Silk Road forums

Discussion => Newbie discussion => Topic started by: isallmememe on July 06, 2013, 02:12 pm

Title: value of btc while in escrow
Post by: isallmememe on July 06, 2013, 02:12 pm
just wondering with the drop in the btc value, what happens if the value of the btc's i paid to sr escrow, when i first purchase, has decreased in value significantly by the time i FE?

i'm guessing sr isn't going to take those sort of losses and i can't imagine the seller would want to either. so if the btc price fell a lot in this time, would i have to make up the shortfall or what??

thx
Title: Re: value of btc while in escrow
Post by: Wadozo on July 06, 2013, 02:38 pm
just wondering with the drop in the btc value, what happens if the value of the btc's i paid to sr escrow, when i first purchase, has decreased in value significantly by the time i FE?

i'm guessing sr isn't going to take those sort of losses and i can't imagine the seller would want to either. so if the btc price fell a lot in this time, would i have to make up the shortfall or what??

thx

Most vendors choose to peg (hedge) their listings to the US dollar for a 4% fee. This is a description from the SR Wiki -

Quote
  Unfortunately, the Bitcoin exchange rate isn't as stable as we would all like it to be, and can fluctuate wildly in a matter of hours, let alone the days or weeks it takes for a package to arrive. Because of this, there is a real danger that the Bitcoins being held in your escrow account will lose value by the time your customers finalize their orders. So, we've given you the option to hedge the future payments you are expecting from escrow such that the dollar value of the payment doesn't change as the Bitcoin exchange rate changes.

For example, someone purchases one of your 10 btc listings. The dollar value of the order when purchased is $100. Now, a week later when the transaction is finalized, those 10 btc are no longer worth $100, they're worth $50! Because you hedged the escrow, you won't get paid 10 btc, you'll get 20 btc equaling the original value of $100. Of course, the opposite is also true. If Bitcoins appreciate in value while your payment is in escrow, you'll get fewer Bitcoins, but they will still equal the original dollar value.

The option to turn off or on escrow hedging can be found on your "settings" page. While it is on, the payments for any orders placed with you will be hedged. Payments for orders placed while it is off will not be hedged, but any hedged orders still not finalized will remain hedged.

On your account page, your escrow balances are split up between hedged and unhedged orders. All orders are hedged as soon as they are placed and unhedged as soon as you are paid.

You can expect a loss of about 4% of your normal payment when using the escrow hedging feature. This is due to the fact that, both when hedging and unhedging, you will lose the bid-ask spread between the available orders that can be used to fill your hedging order.   
Title: Re: value of btc while in escrow
Post by: youcantouchthis on July 07, 2013, 07:14 am
just wondering with the drop in the btc value, what happens if the value of the btc's i paid to sr escrow, when i first purchase, has decreased in value significantly by the time i FE?

i'm guessing sr isn't going to take those sort of losses and i can't imagine the seller would want to either. so if the btc price fell a lot in this time, would i have to make up the shortfall or what??

thx

Most vendors choose to peg (hedge) their listings to the US dollar for a 4% fee. This is a description from the SR Wiki -

Quote
  Unfortunately, the Bitcoin exchange rate isn't as stable as we would all like it to be, and can fluctuate wildly in a matter of hours, let alone the days or weeks it takes for a package to arrive. Because of this, there is a real danger that the Bitcoins being held in your escrow account will lose value by the time your customers finalize their orders. So, we've given you the option to hedge the future payments you are expecting from escrow such that the dollar value of the payment doesn't change as the Bitcoin exchange rate changes.

For example, someone purchases one of your 10 btc listings. The dollar value of the order when purchased is $100. Now, a week later when the transaction is finalized, those 10 btc are no longer worth $100, they're worth $50! Because you hedged the escrow, you won't get paid 10 btc, you'll get 20 btc equaling the original value of $100. Of course, the opposite is also true. If Bitcoins appreciate in value while your payment is in escrow, you'll get fewer Bitcoins, but they will still equal the original dollar value.

The option to turn off or on escrow hedging can be found on your "settings" page. While it is on, the payments for any orders placed with you will be hedged. Payments for orders placed while it is off will not be hedged, but any hedged orders still not finalized will remain hedged.

On your account page, your escrow balances are split up between hedged and unhedged orders. All orders are hedged as soon as they are placed and unhedged as soon as you are paid.

You can expect a loss of about 4% of your normal payment when using the escrow hedging feature. This is due to the fact that, both when hedging and unhedging, you will lose the bid-ask spread between the available orders that can be used to fill your hedging order.   

This is the right answer.
In short, vendor won't loose a penny when it's hedged.

Thank you
YCTT
Title: Re: value of btc while in escrow
Post by: HurtsOnHeroin on July 07, 2013, 07:20 am
Although if you cancel the order, you lose the 4% hedging fee.