Simple SmartCoin Accounts

[Empirical1.2]

What happens after this 1y lock period if the demand for new bitUSD is higher than the new willing fund providers for pool B ?

Well new people/funds can join the pool B every month but yes that is a possible scenario.

I suppose BTS could either increase the cost to issue BitUSD thereby decreasing demand & keeping collateral levels healthy or depending on the value to the network it may choose instead to increase the subsidy it provides to pool B to attract more BTS fund providers.

What should happen in that scenario though is people should become concerned that BitUSD may become under-collateralized and this would naturally decrease new demand. If demand increased in this scenario it may be a sign that the market is comfortable with a lower collateral system.

In which case it would be on BTS to set prudent limits. For example 'Total BitAsset Value should remain less than 40% of BTS total value' and as that limit approaches we limit new issuance and/or increase cost of issuance to decrease new demand. 

(Edit: If you increased BitUSD issuance cost to $1.02 for example due to excess BitUSD demand & concerns about Pool B collateral, that $0.01 difference, instead of going to collateral pool A, could go towards interest for pool B so that the increased BitUSD issuance cost, both decreases BitUSD demand and increases incentives for new fund providers in Pool B.)   

[tonyk]

Interesting. From first look I don't find anything totally unacceptable.(the benefits are clear, I am talking about non market based approaches and bts reserve fund taking the risk that market participants refuse to take)
 Especially keeping in mind BM wants to sponsor market makers using dilution/workers. I personally find more value in tightly pegged and available bitAssets.(your proposal)


What happens after this 1y lock period if the demand for new bitUSD is higher than the new willing fund providers for pool B ?

[Empirical1.2]

"This should provide up to 250 million BTS worth of voluntary collateral"

Who would vote these shares?

The people who owned those shares should still be able to vote or set a proxy while they are locked for 12 months.

[onceuponatime]

"This should provide up to 250 million BTS worth of voluntary collateral"

Who would vote these shares?

[Empirical1.2]

Imagine if basic SmartCoin customers rarely had to see a complicated exchange again...

Mr. Example Account

BTS Balance           888 888
BitUSD Balance:     $88                   Buy BitUSD $1:01         Sell BitUSD $0.99
BitCNY Balance:     ¥8                     Buy BitCNY ¥1:01        Sell BitCNY ¥0.99
         
Buy/Sell Smartcoins with Bitcoin/Bank/Card/Other via our trusted partners.

Visit Exchange (Advanced)

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*Terms and Conditions

24 hour settlement
When you sell BitUSD to the system, the equivalent BTS will be credited to your account in exactly 24 hours, based on the average BTS price over that time. Alternatively you can seek an instant price on the exchange or cash out instantly for Bitcoin/Fiat via a trusted partner

Speculators Fee
Balances held for less than 30 days are subject to an additional 1% fee and cannot claim yield. This is because BTS offers a tight spread which could otherwise be exploited by short term traders. You can seek a better price on the exchange or via a trusted partner.

Hourly Limits
There is a limit to the amount of BitAssets that can be bought and sold by the system.
If there is not enough available you can either wait for the following hour, visit the exchange or a trusted third party.

Smartcoin backing
BTS used to purchase BitAssets are put into a collateral pool.
In addition to that BTS pays others to put their BTS into a long term Black Swan collateral pool. So that BitAssets are always heavily collateralized.

View BitAsset collateralization over time chart.

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Notes: The hourly limits & speculators fee are designed to stop BTS getting overly exploited in trending markets and from traders able to influence the price of BTS to get a favourable purchase or settlement price. (These limits can be adjusted over time based on observation, if they are wrong at first, BTS doesn't lose money but the collateral backing BitAssets would be less than it otherwise would be.)

BTS could also charge 0.1% trading fee which would could go to BitAsset Yield. This would benefit longer term holders to the point that over time it would compensate for the spread and provide a positive return.

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There are various methods of removing shorts from the equation and offering a tight peg.

BTS can either use the reserve pool or incentivize others to put up additional collateral.

My first attempt was fractional reserve smartcoins which used trading fees to incentivize BitAsset holders to lock up their BitAssets so that those in circulation were sufficiently collateralized. https://bitsharestalk.org/index.php/topic,21078.0.html

Smartcoins^ could pay interest if you were willing to lock them up. (SImilar to NuBits parking rates which haven't been needed. )

Example:

BTC38 for example does about $50 000 volume of BTS a day, with a 0.2% trading fee that could generate $100 a day, $35-40k a year.

They have circa 300 million BTS I believe, with a market value of $900 000?

If the trading fee rewarded those willing to lock up their BTS for a year, then 40% of BTS on the site could be locked up and receive 10% interest per year.   Similarly 40% of BitUSD could be locked up and receive 10% a year.

The Smartcoins^ that are locked up for an extended period reduce the pressure on the collateral pool and may make at it over-collateralized in most market conditions.

Another alternative is diluting BTS to fund a Black Swan Collateral pool.

BTS Black Swan Investors Fund (BSF)

The problem
Requiring a long to meet a short to create BitAssets is innefective at creating a tight, liquid peg because depending on the markets medium to long term price expectations for BTS, the price people are willing to short at can vary significantly from 1-1 over long periods of time.  However if BTS simply issued and redeemed BitAssets close to the peg itself, there would be a lot less collateral backing BitAssets and the system may be exploited.

The Solution
- The Black Swan Investors Fund (BSF) is an alternative to the additional collateral that currently comes from shorts.
- This is achieved by diluting BTS 1% per annum and awarding it to holders of BSF.
(Once there is a bond market this fund can look to seek additional income from there too.)

How it works
-To be a holder of BSF you must lock up your BTS for a period of one year.
In return you will receive your share of 2 million BTS a month less your percentage share of BSF forced settled that month.
However there may never be any BSF forced settlements...

Collateral Pool A
When a customer purchases a BitAsset created by the system, the BTS goes into collateral pool A.
Whenever there is a forced settlement it draws from Collateral pool A first.

So even if BTS declined 75% in value, Collateral pool A would still be worth 25% of all BitAssets and it would take forced settlement of 25% of all BitAssets in that period for BSF (Collateral pool B) to be called into action at all.

Example: NuBits has existed for well over a year on much, much less than Collateral pool A.

Funds used to purchase Nubits have been spent on shareholder dividends (>$400 000), Market Maker subsidies, advertising and development and yet they have not needed additional collateral to meet redemptions. The BTS collateral pool A will have none of these expenses and so will be far more collateralized. (Over time BitAssets will also be lost forever due to various reasons.)

So as a holder of BSF you receive a very generous interest rate to put up additional collateral

This should provide up to 250 million BTS worth of voluntary collateral which would earn 10% per annum less collateral B redemptions.

Advantages

BitShares can now issue and redeem BitAssets very close to the peg without the need for shorts and still have heavily collateralized BitAssets.

This means a bridge can sell BitUSD to users for BTC/Fiat without needing to put up additional collateral.