If the starting collateral is 100 BTS backing 50 USD... and the price of 50 USD rises to more than 100 BTS so fast that the market couldn't cover the position in time then there would not be enough BTS in the short position to buy back 50 USD... so the network would be forced to create new BTS to close the short position.
Let me get this straight:
1 Bitshares =1 bitUSD.
2 Bitshares are required to short 1 bitUSD (2:1ratio no mater the price).
Maximum risk of the short trader is 2 Bitshares.
maximum risk to the network is limitless, in theoretical extremes.
Maximum risk of long bitUSD trader is 1 bitUSD.
Maximum profit of short Trader is 1 BitUSD.
Maximum profit of long Trader is limitless.
Maximum profit to network does not exist.
Isn't this just shifting the risk from the person who shorts USD to every BTS holder through dilution? I think an automated stop loss would do the trick. One that automatically buys back the short position when it nears the collateral limits. Although you could then have whales attempting to hit stop losses to gain momentum especially if there is an open ledger with these types of transactions visible.
Am I seeing this right?