As we all are probably aware, a decline in the price of BTS of more than 66% in a short period of time (a 'black swan' event), would cause problems to bitAssets, as there would no longer be sufficient BTS collateral backing them. When the resulting margin call is executed, some of the value that should go to the bitAsset holder might be unrecoverable.
While a decline of this magnitude seems unlikely, it is not outside of the realm of possibility. After all, in its past bitcoin has had a couple crashes when exchanges went down. Alternately, a bug in the price feeds could result in the false appearance that the price had declined dramatically.
What modifications could be implemented in order to reduce or eliminate this vulnerability?
* Implement 'brakes' on the amount that a price feed can change.
In the stock market, exchanges automatically halt trading for a period of time if prices decline by more than a certain percentage. This helps to prevent or limit 'flash crashes', and allows time for the market to stabilize and new orders to be placed.
We know that bitAsset pegs work fine in the event of a steady decline, as long as it does not occur too quickly.
If price feeds were prevented from declining by more than X% over a Y hour period, then the system would have time to adjust, and issue margin calls while there was still sufficient collateral in the system to cover them. The percentage change allowed could be quite large, perhaps 50%.
Other ideas, comments and criticisms are appreciated.
Ideally, any solution would not infringe on free market principles.