Alice has BitBTC and wants to exchange it for BTC. Bob has BTC (as well as a little bit of BitBTC already) and wants to exchange it for (more) BitBTC. There is a special BitBTC/RealBTC exchange on the BitShares system. Since the BitShares blockchain cannot actually hold real BTC, the bid orders for BitBTC on this BitBTC/RealBTC exchange are actually requests to buy the BitBTC with real BTC and with some BitBTC provided as a surety bond to ensure payment of the real BTC in a timely manner. =
Let's say Alice places an ask order for 2 BitBTC at a price of 0.99 BTC/BitBTC and the ask order also has her BTC address (1A...). Bob sees this ask order and matches it with his bid order for 1.5 BitBTC at a price of 0.99 BTC/BitBTC. His bid order includes 0.15 BitBTC to be used as part of the surety bond (let's pretend that the market requires that 10% of the BitBTC quantity of the bid must be posted as the surety bond). Bob's bid order also includes his BTC address (1B...) from which he is expected to send the BTC payment to Alice's Bitcoin address.
Once these two orders are matched, Bob's 0.15 BitBTC joins Alice's 1.5 BitBTC and gets locked as collateral in a special escrow contract. At this point, Alice will still have an ask order for 0.5 BitBTC at a price of 0.99 BTC/BitBTC in the order book. This escrow contract requires a delivery confirmation to occur within 24 hours for the entire collateral to be send to Bob. The delegates monitor the Bitcoin blockchain for a total transfer of at least 1.485 BTC (1.5 BitBTC * 0.99 BTC/BitBTC = 1.485 BTC) from 1B... to 1A... between the time the orders were matched until 24 hours after that. If that condition is met, the delegates will sign off on the delivery confirmation for that escrow contract. Once a super majority of the active delegates have signed off on the delivery confirmation of the escrow contract (prior to the 24 hour expiration time), the delivery will be confirmed and all the collateral (1.65 BTC) will be sent to Bob. If this does not happen prior to the 24 hour expiration time, then all the collateral will instead go to Alice.
Bob has to put some BitBTC up so that attackers who want to just cause damage to BitBTC sellers are discouraged. If Alice is forced to lock up some BitBTC for 24 hours without getting payment for the promised trade, she will at least be rewarded with 10% profit after the 24 hours. If Bob trusts the delegates to do their job, he should be confident that he will get back his surety bond and will also get the 1.5 BitBTC he was promised as long as he delivers the 1.485 BTC from his 1B... address to Alice's 1A... address within 24 hours (it is best to not leave it to the last hour to ensure the delegates have enough time to sign off on the delivery confirmation).
Fiat on and off ramp (via Bitfinex wire transfers) for BitShares without needing to convince the company to even touch the BitShares client.
Just make the following substitutions in the above quote: s/BitBTC/BitUSD/g, s/RealBTC/BitfinexUSD/g, s/BTC/USDT/g.
I do not get it too. Isn't TetherUSD remove a need for bitUSD? And that is good for bts? http://cointelegraph.com/news/112968/tether-brings-benefits-of-p2p-transactions-to-fiat-currency-transfers
“While the blockchain shows great promise to more efficiently connect the world to banking, individuals are very hesitant to use Bitcoin until we effectively end the volatility concern. This is a critical step for mass adoption of this technology, and Tether is bridging the gap by bringing familiar currencies to the blockchain.”
"The way that they accomplished this is relatively simple. The platform simply formats fiat currencies as tokens. Currently, there are only three currencies available—the US dollar, the European euro and the Chinese yen. But the platform itself is completely transparent, and regular audits are promised as well. Each Tether token is fully backed by its original currency, so there is no exchange risk."