I support this change. I also believe we need to shift the paradigm even further:

1. The old CFD metaphor is obsolete and will only confuse things going forward. Smartcoins are no longer brought into existence by BTS bulls wanting leverage. They are brought into existence by borrowers of the asset, who simply offer BTS as collateral. They can then sell the asset and use those funds for any purpose they desire. Buying BTS for leverage is just one of those many uses. Perhaps we should be promoting SmartCoins in a more relevant way.

What is a bitUSD? Its a transferable token that represents a collateralised USD loan to a set of borrowers.

2. A primary use of such borrowing should be making markets in the Smartcoins. By self-creating the Smartcoin, the user can switch their long position between the Smartcoin and the real underlying asset as relative prices move, without ever changing the number of BTS they hold (and now use as collateral). Their only requirement is to ensure their collateral remains sufficient.

I've previously commented on each of the above, for example here... https://bitsharestalk.org/index.php/topic,16427.msg210011.html#msg210011

There are some further possibilities this approach opens up. For example:

3. There is scope for much greater flexibility on collateral, given it is controlled exclusively by the shorts. That is, the collateral is completely independent of what the Smartcoin trades against in the free market. It could be BTS, or a BTC or USD substitute, or even a portfolio of collateral tokens. This would open up the architecture of Smartcoins, increasing the potential range of users on both sides of the coin. For further comments on the concept of Flexible Collateral, see:
https://bitsharestalk.org/index.php/topic,16326.msg208798.html#msg208798, and

Quote from: starspirit on June 11, 2015, 05:35:29 am

Quote from: arhag on June 11, 2015, 05:00:07 am

By the way starspirit, I don't see how the BitAssets backed by a mix of collateral types would be fungible unless a fixed mix ratio was specified as part of the BitAsset definition that all shorts of that privatized BitAsset had to satisfy. And in that case, I would imagine the only practical way to short new BitAssets with mixed backing collateral into existence would be through a self-short. The logic for margin calls would also get more complicated with mixed collateral.

Correct. With self-shorting and self-cancellation, shorts get to control the mix of collateral they want. I've been working on just such a structure. Collateral can then be completely independent of the markets in which the token trades. Also margin calls could be satisfied by applying each collateral token in sequence to covering the debt until it is satisfied, and then returning the residual collateral tokens to the short. This sequence could even be determined by the short.

Also, in case it wasn't clear in my answer, no, you don't require a fixed mix ratio. The shorts could change the mix of collateral as they please, as long as they met the minimum coverage conditions.

[Edit: Offering collateral flexibility like this admittedly comes with some complexity though, notably in dealing with settlements and covers].

Bottom line - the OP is the right way to go, but there is a lot more possibility than you are thinking yet.

Quote from: starspirit on June 16, 2015, 08:02:22 am

The reason why bitUSD has been offering a yield in the past is largely because of sharing in system fees, which is not really a sustainable model.

I'm not totally sure I agree with this statement. Isn't this basically saying that, for example, forex brokers are not profitable? IMO, the bitshares blockchain attempts to be a decentralised forex exchange, which ought to be capable of earning substantial profit through trading fees, which could be passed on to users through yield on the bitAssets.

Why wouldn't that be sustainable?

Fair point, any business can choose to pass as much of its revenue to customers as it wants. It just eats into the profits and returns on capital, and the ability to help fund things like development.

My view...Given its not clear how any existing accounts were referred to or found bitShares, it does not make a lot of sense to me to pay the referral amounts to any particular party, let alone CNX that did not exist before. If instead they are paid into the reserve pool for the benefit of all BTS owners (i.e. paying ourselves), community decisions can be taken later on whether to use these funds to pay workers or witnesses, or to burn. One of those options, but not the only one, could be as payment toward the first CNX projects, as BJ2.0 expresses above. Then everyone's happy?

So basically what we are saying is that the level of dilution that is considered acceptable for a currency (in competition with Bitcoin etc) is not sufficient to fund the level of development we are aspiring to. And as a result the cost of that development needs to be defrayed across multiple networks through CNX licensing out that technology.

But have we exhausted all the ways in which the development could be internally funded?

Below I've just brainstormed a bit on internal funding approaches to open what might be an interesting and curly discussion about these and other ideas people might have. They are not mutually exclusive, and they do not necessarily preclude the CNX/license approach either - possibly some of these could be complementary.

I'm not recommending any of these approaches right now, as they come loaded with enormous philosophical arguments about what bitShares really is or might be (e.g. startup business, currency, something else...). I can guarantee the community would be up in arms on just about any of these approaches! So nobody get their knickers in a knot 

1. "Equity dilution" - What if we gave up on the notion that BTS is like a currency? We could treat it more like a startup business. First we would need a clear profit model for our core products - that is, how will these be monetised and what could they be worth. Then, there would be no reason why we could not dilute $2m worth of shares in a year, if we thought that was the investment required for the project to deliver a revenue stream well in excess of this down the track. If the market embraces the direction of the business, capital gains should more than exceed the dilution.

2. Investment Loans - What if we borrowed from the market for investment purposes, effectively leveraging the business? For example, we issue $2m USD loan tokens to the market, paying say 25% pa (or a market-determined rate), repayable in 2 or 3 years. Payment is made at expiry by the block-chain diluting the necessary value of BTS shares. If the business has invested well, the market cap should have risen by much more than $2m. If there is not sufficient equity for payment, loans may need to be rolled if the market is willing, or else default terms would kick in.

[A side point on approaches 1. and 2. which treat bitShares as a start-up business. Eventually when the business revenue exceeds the need for investment, the business would no longer need dilution (from equity or loans), and would be self-funding through profit. And ultimately when the business builds a decreasingly risky utility-like income stream, it could be bid up to the point where the yield is quite low and the main utility of BTS is as a currency. This could be an alternative path to eventual currency status.]

3. Project equity - Development projects could be privatised as far as possible, where there is a clear revenue stream possible. Developers can either take the risk themselves, share it with a group of backers, or take a salary and pass it all to the backers. At a granular level, it may even be possible that any modules accepted into the core protocol could receive a revenue stream from its direct use, or use by other modules.

4. Donors - there may simply be people that would like to donate to the cause and evolution of bitShares. This could be for their own philosophical reasons, or perhaps they may hope to get network advertising or other benefits from it.

5. Other??

These are some of my current questions, I am not making any judgments on anybody's intents:

1. What is the primary purpose in anyone making a claim on IP at all?

2. What is the core legal argument as to whether that IP belongs to Cryptonomex or to Bitshares? My (not-a-lawyer) understanding is that generally an employer will own the intellectual property created by its employees in the course of their employment. This is irrespective of who did the creative work and whether they felt they were paid enough for it.

3. If Cryptonomex did have a valid claim on the IP, is it legally feasible that the liberal terms of that license for BitShares could be altered at any time in the future (irrespective of any current intents)?

4. With regard to future development within Bitshares, such as third party scripting, or other customised builds on top of the core protocol, how would rights around these be arranged to be equitable to all parties?

I'm designing a range of asset class structures and associated tokens that could be implemented in bitShares, and serve as (better) substitutes to traditional structures like stable currency, term deposits, bonds, ETF's, futures and options, CFDs, credit markets, etc. This will require greater flexibility than privatised bitAssets currently allow, so there will initially be some lobbying to do on this front. Later I would like to get others involved as co-funders, developers and promoters to help bring these to fruition and share reward from them.

My view is You Get What You Ask For was never a good solution to front-running, because by definition it cost users more than if they had just accepted the front-running in the first place.