Quote from: Empirical1.1 on September 06, 2014, 01:03:25 am

I know you're on another level compared to me here, but looking at the order book wouldn't you agree we need to attract BitAsset buying demand?

Translating shorting demand into transaction fees which gets transferred to incentivising genuine BitAsset buying (via interest) helps correct the demand imbalance imo.

I think to create buying demand you want to motivate shorts to cover whenever bitUSD is offered below parity.  I think the current method works against that goal.

If the odds that BTSX has a serious issue/failure in the next year are 2% then a BitAsset is only worth 0.98 to a long term BitAsset holder.

A genuine BitAsset holder also has to consider the utility of a BitAsset or the cost of conversion to acquire the real world counterpart (edit: or at least the fiat value equivalent) his BitAsset mirrors.

So even if your proposal resulted in a tighter range than the current few % now it wouldn't attract genuine buyers because a BiAsset isn't worth 1-1 in the medium term because of risk, conversion & utility costs which is why you have a dead buy side of the order book.

Interest will offset these factors and does make BitAssets 1-1 or better which attracts buyers at 1-1 Therefore making a bigger market than the current one and it creates the peg at 1-1 (because the interest applied in this way is self-regulating.)

What effect (if any) do you guys think the 5% interest will do to the price of Bitassets? Take something like bitUSD which already inflates via the US government by about 2% per year. Then we add 5% on top of that. How will the 7% annual inflation rate affect the price of Bitshares- if it will at all?

I know this is about creating a demand for Bitassets and I think it will, but are there any long term side effects regarding to the bitasset market peg in making bitUSD annual inflation at 7% when the actual inflation rate is closer to 2%???

Inflation is bad, interest is good.

So when they say there's 2% inflation it means at the end of the year $1 will on buy you $0.98 of the stuff it does today. Whereas 2% interest p.a means at the end of the year means $1 will buy you $1.02 worth of stuff. (Though if there was 2% inflation the two would cancel out.)

In your example of 5% interest and a dollar with 2% inflation would mean $1 would be worth $1.03 at the end of the year.

What will it mean for BTSX?

Very good things. Imagine two identical places. Place A gave you no interest on your money and place B did. Assuming all else is equal, you would put your money in Place B.

It's likely the BitAsset interest rate while variable will be higher than most traditional places so it means BitAssets will attract a lot of new money.

Also the nice thing if I understand it correctly is that our interest rate is self-regulating.

So for example right now there is not a lot of BitAsset buying demand but a lot of people who want to short BitAssets. They are competing with each other by essentially who is willing to pay the most when there is a chance to short. These contribute some of the fees that are then used to pay the interest. This interest attracts buyers. More buyers mean the shorts have to compete less which means less fees for interest, less interest means less demand and so on...

I think for many BitUSD holders, they would rather not worry about all of this stuff. They would just like to get some variable interest on their BitUSD balance, just like they would in their bank savings account. Using the BitUSD fees to pay this interest makes things much easier for these users. If they are unsatisfied with the rates they are getting, then they can look into the bond market.

 

Quote from: Empirical1.1 on September 06, 2014, 12:32:51 am

Quote from: arhag on September 05, 2014, 11:55:02 pm

Why require a minimum of a month?

I'm not anywhere near the same maths or trading level as you guys but these are my thoughts.

- Instead of selling their BitAssets for BTSX in a bubble or in a panic during a technical problem. BitAsset holders are now incentivised to hold and not create as much volatility.

- Not sure about this one, but doesn't giving people an incentive to hold, take some BitUSD out of general circulation so there will be less available for shorts looking to cover for example thereby increase demand and making BitUSD average closer to the peg than the few % below I hear it averages now?

- Doesn't this proposal reward savers over traders?
Just like keeping your funds for any length of time on a centralised exchange is risky, till BTSX has proved itself so too is holding BitAssets. (BitAsset savers take on a lot of the risks of BTSX with few of the benefits) Maximising their reward attracts genuine saving not just trading demand for BitAssets.

Don't we want more people trading not hording? More trading = closer to peg value over time especially when the price is moving. IF people need to hold onto their bit assets it discourages trading which decreases liquidity. There should be no minimum time. Also more trading = more fees, which is also good.   

Unless I'm missing something?

You may be right. I'm not hot with these things. I'm sure the main guys will be able to clue us in here.

I would think traders would come in whenever there is a profit to be made from an imbalance anyway, they don't need the interest as an incentive.

I also think there is a risk to holding BitAssets long term as well as a conversion cost and lack of utility short term for someone looking to move some of their BTC position over to BitBTC for example so those people are the ones we want to maximise the rewards for.

Also if trading is anything like poker. The traders want as many of the average Joe savers in the game because that's who they get their edge from.

Quote from: sschechter on September 05, 2014, 10:57:19 pm

I don't like the word 'rewards' - sounds like a cheap marketing ploy that I ignore from my brick and mortar banks. I like the expression 'dividends through profit sharing' or something along those lines.  It subconsciously emphasizes the fact that DACs are companies that are designed to earn profits, and that those profits are being returned to the user. It also implies that the size of the dividends are dependent on the profitability of the company. 

  That sounds perfect to me.

I also feel the same about 'rewards' but I think apparently describing it using the words 'dividends', 'interest' or a derivative of them is a no go.

"dividends" and "interest" are difficult words to legally market.

You give them USD, via bank transfer, and they give you CoinoUSD in return.
If you want to cash out, you give them back your CoinUSD, and they give you $1 per 1 CoinoUSD asset.

More details: https://coinomat.com/coinousd.php

1. What are the odds that CoinoUSD is going to cash out for someone deemed to be conducting an illegal activity or be linked/used for large 'illegal' transactions?
2. What are the odds CoinoUSD is targeted as a result?

Lets say conservatively, the answer to (1) is 40% and the answer to (2) is 25% it still means 10% of the time the assets/dollars backing CoinoUSD will be seized/freezed in which case a CoinoUSD is only worth $0.9 without interest that's being generous and assuming you 'trust' the issuer of CoinoUSD.

BitUSD isn't perfect but it's value is a lot higher than that.

Who holds this USD that coinoUSD is backed by?

That's what I want to know.

It's probably a centralised entity like Realcoin where you have to trust CoinoUSD won't do a runner and know that if .gov doesn't like it they can just seize their backing dollars/assets or target them through their banking partners.

CoinoUSD will probably be backed by centralised seizable collateral but BitUSD is backed by decentralised unseizable collateral.

BitShares X -'I killed the bank' - Andrew Jackson

BitAssets - Can't touch this

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BitGold - Hoarders without borders

BitUSD - Fuck 'fractional' reserve

BitCNY - Free your dragon