I see. Thanks for providing the historical context.
I think the $0.85 for the bitUSD doesn't concern me in an illiquid market. I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD To me it's more about perspective. Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD? It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD. If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it. If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile. Bitcoin or Gold will seem stable.
Last I checked the price for Bitcoin was:
Local Bitcoins: $248.6
Coinbase: $236.5
Bitfinex was $235.7
http://bitcoincharts.com/markets/
From a Bitcoin perspective there are three different prices for one dollar. The differences are entry/exit costs and counterparty risk. From the dollar perspective there are three different prices for Bitcoin.
I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take. In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference. (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)
Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world. A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk. Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.
Some of this reasoning is backwards. USD has a floating value. Checkbook money, travellers checks, credit cards share the same value precisely because they are settled in USD. It's not that USD is magically pegged to those things by some form of consensus.
The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.
[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]
No problem. It's not so much an ideology rather than just theories on the nature of money that generally makes sense to me.
When you take into consideration the commodity nature of money, in a free market all various forms of money would have different value. Just like redeemable gold certificates will have premiums or discounts based on the risks and costs of the issuer. Hence if you view Bitcoin as money there are various prices based on risk and costs. A MtGox bitcoin was worth much less than a Bitstamp bitcoin. What is a BTC38 BitShare or BitUSD worth? Should a BTC38 BitUSD be worth $1 or maybe 75 cents?
In a free market, federal reserve notes (ie. cash or base money) would have a premium over checkbook money. This was especially true when federal reserve notes were redeemable in gold. Imagine having $1 million dollars in a checking account at a high-risk bank with $250k FDIC insurance compared to $1 million in federal reserve notes. Your $1 million in checkbook money could be worth as little as $250k. The banks, government & people just collectivize all the counterparty and operational costs of the different forms of 'money' and deem them to be worth the same and settled as such.
I think the first question to ask is: What is a dollar worth and why? Some may say it's a piece of paper with ink. Would you beg to differ and if so what is a dollar to you and why? Do you think that a dollar is worth the same to another person and why? Is there an objective value you think everyone has of this dollar? So why does a haircut cost around $10 and not $10,000?
von Mises asked himself similar questions about fiat money and theorized that people value a fiat currency for what it was worth the day before. When you go back in time, the dollar or fiat first represented a certain amount of gold that was redeemable. Hence people had a reference of gold to compare any good or service they could exchange for. Gold's value was first determined in the free market of barter. Nick Szabo may argue even before barter, beads, seashells and jewelry had collectible value. Gold can fulfill the regression theorem because it was borne out of use, barter, or collectibility. Since fiat currencies have very little intrinsic value in barter, von Mises suggests it could never become money on its own.
If you were transported to some other alien planet with the same resources as Earth, but started with no memory of the past value of a dollar, will the new society use the dollar and will a haircut be worth around $10? I would argue the dollar will neither be used for money nor will a piece of paper w/ ink that says $10 get you a haircut.
In regards to the internal asset exchange market you can peg to whatever you want, but I believe the trade will be dicated by the real world exchange of bitUSD for a one dollar federal reserve note on the street. The internal market engine may show it worth around $.97 due to exit/entry costs, +/- $0.95 for a trusted exchange like Coinbase, +/-$0.85 at BTC38 & BTER
... hey I don't know how trusted these exchanges are so it's just a hypothetical. Our current price feed is based on centralized exchanges with counterparty risk. And remember I'm throwing out all these hypothetical numbers when the value of bitUSD vs BTS will be constantly changing every second and in flux!