I noticed the BitUSD peg is currently not working so well and I feel like that will keep happening, especially when people expect bitshares price to change rapidly.
Could you just code it so that BitUSD trades can only be executed within $.01 (or whatever) of the price feed, that way people are always guaranteed within 1% of the dollar?
Maybe I'm missing something, please comment.
What would happen if you did that was that once there became a problem and bitUSD was far off of the peg, you would never be able to trade again, because you wouldnt be allowed to trade it for the value that people wanted to trade it at. This would actually stop anyone from making money by arbitraging, because they would not be allowed to buy at .90 or whatever, so the peg would never correct.
Arbitraging to bring it back to the peg is the free market solution, and is the solution that works, IF there are people taking that arbitrage profit. and providing liquidity.
The proposed method is essentially like the government sticking a gun in your face and saying "you may not sell <a type of good> for less than X or more than Y!". What happens in that case is that if the value that the good should be trading at is outside of that range, then all trade STOPS. In this case, the code forcing you to only trade in that range is analogous to the government forcing you to trade in that range.
We need the free market solution, which will work (given sufficient arbitrageurs an liquidity), not the proposed solution which involves force.