Settlement has nothing to do with liquidity (in core smartcoins like USD, EUR, CNY, etc..) IMHO
maybe I misunderstand what you're saying.
Settlement has everything to do with liquidity. That's its only purpose.
It guarantees up to 2% (or whatever it's set to) of daily smartcoin supply is liquid at the settlement price.
It is in effect a standing order to buy that smartcoin. (with 24 hr delay)
sure .. for that direction there is everything fine and we do have 2% of supply in instant buy orders for smartcoins ..
the liquidity issues are on the other side .. no one wants to sell his smartcoins .. not even for a 5-10% premium (depending on the actual asset) ..
simply because we don't have a big on/off ramp for bitassets ..
Forced settlement is guaranteed buy side liquidity at the peg.
I think we need some sort of guaranteed sell side liquidity at the peg+10%. This would have to come from the rerserve pool imo.
One of the benefits of @Empirical1.2's idea is that yield can be directed not only to BitUSD longs, but also to BitUSD shorts. Also, it stands to reason that a subset of the people buying BitAssets for yield would also be interested in participating in a liquidity pool to gain additional yield. Funds from such a pool can then be used in conjunction with funds from the reserve pool to create liquidity on both sides of the peg.
What about BMS concerns about being long and short at the same time. It artificially increases supply but not liqidity? Also there's no need for reserve pool subsidies of the buy side because of forced settlement.
Increasing BitUSD supply via yield harvesting is still a positive imo because...
- It removes BTS supply from centralized exchanges
- Converts many BTS holders in Smartcoin holders (the product we are trying to bootstrap)
- Converts many BTS holders into longer term yield seeking holders vs. speculators
http://bytemaster.github.io/article/2016/01/04/The-Benefits-of-Proof-of-Work/- Makes us the Crypto USD market leader by value and numbers of holders thereby making us the most lucrative market for merchants.
>70% of BTC is illiquid and hasn't moved in >6 months, but the number of holders and value of their holdings is the most lucrative crypto market and has attracted over 100 000 merchants. This utility increases liquidity and usage.
http://www.ofnumbers.com/2014/11/22/approximately-70-of-all-bitcoins-have-not-moved-in-6-or-more-months/ (Whereas why would a lot of merchants want to make the effort to offer their product and services in a much smaller market with fewer users? Let's become the USD crypto market leader fast.)
Nearly all other promotions and developments cause the BTS price to fall in the short term in the hopes of creating demand in the future, dilution for yield should increase the BTS price (via increase BitUSD (BTS) demand in the short and medium term)
https://bitsharestalk.org/index.php/topic,21641.0.htmlIncentivizing liquidity, incurs a constant cost but not necessarily constant net new demand for BTS. (Without yield many seek crypto USD only temporarily during BTC/Crypto declines.) By offering yield we have a higher probability of bootstrapping BitUSD and a BitUSD economy. (In a way that should actually increase the value of BTS from the outset and for a cost that can be mitigated by shareholders via yield harvesting.)
So personally I think we should offer dilution for yield during the growth phase of the DEX as well as conservative liquidity subsidies.