So what where does this leave us?
New BitUSD should only be created when there is demand for it at prices at or above parity.
All USD should be guaranteed a buyer at 90% parity. This limits the risk to the downside.
Potential Problem: There will be little demand for BitUSD at prices at or above parity in the short term < 3 months.
1. I feel there is at least a 1/2% utility difference that comes from the cost and effort of converting BitUSD.
2. The wallet just being released has bugs etc. this introduces a risk premium that must be accounted for.
3. The problem BM already identified 'BitUSD vs USD will not track well in an immature market because BitUSD-deniers will not buy BitUSD and neither will believers.'
A market determined mechanism that incentivises BitAsset creation is needed in my opinion.
Potential solution: Bring the options contracts into the BitUSD creation mechanism by having shorts compete at parity (or slightly above*) by the fee they are willing to pay to longs.
Of course the problem is if shorts competed via fees that were paid immediately obviously BitUSD would track at parity less fees.
The Twist- Fees are payable in BTSX and are only redeemable after you have held the BitAsset you bought for at least 3 months (If you sell your BitUSD before 3 months the fee gets paid to the network or the insurance fund.)
-Because the fee is paid in BTSX, the better BTSX does, the more their fee is worth
so now people are incentivised to hold their BitAsset even if they think BTSX will do well. (This is important because even with traders tightening the range the peg will fluctuate considerably based on the short term fortunes of BTSX, this dampens that considerably so adds more stability.)
-People selling before 3 months will be adding to the security of the network and appeal of BitAssets because their fees will add to the insurance fund.
This system will find a level that encourages BitAsset creation whereas at the moment there will be very little BitAsset demand.
This delayed gratification also discourages selling and so limits supply of BitUSD with no incentive attached. (Shorts looking to cover will find very little BitUSD for sale driving the price of BitUSD (with no BTSX fee attached) up very close to the peg.)
(* I would actually like shorts to compete at the $1.01 level for BitUSD creation vs. the $1 level so that BitUSD with no incentives is worth $0.99-$1 vs. $0.98-99)
As BitAsset demand increases the fee will eventually become negligible.