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Offline mike623317

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Where does the interest come from?
« on: December 07, 2014, 06:35:06 PM »

I'm trying to explain BitShares to a friend and i need to clarify something.

I think interest earned from holding BitGold or BitUSD comes from other peoples transaction fees because i'm providing liquidity but i'm not sure. Please can someone clarify where the interest comes from if i buy BitUSD and hold it for a few years.

Appreciate peoples help.

Thanks
M

Offline sparkles

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Re: Where does the interest come from?
« Reply #1 on: December 07, 2014, 07:02:09 PM »
It comes from shorts who borrowed the BitAsset into existence and it comes from transaction fees on that asset.

Offline speedy

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Re: Where does the interest come from?
« Reply #2 on: December 07, 2014, 07:25:02 PM »
It comes from shorts who borrowed the BitAsset into existence and it comes from transaction fees on that asset.

I still find this explanation of interest confusing, and I doubt its helpful for beginners.

I prefer this simpler explanation: shorts are super bullish on BTS, so they are willing to pay interest to whoever takes the opposite side of their trade, which bribes/incentives them not to dump their shares.

Offline mike623317

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Re: Where does the interest come from?
« Reply #3 on: December 07, 2014, 07:51:28 PM »
It comes from shorts who borrowed the BitAsset into existence and it comes from transaction fees on that asset.

I still find this explanation of interest confusing, and I doubt its helpful for beginners.

I prefer this simpler explanation: shorts are super bullish on BTS, so they are willing to pay interest to whoever takes the opposite side of their trade, which bribes/incentives them not to dump their shares.

Thank you for replying.

So, primarily its from Shorts and some transaction fees. How high are these fees associated with Bitshares? Fractions i would assume.

Offline biophil

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Re: Where does the interest come from?
« Reply #4 on: December 07, 2014, 09:10:58 PM »
It comes from shorts who borrowed the BitAsset into existence and it comes from transaction fees on that asset.

I still find this explanation of interest confusing, and I doubt its helpful for beginners.

I prefer this simpler explanation: shorts are super bullish on BTS, so they are willing to pay interest to whoever takes the opposite side of their trade, which bribes/incentives them not to dump their shares.

Thank you for replying.

So, primarily its from Shorts and some transaction fees. How high are these fees associated with Bitshares? Fractions i would assume.

The bitUSD transaction fee was about half a cent, last time I checked.

In the long run, the lion's share of interest will probably come from the interest paid by shorts. Source: my intuition.

Sent from my SCH-S720C using Tapatalk 2


Offline Troglodactyl

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Re: Where does the interest come from?
« Reply #5 on: December 07, 2014, 10:49:42 PM »
It comes from shorts who borrowed the BitAsset into existence and it comes from transaction fees on that asset.

I still find this explanation of interest confusing, and I doubt its helpful for beginners.

I prefer this simpler explanation: shorts are super bullish on BTS, so they are willing to pay interest to whoever takes the opposite side of their trade, which bribes/incentives them not to dump their shares.

Thank you for replying.

So, primarily its from Shorts and some transaction fees. How high are these fees associated with Bitshares? Fractions i would assume.

The bitUSD transaction fee was about half a cent, last time I checked.

In the long run, the lion's share of interest will probably come from the interest paid by shorts. Source: my intuition.

Sent from my SCH-S720C using Tapatalk 2

Agreed, so when shorts are competing, interest on a bitAsset should reflect the average consensus among shorters of how rapidly BTS will appreciate relative to that asset.

Offline mike623317

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Re: Where does the interest come from?
« Reply #6 on: December 07, 2014, 11:42:41 PM »
Thanks guys, appreciate the clarification.
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Offline fran2k

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Witness: rmglab /// Buenos Aires BTS Meetup http://www.meetup.com/es-ES/BitSharesBA/ /// [old BTS 1.0 chain] Delegate bitshares-argentina (ex argentina-marketing-matt608) Thread https://bitsharestalk.org/index.php/topic,15781.0.html

Offline mike623317

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Re: Where does the interest come from?
« Reply #8 on: December 08, 2014, 04:35:32 PM »
Oh yea, thanks for the links

 

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