BTS decline 94% from peak to trough, between Sept 2014 and April 2015. 

Despite that decline, holders of bitAssets were still able to get the correct value back out of the system.  (Give or take a couple percent, and transaction fees).  In fact, They could even sell at times near the bottom for a 5-10% premium.

A deep bear market is a good test, but is not the nightmare scenario. The nightmare scenario is a price gap or discontinuity, such as when BTC collapsed from the $500-600 region to the $100 region in a matter of hours in February 2014, due to forced unwinding and insufficient market depth to meet the selling. Such flash crashes do happen from time to time in other markets too. These are rare (yet not inconceivable) events.

Smartcoins will be able to use collateral assets other than BTS, including user-issued assets (UIAs). However, as its hard to see what confidence might be placed (initially) in UIAs as collateral, in effect collateral will still be BTS or another token (e.g. bitUSD) that uses BTS as collateral. BTS would still be the necessary foundation collateral for the hierarchy of assets, and thus all Smartcoins would share this vulnerability to different extents.

I think the only way around this is to have alternative assets represented on the bitShares block-chain, that could serve the function of collateral, and perhaps allow diversification across these. I personally think this is a direction we must go. Open up the platform for the universal trading of any digital or digitisable asset. We need the right tech to get there though.

Another possible variation to help fund development and speed growth, without diluting BTS supply, is to issue a new token that has preference over network revenue. Let's call this a BTSP, short for "BTS Preferred".

Suppose BTSP are sold and raise funds of X. X can be used to fund a level of project development in excess of delegate based pay. The BTSP capital is repaid by having first preference over bitShares network revenue, until full repayment of [X+accumulating interest], has been completed. By structuring BTSP in this way, there is no impact at all on BTS supply - however, BTS owners are giving away the first cut of profits as a trade-off for faster development of the network.

As with any such structure, there are a number of variables that can be played with. For example:

Denomination - X can be denominated in BTS. Or it could be denominated as a fiat currency equivalent value of BTS.
Interest - can be preset, or subject to market bidding when capital is raised
Profit cut -  could be a meaningful proportion of network revenue (100% or less), and/or subject to a ceiling, or if project specific, might even relate to specific types of revenues
Performance triggers - repayment only begins if pre-specified development outcomes are met, or adopted into the protocol
Payment - could occur by using buybacks, settlements, or distributions.

If BTS owners were to accept the idea of sharing network revenue in order to allow deeper funding pools and faster network development (presumably subject to some sort of BTS vote), then it is also possible to invite alternative development teams to share in the development of the core protocol, and find community segments willing to fund them. This would require sound profit models, and the license arrangements with CNX might need some modification to deal with this flexibility.

If people are happy with the rate of development coming through on 2.0, this might not be considered necessary right at this point. In future I do think bitShares ultimately retains more control over development if it has a number of means to fund itself.

BTS was built on the idea that we could create a currency-like token that can make profits for owners instead of losses. As such, BTS self-identities as both a currency-like store of value and a profit-generating share. This dichotomy of purpose makes it hard for the external market to evaluate.

For a currency, constraints on supply are all-important as a store of value. For a share, all that matters is profitability and return, and the shares themselves can be far more mutable. Who is asking questions about how many shares Apple or Google will have in 10 years' time? It's only about profit and growth.

So what is BTS? I worry that trying to be both risks failure on both fronts. You limit dilution to look like a currency, and ultimately you can't compete against more agile businesses on funding and growth, and resulting profitability and dominance of the target space. You make changes to dilution, burn, and reserves to solve the business economics, and you lose any sense of a stable and secure currency.

I keep thinking that bitShares will ultimately need to offer multiple tokens built specifically to achieve different ends, even if we keep BTS as is.

Here is an idea for how we could get better alignment on developer pay.

What if we pay developers part in BTS salary and part in "Performance Pay", giving them each a choice about the split they want?
Performance Pay could be structured as payments of BTS that are only exercisable if the BTS price or market cap exceeds some level at some future vesting date (e.g. 3 years). At that point the vested payments would be dilutive, but only if BTS had experienced substantial market cap growth. In this way, it may be that the prospect of future dilution is not viewed as a negative impact on the BTS price (although I accept not all BTS owners would find this acceptable).

Developer staff could have the following choices:

- Work for bitshares and receive pay of X BTS (less than market rate) - in this case they are like a salaried employee
- Work for bitShares and receive Performance Pay, with an underlying of X+Y BTS (will be worth more that straight salary if BTS is ultimately successful) - in this case, they are like workers in a startup business
- Work for some combination in the middle of these two extremes, depending on individual needs
- Work for IBM or Apple if they want and just invest in BTS, but potentially forgoing all the intangible benefits of working inside bitShares, such as future recognition and reputation value

Possibly such a structure could align everyone's interests better. Although something we must be alert to, as where executive options of this type are used in traditional industries, is that beneficiaries do not start focusing more on BTS price and trying to pump it through hype, than they do on underlying BTS progress and performance.

This is not the only possible solution I'm sure. But I think we would all be better served by creatively exploring the choices we can create, rather than irresolvable issues like rights, entitlements, or the fuzziness of future intents.

Only one type of collateral per bitasset, but that type can by any other asset including other BitAssets.  This is done because of the collateral type effects fungibility and there is no way to settle a blackswan when only one collateral type goes bad. 

What if the black swan mechanism created a reserve by taking collateral tokens from each individual short in a pre-defined sequence of preference, until the debt is covered, and returning the excess collateral tokens to the short. The reserve will then be comprised of mixed assets in a known mix of quantities, and subsequent settlements by longs would receive exactly the same pro-rata mix of quantities. Although the rules are more sophisticated, isn't such a settlement scheme feasible without losing fungibility?

Thanks everyone for all the very constructive feedback. To summarise the views:
- there is skepticism that a pure currency will gain traction,
- reluctance to give up the hybrid model and the extra "immutability" valuation conferred from the crypto space
- question on whether the R&D is worth it
I understand each of those concerns.

I think it is a safeguard for bitShares to have flexibility in its own funding options. Its possible that a competitor starts up with deeper and more flexible funding sources to build a competing financial platform. Its also possible that CNX may not receive enough funding from bitShares to prioritise bitShares-specific projects over competing calls on its developer resources if its business grows in other areas. Either of those events still dilutes our interest, and we may be compelled to consider wider options. What I'd like to see happen is for CNX or other development teams to always see working for the system as their best option. So I still want to explore ideas here, but perhaps that are less disruptive on the current BTS structure.

[As a tentative possibility along these lines, we could keep BTS as is, while less restricted tokens could be sold to provide additional finance to a development team (CNX for example) under more flexible funding arrangements.]