Do BitShares need an interest rate?

[bitcrab]

If the interest rate goes too high then the value of BitUSD would rise... as USD holders seek to buy BitUSD for a solid return... too low and it will fall as USD holders move elsewhere.   Thus it could be said that BitUSD with an interest rate of 0 will be pegged to the value of CASH.   BitUSD with an interest rate of 5% will be pegged to the value of a 5% treasury note.

So what does this mean for a blockchain?  To maximize the value of the chain you want to maximize the number of people storing value IN the chain.  Most people don't keep CASH on hand because they can at least earn SOME interest in the bank.   

My conclusion is that 0% interest will approximate cash and if you want to hedge against inflation having a separate BitAsset pegged to the inflation rate with 0% return would solve the problem. 

If the prediction market is always working to bring the current value of BitUSD to be equal to the dollar then the only premium or discount you will see based upon whether money is flowing into or out of BitUSD / USD.

Conclusion... any interest rate placed on BitUSD and/or shorting in this system may be irrelevant and an unnecessary added complexity that merely biases the market and breaks the peg with a premium in one direction or another.   If the interest rate merely prevents shorts from entering the market until the price is 5% too high given their time horizon why implement it.

Not implementing interest at all would be simpler and if the economic consequences are the same then perhaps it would be best to forgo interest in the initial chain?

Simplicity seems to be the best option
 

agree 0% interest.

actually I don't think "Bank" is a good metaphor here, bank pay interest to savers because they save money in bank and then others can borrow these money from bank and pay return, however, blockchain is rather just a wallet for users.

surely some other BitAssets can be created to track coupon bond, but I think it's best for BitUSD to track USD cash, in my view, two important roles BitUSD need to play is payment method and value reference, if people can pay BitUSD instead of USD in many e-Commerce scenarios and take BitUSD as a reference to measure the value of other digital Assets, we do not need to worry there will not be enough BitUSDs in the Bitshares systems.

[Markus]

What do you mean by "BTS becomes saturated?", like why would that cause there to stop being shorts coming out when BitAsset price goes too high?

With saturated I mean BTS has reached a price level where a majority of market participants believes it will not rise by more than 5% per year. People will only short BitXYZ against BTS if they believe XYZ will lose more than 5% p.a. relative to BTS. The minority that believes BTS will rise and therefore short BitXYZ will be outdone by the majority happily sucking up those few fresh BitXYZ.

BitAssets do not have infinite redemption date, they have *arbitrary* redemption date. You can redeem BitAsset <-> Asset any time, in the form of trades like (BitAsset <-btsx-> BTS <-bter-> BTC <-coinbase-> USD <-> Asset). This transaction cost will be reflected in the price of BitAsset. Eventually though you will have transactions like (BitAsset <-merchant-> Asset) which will hopefully be cheaper than (BoAUSD <-merchant-> Asset)!

Selling an asset to somebody who is willing to buy it is not the same as redeeming. Many zero coupon bonds are being traded on an open market but still change hands at a large discount to their face value. Redeeming probably translates best to covering in BitShares lingo. For covering there is no face value you can insist on but just the consensus of a fair price. Hopefully.

[toast]

I think it would work, as long as a majority believes BTS will appreciate by at least 5% p.a. against the relevant BitAsset. This will most likely be true at the beginning, rewarding all early adopters. Once the value of BTS becomes saturated any drop in price of the BitAsset below the perceived fair value of the infinite bond (far above parity) will be taken advantage of by new longs. Because this fair price is difficult to agree on this will mean high volatility (bad tracking) and possibly drying up BitAsset supply (leading to the BitAsset price floating up and up and up - totally losing tracking).
Just my thoughts, it is very difficult to predict the behaviour of such a novel concept. Definitely too many variables.

What do you mean by "BTS becomes saturated?", like why would that cause there to stop being shorts coming out when BitAsset price goes too high?

The new question is, will 0% interest rate cause a drop below parity?
Yes: Zero coupon bonds trade at a discount because they earn an interest (0% p.a.) below market rate and they are not redeemable until a point in time far in the future. Because BitAssets are only redeemable after ∞ years they should even be trading at 0 value.
No: Cash does not really trade at a discount to the dollars in my savings account. There are not really any assets around you can earn interest on while holding them yourself. You always have to lend your money to somebody else. Somebody might offer a BitUSD savings account and offer interest on it. If a BitAsset trades below parity shorts would start covering because there is a short-term opportunity to make a profit. And opposed to the case with 5% interest it is now clear where the fair value is.

For now I am tending to "No" but I can't "prove" it yet.

BitAssets do not have infinite redemption date, they have *arbitrary* redemption date. You can redeem BitAsset <-> Asset any time, in the form of trades like (BitAsset <-btsx-> BTS <-bter-> BTC <-coinbase-> USD <-> Asset). This transaction cost will be reflected in the price of BitAsset. Eventually though you will have transactions like (BitAsset <-merchant-> Asset) which will hopefully be cheaper than (BoAUSD <-merchant-> Asset)!

[Markus]

I interpreted the as allowing for some wiggle room between spot and market. If it is 0%, you should have a tighter correlation. Although lots of people are saying "oh boy, we get !" I don't think they realize it is meaningless since assets will be priced taking that into account, so in reality they will get some market interest rate (bit assets will be priced assuming a 5% growth). It's like buying a one year 5% coupon bond at a 4% premium, you're really getting something like 1%, even though it says .

Well, I guess what I'm saying is it almost doesn't matter what % you choose, the market in the long run will correct itself (if is too high, asset value decreases over time, if it is too low, asset value increases over time). The bigger the %, the less correlated to spot in the short term. The bigger the %, the more people "feel" like it is a bank.

It is a tad tricker than just a premium because there is no expiration date where it comes to 'maturity' so I think it really could be 5% gains funded from those who expect BTS to go up by more than 5% and thus short it.   The market peg might even keep it parity with USD even with 5% interest because I think the peg may be mostly independent of the 5%.    To be honest we will just have to experiment because there are too many variables for me to model in my head.

I think it would work, as long as a majority believes BTS will appreciate by at least 5% p.a. against the relevant BitAsset. This will most likely be true at the beginning, rewarding all early adopters. Once the value of BTS becomes saturated any drop in price of the BitAsset below the perceived fair value of the infinite bond (far above parity) will be taken advantage of by new longs. Because this fair price is difficult to agree on this will mean high volatility (bad tracking) and possibly drying up BitAsset supply (leading to the BitAsset price floating up and up and up - totally losing tracking).
Just my thoughts, it is very difficult to predict the behaviour of such a novel concept. Definitely too many variables.

This is very similar to the original Ponzi scheme which works fine as long as there is an influx of new capital which is used to pay the high interest promised to the early adopters. Once the supply of new capital stops the bubble pops.

The new question is, will 0% interest rate cause a drop below parity?
Yes: Zero coupon bonds trade at a discount because they earn an interest (0% p.a.) below market rate and they are not redeemable until a point in time far in the future. Because BitAssets are only redeemable after ∞ years they should even be trading at 0 value.
No: Cash does not really trade at a discount to the dollars in my savings account. There are not really any assets around you can earn interest on while holding them yourself. You always have to lend your money to somebody else. Somebody might offer a BitUSD savings account and offer interest on it. If a BitAsset trades below parity shorts would start covering because there is a short-term opportunity to make a profit. And opposed to the case with 5% interest it is now clear where the fair value is.

For now I am tending to "No" but I can't "prove" it yet.

[bytemaster]

I interpreted the as allowing for some wiggle room between spot and market. If it is 0%, you should have a tighter correlation. Although lots of people are saying "oh boy, we get !" I don't think they realize it is meaningless since assets will be priced taking that into account, so in reality they will get some market interest rate (bit assets will be priced assuming a 5% growth). It's like buying a one year 5% coupon bond at a 4% premium, you're really getting something like 1%, even though it says .

Well, I guess what I'm saying is it almost doesn't matter what % you choose, the market in the long run will correct itself (if is too high, asset value decreases over time, if it is too low, asset value increases over time). The bigger the %, the less correlated to spot in the short term. The bigger the %, the more people "feel" like it is a bank.

It is a tad tricker than just a premium because there is no expiration date where it comes to 'maturity' so I think it really could be 5% gains funded from those who expect BTS to go up by more than 5% and thus short it.   The market peg might even keep it parity with USD even with 5% interest because I think the peg may be mostly independent of the 5%.    To be honest we will just have to experiment because there are too many variables for me to model in my head.

[maqifrnswa]

I interpreted the as allowing for some wiggle room between spot and market. If it is 0%, you should have a tighter correlation. Although lots of people are saying "oh boy, we get !" I don't think they realize it is meaningless since assets will be priced taking that into account, so in reality they will get some market interest rate (bit assets will be priced assuming a 5% growth). It's like buying a one year 5% coupon bond at a 4% premium, you're really getting something like 1%, even though it says .

Well, I guess what I'm saying is it almost doesn't matter what % you choose, the market in the long run will correct itself (if is too high, asset value decreases over time, if it is too low, asset value increases over time). The bigger the %, the less correlated to spot in the short term. The bigger the %, the more people "feel" like it is a bank.

[Markus]

If the interest rate goes too high then the value of BitUSD would rise... as USD holders seek to buy BitUSD for a solid return... too low and it will fall as USD holders move elsewhere.   Thus it could be said that BitUSD with an interest rate of 0 will be pegged to the value of CASH.   BitUSD with an interest rate of 5% will be pegged to the value of a 5% treasury note.

So what does this mean for a blockchain?  To maximize the value of the chain you want to maximize the number of people storing value IN the chain.  Most people don't keep CASH on hand because they can at least earn SOME interest in the bank.   

My conclusion is that 0% interest will approximate cash and if you want to hedge against inflation having a separate BitAsset pegged to the inflation rate with 0% return would solve the problem. 

If the prediction market is always working to bring the current value of BitUSD to be equal to the dollar then the only premium or discount you will see based upon whether money is flowing into or out of BitUSD / USD.

Conclusion... any interest rate placed on BitUSD and/or shorting in this system may be irrelevant and an unnecessary added complexity that merely biases the market and breaks the peg with a premium in one direction or another.   If the interest rate merely prevents shorts from entering the market until the price is 5% too high given their time horizon why implement it.

Not implementing interest at all would be simpler and if the economic consequences are the same then perhaps it would be best to forgo interest in the initial chain?

Simplicity seems to be the best option
 

+0%

[bytemaster]

Wait no hold on, without the  all the fees are paid by destroying BTS right? Then BitAssets get no returns anymore

You are correct, without interest BitUSD would not pay a return except holding it as a speculative bet that other assets will fall vs USD. 

[toast]

Wait no hold on, without the  all the fees are paid by destroying BTS right? Then BitAssets get no returns anymore

[toast]

I thought that was one Bitshares' most innovative features. If you remove interest entirely, it then becomes harder to argue that it is a bank at all.

While its true that a large interest rate will add a premium to BitUSD, Bit assets are already reduced in value because of the fact that I need to convert them to Bank USD or cash before I can spend them, with all the exchange fees that entails. I personally would only offer 90 Bank USD for 100 BitUSD.

In other words, if Bitshares wont give me any interest on my deposits, I now have no reason to store my USD in a crypto bank - I am much better off storing it in my regular bank where I can spend it on goods without paying fees. The only purpose of deposits is then like you said - to protect against a drop in the value of Bitshares itself.

I would be really disappointed if you dropped the interest feature entirely - Bitshares just wont be as appealing without it. We need to compensate for going in & out of crypto, or at least some interest rate.

You'd still get dividends from various fees, which is guaranteed return unlike BTC

[bytemaster]

I thought that was one Bitshares' most innovative features. If you remove interest entirely, it then becomes harder to argue that it is a bank at all.

While its true that a large interest rate will add a premium to BitUSD, Bit assets are already reduced in value because of the fact that I need to convert them to Bank USD or cash before I can spend them, with all the exchange fees that entails. I personally would only offer 90 Bank USD for 100 BitUSD.

In other words, if Bitshares wont give me any interest on my deposits, I now have no reason to store my USD in a crypto bank - I am much better off storing it in my regular bank where I can spend it on goods without paying fees. The only purpose of deposits is then like you said - to protect against a drop in the value of Bitshares itself.

I would be really disappointed if you dropped the interest feature entirely - Bitshares just wont be as appealing without it. We need to compensate for going in & out of crypto, or at least some interest rate.

We will probably experiment with interest to see how it does in the market, but I think we have enough other things to play with that the first version should be simple.   

[speedy]

I thought that was one Bitshares' most innovative features. If you remove interest entirely, it then becomes harder to argue that it is a bank at all.

While its true that a large interest rate will add a premium to BitUSD, Bit assets are already reduced in value because of the fact that I need to convert them to Bank USD or cash before I can spend them, with all the exchange fees that entails. I personally would only offer 90 Bank USD for 100 BitUSD.

In other words, if Bitshares wont give me any interest on my deposits, I now have no reason to store my USD in a crypto bank - I am much better off storing it in my regular bank where I can spend it on goods without paying fees. The only purpose of deposits is then like you said - to protect against a drop in the value of Bitshares itself.

I would be really disappointed if you dropped the interest feature entirely - Bitshares just wont be as appealing without it. We need to compensate for going in & out of crypto, or at least some interest rate.

[bytemaster]

If the interest rate goes too high then the value of BitUSD would rise... as USD holders seek to buy BitUSD for a solid return... too low and it will fall as USD holders move elsewhere.   Thus it could be said that BitUSD with an interest rate of 0 will be pegged to the value of CASH.   BitUSD with an interest rate of 5% will be pegged to the value of a 5% treasury note.

So what does this mean for a blockchain?  To maximize the value of the chain you want to maximize the number of people storing value IN the chain.  Most people don't keep CASH on hand because they can at least earn SOME interest in the bank.   

My conclusion is that 0% interest will approximate cash and if you want to hedge against inflation having a separate BitAsset pegged to the inflation rate with 0% return would solve the problem. 

If the prediction market is always working to bring the current value of BitUSD to be equal to the dollar then the only premium or discount you will see based upon whether money is flowing into or out of BitUSD / USD.

Conclusion... any interest rate placed on BitUSD and/or shorting in this system may be irrelevant and an unnecessary added complexity that merely biases the market and breaks the peg with a premium in one direction or another.   If the interest rate merely prevents shorts from entering the market until the price is 5% too high given their time horizon why implement it.

Not implementing interest at all would be simpler and if the economic consequences are the same then perhaps it would be best to forgo interest in the initial chain?

Simplicity seems to be the best option
 

[vikram]

Not to get too 'meta' but how should the interest rate on the interest rate BitAsset be set?   I am thinking it could be fixed at 0% because it isn't actually trying to maintain a peg against anything else.

Even with a 0% interest rate, people should still have an incentive to go long or short depending on their predictions right?

Correct


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Could there be any danger of a positive feedback loop from many people wanting to short assets, then bidding down the interest rate, causing more people to want to short, etc. Or should it all balance out assuming the prediction markets work properly?

[stuartcharles]

Not to get too 'meta' but how should the interest rate on the interest rate BitAsset be set?   I am thinking it could be fixed at 0% because it isn't actually trying to maintain a peg against anything else.

I agree, the reason you would hold bitgold would be because you think its price is going to go up against your local currency and maybe as a hedge against cripto currencies being used as a store of wealth. Not for the 5% earning.

Its very difficult to predict the response to something that hasn't been done before. I know you were thinking about releasing a group of bitassets or/and currencies to start. Would it be better to start with one and see how the market reacts? Since bitusd is the most important i would make the first an asset not a currency? I know you have the test version but until people are sweating about losing real dollars their actions will be different .

[Pocket Sand]

Not to get too 'meta' but how should the interest rate on the interest rate BitAsset be set?   I am thinking it could be fixed at 0% because it isn't actually trying to maintain a peg against anything else.

+ 1

[bytemaster]

Not to get too 'meta' but how should the interest rate on the interest rate BitAsset be set?   I am thinking it could be fixed at 0% because it isn't actually trying to maintain a peg against anything else.

Even with a 0% interest rate, people should still have an incentive to go long or short depending on their predictions right?

Correct


Sent from my iPhone using Tapatalk

[vikram]

Not to get too 'meta' but how should the interest rate on the interest rate BitAsset be set?   I am thinking it could be fixed at 0% because it isn't actually trying to maintain a peg against anything else.

Even with a 0% interest rate, people should still have an incentive to go long or short depending on their predictions right?

[bytemaster]

Not to get too 'meta' but how should the interest rate on the interest rate BitAsset be set?   I am thinking it could be fixed at 0% because it isn't actually trying to maintain a peg against anything else. 

[Markus]

It would be a large market, but it would also allow people to hedge against changes in the interest rate and provide the market with VERY useful information as a side effect.   This is a very valuable side market that could eventually be used for doing interest rate swaps and the like.

Yeah, and since I've been preaching that there's a correlation between interest rate and fair BitAsset price I guess cross trading might be an opportunity too.

Any plans to have this ready for the first BitShares X chain? With the new campaign I assume this won't happen.

Keep up the good work Dan, you're doing a great job!

[bytemaster]

4) […] The way this can be achieved is by using one BitAsset as a prediction market on what the interest rate should be on another BitAsset.   

Wouldn't the interest prediction market have to be roughly the same size (in trading volume) as the market for the underlying BitAsset itself? This would bind a lot of capital just to set the interest rate. If it wasn't large enough the BitAsset holders (longs vs. shorts) would manipulate the interest rate to their advantage.

It would be a large market, but it would also allow people to hedge against changes in the interest rate and provide the market with VERY useful information as a side effect.   This is a very valuable side market that could eventually be used for doing interest rate swaps and the like.

[Markus]

4) […] The way this can be achieved is by using one BitAsset as a prediction market on what the interest rate should be on another BitAsset.   

Wouldn't the interest prediction market have to be roughly the same size (in trading volume) as the market for the underlying BitAsset itself? This would bind a lot of capital just to set the interest rate. If it wasn't large enough the BitAsset holders (longs vs. shorts) would manipulate the interest rate to their advantage.

[clout]

Interest rates have an interesting effect and I have been thinking a lot about it while traveling to/from Miami.  Here are some of the thoughts I have had.

1) Price Fixing of any form will result in problems, thus 5% price fixing will result in the price of BitAssets diverging proportional to the difference with real world interest rates on the same asset.

2) Price Fixing at 0% is no different than price fixing at 5% in this regard.  It would give you a perfect price *today* but without a proper yield there would be no demand to HOLD it thus create a lot of churn as people look to move to a higher yield on that asset outside the system.

3) BitUSD needs to be correlated to the price movement of USD, not pegged TO USD in a perfect 1:1 manner.  Remember, there is no such thing as USD, just JPMorgan USD, BitStampUSD, BOA USD, FRN USD and each of these has a floating value against one another based upon the current interest rates offered at the various banks and the credit worthiness of each institution.  So long as a 2x gain in FRN USD results in a 2x gain in BitUSD it doesn't matter if FRN to BitUSD have a slight premium or discount, this premium or discount will be a 'constant' and mostly stable offset driven by constant and mostly stable interest rate differences.   

4) The interest rate on Gold, Silver, EUR, USD, etc must all be independent and adjustable to market conditions in order to achieve a more accurate peg.  The way this can be achieved is by using one BitAsset as a prediction market on what the interest rate should be on another BitAsset.   

[bytemaster]

Interest rates have an interesting effect and I have been thinking a lot about it while traveling to/from Miami.  Here are some of the thoughts I have had.

1) Price Fixing of any form will result in problems, thus 5% price fixing will result in the price of BitAssets diverging proportional to the difference with real world interest rates on the same asset.

2) Price Fixing at 0% is no different than price fixing at 5% in this regard.  It would give you a perfect price *today* but without a proper yield there would be no demand to HOLD it thus create a lot of churn as people look to move to a higher yield on that asset outside the system.

3) BitUSD needs to be correlated to the price movement of USD, not pegged TO USD in a perfect 1:1 manner.  Remember, there is no such thing as USD, just JPMorgan USD, BitStampUSD, BOA USD, FRN USD and each of these has a floating value against one another based upon the current interest rates offered at the various banks and the credit worthiness of each institution.  So long as a 2x gain in FRN USD results in a 2x gain in BitUSD it doesn't matter if FRN to BitUSD have a slight premium or discount, this premium or discount will be a 'constant' and mostly stable offset driven by constant and mostly stable interest rate differences.   

4) The interest rate on Gold, Silver, EUR, USD, etc must all be independent and adjustable to market conditions in order to achieve a more accurate peg.  The way this can be achieved is by using one BitAsset as a prediction market on what the interest rate should be on another BitAsset.   

[Markus]

If there are no borrowing costs then you eliminate a major market incentive to cover and make shorting vs simply selling equal.   We want to bias toward sellers first before shorts.

This one seems to be the gist of the matter. Can you explain why this bias is necessary?

I was wondering if somebody could go more into detail on this one. I haven't gotten any reply yet.

[Pocket Sand]

Would like to start this discussion again if possible, Markus raised some very good points that would be worth further discussion.

[Markus]

There needs to be a global rate or BitUSD would not be fungible.

I agree, that at any one time any one BitAsset must have a global rate to make them fungible. This doesn't necessarily mean if has to be larger than zero.

If there are no borrowing costs then you eliminate a major market incentive to cover and make shorting vs simply selling equal.   We want to bias toward sellers first before shorts.

This one seems to be the gist of the matter. Can you explain why this bias is necessary?

Another reason why you want to have an interest rate is because it drives incentive to hold BitUSD and drives demand for BitShares.

This will not drive up demand for long. What it will do is drive up price of BitAssets to an equilibrium level where future interest payments will be priced in - the 114 %, 128 %, 200 % and 400 % figures mentioned in my post. I don't think it will drive demand for BitShares. Rather, promising people they will earn more on a BitAsset than on the corresponding real-life asset taints the whole thing and makes it look Ponziish.

A bank with 0 interest rates is unlikely to receive many deposits and we want there to be a large number of BitUSD deposits.

This is not true if the price of the deposit is floating. Otherwise zero-coupon bonds would not work.

[bytemaster]

Another reason why you want to have an interest rate is because it drives incentive to hold BitUSD and drives demand for BitShares.  A bank with 0 interest rates is unlikely to receive many deposits and we want there to be a large number of BitUSD deposits.

[bytemaster]

I think returns ought to be floating and determined entirely from how much the network was able to collect from the various fees.

This leaves only how to determine fee for shorting. Like you said, it is not clear that a fee is strictly necessary (there are many other fees to pay dividends with). Perhaps allow short positions to choose their rate, competing for limited blockchain space?

There needs to be a global rate or BitUSD would not be fungible.  If there are no borrowing costs then you eliminate a major market incentive to cover and make shorting vs simply selling equal.   We want to bias toward sellers first before shorts.

There is a problem with having a fixed rate, and the solution is to use a prediction market to assess what the rate should be at any given time.  But this is something that will be in future chains and not the first chain.  A predictable 5% is better than unpredictable / floating rates in many ways.  One less variable and component of risk.

[toast]

I think returns ought to be floating and determined entirely from how much the network was able to collect from the various fees.

This leaves only how to determine fee for shorting. Like you said, it is not clear that a fee is strictly necessary (there are many other fees to pay dividends with). Perhaps allow short positions to choose their rate, competing for limited blockchain space?

[Markus]

2) BitAssets will now receive a predictable, hardcoded 5% interest return, and short positions will pay a 5% borrowing cost.

There has been some discussion in the BitShares Status Update thread but I think this topic deserves its own thread.
After thinking about this for some time I wanted to share some thoughts. My question is:

Why do BitShares need interest payed by the shorts to the longs? Without it the BitAsset would track the real-life asset much better.

Essentially, what you are creating with this interest/dividend is an bond with a 5 % coupon and infinite maturity. The price of this asset will be highly susceptible to market interest rates changes. In theory causing the price of the asset to change the same magnitude as the interest rate: for example a rise from 3 % p.a. fo 4 % p.a. (4/3 = a 33 % rise) should lead to a drop in asset value by 25 % (to 3/4). Compare this volatility to a 30 year (the longest maturity available) US treasury bond.
Chart: http://www.comdirect.de/inf/anleihen/detail/chart.html?timeSpan=5Y&ID_NOTATION=15793986#timeSpan=SE&e&

The price of the BitAsset will be (much) higher than the real-life asset where the coupon (5 % assumed) is much higher than the market interest rate. For BitUSD with a US treasury bond yield of 3.9 % p.a. this effect might be negligible (the NPV calculation quoted in the BitShares white paper states 114 %*, I arrive at 128 %). For assets which normally don't fetch an interest (Gold, JPY, etc.) this will be a huge difference: A 100 year 5 % coupon JPY bond in an environment where you normally get 0.8 % p.a. would trade near 400 %, a 30 year bond just above 200 %.

In BitShares there is no need to charge the shorts a penalty. In real life you have to pay for shorting because you need a counter-party. Being long in any asset is quite a natural thing and you can do that on your own. Being short requires somebody to lend you the asset first before you to then sell it. This loan is open as long as your short position is open. In Bitshares being long and being short seem to be equivalent as both need a counter-party, so why disincentivise shorts? Would this not choke the supply?

If you want to fix these issues then at least every BitAsset will need its own interest rate. But my gut feeling is, the lower the rate the better, zero best.

* Is that calculation available anywhere? The paper only states the result.