HERO Price Formula

The price feed of HERO ensures that margin calls and settlements are executed at the correct price. A price feed is link to the external price of the collateral (BTS) and is provided to the BitShares blockchain by a distributed set of feed producers. The price feed itself is stored on the blockchain for everyone to inspect, analyse and verify the trustworthiness of the producers.

As of 2017-05, the HERO requires at least 7 feed producers to have published a price no older than 24h. As long as at least this amount of feeds are available, HEROs can be borrowed and margin calls as well as settlements will be executed. It is the duty of the HERO Management to ensure sufficient feed producers are available at all times.

Given a set of N price feeds as produced by different feed producers, the actual price feed is derived from the median of the feeds.

Next to the settlement/feed price, the feed producers also define:

  • the core exchange rate (for transaction fee payments using HERO instead of BTS)
  • the maintenance collateral ratio
  • the short squeeze ratio

The HERO formula

The USD value of HERO can be derived in python with

from datetime import date
print(1.05 ** ((date.today() - date(1913, 12, 23)).days / 365.2425))

Description:

  • 1.05 corresponds to +5%
  • ((date.today() - date(1913, 12, 23)).days is the number of days since 1913/12/23
  • 365.2425 is the length of the year (for a +5% APR) as per the Gregorian calendar

The maintenance collateral ratio should be 175% and the short squeeze protection ratio 110%.

From USD to BTS

Given that the collateral is provided in BTS, we need to provide the value of HERO denoted in BTS. To obtain this, we make use of the USD price feed that is also denoted in BTS and is provided by the BitShares witnesses for the bitUSD asset. This means that we have three prices in place:

  • USD/BTS - provided by the BitShares witnesses
  • HERO/USD - provided by the formula above
  • HERO/BTS - the product of the prices above as derived by HERO’s feed producers

HERO’s feed providers

The feed producers of HERO are defined by the HERO management and are distinct from the BitShares witnesses. This means that anybody capable of running some small piece of software could become a feed producer for the HERO. Ultimately, the management could even rotate through multiple sets of producers periodically.