A bad debt means value of a debt position's collateral is less than value of its debt.

Currently, when a bad debt appears in the system, no matter how small the debt is, global settlement will be triggered and ALL debt positions will be forced closed. IMHO this mechanism is flawed.

Here I propose a new mechanism to handle bad debt, the core ideas are:

1. set up a special account "bad-debt-holder" in the system, with an impossible authority like null-account, so nobody can control it
2. when a new bad debt appears, don't trigger global settlement, instead, convert that debt position to a sell order which will never expire, sells its remaining collateral for its remaining debt, under the "bad-debt-holder" account
3. if the order get filled or partially filled, destroy the (debt) asset received.

In comparison to current mechanism, this new mechanism is much "softer" and more flexible. All state will be on the order book and easy to participate for all traders.

Thoughts?

actually BSIP42 is already active on bitUSD, otherwise bitUSD would have a big premium as before.

BSIP42 is irrelevant to MCR adjusting, the new MCR-based solution should have its own BSIP.

yes we need metrics to evaluate the feed price, as a base I think we need a chart that involve feed price from all witnesses, median price, latest price and some other reference price, seems someone began working on this?

Who's working on it?

No matter if bitUSD holders convert their bitUSD to BTS via margin calls or via forced settlements, the BTS are (forced) paid by debt positions with least collateral ratio, aka by bitUSD borrowers/creators, so what's the difference? IMHO there is no difference.

bitasset value = max(market price, settlement price)
If you take out settlement, this means bitasset value = market price.
The former formula gives a relative minimum price to the feed, but the latter formula looks exactly like UIAs.

So effectively, taking out settlement will make bitassets the same as UIAs in terms of value.

Thoughts?

voted !

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