I just want to make it clear that we will use price feeds if necessary to establish the peg.
I have always been aware of that, and believed strongly that we must go to plan B,
only if necessary.
BitUSD will eventually get to USD parity because otherwise this network will be worthless.
On the other hand, the network will be worth as much as it is worth. Making unnecessary restrictions will make it worth as much as if those restriction were necessary.
The network will end up with USD on its balance sheet proportional to the "surplus short demand" and the XTS created to buy this USD is actually locked away in the collateral of the shorts. Thus we can safely say that printing XTS to perform this market making algorithm will not create additional XTS in circulation.
One of the main points is that actually
the new BTSX are NOT locked as collateral.The main difference between this proposed system and the market can be summarized as follows:
When short are offering cheap dollars they provide collateral for those new bitUSDs. The market will punish them if this is unwise decision. If you think those are unwise choices on their part go ahead and buy cheap bitUSD (vote with your money, not with your power to take whatever decision will solve your perceived problem).
In you system you fix the price of the bitUSD to no less than 0.95 USD. You prevent the shorts from making informed economic decisions. The only actors left with this choice are the USD sellers. They think/believe bitUSD is worth less than 0.95 USD -I am selling. And you hope the way to solve this is to buy from those sellers, print more money (BTSX) diluting the backing of the bitUSD in existence? … and hoping that this will make reasonably acting market participant think that their dollars are worth more ... Good Luck...
In short one bitUSD will be worth one USD when its utility is one USD. We might eventually need to make the system less valuable to provide the bitUSD peg, with measures similar to the one proposed but let's not destroy something potentially great by jumping to too quick conclusions.