The current yield computation is very crude. The approximations result in a very low yield compared to "exact" computations.
If we pay 0.01% to everybody whenever the yield fund accumulates to a level where we can afford to do so, what would happen?
I have a feeling this would be very easy to implement and keep the level of network equity in the yield fund to a minimum [1] [2]. I think I have a solution to the compounding problem with this scheme as well, but that'll be a separate post.
[1] By "network equity in the yield fund," I mean "if everyone asked for their yield immediately, how much would be left over?" I think answer to this question will always be "most of the yield fund" in the current implementation. Meaning we hold BitUSD potential back because we could afford to pay more interest (which would attract more investors). And we might be setting the stage for a supply-side margin crisis if shorts need to buy BitUSD to cover, but can't because too much BitUSD is tied up in the yield fund.
[2] If we think it's important to keep a reserve for macro-economic purposes other than yield, like buying up underwater shorts, we can simply set up a separate fund, and explicitly set (an algorithm to determine) its desired balance level (e.g. 10% of BitUSD in circulation). Then divert fee income into that "macro fund" when the fund is below the desired balance, and "change the sign" of this flow when the fund's balance is above the desired level (pay a portion of the fund's balance as fees).