An EMC derivatives exchange?

Discussion in 'Marketplace Discussion' started by 72Volt, Jan 4, 2015.

  1. "If you're a farmer worried about the value of next summer's wheat crop, you can sell it ahead of time for a fixed price. So now you have a contract to deliver X amount of wheat by a specific date - and that contract can now be bought and sold. The contract, which derives its value from the underlying goods, is known as a derivative - and that contract can be bought and sold many times, whereas the wheat will only be delivered once; people betting on the value of next year's wheat crop may turn that derivative over on a daily basis between now and next summer. That's why the market in derivatives can be many times bigger than the value of underlying assets. Chicago and London are the world's biggest derivative markets; in London more than a trillion dollars of the things are traded every day. That's about half the whole size of the British economy, traded daily."
    ~ How to Speak Money by John Lanchester, a fun new book I got for Christmas

    I read this, and I have to think: why don't we make a derivatives exchange on EMC? It'd work like this.
    1. Someone would set up an exchange, and approach bulk buyers looking to make some money in advance. Bulk buyers would offer a set quantity of materials (probably in DCs) at any time following a specific time and date.
    2. The exchange owner would write a minimalistic contract as a Written Book, detailing the username (or usernames, if the supplier uses alts) of the supplier, the quantity and type of good offered, and the date from when the contract would be eligible to be redeemed. The Book would be put in a shop chest on the exchange's residence, and an advertisement put up on the forums.
    3. Someone would buy the contract from the exchange, and the exchange owner would pass on the bulk of the money, taking a small fee for their services. The contract would then be free for the buyer, or any future owner, to sell or buy.
    4. Once the redemption date has arrived, the bulk supplier delivers the goods to the exchange's storage area. The exchange owner collects the book, checks if it is counterfeited (i.e. not written by the owner or an alt of the owner) and if it is valid, the owner leads the redeemer to the storage area, where they could collect the goods.

    What opportunities would this create?
    • If you're a supplier, the price of a good could go down due to an update making it more abundant, you could secure a good price in advance.
    • If you're a supplier, you get your money in advance.
    • If you're a trader, you could make a quick profit if you know your stuff; buy low, and sell high.
    • If you enjoy making rupees through tedium and attention-to-detail, you could run an exchange.
    • If you're a buyer, you could possibly get a cheaper deal by paying in advance.

  2. Sounds great but I can rarely see this happening, due to the length and complexity of the task.
  3. You get nice books for christmas! :)

    I love this idea.
  4. Exchange owners would manage the complexity; it would allow people versed in finance to make money by providing that service.

    I'd offer myself, but I no longer have the time or energy to commit to EMC.
    Deadmaster98 likes this.
  5. I see giving money in advance as a problem, because we have no civil jurisdiction and law enforcement on EMC. We would first need to establish that, and then we would be free to make any contracts we like. Until then: "Banks are not allowed on EMC." Or, more generally, "Contracts are not allowed on EMC."

    It seems to me that the EMC community is not (yet?) able to do that quantum leap.
    The critical mass of people who understand community (and economy, and
    the tight bond community = economy) has not been reached.
    Or has it?
  6. We don't have seasonal Wheat harvests here or things like weather that might give us a good harvest so I don't think this analogy can be matched up to Minecraft exactly. In my opinion though, we already have the Minecraft equivalent of derivatives. We have contracts for goods and services, due dates, and factors that affect their value.

    Supporter, Vault, and Stable Vouchers all could be seen as contracts. I think Dragon Eggs, Dragon Stone Fragments, and Blizz Ard's Noses could be viewed this way also.

    All represent a fixed amount of something, the value of which may go up or down dependent on an EMC announcement or a Minecraft update. Even though we don't know the exact things some of them are contracts for yet, their value will change when we do know just as the value of a crop harvest may change due to a good or poor growing season.

    We could possibly view Melons since they may be traded with Villagers and Lapis for enchanting in 1.8 this way too. What about an Auction or Reverse Auction? Probably too much of a stretch but certainly similar.
    607 likes this.
  7. It sounds like a really cool idea as long as it is well regulated. It would also have to be worded very specifically so that all participants know that they are actually paying those rupees for a book and that the items are an added bonus. This establishes that buyers understand the risk involved and know that they can't really complain about not receiving anything but the contract in the case that the seller just disappears one day. It would also need to be well regulated by the middle men. They would need to set very strict rules for both parties surrounding the goods. It should be their job to refund the buyer if something weird happens while also banning the seller from participating in future sales. There is some iffiness in how allowed this is on EMC but I feel that it should be fine. It is really no different from a bulk supplier asking for the money before getting the items.
  8. Personally I'd love to see actual exchange shops on EMC. There's a few rather small ones I've found here and there but nothing completely exchange. Perhaps that's what my shop will have to be. Maybe.
    72Volt likes this.
  9. Do it.
  10. That much stock isn't something I'd be able to handle alone :(
  11. I would be able to help you with this if you want.
  12. Let's chat in a pm the both of you.
  13. It sounds like an interesting idea, but the main problem I see is the heavy potential for abuse. Basically the same issues which can happen with banks and the likes; it all depends on an agreement between players. So what do you do when something goes wrong there?

    The main point I'm worried about is item 2:

    The problem I see, although I admit that I might be a little negative, is that there's no stopping such an exchange owner from merely putting any name in the book he likes. After all; there is only one player who can sign a book, and then its their word against the other. As said, maybe I am too negative, but that's bound to get abused I think. At least that's what I'm afraid off.

    Instead I think the supplier should make this contract, aka written book, where he or she makes it understood that the book is good for a certain value. In this case it represents a certain amount of goods, then they sign it. That book can then be given to the exchange owner which can then use it. Because the supplier signed it there can be little doubt about the value of the book.

    However, and this is where another main problem resides: the exchange owner should pay the supplier I think. But if he does then wouldn't it make more sense for the supplier to directly sell his goods to a potential buyer?

    Another problem...

    How are you going to deal with unsatisfied sellers? Because you mentioned that you do expect a shift in market prices. So its also not unlikely that someone sells his stuff for a fixed price, only to discover that they might have gotten a better deal somewhere else.

    Normally when that happens you only got yourself to blame. After all; could have started an auction or looked around a little harder for other buyers.

    But in this setup the exchange owner would becomes the de-facto target for complaints.

    That could be a cause for more problems, and I can't help wonder if this doesn't border the problems around banking as well.
    607 and M4nic_M1ner like this.
  14. Everything has potential for abuse, and everything gets abused from time to time. This is something we have to deal with.

    What EMC owners did in the past is what I call "Kindergarden approach": the assumption is that the majority here are uneducated, immature kids with time and will to create all kinds of fuss. So the easiest way to avoid trouble is to restrict what kids are allowed to do. Are kids allowed to sign contracts? No.

    Naturally, this puts silly restrictions on other members who would like very much to slip into a role of banker, exchange owner, insurer etc. and provide that service to the community.

    The EMC mods have enough to do and can't be bothered with another source of trouble.

    So what to do?
    I think this is needed:

    - Form a core group of rather educated, mature and of course interested members
    - Establish and publish a social contract
    - Accept further interested members who become part of the group
    - Vote a senate which servers as the top jurisdiction
    - Establish (the minimum of) needed rules
    - Establish own moderators
    - Declare that the group will put any needed reasonable effort in moderation and handling of issues between its members. This would be a part of the social contract.

    This way, the EMC staff / moderators are still in charge regarding EMC rules, but all other issues between the members of the group are handled by the group itself.

    Contracts, such es mentioned above, can then be made between the members of the group. If something goes wrong, the group can handle this, including the internal jurisdiction, an internal insurance to cover potential damages etc.
    ShelLuser and 607 like this.
  15. Sounds like a player run player controlled government to me. I feel like we have this idea already with outposts but bringing the idea to the economy sounds interesting..
  16. I see your point but I don't fully agree with it. That is; I do agree that there are some 'preemptive rules' in place; rules which are there to, as the name implies, prevent issues from happening. But to be honest; I think "Kindergarden approach" may not be the best description here.

    Could be because I pick it up differently then you, sure. The thing is: treating the community like kids would for me amount to simply laying out the rules as they are. You know: "No swearing in chat", "No griefing", "No loans and banking". Why? "Because we, staff, say so".

    When looking at banking the EMC staff does more. Although they do deny the use of banking they also explain their motives. That goes way beyond "No, because we say so". Better yet: They also allow(ed?) players to question and challenge these rules.

    So with that in mind I do agree with you on those preemptive rules, but don't agree about the way they're being applied. But that's just my opinion (and I'll be the first to admit that I have a lot to learn about EMC history).

    Sounds like a solid plan to me. There's one more point I think which could be considered for inclusion: Educate potential new players. Reason why I'd separate this one is to make sure that new players will always be informed about what is going on and that there might be a few risks attached as well.

    My idea is that if you separate this part then the person who does the explaining might also be able to make a fair assessment of the involved player (how mature and/or serious is he, stuff like that).

    But, that's just my 5 cents :)

    But yah, if you build this into a community and make sure that you can solve any disputes amongst yourselves then this could work.

    For the record: I'm not really interested in participating to the project itself, but if you guys can use an unbiased person to look into any possible disputes then I'd be happy to help out.

    Meaning: Two players have an issue with the Exchange, they take it up to the Exchange owner, who can't fully help them because the deal was already made (for example). Now what; you wanted to keep staff out of this... In that case it might help to have someone outside of the project (so fully unbiased either way) who can listen to both points of view and then make a decision accordingly.

    If you set up the Exchange to make fully sure that all involved players understand that if they have a dispute they can still appeal to it but one outside player shall have the final say in things then this could help such an Exchange. For the simple reason that you'd provide players more than merely: "If you don't agree on something you're out of luck".
    M4nic_M1ner likes this.
  17. Government or a republic for few people is far too much work, even for few 100 people. I'm thinking more like villages were organized in the past - and still are in some parts of the world. I guess this would work even with 1000+ members. As simple as possible.

    These things did change quite a bit since the change in EMC ownership, but many old rules are still here. For example auction rules.
    An old, now abandoned rule was "goodbye threads are not allowed."

    This was mainly the case and approach. It took me several months to get the answer to the question "why auction only a multiple of 3456 blocks at once no matter if it is dirt or diamonds?"

    As soon as you (try to) deny people freedom of contract you are treating them like incapable - so either kids or retarded. To deny someone freedom of contract is against US constitution, and is AFAIK also illegal in the most of developed world countries. So actually, EMC staff is not allowed to forbid anyone to give or take a loan etc. What they could legally do is to add that condition to the "Terms and Rules" ... but they did not do that.

    This is one of the bright sides of EMC (freedom of speech), although there was also quite a bit of censorship before the change in EMC ownership, threads were disappearing just like that.

    This would be very nice, but I think it would be to costly. I guess potential members would need to get education on their own.
    I'd say anyone can join, but a competence test and/or sponsorship from another member is needed before performing advanced tasks / duties or participating in complex contracts.
  18. The 'no banking' rule was not made haphazardly as a way of saying kids can't make contracts, so you can't make one here.

    It was made because of the ABUSE of the system. You allow something that you see as generally harmless and someone will find the weakness and exploit the crap out of it. Contracts are too much of a problem to allow on EMC. Trust me, we've thought about allowing contracts. The issue is that there are so many what-if scenarios that we really cannot.

    What if the contract was worded to purposefully swindle a player?
    What if the player gets banned?
    What if the contract has a hole in it that is exploited?

    The fact of the matter is that if we were to allow them, you've got kids and adults playing on one server and we don't have a team of lawyers to review every contract to ensure that someone won't be conned. It's a waste of effort on EMC's part to even attempt creation of such a system when our effort is better suited elsewhere.
  19. Right, but why would Starils / EMC / Staff be responsible for any contract between two users?

    Why do you think that it would be obligation of EMC staff or EMC lawyer team to check contracts between users?

    There is no such obligation whatsoever, unless you agree to take care for kids or incapable persons.

    The very same that happens if they make the contract on the playground, in the school or in a pub.

    Example: two students attend to a school and make a contract. Is the school responsible for anything?

    I wonder what makes Starlis / EMC thinking that they would be responsible?
  20. Kids making a contract on the playground isn't the same thing at all. And technically speaking that school would be pulled into it if the 'contract' between the kids resulted in one kid being upset because the other took their stuff as a result of the 'contract' terms.
    We are talking about an in-game occurrence that will involve people pushing for staff intervention if something goes haywire. We've already had multiple people, even though we don't allow loans/banking, coming to us complaining that they were scammed as a result of someone not paying back a loan/banking with someone. It takes staff time to investigate these matters before we even realize it was a loan or bank situation. Then the player is upset when we say we don't allow loans nor intervene with people that choose to break the rules and do them anyways. In the end, it's headaches for everyone involved and someone gets the short end of the stick.

    The staff already have enough on their plate with catching griefers, holding events, keeping chat clean, etc.
    607, M4nic_M1ner, ShelLuser and 2 others like this.