If BTSX takes a nose dive and covering Alice's short would dip into Carrie's $8000 principal, then Carrie and all the other creditors will start putting a ton of political pressure on the central bank to print BitUSD or BTSX to make them whole. Regardless of the central bank's response or non-response, the crisis of confidence will jeopardize the entire system.
Hold on. Creditors like Carrie will be holding a security that has nothing to do with BitShares X. We can't stop them from doing that. If they lose all of their money because of malinvestment, that is too bad for them, but it doesn't mean BitUSD would be undercollateralized. BitShares X only cares about maintaining the peg of its BitAssets. It is not responsible for other investments people want to make. And everyone should be clear on this. There is no reason to take seriously the outside investors whining about BitShares X doing something to make them whole.
Regarding your third post:
Your already complicated proposal is now getting even more complicated (three-day rules?). Seriously, what is wrong with the capital gains tax method
I described a while ago. Shorts would only be able to cover through a BitAsset buy order at market rate using the BTSX held in collateral. If BTSX needed to buy the BitAsset for covering was less than the initial reserve (just the "reserve", according to my terminology in that post, not the "margin"), the difference would be taxed at a rate that the short set when creating the short position. This tax rate is used to prioritize short matching at the same price. If desired for the purpose of simplifying the trader's decision making, the tax rate could only apply if the short was matched at the feed price. Extra margin could be kept with an open short order in order to allow it to remain active, within the price limits set by the short, even as the feed price increased (until the margin was no longer enough to meet the minimum 200% collateral requirement at the feed price). Any extra BTSX that was not necessary to meet the 200% collateral requirement at the time the short was matched would not be locked up in the short position; it would instead go back to the trader's balance. Alternatively, the short order could be set up to always use all the margin provided if the short was matched within the price limits by adjusting the amount of BitUSD for sale to satisfy the 200% collateral requirement. If the price of the BitAsset relative to BTSX goes up, the short does not have to pay any additional fees to cover (assuming no margin call). Ted, your fast trader, has no greater incentive to raise the tax rate to jump ahead of the line any more than the medium term traders. If the price of the BitAsset relative to BTSX goes down shortly after opening the short position, the trader has incentive to cover their short early and re-short to compound gains, keeping liquidity high. The funds collected from the capital gains taxes can be used to increase demand for the BitAssets through higher yields. There is still a negative feedback loop, although the propagation of information in this feedback loop might be slower than your interest proposal. Even then, now with the new maximum holding period of a month and with market making bots, the time delays shouldn't be too significant (and if yields saturate at a cap of 5% for BitCurrencies like I hope for, it shouldn't even matter because the demand shouldn't be very sensitive to the tax rates). My proposal can also be modified to allow competing with increased collateral at first up to some limit (like 400%) before then competing on tax rates, although I personally don't see the need for this because I think a 200% reserve is already good enough.
Regarding your fourth and fifth posts (and BitBonds in general):
I have already talked about my thoughts on this issue
with you actually. My view is that the money raised from fees on the shorts should be used by the DAC for two purposes: one, used to provide a reasonable
yield on BitCurrencies as a marketing strategy to get initial adoption; and two, sent to entities/individuals the shareholders think can grow the value of the DAC best (whether that is regular delegates, business delegates, or workers chosen by proposals ratified by shareholder vote) or alternatively burned as a dividend to shareholders if we are past the growth stage of the DAC. The reasonable
yield just needs to be good enough to be better than what people can get holding their fiat in a traditional bank; I think the marginal increase in BitCurrency demand by raising the interest rate higher is not worth the opportunity cost of not using those excess yield funds to grow the DAC in smarter ways. And, as someone else on the forum said, making it too high makes people suspicious and makes them think this whole thing is a scam. I think a yield up to
5% is great. That is up to
, meaning it is variable with a cap of 5%. My guess is that in the early stages the yield would be consistently saturated at the 5% cap for a long time (which makes it easier for people to reason about by the way because they can just think they get a consistent 5% per year).
Now from what I remember you want the excess revenue to be given as additional interest via BitBonds. Why? What are the holders risking to get that kind of return by the way. What are we (the BTSX holders) getting out of them holding the BitBonds? Just that they hold their BitAssets for a long period of time? We would already be making BitUSD and the like extremely attractive to hold with the 5% yield compared to dollars in outside banks. I think we can do smarter things with that extra revenue that would be going to BitBonds in your proposal. Besides if they actually believe in the system and they already have more than enough wealth with price stability for the short-term and want higher returns over the medium to long period of time, then in my view they should hold BTSX (at least during the growth phase).