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« on: December 18, 2014, 03:38:15 pm »
I've seen a lot of stuff written and mentioned on Lets Talk Bitcoin, that bitAssets are 2x backed by BTS. However, when walking through the process myself it appears to me to be 3x collateralized.
I put up 2x BTS for the initial 1x bitUSD. That bitUSD is immediately sold and the proceeds give to me. However, the original 2x collateral and the proceeds from the sale are marked as "add collateral" and neither hit my available balance. It seems like the whole 3x balance is available for the system to use in a forced cover. Seems like 3x to me. Also, confusing is the language that says if I have to use 150% of my collateral to cover it will force me to cover. But this value seems to be based on a 2x cover. Example, if the short price was 50, you would be forced to cover at 75.
Also, from a practical point of view if you want to avoid a forced cover you actually need additional funds to manually buy the asset before you can actually cover. So, if you plan to short and cover manually you need to have ~3x the funds yourself. Maybe in the future you could put out a special buy order where it allows you to use your collateral to buy the asset and the asset is immediately used to cover that particular short so you would not need that additional capital to use shorts.
which actually brings up another question around short expiration. I understand the forced cover, but if the short just expires how is that process handled? Same as a forced cover I assume except maybe you don't have to pay the 5% penalty?
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. Well done! 
