Agreed decentralized version beats centralized version. And I am very skeptical, I wouldn't touch for a long time to come but I really do hope it works, then nxt can take the idea, tweak it and make it our own
As I understand though, when shorting, you take twice the amount that you are paying for the asset and put up some collateral, right?
So what happens if it the price falls to the point where you don't have the assets to cover the loss? Is is automatically revoked?
Let's say that the price of BTSX halves, does that mean that all those BitUSD suddenly disappear? I'm probably misunderstanding how shorting works.
I'm just learning it just like you but from my understanding the collateral doesn't need to be 2x its just 200% to use as a buffer for fees etc where as 100% would be a perfect cover order... in reality anywhere from 115-125% should do the trick in the future when it becomes more liquid...
As a trader, when you go long bitUSD you are basically hedging against a speculation that btsx will not rise, in that you will be able to transfer bitUSD back to btsx but recover a bigger stake in btsx later on once it is lower, purchasing power rises with USD. The short bitUSD is hoping for a rise in btsx such that the value of USD will fall versus btsx, purchasing power rises with BTSX, and the person who goes short bitUSD will be able to close the position and recover more btsx than he/she started with. Essentially it becomes an ecosystem where you don't need to sell your btsx back to btc but you simply hedge/unhedge your position if you are a speculator and you can "sell" for bitUSD if you need to pay a vendor or whatenot in USD once the bitUSD -> USD bridge is set up. I don't see any margin on the trades so I don't think you are force to cover because of a situation with price, until price doubles/halves. Your collateral should be used to offset gains/losses as the order is closed out. I'm not sure what happens when your collateral is not enough to cover the contract (margin call)... I think it auto closes your contract and you have to reenter the market?
The "ecosystem" needs players to accept the "long" and "short" contracts for bitUSD -> btsx and btsx -> bitUSD so that as swings happen people can get in and get out without major spread issues. Once the bugs are ironed out of the wallet code/toolkit API then we should see it in action and I hope we can get bitUSD<->USD happening fairly easily as that will the bring the ability to enter into a DAC without going thru the hoops of acquiring bitcoins. Ofcourse out of 1000 people only a small % of people get into bitcoin because of the amount of work it involves to be able to buy it.. although its becoming easier with ATM's and localbitcoin etc however a conversion from USD to bitUSD once we have enough volume would pretty much trump any of those options as a viable way to get into the crypto game and directly into our "ecosystem"
As far as comparing a central system with a decentralized system i think the later wins almost every time (except as a system starts out and there isn't enough volume, where a market maker would have been able to cover orders in a central system).. however the potential for a decentralized system is far higher than a central system because that is where we are headed with blockchain technology and what it was designed for. The other competitor "counterparty" and all of its derivatives (viacoin) tries to add services onto the blockchain which Satoshi openly came out and said that its a bad idea... not going to go into that one.
Speaking of which, where is the protocol spec on btsx? drltc still going ahead with it?