I want to give clarity about the difference between BitUSD and interest bearing bonds and how market based interest rates can be established. I also want to emphasize what is needed to fix the BitUSD peg.
A couple comments from bytemaster have motivated this post:
BitUSD is a market between those who want leverage and those who want stability. The "price" in this market will depend upon the interest rate people are willing to borrow at to get the leverage they desire.
Bottom line, you cannot get rid of "interest rates" or "premiums" by resorting to price feeds or price fixing.
BitUSD is not supposed to have an associated interest rate. It's just supposed to track the dollar. People will buy a bitUSD that reliably tracks the dollar for the purpose of facilitating trade, not for getting interest.
The current BitUSD market implementation is flawed and the peg is not working. The notion that the difference between USD and bitUSD price is an "interest rate" is inaccurate. There is nothing stopping the bitUSD price from falling further without intervention.
The method to fix the peg is to use the price feed to limit the creation of new bitUSD by preventing shorts from shorting below the USD price.
Interest bearing bonds require a separate market and implementation from the core BitUSD market. A BTSX holder can sell a collateralized promise to pay a certain amount of bitUSD at a certain date in the future. There can then be a "bond market" for these promissory notes. The present day value of these future promises to pay BitUSD will determine short term and long term interest rates.
The first step however is to get the bitUSD implementation to accurately track the dollar. And for this we must use the price feeds as I've described.