Silk Road forums

Discussion => Silk Road discussion => Topic started by: navy4512 on July 19, 2012, 07:14 pm

Title: Escrow Hedging question:
Post by: navy4512 on July 19, 2012, 07:14 pm
If I paid BTC110 a few weeks ago and hedged the order for $700, todays exchange rate makes my refund only BTC79.  What happens to the other BTC30? if the vendor cancels do I get the initial BTC investment back? If not, where do the extra BTC go?

Thanks
Title: Re: Escrow Hedging question:
Post by: Nikodym on July 19, 2012, 09:05 pm
Probably to an exchange somewhere. I'm guess the hedge works by selling your order btc and then buying back the same dollar amount of btc (minus fee) on an exchange. Because the btc appreciated, you receive less btc back for the same amount of dollars. You only get the btc amount back if the order was unhedged. I bet a lot of vendors are wishing they'd been running unhedged over the last week or so!
Title: Re: Escrow Hedging question:
Post by: HardHustle on July 19, 2012, 09:08 pm
Dude the btc price went up a lot in the past couple weeks. You didn't lose any money, you still have the same amount of dollars as you did before. It's just that the amount of btc you have has changed because it has appreciated relative to the dollar.
Title: Re: Escrow Hedging question:
Post by: navy4512 on July 19, 2012, 10:06 pm
An exchange somewhere? haha yeah right, how about directly to the SR administrators. Thanks guys, there's no new info to me there, of course; my issue is that my (apparently) lackadaisical and unprofessional vendor's downtime and inability to support his end has screwed me out of plenty of $$...

wish there was a way to nullify the whole transaction and return to the point BEFORE the vendor screwed me and when I still had the full BTC110

I dont suppose there is a way to do that, is there?
Title: Re: Escrow Hedging question:
Post by: RxKing on July 19, 2012, 10:24 pm
When you hedge and the BTC go's up..You do not get shit. You get... exactly what you hedged the dollar amount for.

So if you got 100 BTC in escrow and the BTC was valued at $7.00 you have $700 coming to you when the order is finalized.

Let's say that takes 10 days and in that time the BTC is now worth $9.00 .... you still only get $700.00 though if you didn't hedge you would have gotten $900.

Do I have this correct?

If I do then SR gets the "extra" $200. Plus the % fee.

Can someone who knows confirm this please...

Thanks

Title: Re: Escrow Hedging question:
Post by: GreenGiant on July 19, 2012, 10:59 pm
When you hedge and the BTC go's up..You do not get shit. You get... exactly what you hedged the dollar amount for.

So if you got 100 BTC in escrow and the BTC was valued at $7.00 you have $700 coming to you when the order is finalized.

Let's say that takes 10 days and in that time the BTC is now worth $9.00 .... you still only get $700.00 though if you didn't hedge you would have gotten $900.

Do I have this correct?

If I do then SR gets the "extra" $200. Plus the % fee.

Can someone who knows confirm this please...

Thanks

Essentially yes, but not really the $200 goes into what i would believe would be the hedge fund for if the opposite of your example happens.

$800 goes into escrow at $8 per BTC so 100BTC, 1 week later prices have dropped to $7 per BTC, so you then get 114.28BTC back.

without this system some vendors could not work
Title: Re: Escrow Hedging question:
Post by: Tienamen on July 19, 2012, 11:02 pm
Wiki on Hedged Escrow:

Quote
Hedged vs Exposed Escrow

Vendors have two options for escrow, hedged escrow and exposed escrow. Exposed escrow places bitcoins into holding as described earlier in this article. The exchange rate of bitcoins to USD can change dramatically over weeks or even days. A vendor could sell an item on Monday for ฿10 which is the equivalent of $100 USD if 1฿ = $10. If the exchange rate drops during the week to 1฿ = $5 then when the buyer finalizes and the vendor is given ฿10 he has the equivalent of only $50. In this scenario the vendor has lost a significant amount of money and results in a net loss.

To combat bitcoin fluctuation vendors have the ability to select hedged escrow which places the bitcoins into USD when the order is placed and converts them into bitcoins once the order is finalized. In the above scenario, a vendor who uses hedged escrow would be given ฿20 to equal the value of $100 USD.

Link to full wiki article:  http://dkn255hz262ypmii.onion/wiki/index.php/Escrow
Title: Re: Escrow Hedging question:
Post by: navy4512 on July 19, 2012, 11:43 pm
i suppose it was my misunderstanding that the escrow system was there to protect buyers and sellers against market fluctuation between the opening and closing of a deal- did not realize it applied the exact same to deals that were completely defunct and basically scams that needed to be reversed.

could anyone "in-the-know" fill me in (not someone who likes to purport their speculation as fact, thanks) on a logical reason why the hedged escrow system even applies in the event of a refund? maybe even some documentation? Because I sure cant find it. Thanks.
Title: Re: Escrow Hedging question:
Post by: GreenGiant on July 20, 2012, 12:08 am
the hedging system could not really exist unless it works both ways, SR cannot just magic up BTC to cover orders if BTC rates drop
Title: Re: Escrow Hedging question:
Post by: RxKing on July 20, 2012, 01:42 am
the hedging system could not really exist unless it works both ways, SR cannot just magic up BTC to cover orders if BTC rates drop

Of course "they" can just magic up..."they" take 10% of all sales plus the 4% it cost you to hedge..

For the record I have zero problem with it. It's business.

And over a year ago when the BTC was all over the place this service was almost a must. Now with the BTC just going up it does not seem to be needed. But what go's up comes down:)