactions and price discover on the same chains could work, given IOTA supports time stamps from distributed Network Time Protocol dNTP sources.
That said, if the sources of price information feeds arriving through an oracle simple come from markets which have no protection against nake short action, then what does it matter wht you dial up the Consensus agreement percent to in the quorum deciding if the price is honest at that moment?
Naked Short Protection : One of the Keys to Honest Price Discovery.
First let's just say the Crypto market 'aint no over papered Comex play explained ' , suppressing honest price discovery with an oversupply of certificates beyond the actual supply of the physical metal in shipping form (in the vaults so to speak) . That said, crypto does have a host of problems lurking in every central and distributed exchange in the form of the penalty free bid and ask offer removal, devoid of any time contract with staking requirements and partial loss of stake amount of either the bidder or seller(ask) back out from their original price commitment.
In the above use case Reputation of the buyer and the seller of the digital asset does very much matter and, should be transparent to the both parties before a bid or ask price is set by either party.
Preventative Medicine- Reputation Scores, accessed via Distributed Public Ledger keys , immutable data secured elsewhere?
Think eBay. If one buys something does the seller actually deliver what one has purchased, on time and in great condition?
Most times the answer is yes.
That said, there is an element of blind trust on both sides of the settlement, which unfortunately has not really been solved by the likes of eBAY and others to ensure bullet price honest price discovery with reserves and deadlines offering some modicum of price discovery protection in the latter's case.
Knowing who you might be buying from or selling to, is important, how transparent that is and, the depth of history required, for each player in the potential transaction, is always a big variable, the form of which, that is the degree of Reputation transparency, remains in the end, the buyer and sellers choice in a free market.
Proxy Price Checking Service: Blockchain Node+Oracle Consensus and History helping AI decide the way forward:
For you and your Order Router
"Got rules, got safety, we're de-risked, right?" Says the Pension fund Manager to the AI_Engine/ML Developer and Test Team..,
a Unison "Yup" and, away the Pension Manager goes, pressing the key to "activate them ornery Order Routers" trying, largely in vane to out manoeuvre other better equipped Order Routers and their intelligent Rule sets of big Banks (curve driven algorithms included). These Big Bank Order Routers are well armed to battle at their respective Casino table, armed with unlimited fiat reserves, able to out smart most any Pension Fund, with one key stroke to secure the price they want of a Stock or Bond or Crypto at a time at the price they want, versus the Community Fund Manager operating the Pension fund order router, authorized to invest in same, always getting out manoeuvred by some power that shouldn't be with regulations favouring the former, which would be your prov/state or federal legislature dishing out said regulations. What does those govt guys know anyway about anything in any of these markets? Credentials please.
See the problem? You have the minor leaguers playing against Pros, with the buy/sell advantage and outcome all but pre-determined in favour ofthe Pros.
Fiat Markets can never be 'truly honest price discovery driven markets', Crypto markets can be, if we want them to be:
Enter "BRUTUS" Brute Force Deterministic Pricing with Crypto Staking & SC evoked Penalties for early withdrawal of bid or ask prices.
The SOVRINTown project is at the moment in the applied research phase, starting to take form in terms of the 'lego tech' salad bowl mix of open source we are considering, to resurrect some very good brute force B2B Market, deterministic price matching code, a spin out of CMU, some 20 odd years ago.
This B2B code we call BRUTUS in the current project I am working on, formerly partly known as Powerloom circa 2002+.
BRUTUS is transforming and refactoring a known to work , brute force deterministic price mathcing engine. It's a 2021 modernization designed to be faster and even more secure and yet also 'scale out' better than the earlier form of code, a CMU spin called Powerloom. BRUTUS is about to be mashed up 0.7 style in existing LAMP form with some tweaks, first to manage DC Data Centers and COLOS as a Service, then next, BRUTUS will transform to have a MEAN UI/UX form latched to an INMEMDB (likely Hazelcast_core IMDG or Redis Lab Enterprise served up by F5 Networks) and will find its way into and early SOVRINTown Treasury Management Open Source Mashup 0.9 as an oracle add-on, after some testing of the same number, to be deposited on Github here, for anyone to fork and fiddle with, contribute to the effort, as will DHT Distributed Hash Table Logic.
The 0.7 Mashup for COLOSaaS in the form of Digital Pools ETA is currently June 5th, 2021, driven by a partnership with the PowerLoom inventors, mostly and, a few other 'honest price discovery' enthusiasts. so BRUTUStly honest price discover for crypto is a CAN/AM affair for now. Expect the names to change, so we will keep you posted on that as well. (after all we are in stealth mode figuring this big problem out)
Et Tu BRUTUS?- A Free and Open Source world of Honest Price Discovery
Will BRUTUS be open source? The core will be for sure. We will figure out the add-on value stuff most likely the way Hazelcast and Redis Labs handle their business models. After all, we can't run on air. ;)
The SOVRINTown Oracle implementation will get forked, likely rename Price_Discovery_Oracle or _PDO for short and be strapped into a test UXTO DL with Komodo (SCs & DEX) and BTC for DPoW protection, facilitating and recording on Pirate Chain. Thereafter we we will see where BRUTUS and _PDO forks of the refactored Powerloom B2B price matching engine code goes from there.
For the _PDO (pretty damned ornery) variant is a good match for IOTA me thinks, which be could form the follow on 0.8 Beta Field Test (ETA Sept 5th 2021), using IOTA SCs as the front end and the WASP DAG Test Network to test both of these parallel development efforts.
One thing for sure is, BRUTUS doesn't like central control price feeds and, cuts to the chase finding the best match. So no chance for any one exchange to behave like Caesar when it comes to price discover, ie- no Naked Short Protection = Shit Reputation Score, published and recorded to the world an Honest Price Discovery Rank Score "PDRS, frequently, immutable stored with everyone else reporting price to BRUTUS or the _PDO on a distributed public blockchain. Index criteria to be shared shortly to get all your feedback ;)
We will keep you posted, until then, do your best to make sure the price is right and so is the bidder or asker. ;)
TK over and Out..
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