Shareholders want whales to come into the ecosystem and get it kick started. I think there is an alternative method where the shareholders pool funds together to capitalize a Super Whale that gives the profits back to the shareholders who funded them by way of a UIA.
There are lots of arbitrage opportunities between bitAssets and bts across various exchanges and I've been thinking of a way to profit from it by capitalizing traders and sharing the profit with them.
By pooling money with other shareholders and employing traders to take advantage of these arbitrage opportunities holders can profit at the same time as contributing to a fund that aims to provide liquidity to the BitShares internal exchange and contribute to keeping the peg between bitAssets as tight as possible.
The issue comes with who manages the UIA and can be trusted to manage the fund and distribute funds amongst traders.
A quorum of delegates could issue and manage a UIA. By purchasing the UIA the user provides funds that are then pooled and distributed in small sections to several competent traders who promise to look for arbitrage opportunities and other low risk trades to grow the value of the fund. The traders are rewarded with a healthy portion of the profits to incentivize them to increase the value of the fund.
Like in micro-lending, the fund should be split up among as many traders as possible to decrease the variance in the profit earned and reduce the impact of fraud or loss.
Checking up on every individual trader will be very expensive and time consuming. Instead, each trader could only be allocated a portion of the fund that the fund could afford to lose. So long as a particular percentage of traders can be trusted to make a target profit, then other losses can be absorbed.
This means that delegates would not be needed to chase down traders and monitor their progress in any detail. The shareholders could decide on certain goals that must be met to remain a trader, and if they are not met then they are automatically frozen out and can no longer access the fund.
The only duties of the delegates involved would be to sign multi-sig transactions from the fund to approved traders and manage the UIA. The managing delegates could receive the UIA trading fees.
How should I proceed with getting this started?
I'm thinking of posting job listings for crypto-traders. Their resume would have to demonstrate that they can be trusted to trade for steady profit sufficiently to the shareholders before they could access the fund.
How can potential traders be asked to prove themselves?
I expect in the beginning this fund will be very small and may only be able to attract one or two amateur day-traders as the profit potential would not be enough to sustain any more.
However, a trustworthy reliable amateur who grows the fund every day is at least as good as I would be, trading myself. If these amateurs could grow the fund and attract new investment through demonstration of steady growth, then the fund can employ more traders to reduce the risk and streamline the process.
I want to get something like this going, where do I start?
EDIT: Perhaps individual day traders could be encouraged to issue UIA's that represent a share in the fund that they trade. More successful traders will grow the value of their UIA and attract more investment.
The shareholder hedge fund could purchase a basket of trader UIA's, after analysis of the trading success of each UIA.
New traders could be required to provide 110% collateral for the funds they are trading with, with a decreasing scale once the trader has an established track record.
I want to avoid a situation where the fund is too large for a day trader to be expected to provide 100% collateral to.
Unless the fund could employ so many traders that each trader holds a small enough amount.
But why would a trader lock up his own capital just to be able to trade with an equal amount of someone elses? 100% collateral isn't going to work long term unless there can be significant advantages to trading with the fund. Are there any incentives that can be offered? Perhaps a share of the UIA trading fees for x amount of time if they trade for the fund and provide collateral.
A percentage of all UIA trading fees for life could be the incentive. The tiny % of UIA fees for life given away to each trader in exchange of 1 day of work could be set so that the fund can employ millions of work-days before 100% of the UIA fees are allocated.
x% of fees on this fund for life could be quite a good incentive, particularly if this hedge fund is endorsed by the shareholders and is expected to grow in size.
EDIT 2: Traders could be incentivized to reinvest their share of the profits back into the fund by using them to buy a higher % of the UIA fund fees forever. There could be a free floating market between fund profits % and fund fees forever %.
Or traders could be awarded a bonus amount of UIA shares in the fund in return for reinvesting their trading profits into the fund.
If we could demonstrate a financial instrument that has steady daily growth only accessible on the BitShares exchange then we can create yet another reason to make an account and use the network.
Once we have this one hedge fund UIA up and running others will surely pop up in competition. Like MPA (market pegged assets) serve as a demonstration for privatised bitAssets; this fund can demonstrate the business case of a BitShares UIA hedge/trading funds.