If any motherfucker dares to short at $0.7 I will eat his collateral like a mama bear eats baby bear hunters

Quote from: trader on August 24, 2014, 07:35:44 pm

You missed out that a big part of the expected price rise is due to more people observing how good the dividends are due to all the burned transaction fees from market trading.

I.e. this digital asset combines usefulness (bitUSD) with great economics (dividends).

I understand that about btsX but will bitUSD have the same feature? I mean, will parts of its fees be burned and that process work as paying dividends for bitUSD holders?

Quote from: Empirical1 on August 19, 2014, 03:48:04 pm

Has this insurance fund proposal been implemented?

All BitUSD fees collected by network are saved and used in the event that a short runs out of collateral.   If the fees are not enough then the fund will go negative and will slowly pay it back over time.

Quote from: prophetx on August 23, 2014, 04:47:57 am

I went to check this out and it seems that the cost of creating an asset is currently about $5000

How can this be?

Quote

Fees for creating a new asset: 196,589.0304 BTSX

BTS X is not designed for every user under the sun to issue assets, but instead is trying to focus on larger high-value assets.  BitShares ME will be for everyone else.

How many 5 year old bettors do you know? Just kidding...
Or one with knowledge of Nash equilibrium?

The primary assumption is that there exists a crypto-asset with no counter party and a non-zero value.  IE: bitcoin, Nxt, and BTSX.

The secondary assumption is that the volatility of this asset is within some reasonable range.  200% initial collateral seems to be reasonable, but it could easily be 400% if the volatility called for it.   

Given these assumptions we then assume there are two individuals in the free market that want a "contract for difference".  Contracts for difference are well established and proven and even used in counter party.  One person is given price stability and the other is given leverage.   

If you assume the contract for difference was settled by a 3rd party price feed then it is clear how it would work.   

So given those initial fundamentals we can slowly build up to BitAssets.   The first step is to take the same contract and remove the 3rd party price feed and instead use Nash Equilibrium.  Both parties will want to exit at some point and thus have to agree on a price in the future.  Assuming they were both equally wanting to exit their position the price they would agree at would be the "fair price".   Now clearly if there are only two parties to the trade they may not want to exit at the same time.    So you allow the "long" side to sell his position to others and you allow the "short" side to cover with anyone.   

If someone wants to be a stubborn jerk and not settle then that is fine.... eventually a margin call will be triggered.   The peg will fluctuate as the relative demand for longs vs shorts settling causes the peg to have a settlement premium sufficient to motivate settlement.   

I think it is fairly clear that if there is a price feed from a trusted source that was used to enforce settlement then the system would work to the extent that you could trust the feed.   The hypothesis is that this price feed is irrelevant given a market full of speculators and market makers willing to hold until a short voluntarily covers at a fair market price.

I hope that through this perspective I have shown what the economic incentives are and how the core principles are sound.  All that remains to be seen is whether "market consensus and speculation" is enough to enforce a peg via a "decentralized price feed" or "prediction market" mechanic.  My understanding of game theory and economic incentives tells me this will work, but even if I am wrong I know that price feeds can be used as a "trusted" judge on the "smart contracts for difference".   It is an entirely different game to trust someone to produce a fair feed (or 101 someones) than to trust someone to maintain a vault full of gold.