So if I'm short and the BTS price drops I get to keep my position. OK, I lose money but I knew the risk.
On the other hand, if the BTS price rises somebody will snatch away my short-position offering slightly higher APR and I miss out on the rise.
You're leaving me the risk but taking the reward.
Currently people can only short at 0% (even to themselves) if there is an under-supply of shorts. There's no need for a fix here.
No, you have the proposal wrong. If the BTS price rises and somebody snatches away your short position, you get the full profit from the rise that occurred before they outbid you on interest. If you still think the interest rate is lower than anticipated BTS growth at that point, you outbid the lowest interest short and end up short again.
The reason this fix would be necessary is that it would eliminate the need for shorts to expire, because paying interest would encourage shorters to cover any time there was excess BitUSD rather than harvesting yield with lower than average interest self shorts.
There is definitely need for a fix here. The 30 day expiration combined with the 10% discount on expired shorts pretty much guarantees that BitUSD will generally be scarce and overpriced by about 10%, because it's guaranteed that if BitUSD holders refuse to sell, within 30 days someone will be forced to offer feed + 10%. Interest rate competition taking place independently in every block and then locking in for a month also makes no sense.
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That's a very clever analogy, no doubt it help our marketing team !
