Co-founder and Chief Executive Officer
On the 10th of June, we deployed an update to our price feed script for the peg.PHP asset with the intent on narrowing the gap between our price feed and the market - it was about 2% of the market due to pricing differences on some exchanges and not excluding fees from rate calculations for some brokers. Unfortunately, there was an error in the calculation which got past our staging and testing release processes which resulted in all 3 price feeds for the peg.PHP asset being updated with the incorrect price feed. This caused the asset to go into Global Settlement.
A Global Settlement event occurs in Bitshares when the people who have created a stablecoin (e.g. peg.PHP) do not have enough crypto (e.g. BTS) to back the amount of the stablecoin they created. This is based on the price provided to the blockchain by price feeders.
In this case, Bitspark provided all feeds (for other assets, many more price feeders are available reducing the risk). Therefore, when we deployed the updated pricing, it caused the debt positions to be under-collateralised and the asset was no longer able to be created until the collateral required caught up to the outstanding debt.
What happened next:
Approximately 2 hours after it happened, we notified the community via our Telegram channels of the situation and what was being done to solve it. It was noted our intent was to isolate the cause and provide a full follow up at a later date and we committed to refunding the amount of peg.PHP owed by each holder on refloat.
Having had time to review the problem and our internal processes, we resolved to do the following to ensure this never happens again:
As you’ll see from our price feed script, there are 10 separate locations we determine pricing from. In the case of the PHP stablecoin (and future stablecoins), below is a common example of a feed flow used to determine a price feed. There are many combinations and a median is taken of all of them but one could be:
A: Get price XE.com: USD/PHP
B: Get price Coinigy USD/BTC
C: Get Price Coingecko BTC/BTS
From the above you can derive some formulas to get PHP/BTS required for a price feed for peg.PHP. Keeping in mind indexes like Coinigy and Coingecko etc get their feeds often from the same exchange thereby centralising the risk of both of those feeds. Often it worked out that depending on the route you take to get PHP/BTS there could be variations of less than 2%, hence our initial update.
The multiple routes was not ideal and shortly after in chat we posited the idea of refloating peg.PHP but with BitUSD as collateral backing.
We think this would greatly increase adoption as follows:
Having resolved that BitUSD was a good solution for a refloat of peg.PHP (and for future releases of stablecoins such as VND and IDR as per our roadmap) we decided to look into making that happen.
We had 3 decisions to make:
The issue with option 1 is that this does not align with the new direction for BitUSD collateral. We attempted to do option 2 however an existing peg.PHP holder was uncooperative and hostile to removing their open orders, they prefer to have a dead asset than something with value strangely. Therefore today we are releasing our new asset based on the ‘stable’ prefix and the re-launch of PHP via stable.PHP.
New stablecoin stable.PHP
In order to demonstrate our commitment, we have seeded 10,000 BitUSD to back stable.PHP and start the markets. We will look at adding another 50,000 BitUSD soon when our next iteration of the Bitspark platform is live with withdrawal to PHP cash via web not just API (API only currently and also where our major PHP customers integrate with us).
As noted above, shorters should be very interested in this as emerging market currencies almost always depreciate against USD in the long term and therefore creating stable.PHP with BitUSD is highly likely to be a profitable trade, just about always. This is something we are constructing a marketing campaign for, targeting the large financial and FX industry in our home markets in Asia.
We apologise for the circumstances that led to the Global Settlement of peg.PHP and endeavour for that to never eventuate again. We stand by to refund shorters of peg.PHP in full with stable.PHP and resolve to enact a number of new safeguards on deployment processes.
We also think that while this is an unforeseen circumstance, it comes as a new unique opportunity to reduce risk (bitUSD collateral), increase liquidity (lower MCR) and create new DeFi opportunities for shorting exotic currencies easily. As always, we welcome your support and look forward to adding many more stablecoins very soon!
Bitspark is a bankless money transfer ecosystem that enables businesses and people to cash in and cash out cryptocurrencies across Asia and Africa.