bytemaster and others interested,
*** The Short Version ***
I'm proposing an approach to bitAssets, for assets not
intended as currencies, that is more like a traditional exchange-traded fund (ETF). This would be like holding the real asset, but where the underlying number of units changes gradually over time according to a market-determined funding rate, that could be positive or negative. Due to 2-way arbitrage, the tracking token would tend to centre around fair value, while still having some spread for liquidity.
I'm looking for interest in the concept, as a possible alternative to BTA 2.0 for these types of assets, with a view to writing up a full design concept for further review.
**** Longer Version ***
It seems to me that there are different goals for tokens to be used as currency in goods and services transactions (bitUSD, bitCNY etc) versus tokens that are intended to simply behave like holding and storing an asset (e.g. oil or other commodities, stocks and stock indices, etc). This suggests that the optimal structure for each class may also be different.
bytemaster, you seem to be taking the bitAsset 2.0 design along the path of having a continuous premium to parity to accommodate a cut to payment facilitators when currencies are used with merchants. As you know, I am not sold on this yet, but we can take this up in the other thread. In any case, I believe this line of reasoning has no relevance to the second class of tokens above, which will never be used for goods and services.
I believe that the most useful design in these cases is something similar to the way that exchange-traded funds (ETFs) behave. An ETF allows investors to receive the performance of the underlying assets held in the fund. That includes any earnings or costs associated with the holding of those assets. To the extent those earnings are reinvested, or expenses paid from the assets of the fund, the effective number of units of the underlying asset per share in the ETF varies over time. But that does not matter to the investor. What matters to them is that the returns on the fund are a near perfect proxy for having held the assets themselves.
I've designed a concept that constructs a bitAsset to behave in this manner, although of course its construction is by necessity different to an ETF, representing decentralised trades between parties rather than a security on a fund. The structure could even be used for currencies, as long as investors are buying as an investment exposure rather than for use in transactions. That's because there is a market-determined funding rate that adjusts the number of notional asset units of exposure per token over time, whether positive or negative. That is, its not a fixed exposure to the asset. The funding rate is determined by supply and demand, but these in turn will have at least some regard to external funding rates (or interest rates on currencies), providing an external linkage.
For non-transactional holdings, I think this structure is favourable to bitAsset 2.0 because it centres around the fair value of the underlying asset instead of at a premium, and arbitrage mechanisms act as a compressing force around the peg. This will give investors and traders exactly what they are looking for. [Edit: It also may pay a reinvested yield, just like the underlying asset, where net yields are positive in the external market].
I would like to know whether you would like to collaborate further on this concept if you see it fitting into the core BitShares protocols, and how to take forward. It still requires peer review, and no doubt some refinement. Interested in your view and that of anybody else interested in this approach.