Silk Road forums
Support => Technical support => Topic started by: soupmoney on March 14, 2012, 06:16 pm
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So this is something that I started thinking about from having an order refunded recently. My order was placed late last evening for 12.13 btc and ended up being canceled by the vendor about 5 hours later. Now do to the recent surge of the btc, the hedged dollar value has changed quite noticebly and I only received 11.50 btc. Now I understand hedging well, and believe that it is essential for say a week long delivery to keep pricing square; BUT what happened to the missing change in bitcoins? The vendor just gets to keep them b/c he held them for 5 hours while the coins GAINED value, even though no service was attempted???! Unless I'm missing something it seems like this could be a real issue, ex: possibly vendors on such a bull market day could cancel half their orders, tell the buyers "sorry man, we ran out." and pocket btc worth in the hundreds to thousands of dollars depending on the size of the vendor. In the world of finance this would be shorting a currency, and since SR's hedging values are delayed to MT. GOX average price index, this would be insider trading since they know the outcome beforehand. Not that the FTC and its rules have any authority here (duhhh the reason were here, FUCK LE haha) but I find it something interesting to consider and propose to the community. cheers to my first forum post, soupmoney
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So this is something that I started thinking about from having an order refunded recently. My order was placed late last evening for 12.13 btc and ended up being canceled by the vendor about 5 hours later. Now do to the recent surge of the btc, the hedged dollar value has changed quite noticebly and I only received 11.50 btc. Now I understand hedging well, and believe that it is essential for say a week long delivery to keep pricing square; BUT what happened to the missing change in bitcoins? The vendor just gets to keep them b/c he held them for 5 hours while the coins GAINED value, even though no service was attempted???! Unless I'm missing something it seems like this could be a real issue, ex: possibly vendors on such a bull market day could cancel half their orders, tell the buyers "sorry man, we ran out." and pocket btc worth in the hundreds to thousands of dollars depending on the size of the vendor. In the world of finance this would be shorting a currency, and since SR's hedging values are delayed to MT. GOX average price index, this would be insider trading since they know the outcome beforehand. Not that the FTC and its rules have any authority here (duhhh the reason were here, FUCK LE haha) but I find it something interesting to consider and propose to the community. cheers to my first forum post, soupmoney
Yeah, I've had this happen numerous times in other ways. When I first came here $/BTC was at around $28 each. Most of us that have been here for a while have had this occur. But you are making back exactly what you put in, you aren't "technically" losing anything, but you would have profited on the surge, yes. I do not believe the vendor gains anything by this, but I believe SR does.
If I understand it correctly the seller "hedges." This converts your coins into cash immediately. If the seller doesn't "hedge" it stays in escrow as BTC and not cash.
Anyone feel free to correct my errors.
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So this is something that I started thinking about from having an order refunded recently. My order was placed late last evening for 12.13 btc and ended up being canceled by the vendor about 5 hours later. Now do to the recent surge of the btc, the hedged dollar value has changed quite noticebly and I only received 11.50 btc. Now I understand hedging well, and believe that it is essential for say a week long delivery to keep pricing square; BUT what happened to the missing change in bitcoins? The vendor just gets to keep them b/c he held them for 5 hours while the coins GAINED value, even though no service was attempted???! Unless I'm missing something it seems like this could be a real issue, ex: possibly vendors on such a bull market day could cancel half their orders, tell the buyers "sorry man, we ran out." and pocket btc worth in the hundreds to thousands of dollars depending on the size of the vendor. In the world of finance this would be shorting a currency, and since SR's hedging values are delayed to MT. GOX average price index, this would be insider trading since they know the outcome beforehand. Not that the FTC and its rules have any authority here (duhhh the reason were here, FUCK LE haha) but I find it something interesting to consider and propose to the community. cheers to my first forum post, soupmoney
Yeah, I've had this happen numerous times in other ways. When I first came here $/BTC was at around $28 each. Most of us that have been here for a while have had this occur. But you are making back exactly what you put in, you aren't "technically" losing anything, but you would have profited on the surge, yes. I do not believe the vendor gains anything by this, but I believe SR does.
If I understand it correctly the seller "hedges." This converts your coins into cash immediately. If the seller doesn't "hedge" it stays in escrow as BTC and not cash.
Anyone feel free to correct my errors.
That's also the way I understand the system. The Vendor never saw any money because it was still in Escrow. Until you "Finalize" the order the money stays in Escrow and under SR's control.
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The difference goes to SR. If the BTC price drops, SR also adds the extra coins. If you don't like it, don't buy from a vendor who hedges.
Most people like it though, because they only get BTC right before their purchase (basically buying stuff at the dollar price).
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The difference goes to SR. If the BTC price drops, SR also adds the extra coins. If you don't like it, don't buy from a vendor who hedges.
Most people like it though, because they only get BTC right before their purchase (basically buying stuff at the dollar price).
So it'd be possible to get more coins from a refund if the BTC priced dropped? or get a few coins back after you finalized an order as well? Just never had this occur always seems to be the opposite way. Looking around I see that on the Seller Guide it says that sellers are expected to lose 4% from hedging which I expect would go to SR
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So it'd be possible to get more coins from a refund if the BTC priced dropped? or get a few coins back after you finalized an order as well? Just never had this occur always seems to be the opposite way. Looking around I see that on the Seller Guide it says that sellers are expected to lose 4% from hedging which I expect would go to SR
I've never had a refund, but that's how I understand it works. As a buyer you get the dollar value in BTC in case of a refund, as a seller you get the dollar value in BTC after the funds are released from escrow (finalized by the buyer). There wouldn't really be a point to hedging if you can only get less coins.
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The reason hedging was brought in was to prevent sellers losing out when the btc market was in freefall. 6+ months ago the market place was so volatile that on extremely choppy days vendors would simply refuse to deal. You couldn't be a successful vendor (esp. using escrow) without being a decent speculator or extremely cautious/lucky. Hedging was necessary to give vendors the space and security to concentrate on the drug market. I can guarantee that throughout that period DPR lost a ton (although I reckon his fees made up the difference).
I understand the frustration of OP, its bad enough going through all the trouble of getting btc and then having your order cancelled, let alone being charged for the inconvenience.
However it is simply not the case that a vendor can exploit hedging for gain. DPR on the other hand will hopefully show a long term profit. IMHO he deserves this given the expense incurred by bringing stability to SR in the delicate early days. Conversely, with hedging off a vendor is only required to return a nominal btc amount and therefore, buy choosing when to confirm (or cancel) an order, able to profit from btc swings.