Thanks toast, it makes sense that this would be the goal.
My trouble is, at some point, somewhere, somehow, someone is going to have to offer BTSX for sale for the makers(peggers) to cover their shorts to remain neutral.
Lets say there are only 2 market participants. the willing market maker(bot) who only wants BTSX and some individual(Al) who only wants bitUSD.
bot shorts 1MM bitUSD at 100 BTSX per $
Al buys 1MM bitUSD at 100 BTSX per $
Where is bot going to cover his short from if he intends to only be long BTSX?
There are no other participants. Is it another market maker (bot2) ?
Then where is bot2 going to cover his short from? bot3? and at what price is bot12 offering his bitUSD, is it at 101 BTSX per $ maybe more?
I don't understand how bytemaster can so easily guarantee that someone will be willing to provide him with bitUSD to cover at a profit.
I will have a huge incentive to provide very highly collateralized shorts and then cover at very narrow spreads because I will remain net long BTSX.
Or maybe this isn't the problem.
If no one is willing to buy from bot or any other short for that matter, then we continue with what we've got with a bid and ask market well below the peg. There's still no incentive to pay more for bitUSD. There's plenty of supply below the peg.
At any rate, I'll spend some more time with this. Its often slow to sink in.