Trying to force liquidity into the internal exchange doesn't solve the root of the problem that is people need a reason to use and trade on the dex in the first place. Note: I'm also not sure exactly how you can prevent someone from trading BTS externally on an exchange or peer-to-peer and I'm not so sure that's desirable in the first place. All two people need to exchange are wallets and a centralized exchange can always have a wallet as they do currently right?
I had the same thought too initially that the idea is 'forcing liquidity into the DEX' and restricting the trading of bts. As I dived deeper into the concept, I realised it is not so.
The idea is really about changing the crypto-currency model into a true share-based model. Shares are now based on the value of the co-op and tradable within the internal DEX. To get into the co-op, you buy bitasset with fiat and get out of the co-op, you sell your bitasset for fiat. So there is really NO restriction in movement in and out.
When bts shares are only tradeable in the DEX, it will not flow into the outside centralised exchanges. And for those bts tokens out there before the model switch, they need to retain their values. IMO, one idea is to have these tokens exchanged to bitassets before they can get into the co-op. I believe more brainstorming on the idea is needed.
I think it's more about perspective and the language about it being a share-based model that is appealing, but fundamentally we can already be considered that and whether trading happens inside or outside doesn't change the nature of the system fundamentally. I think the notion of trades only happening in this isolated DEX chamber and the concentrated liquidity that is perceived to come with it sounds appealing to people, but again the root of the issue is that people have to want to use the platform in the first place and businesses still need to create a value proposition for consumers. Even if desirable and if centralized exchanges that trade BTS pose a big problem (and I don't agree with this notion), I'm curious to know about the implementation of this isolated DEX chamber and how BTS can only be traded within it and not outside. From one perspective we already have an isolated DEX chamber that people can only exchange bitAssets/UIAs or any tokens for BTS. The key difference is that somehow trades are restricted on the outside which I'm curious to know how that would work.
I think the perspective is not about restricting movement or tradability of bts (you term it 'isolated chamber') because the movement in and out of the bts network (co-op) remains free via say bitUSD/bitCNY. That is, there remains a free movement in and out.
Rather the focus is on bitUSD/bitCNY becoming the main gateway into the network. External exchanges will be trading bitUSD/bitCNY instead of bts. One of the problems with bitUSD now is that bitUSD users tend to hog their bitUSD holdings. The new model means users need to convert their bitUSD for bts to use any operation. With the shift to bitUSD/bitCNY being the main gateway, the trading of bitUSD/bitCNY would go up because of the increase in demand. The profit opportunities for trading bitUSD and bitCNY would go up too, attracting more shorters ie producers of new bitUSD/bitCNY. Once the bitUSD peg holds well because of the increased liquidity, confidence of bitUSD set in and we can expect a cycle of even more liquidity.
Bear in mind that there are now dividends giving out to the users and these dividends are based on real transaction fees earned (and not dilutions). This is an added value proposition.
And of course, as your rightly pointed out, ultimately the other value parts of the network (on/off ramp, FBA, STEALTH, Prediction Market, Bond etc) continue to be the main pulling force to attract users.