You see this is something that bothers me.
Sure if you want to separate out the yield from the instrument fine it's your prerogative. I don't get a say here, but I'm going to say my peace on the matter.
Simply put this is NOT how it was done before and it's going to kill the market at a fundamental level.
Any new campfire will take some time to smolder, then kindle before fully igniting.
bitUSD was smoldering a long time, there were real technical problems with the built in exchange mechanism that were preventing it from kindling properly. But now it's kindled, we're suddenly talking about pissing on the fire so we can put it out and move camp.
I think that the campfire should be the goal here, not the campsite. If we extinguish what is there now, we will not be able to restart it. Put another way. If we piss on the fire we do have, the wood will be wet and much harder to start burning again.
I'm in a position where I've spent months building a business around the entire bitUSD model. Now that model changes. I'm not happy about it and I don't see an upside for anyone here. I can't bolt and even if I could, the market pegging mechanism used here is fundamentally more important than the yield.
I've done the math, it's very hard for bitUSD to fail as long as people continue using it.
BTS has issues because they're printing WAY too much of it, but bitUSD is what I'm building my business around.
If they are going to do something to change the economy, adding a way to shrink the currency supply of BTS might be the best thing. Instead it looks like they're coming at the problem sideways by deconstructing the thing that drives adoption (market pegged assets), and killing off the incentive hold them. The incentive now slips to the supply side while killing the demand side.
Let's put fires and everything else aside for a minute and look at this from an economics 101 perspective.
An economy is nothing more than a system of value transfers. In the real world US Dollars are brought into and out of circulation by the Federal Reserve and the US Treasury dept who's job is to prevent deflation while keeping inflation in check and yet still leaving the economy enough breathing room that the USA is currently the worlds most powerful economic engine.
Every decision that these 2 entities make have repercussions that filter out globally because the US Dollar is the worlds choice for both value transfer and wealth storage. The climb of the dollar against other currencies makes products Made in America more expensive in other countries, which causes a trade deficit. It also makes foreign made products cheaper.
US Dollars flow out of the economy and only return when the countries who are trying to keep their currency low (in order to support their export driven economy), give those dollars back to the US by purchasing T-Bills. This is why China is the biggest holder of US "Debt". But the interest on that debt doesn't match real inflation.
It is effectively the same thing as negative interest rates.
The Chinese government is paying for part of your Chinese made products.
The US Dollar does not have a built in yield mechanism. No currency does. Yet it does have a shrinking mechanism.
The yield on TBills are tied to decision based on fundamental market forces and this yield is a money sink that sucks the US Dollar out of international circulation and filters it back into the economy via government run projects and services.
This means that the only thing the dollar really has going for it, is that it is a currency that everyone accepts in exchange for goods and services. There is an effective yield, because the dollar generally rises against other currencies as long as the US economy is the major economic engine of the world. (Also a negative effective yield when their economy takes a dump)
bitUSD is a derivative. It is a derivative of BTS that pegs a certain number of BTS against the US Dollar. If BTS rises or falls against the US Dollar then the quantity of BTS that a single bitUSD represents also rises or falls.
This is genius. Except it misses something. BTS and bitUSD are effectively illiquid. I cannot get into and out of bitUSD without paying some kind of fee. That fee can range from as low a 1% to as high as 10%. But when I want to buy bitUSD or spend bitUSD then there are fees that must be paid. This is a complete disincentive to, acquisition, holding and of course acceptance.
The act of creating bitUSD has previously required a yield. Why? Because bitUSD is effectively illiquid or at least semi-illiquid.
Paying a interest was a disincentive to creating the derivative.
It kept the supply low while demand was relatively fixed.
This means bitUSD is an effective mop for excess BTS liquidity.
Now there is no more disincentive to creation. In fact, quite the opposite there is now an incentive to creation.
If there is no interest paid, why not just convert every BTS in circulation directly to bitUSD and derive all assets from that?
The reason is that it would kill demand. Yet this is what will happen. If people no longer have to pay interest to create it they will create more. If they have an incentive to create it (by getting paid interest), they will make as much as they possibly can. This will push supplies skyward faster than demand could reasonably be expected to increase.
Furthermore if there is no interest paid to holders, they have a disincentive to accept bitUSD.
You guys are counting on people deciding to park their funds in a bond market in leui of receiving a yield payment.
That won't work. People aren't savvy enough to even understand what that means. What they will do is see that they can acquire 1 bitUSD for 1.10 USD and say to themselves, "Time to break out the Visa Card" when it comes down to figuring out how to pay for their purchases.
If you guys had done this from the beginning it wouldn't be so bad.
But it wasn't done that way, and now there are plans to make a fundamental change to the social contract.
Change is scary, even if it's as you believe "for the better good", it's going to scare the hell out of people and they will avoid getting into an uncertain position. This will further reduce demand.
It might not kill it, but it's going to cripple it.
Please for the love of God. Turn off the BTS spigot or at least turn it way, way down.
What is killing the BTS currency is supply and demand. There is almost no demand as it is, the fundamental demand drivers that do exist are getting changed and demand will suffer if for no other reason than "change is scary".
Yet supplies continue to increase.
Go buy an economics 101 textbook, open the page to supply and demand fundamentals and look at what happens when this occurs. Then decide if you really want to kill demand while continuing to increase supply.
Or someone please feel free to tear this posting apart and show me every place I'm wrong. This is not meant to start a flamewar or be a troll. You look at my posting history, I am doing what I can to increase bitUSD utility and acceptance, but it's a hard as hell sell already. Make my job easier, prove me wrong, please.
Topic: Will bitassets in 2.0 Still Earn Interest? (Read 12668 times)
