The DEX should be able to offer BitLTC^ in exchange for LTC and vice-versa via a bridge like Metaexchange
NuBits shows that there is market demand for fractional reserve but liquid Smartcoin offerings.
Fractional Reserve Smartcoins^ (I'm not suggesting removing the current Smartcoins but am suggesting introducing a new seperate set of Fractional Reserve Smartcoins^.)
The DEX can issue BitLTC^ up to a certain daily quota at LTC feed price + X% if there is demand above the feed.
BitLTC^ can be force settled at feed price - Y% from the collateral pool.
There are two situations that could make the BitLTC^ collateral pool under-collateralised.
- LTC could rise in current value including vs. BTS
- BTS could fall in current value, including vs. LTC.
Smartcoins^ rising in current value, including vs. BTSThe first problem is partly solved by putting all Smartcoin^ collateral into a common pool. So if LTC rises vs. BTS, BitLTC^ won't be under-collateralized because it will be drawing from a common pool that would have remained fairly stable in such an event.
Such an event is negative to the collateral pool, as a result the cost to issue new BitLTC^ could be increased to reduce demand.
BTS falling in current value against the majority of Smartcoins^In this case BTS would want to encourage new Smartcoins^ to be created at the new level and discourage forced settlements.
So BTS could increase the available daily quota for Smartcoins^ and issue them very close to the feed price, thereby increasing demand.
Smartcoin^ InterestSmartcoins^ could then pay interest if you were willing to lock them up. (SImilar to NuBits parking rates which haven't been needed. )
Example:BTC38 for example does about $50 000 volume of BTS a day, with a 0.2% trading fee that could generate $100 a day, $35-40k a year.
They have circa 300 million BTS I believe, with a market value of $900 000?
If the trading fee rewarded those willing to lock up BTC38-BTS for a year, then 40% of BTC38-BTS could be locked up and receive 10% per annum.
What percentage of BitUSD^ holders would lock up for
per annum?
The Smartcoins^ that are locked up for an extended period reduce the pressure on the collateral pool and may make at it over-collateralized in most market conditions.
Other:Over time due to loss of private keys/death/other a percentage of Smartcoins^ will never be redeemed thus also reducing pressure on the collateral pool.
ConclusionA good Fractional Reserve Smartcoin^ System would allow BTS to be a decentralized alt-coin, currency and stock exchange where users could deposit USD for BitUSD^ and DASH for BitDASH^ and vice versa for a reasonable cost.
Good liquidity and a well managed collateral pool, could make Smartcoins^ much more popular and useful than the current over-collateralized Smartcoins.
Thoughts?