@starspirit, i think if you buy your own short you've just covered your position, but you still have collateral posted to the blockchain, so you actually have less BTS available than before you opened the positions. When you close your short you give back the BTS you borrowed from yourself (net interest exchange to yourself and fees to the network), and your collateral is released. Overall, you've lost 2 BTS in fees without any gain.
When i short to myself i'm doing that to roll an open short forward another 30 days, that's all.
When you self-create and self-cancel the short there are small transaction fees involved. Its what you do in the middle that earns your reward, whether that's the returns on another asset you funded, market-making income, yield income, or other utility.
sorry i'm a little on the slow side tonight...
so i short bitUSD and buy my own short ...i have an open short and some bitUSD i can go run amok with, but i've traded my collateral BTS for the short and i've traded BTS for the long...i'm sitting on 2x less BTS and have half that BTS-equiv amount of bitUSD to do something with. would i have been better just using my BTS to buy bitUSD? or actually, wouldn't i just have been better off doing nothing and keeping my original BTS to fund whatever else i wanted?
If you sold BTS to buy bitUSD, you have given up some of your BTS exposure, and might miss potential gains. If instead you use the BTS as collateral to create a bitUSD (to use for whatever purpose you want), you have not reduced your BTS exposure at all. You've just used your equity to get a loan. So you keep any gains on BTS, as well as have a loan to do with as you please (like investing in more BTS, or in some other investment).
If you did nothing and kept the original BTS in your wallet, you couldn't use this to fund anything.
but it's a loan from yourself, right? you're lending yourself your own BTS by going simultaneously long and short; however, you're actually locking up more BTS as collateral than you're borrowing, so wouldn't you be holding less BTS for the duration of the loan to yourself than had you done nothing?
No, its not a loan from yourself - its a loan from the person who buys your bitUSD. Let me explain...
Let's say the collateral requirement for shorts is 100% - i.e. every $1 bitUSD has minimum $2 BTS in collateral.
And let's say you have $2 of BTS you want to keep, but you're not currently using. You can retain your exposure to the BTS, and use it as equity to raise funds for you to use elsewhere.
So you use the $2 of BTS to simultaneously open a long and a short. The $2 of BTS now sits in the collateral pool.
Now you can sell the bitUSD on whatever exchange you like, and for whatever asset it trades against, to raise funds. If bitUSD trades against USD on an external exchange, you can sell it directly for USD. If it trades against BTC, you can sell it for BTC.
If the bitUSD only trade against BTS (and I think this is the source of your confusion), then you can sell it for BTS. But even in this case, you are not borrowing your own BTS - that BTS still sits in the collateral pool backing the bitUSD. You have in fact at this point received additional BTS provided by the bitUSD buyer, giving you a leveraged position (you have $3 of exposure now) unless you convert it to something else. You don't need to keep the BTS proceeds, you can exchange them for whatever you want, and still have $2 of BTS in the collateral pool.
The proceeds you receive from the sale of your bitUSD, in whatever form, can always be exchanged into whatever form you prefer, to use in whatever way you see fit. No matter what you use it for, you still have $2 of BTS in the collateral pool (assuming no price change at this point), waiting for you to reclaim it as soon as you buy back the bitUSD to cancel your short.
But let's say you did sell the bitUSD for BTS and kept this position. If BTS doubled in value, then you will only need half the BTS proceeds of your initial bitUSD sale to buy back the same bitUSD. With this bitUSD in hand you can now cancel your original short and free the quantity of BTS you originally placed into the collateral pool. In addition, you have the other half of the BTS proceeds from the initial bitUSD sale to keep as profit. This shows you did not simply borrow your own bitUSD.
Sorry that's a bit long-winded, but hope it helps.