Silk Road forums

Discussion => Newbie discussion => Topic started by: proxanne on May 28, 2013, 02:05 am

Title: What happens in this scenario?
Post by: proxanne on May 28, 2013, 02:05 am
What if you have bought, say, a .30 BTC item.  While waiting for delivery to finalize, the price of BTC drops $20.00 in value?  What would happen in that case?
Title: Re: What happens in this scenario?
Post by: SealTeam6 on May 28, 2013, 02:23 am
Well it should not matter to you since you have already spent the coin.  As far as the coins value to the vendor, it will depend on whether the vendor hedges his coins or not.  If the coins are hedged that means the vendor will receive the original dollar value in Bitcoin of the item when finalized.  If the coins are not hedged then the opposite will take place, meaning a loss in the value of the coins.
Title: Re: What happens in this scenario?
Post by: proxanne on May 28, 2013, 02:30 am
I don't understand.  If the bitcoins in escrow are hedged, and the value drops from 100 USD to 50 USD per BTC, where do the bitcoins the reimburse the lost value come from?  Are they simply created from the bitcoin matrix then?
Title: Re: What happens in this scenario?
Post by: UptownBrown on May 28, 2013, 02:43 am
yea what they said
Title: Re: What happens in this scenario?
Post by: Sooperknot on May 28, 2013, 02:47 am
I don't understand.  If the bitcoins in escrow are hedged, and the value drops from 100 USD to 50 USD per BTC, where do the bitcoins the reimburse the lost value come from?  Are they simply created from the bitcoin matrix then?

In theory, they would come from another bet placed by the SR hedging mechanism -- essentially a "short" bet that Bitcoins would go down in value.  If that happens, the bet pays off and the "hedge fund" uses the proceeds to cover losses on its other bet (the "long" one betting that Bitcoin would go up in value). 

In practice, it may simply come out of DPR's personal funds -- we don't know exactly how his hedging is done.
Title: Re: What happens in this scenario?
Post by: ThisIsPermanent on May 28, 2013, 03:14 am
I don't understand.  If the bitcoins in escrow are hedged, and the value drops from 100 USD to 50 USD per BTC, where do the bitcoins the reimburse the lost value come from?  Are they simply created from the bitcoin matrix then?

In theory, they would come from another bet placed by the SR hedging mechanism -- essentially a "short" bet that Bitcoins would go down in value.  If that happens, the bet pays off and the "hedge fund" uses the proceeds to cover losses on its other bet (the "long" one betting that Bitcoin would go up in value). 

In practice, it may simply come out of DPR's personal funds -- we don't know exactly how his hedging is done.

Thank you for taking the time to explain. I've often wondered about this myself, but haven't found an answer until now.