BitBIP would let you hedge against dilution. We can have a perfect feed and have certain types of guarantees about the collateralization.
That doesn't make any sense. Either the shorts are guaranteed to lose or the longs are guaranteed to lose depending on which stage of the DAC we are in. If we are in the stage of the DAC where we are inflating, the shorts are guaranteed to lose in the 30 day period because there will be dilution during that period; thus no one will want to short. If we are in the stage of the DAC where we can afford to go back to deflating (return profits back to shareholders), the shorts would of course love to short BitBIP but no sane person would be willing to go long.
I was about to write that if BitBIP had some predefined inflation rate then it might work, but actually I am not sure about that either. I don't think the time scales match properly. One is on the time scale of 30 days, the other is a longer term plan by the shareholders on the direction of the DAC. I think the only time it makes sense is if new shorts are able to specify the current inflation rate as part of their formula. Then if shareholders decide to change the inflation rate in either direction, that is when either the long or the short would win/lose. But the problem with that is that it makes the long position nonfungible, so maybe this is more of a bond market.
The other big problem with the above is that even the long positions would still be exposed to
some dilution even if their bet went in their favor, since if there is significant dilution at the time that they enter the long side of the contract then no short would be crazy enough to set up a contract at zero dilution because they would almost be certain to lose. But the hard-liners complaining about dilution don't seem to accept
any dilution whatsoever. This is a philosophical problem that needs to be resolved. It is a vestige of still thinking about this like a cryptocurrency rather than a company. The way to resolve it is to either: make them see reason and understand why it is in their financial interest to allow for shareholder-controlled "capital infusion" (That's what we are calling dilution now right? I'll never get used to that.); or, let them get out of BTS (ideally into a BitAsset on the chain like BitGLD or BitUSD) and allow the rest of us to do what needs to be done.
Edit: Here is another idea which I haven't thought through too carefully, so there could be some critical flaws. I3 should figure out some growth curve for the value of BTS (in USD) if it was to try to survive without dilution. There should be some iteration between I3 and the community to come to a consensus on some curve so that the people who don't want dilution are satisfied with that growth curve and I3 believes they can achieve even faster growth than the curve if they have capital infusion available to them. Take this consensus growth curve and put it into the definition of a new BitAsset that is an investment vehicle for all the people who are really afraid of dilution. I3 can short that BitAsset and if their guess is correct they should profit from it (obviously anyone else is free to short it as well). The people who are afraid of dilution can go long on that BitAsset (and lose voting rights on matters such as capital infusion). There should be far more people willing to go long on that BitAsset than BitUSD for example, so I3 could potentially make more money going short on that BitAsset than they could by going short on BitUSD and having to pay high interest to compete with everyone else trying to short it. Also, the formula should extract the short term volatility of BTS/BitUSD and superimpose it on the growth curve, just to scare away anyone who is thinking of using this as anything other than a long-term investment asset. We don't want it to steal the demand for BitUSD.