As wonderful as trading in cryptocurrency can be, there is some drawback as well.
One of the concerns in the cryptocurrency segment is that of liquidity. This is one aspect that can certainly see some improvement.
It is a well-established notion that funds converted to cryptocurrencies are not as liquid as traditional assets.
And that is the problem which BitShares intends to solve.
But before we talk about BitShares, we need to understand the concept of value and how it ties to BitShares.
BitShares Review: Volatility, Value, and Bitshares
A popular gripe about cryptocurrencies is the fact that they are volatile. One minute they can be worth X and the next moment it can be worth Y. Everyone is happy when the price goes up but sad and frustrated when it goes down.
This lack of stability is a hindrance for the growth of cryptocurrencies in a larger context. The consensus is that businesses will not want to accept cryptocurrencies because of the swings in prices. Businesses don’t want to sell their product for one price and have to worry about netting less profit due to currency volatility.
They already deal with enough headaches, they want to deal with another issue for no reason.
Bitshares will also have the same problem of BTC. It will experience volatility, it can go up and it can go down, it all depends on the market.
What BitShares does to provide a form of stability is that it forms buckets of bitshares to support its assets. For example, one BitUSD is equivalent to X number of bitshares at Y price that equals one full dollar.
Today one Bitshare is worth $0.103054. $0.103054 x 9.8 bitshares would equal $1.00 dollar. A basket of 9.8 bitshares at the current price would mean that we have a dollar’s worth of bitshares that would back a BitUSD.
The current or future price of the bitshare would not matter, one would just need to recalculate how many bitshares are needed to make up one dollar. This gives merchants confidence, they can accept one BitUSD because they know that it is backed by a constantly varying number of bitshares.
This simple premise gives way to polymorphic digital assets such as bitUSD and bitBTC, assets that market pegged to the value of a dollar. It also makes for interesting functionalities such as collateralized shorts and options.
Let’s learn a little bit more about bitshares.
BitShares Review: What is BitShares?
Bitshares brings to the fore the idea of a decentralized autonomous company. Instead of looking at coins/tokens as just coins and tokens, view them as shares in a company. The company earns revenues or profits from transaction fees and can give those revenues back to the token holders/ shareholders as profits.
The founder of BitShares saw a bank as a company that is able to magically bring dollars into reality. He wondered why, if a bank can simply conjure up dollars, why couldn’t he?
He looked at the process of how a bank operated. He found that banks originate currency by viewing collateral, a car, silver or a gold bar. The bank will then issue banknotes based on the collateral, the collateral will ideally have more value than the notes given.
Bitshares will provide dividends to those who hold bitshares while also having a 200% reserve with collateral backing each BitUSD.
So how does it work?
BitShares is a platform that allows for several actions.
First, it serves as a cryptocurrency/asset trading blockchain network which allows users to turn their cryptocurrency investments into collateral.
It also gives them the freedom to exchange between the said assets in a simple manner.
Through this mechanism, it acts both as a decentralized cryptocurrency exchange and a platform to turn general commodities into tokens that are digital representations of fiat currencies or commodities such as gold and silver.
These tokens can then be used to purchase other cryptocurrencies or assets within the platform, without users ever having to cash out their investment through an external platform and go through the incurred charges on the action.
The method of being able to trade assets within the blockchain and not having to go through additional charges or turnaround times is what sets BitShares apart from other cryptocurrency exchange environments.
BitShares Review: Trading Real World Assets through BitShares
On BitShares, you can trade cryptocurrencies and other assets as well. These other assets have to carry sufficient value and must also have a specific framework to back up the said asset. These assets are termed as BitAssets on the platform and can be recorded on the blockchain just like any other digital property.
This means that you can trade other assets such as company stocks and even commodities such as gold and silver on the BitShares platform, which can then be turned into asset-backed, price-stable tokens.
And here, the use of multiple tokens that denote to the value of respective fiats such as bitUSD for USD, bitEUR for EUR, and bitCNY for CNY makes the tracking of investment liquidation that much easier within the platform.
The tokenization of cryptocurrency investments and other assets is not just limited to fiat currencies, users can turn their investments to other tokens such as bitGold for the provided value of gold and bitSilver for the trading value of silver.
It is important to note here that the bit/USD/CNY/YEN is divisible, fungible and is a managed market supply. In addition, individuals are able to make positions without holding actual currency (USD, CNY, etc).
They simply take a position, have BTStoken and exchange the value and risk as the market moves.
All of the aforementioned assets are dubbed as SmartCoins on the platform and follow a set of criteria when it comes to fees, whereas, any user-issued tokens that do not fall under the above criteria operate on a different fee mechanism.
What’s more is that this tokenization does not only allow users to have a slew of options to perform their trading activities with ease but also gives them the ability to short sell their existing investments, which lets them have access to a mode of liquidity without having to completely do away with the said investments.
BitShares Review: How Short Selling Works with BitShares
In the current setting, whenever we need to turn our purchased cryptocurrency into fiat, a more liquid and usable currency, we have to sell our cryptocurrency on an exchange instead of being able to use the investment as collateral for procuring liquid currency.
Needless to say, this cycle causes many of us to go through repeated and redundant processes, exchange rates and turnaround times.
Whereas, for seasoned traders, it also forces them to make comparisons with conventional trading, where they could easily turn their investment into liquid cash by shorting their stock, and adjust the margin once they have enough funds to back their stock investments.
That is where BitShares comes in.
The platform allows users to participate in short selling, where they can turn their existing investments into shares and easily trade them for asset-backed tokens, provided that they have enough collateral.
This method is perhaps the most revolutionary feature of BitShares. No other well-known, decentralized blockchain allows the short selling of existing assets while providing a completely safe environment to the lender and a friendly digital atmosphere to the seller.
In this process, all parties could operate under a propitious framework.
The mechanism under which BitShares executes its short-selling remains very simple to understand for seasoned traders. Newbies need not worry, it’s not too difficult to learn.
When it is put into action, the aspect of short selling opens doors to an array of possibilities to cryptocurrency holders. While it remains a risky method of trading, those who understand their collateral and know what they are doing can benefit greatly from it.
BitShares’ Role as a Decentralized Asset Exchange
As mentioned above, BitShares has its own asset exchange environment built into its blockchain, which is officially referred to as the Decentralized Asset Exchange.
With a self-explanatory title, it is not difficult to tell that the exchange operates without its decisions being dependent on a third party. It instead works through a decentralized structure with complete autonomy and transparency.
The exchange deals in trading assets ranging from cryptocurrencies to any recorded commodities on the platform while providing a fast and secure trading environment to its users.
Of course, when talking about a cryptocurrency exchange and its benefits, the discussion cannot be complete without reference to the touchy topic of fees. When it comes to the Decentralized Asset Exchange of BitShares, it has to be mentioned because it is one of the most valued aspects of the network.
While the fees on BitShares keeps updating to keep the blockchain’s service running in an optimal manner, for SmartCoin trades, it is almost never more than a few cents per trade, which is some of the lowest fees that you would be able to notice in the cryptocurrency exchange space.
The exchange and the network have BitShares’ main token, BTS, available through most trading pairs, which also includes SmartCoins. The BTS is the token that represents the assets’ value to the real world outside the blockchain, and is available to be traded through major cryptocurrency exchanges.
Thus, anyone who has any bitUSD, bitEUR, bitCNY, bitGold or bitSilver in their account could trade them in for BTS, and then have the BTS exchanged for fiat at another exchange if they are in need of liquidity into fiat (which would, of course, result in one time fees and processing times on the said exchanges).
BitShares Review: How User Issued Assets Work on BitShares?
As mentioned above, users of the BitShares network can easily issue their own assets through the blockchain. They just have to make sure that they follow the required framework such as know your customer (KYC) transactions and comply with the proper regulations.
These user issued assets can work as custom tokens within the platform that can be traded on the network. They can represent various assets in this form, including but not limited to company shares, stocks, reward points, or even physical commodities of their own.
With the restrictions and limitations that users can put on their issued assets, they also have the ability to ensure that they are traded within a few whitelisted entities if there is a need to do so. In this case, they can also create private SmartCoins and trade them with a select few individuals on the platform for certain transactions.
BitShares Review: Delegated-Proof-of-Stake on BitShares
When it comes to its consensus algorithm, BitShares proves to be different from other existing and popular cryptocurrency platforms.
Instead of using a proof-of-work (PoW) or proof-of-stake (PoS) consensus like many other blockchain platforms, it uses a delegated proof-of-stake (DPoS) algorithm to back its network consensus.
DPoS allows for deterministic selection of block procedures, which in turn paves the way to speedier transactions; it also powers the idea of stakeholder votes for the resolution of certain consensus issues, and it ensures decentralized governance as well.
When placed together, these features can make the BitShares’ blockchain’s operations faster, secure and more efficient than those platforms which use PoW or PoS as their consensus algorithm.
BitShares Review: Other Valuable Features on BitShares
Apart from bringing the aforementioned, major aspects to the table to revolutionize trading on blockchain, BitShares also adds a few more nifty features to make everyday processes easier for its users.
One such feature is the provision of username-specific addresses, which eliminate the usage of long-scale cryptographic addresses that are difficult to remember and remain prone to errors during funds transfers. Instead, this feature allows for network addresses such as ‘bob-bitshares’ or ‘mary-bitshares’.
Another handy feature is the referral rewards program, for which PayPal gets due credit by the platform. BitShares uses the same mechanism as PayPal to essentially give away free money to those who sign up on the platform and those who refer them, which makes it a lucrative platform for existing and new users alike.
BitShares Review: Who Developed BitShares?
The idea for BitShares was first introduced by founder Dan Larimer on June 2, 2013, in a BitcoinTalk forum post.
From here, the idea morphed into discussions, and then gained significant traction to have Larimer first connect with Charles Hoskinson, and then collectively with an investor in China by the name of Li Xiaolai.
As a result, Invictus Innovations came into being within a month from Larimer’s original post, and that gradually led towards the launch of BitShares as a fully-fledged project by 2014.
It is prudent to note that besides BitShares, Larimer is known for being the mind behind Steem, a content sharing blockchain-based platform; and EOS, the bullish blockchain development platform that took the world by storm in early 2018. He currently serves as the CTO of Block.One, the company behind the development of EOS.
Whereas, Hoskinson is popular within the blockchain community for being the co-founder of Cardano, a cryptocurrency platform; and Ethereum, the popular blockchain that brought smart contracts to light. He currently serves as the CEO of IOHK, the firm behind Cardano.
The EOS Connection
BitShares was the subject of passionate discussions earlier in 2018 when the EOS ICO was on the go with much fanfare and just as many controversies.
Due to BitShares’ association with Larimer, the project was a highlight of many online discussions. Some of them were positive, but others seemed to be questioning the very fate of BitShares and Larimer’s other project, Steem.
It was speculated that the project’s consensus algorithm, DPOS, might be rendered obsolete by what EOS would bring to the table, since the new project’s consensus algorithm acts along the same lines with a difference of it dealing with blockchain application development instead of asset exchange and tokenization.
However, months after EOS’ launch, it is now clear that its operations do not outdate BitShares and even though the consensus algorithm in both projects could deem to be somewhat similar, BitShares and EOS operate in two completely different domains.
BitShares Review: Conclusion
With all the features that it brings to its users, BitShares is a very viable platform for those who know how to use advanced features of trading and are able to turn the tides in their favor especially with short selling.
It might take new users some time to get used to the platform after signing up, but the action proves to be worth it if they are being referred by an existing user of the platform.
All in all, BitShares remains a revolutionary and propitious platform for new and old users alike and should be given at least one try.