Rather than thinking of floors, I've been thinking in terms of supply and demand: bitassets can control supply but not demand. There must be a reward for those that work to maintain the peg. Thinking of this from the game theory perspective:
The Goals:When demand for an bit asset (BTS/BTA) exceeds the feed, BTA
must be created.
When demand for an bit asset (BTS/BTA) is less than the feed, BTA
must be destroyed.
Who should profit:The player triggering destruction/creation should profit from these rules to "reward" them for maintaining the peg. The spread is thus a function of liquidity and cost of extracting this profit as the reward for maintaining the peg
The Rules:Current system:The current system doesn't give market rewards and incentives for following the "
musts" above.
When demand for a bit asset is less than the feed +10%, assets are destroyed based on when they expire (or manually in the right condition). Current BTA holders (and shorters) have to provide BTA for clearing and have no incentive to maintain the peg, in fact they have an incentive to drive the peg to the best value for them. That value is feed+10%. (I'm one of those players at the moment, sorry
)
Shorters are in the same boat, why short at the feed when I can short at feed+10% - especially since I'll only be able to cover at feed +10%. I should short at feed>10% and I'll be rewarded by selling to those clearing at feed+10%, thus rewarded for maintaining a peg at feed+10%.
There is no profit for maintaining peg.BTA2.0 (or 3.0):When demand for an bit asset (BTS/BTA) is less than 99% of the feed, BTA are destroyed by the new manual forced clearing due to an arbitrage opportunity. (Remember he primary rules that tokens
must be destroyed when demand is not equal to the feed. 99% is ok - if you can think of it destroying bitUSD at 100% feed minus a 1% fee. The fee is arbitrary, but something that can be changed to remain competitive with other payment processors.) The one triggering the clearing profits by "correcting" the peg, or pays a premium for convenience if the market is below the peg.
This is excellent, there is profit for maintaining the peg.If demand (BTS/BTA) exceeds peg,
why should I short? Where is the market-enforced arbitrage opportunity to reward me for maintaining peg? I know BM was saying that he wants to ensure a minimum value, but now there runs the risk of hyper-deflation. Why should I short today when I can short for even more tomorrow? To protect merchants, the system puts consumers at risk. BM's argument is that shorters will short because they will charge a premium. That only works if they can convert that premium into profit
instantly (or at least a quick arbitrage), I don't see the mechanism by which they can do that. BM says that they could post bts sell orders right above the feed and make money on the spread. However, there is no feedback pushing the ask/bid median back to the feed - we'll end up like the first BTA (before short selling rules) where the price will just drift away. Once it drifts away, no merchant will execute the market clearing (since they'll lose money), and no short will want to short since there is no upper bound to where price is going - and supply will not equal demand at the feed.
ConclusionI don't see the incentive for short sellers (BTA creators) to profit from creating BTA to keep supply=demand. Yes, short sellers will need to sell at a premium, thus driving the price away from the peg. What market force is driving it back towards the peg?