If we don't get Smartcoins closer to a 1% peg you will never get utility out of them and everyone who comes to bitshares is going to end up just creating their own UIAs and smartcoins because the system bitassets are simply too expensive to consider using.
That's my take on it anyways. I haven't seen any reason for driving the premiums up on Smartcoins even beyond 5%+ as has happened other than because we have so little volume some people could and thus profit from the situation in the DEX market... while those few who attempted to buy and use them would just get screwed.
If you are looking to buy them for holding value, what good is it if you are paying/losing 10%+ doing that?
If you are trying to use it as a currency for its counterparty (ie. bitUSD) how do you justify paying 10 cents on every dollar more than the real counterparty value?
At on time I had some customers who wanted to pay us for hosting in BTC in bitUSD instead at my request. The result was continued issues with collection because the premium was SO far from what the value of the BTC was that they were sending to convert to bitUSD at the time due to the premium taking 15%+ of the balance off what was being shown as the value of the BTC in USD on Coinbase. I was forced to contact them and instruct them to send more because the difference sometimes was hundreds of dollars short of their invoice due.
Any business that might consider using these Smartcoins would quickly start getting negative feedback from their customers about this, and any merchants who look into them and see this likely are stopped from adopting them for this very reason knowing that they will have customers upset with paying an extra 10 cents on very dollar.. for what? Because traders in an illiquid market made it that way. Good for trader, bad for utility and adoption.
Some would argue that merchants can short Smartcoins, but really, unless their business revolves around the Smartcoin with lots of BTS to just lockup that is a huge barrier to entry.
It seems like it depends what you think Smartcoins should be used for that will determine what you think should happen with them.
As a merchant I can accept a 1% spread from the peg along with other transaction charges to consider it accepted as a payment method (assuming there is an offramp for me to be able to convert to real counterparty Smartcoins to pay the bills etc). Once you get beyond that.. even credit card companies would charge at most 2.5% spread on currency exchanges (in my part of the world anyways), and transaction charges are getting closer to 1% on top of that (except for paypal.. thats just going up).
I believe it is generally perceived that one of the selling points of crypto/smartcoins is that we have a network that is more efficient and sercure than banks, and therefore we have assets that can be transacted for equal to or less than them. In this case though, the cost of dealing in bitassets are not competitive and therefore make no business sense to use them.
I am not a trader (I have said this before) so my outlook on bitassets is more on the side of their practical use and utility. I understand though that for traders unless there is a bigger spread there is no reason to create the markets with such little volume. The idea from what I understand is that once there is more demand/volume that the spread will become closer to the peg. I have just illustrated the chicken/egg situation that is preventing demand from happening through utility so I hope that if this does come into effect we might start to see that tighter spread that would make bitAssets worth using for businesses.
Otherwise you can expect Smartcoins to become continually fractioned into multiple private assets and thus diluting demand on the network bitAssets ongoing. That would not be so bad either really. The fractioned markets would occur with the bitAssets markets only becoming something to trade but not what businesses should/would use for any utility.
I could be missing something in regards to trading at such high premiums too.. so if there is something I have missed feel free to give input.