Comment by thisisit | Hacker News Reader

Comment by thisisit | Hacker News Reader

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I would check the notes to see what happened with Dole before drawing a conclusion. There is more at stake here than a judge with backing. One of the problems with Dole was tracking shares with DTC - It takes, I think, T+2 for settlement ie I sell you something today it gets updated two days later in DTC. This coupled with day trading and shorts (where btw "borrowing a share" is hypothetical) can cause a lot of headaches. So the solution is? A blockchain which tracks the share count and movement. That is the point being made in the article.

As for the other part. The whole BTC/BCH thing is like a spinoff. And yes the short sellers are on the hook if Stock A tomorrow becomes Stock A + Stock B. Can they say no, well Stock B is more than I paid for A+B combined so I am not paying? Not really because if that was the case it leaves open the door for someone saying - well stock A has appreciated more than I expected so no payout.

Now in case of forks and whether people can be on the hook for the other fork? Well, depends on how famous the fork is really. If it is as famous as BTC cash, well then that is a risk you have to take as a speculator. If not, then why was someone betting on bitcoin going down the drain after the fork? Were they not clear of the implication of the fork taking off? If not, then that's a lesson learned.

To paraphrase Matt Levine - "The basic appeal of the cryptocurrency revolution, to people like me who are not making any money off of it, is that it is fun to watch people rediscover all of the lessons of financial economics, one at a time, in public. "

https://www.bloomberg.com/view/articles/2017-06-23/buffett-d...

It seems like it can be construed as a cash handout to owners of BTC, not a spinoff. At least there seems to be disagreement elsewhere on this thread, and from Levine's article.

I don't think refusing to require shorts to deliver BCH opens the door to any other complications. In fact, I think it's the simplest interpretation. You borrowed one BTC, or share, or pony, or whatever, and later you have to return one BTC. If someone else starts a new currency, fine, but that's nothing to do with your borrowing agreement. There's no mention of the price of anything; for all this simple agreement knows, BTC is the only asset in the world. (Though in practice I'm sure you'd have to post margin. Maybe some ponies?)

For shorting stock, the return of dividends and spinoffs is, I believe, a consensus agreed upon by the market as more closely reflecting what people would want - you can start a different stock-lending market that doesn't do this, but there doesn't seem to be much demand for it. To draw a clean analogy between BTC and an equity spinoff, you have to suppose this kind of agreement exists and the contracts signed. I'm not sure what it is that BTC shorts agreed upon, and it seems there isn't widespread agreement, but to me, the simplest and narrowest interpretation of a short, in case of any confusion, is "I borrow 1 BTC, I must return 1 BTC."

(Again, I have no BTC experience, just finance experience, so if someone out there really is short BTC and has wrangled with this stuff, I'd be happy to hear from them.)

I had to re-read your post again to understand what you are getting at. It is not about what BTC shorts agreed upon rather what does Bitfinex agreement say about people shorting BTC on their platform. As jackgavigan pointed out - 2010 Global Master Securities Lending Agreement is clear on what the obligations should ideally be.

So did Bitfinex create an agreement along those lines for their short sellers? This requires looking into their T&C. A wild guess is they did not and never included a condition about such situations. That means asking BTC shorts to cover BTC cash had no legal legs at all. The best they could do is to pay the long BTC holders and exempt shorts.

You can bet they must have learned their lesson after this fiasco and updated their terms accordingly.

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