Interest/Yield

[BunkerChainLabs-DataSecurityNode]

I'm looking forward to seeing what kind of innovative privatized BitAssets people come up with. For example, nothing stops someone from creating a BitUSD5 (5% APR interest as part of the definition). I wonder how the supply and demand of that asset would work out compared to regular BitUSD as sentiment changes regarding the near future value of BTS (or whatever collateral asset is used) relative to USD. Also, privatized BitAssets could be used to implement the BitAsset 2.0 (the short-lived proposal by bytemaster before the even newer BitAsset 3.0 was renamed to the BitAsset 2.0 that Graphene uses), where the BitAsset creators force liquidation after 1 year, for example, and there could be two staggered versions of this asset. So those assets would be a 1 year bond with some prescribed fixed interest rate and minimum collateral maintenance requirements. The fact that there is a definite end date at which point there would effectively be infinite liquidity at the price feed (or 30 day average price or something) might make the shorts more willing to participate despite the additional risk added from the prescribed interest rate. The users would of course still be responsible for shifting BitUSD5A into BitUSD5B (and vice versa) once every 6 months (assuming they didn't delegate that responsibility to a third-party UIA issuer, with corresponding counterparty risk of course). The main difference between this approach and the collateralized bond market is that the BitAssets would be divisible and fungible. Therefore trading these assets for the normal BitUSD (for example to move from savings to checking or vice versa) could be easily facilitated at any time through the exchange markets on BitShares.

Ouu that sounds good. :)

[starspirit]

I'm looking forward to seeing what kind of innovative privatized BitAssets people come up with. For example, nothing stops someone from creating a BitUSD5 (5% APR interest as part of the definition). I wonder how the supply and demand of that asset would work out compared to regular BitUSD as sentiment changes regarding the near future value of BTS (or whatever collateral asset is used) relative to USD. Also, privatized BitAssets could be used to implement the BitAsset 2.0 (the short-lived proposal by bytemaster before the even newer BitAsset 3.0 was renamed to the BitAsset 2.0 that Graphene uses), where the BitAsset creators force liquidation after 1 year, for example, and there could be two staggered versions of this asset. So those assets would be a 1 year bond with some prescribed fixed interest rate and minimum collateral maintenance requirements. The fact that there is a definite end date at which point there would effectively be infinite liquidity at the price feed (or 30 day average price or something) might make the shorts more willing to participate despite the additional risk added from the prescribed interest rate. The users would of course still be responsible for shifting BitUSD5A into BitUSD5B (and vice versa) once every 6 months (assuming they didn't delegate that responsibility to a third-party UIA issuer, with corresponding counterparty risk of course). The main difference between this approach and the collateralized bond market is that the BitAssets would be divisible and fungible. Therefore trading these assets for the normal BitUSD (for example to move from savings to checking or vice versa) could be easily facilitated at any time through the exchange markets on BitShares.

Arhag, it's a good point that asset definitions are more flexible than just a single immutable unit of the underlying asset, and that's a key area I'm looking to exploit in my own designs. Assuming the price is allowed to be set freely by the market, I believe what you are proposing here is probably more like a bond than a savings account. The market price will behave like a zero coupon bond where the yield to maturity is independent of the stated yield.

[arhag]

I'm looking forward to seeing what kind of innovative privatized BitAssets people come up with. For example, nothing stops someone from creating a BitUSD5 (5% APR interest as part of the definition). I wonder how the supply and demand of that asset would work out compared to regular BitUSD as sentiment changes regarding the near future value of BTS (or whatever collateral asset is used) relative to USD. Also, privatized BitAssets could be used to implement the BitAsset 2.0 (the short-lived proposal by bytemaster before the even newer BitAsset 3.0 was renamed to the BitAsset 2.0 that Graphene uses), where the BitAsset creators force liquidation after 1 year, for example, and there could be two staggered versions of this asset. So those assets would be a 1 year bond with some prescribed fixed interest rate and minimum collateral maintenance requirements. The fact that there is a definite end date at which point there would effectively be infinite liquidity at the price feed (or 30 day average price or something) might make the shorts more willing to participate despite the additional risk added from the prescribed interest rate. The users would of course still be responsible for shifting BitUSD5A into BitUSD5B (and vice versa) once every 6 months (assuming they didn't delegate that responsibility to a third-party UIA issuer, with corresponding counterparty risk of course). The main difference between this approach and the collateralized bond market is that the BitAssets would be divisible and fungible. Therefore trading these assets for the normal BitUSD (for example to move from savings to checking or vice versa) could be easily facilitated at any time through the exchange markets on BitShares.

[fav]

I would expect the bond market to fulfill this need.  The only difference is that rather than having bitUSD that you could sell instantly you will have a bond that you cant sell for X period of time, in order to get the interest.  (Of course, due to liquidity you couldnt necessarily exit bitUSD instantly in reality, it was already like a short term bond).

I am hoping this option somehow is simplified so that not just traders/investors know how to use it, but regular account holders.

+5% please!

[BunkerChainLabs-DataSecurityNode]

I would expect the bond market to fulfill this need.  The only difference is that rather than having bitUSD that you could sell instantly you will have a bond that you cant sell for X period of time, in order to get the interest.  (Of course, due to liquidity you couldnt necessarily exit bitUSD instantly in reality, it was already like a short term bond).

I am hoping this option somehow is simplified so that not just traders/investors know how to use it, but regular account holders.

[starspirit]

The reason why bitUSD has been offering a yield in the past is largely because of sharing in system fees, which is not really a sustainable model.

I'm not totally sure I agree with this statement. Isn't this basically saying that, for example, forex brokers are not profitable? IMO, the bitshares blockchain attempts to be a decentralised forex exchange, which ought to be capable of earning substantial profit through trading fees, which could be passed on to users through yield on the bitAssets.

Why wouldn't that be sustainable?

Fair point, any business can choose to pass as much of its revenue to customers as it wants. It just eats into the profits and returns on capital, and the ability to help fund things like development.

[monsterer]

The reason why bitUSD has been offering a yield in the past is largely because of sharing in system fees, which is not really a sustainable model.

I'm not totally sure I agree with this statement. Isn't this basically saying that, for example, forex brokers are not profitable? IMO, the bitshares blockchain attempts to be a decentralised forex exchange, which ought to be capable of earning substantial profit through trading fees, which could be passed on to users through yield on the bitAssets.

Why wouldn't that be sustainable?

[starspirit]

I've been thinking about it for some time now, and I can't get it out of my head.

we will have a kickass financial platform that could to take over the traditional banking system but there won't be any traditional, secure way to earn interest.

I know there will be the bond system, but that's not for everyone and won't be secure for the lender at first.

Isn't there a way to get 1-2% APR for bitusd?

Privatised bitAssets in their proposed form will not explicitly incorporate yield. But the initial bitAsset structure, in my view, is largely designed to create a form of "cash". If the protocol is extended to allow more flexibility in these designs, it is certainly possible to build a number of different asset types that could incorporate yield, such as :

- at-call deposit accounts (possibly with 0% minimum interest)
- bond markets, allowing term lending and borrowing in currency
- ETF-like tokens that would allow users to get exposure to assets with yield or dividends
- credit markets, which incorporate counter-party risk

So yes I think this will all come down the track, but you also need to recognise that even in these circumstances the level of yield is going to be dictated to some extent by yields available in external markets. That's because shorts offering the internal yield will compare and possibly arbitrage against external yields. So just like the external world, I expect it will be more difficult to get high yields internally on low-rate currencies like USD and EUR than on higher yield currencies like AUD or roubles. The reason why bitUSD has been offering a yield in the past is largely because of sharing in system fees, which is not really a sustainable model.

[fav]

I would expect the bond market to fulfill this need.

possible, but it's too complicated for casual users in my opinion. plus the risk is with the lender...

[Ander]

I would expect the bond market to fulfill this need.  The only difference is that rather than having bitUSD that you could sell instantly you will have a bond that you cant sell for X period of time, in order to get the interest.  (Of course, due to liquidity you couldnt necessarily exit bitUSD instantly in reality, it was already like a short term bond).

[fav]

I wish, I was banking on that  +5% APR to give me comfortable retirement payments (when the time to cash out of BTS comes along)...sigh.

Not sure how safe the bond system will be? If I remember hearing right a huge liability risk is put on the lender, not the borrower...doesn't sound very comfortable.

exactly my thoughts. I want something secure and interest bearing.

edit: we will also lose a great marketing slogan. yield was pretty good to introduce people in my opinion.

[nomoreheroes7]

I wish, I was banking on that  +5% APR to give me comfortable retirement payments (when the time to cash out of BTS comes along)...sigh.

Not sure how safe the bond system will be? If I remember hearing right a huge liability risk is put on the lender, not the borrower...doesn't sound very comfortable.

[fav]

I've been thinking about it for some time now, and I can't get it out of my head.

we will have a kickass financial platform that could to take over the traditional banking system but there won't be any traditional, secure way to earn interest.

I know there will be the bond system, but that's not for everyone and won't be secure for the lender at first.

Isn't there a way to get 1-2% APR for bitusd?