Proposal for Having Alternate Smartcoin Designs

[yvv]

Banks do charge premium from the people who lend them money very often. You lend your money to a bank when you open a debit account. Some banks don't charge you for this, but many do charge various fees.

[Helikopterben]

the system never owns bitUSD because the very moment it creates them, it lends them to you so at no point in time it has the opportunity to own them)

This is why I think "borrow" is the wrong way to look at it and will only confuse new users, but there will probably be a steep learning curve for new users who decide to create smartcoins anyway.  That and the fact that borrowers don't charge premium.

[yvv]

You are not borrowing bts from the system.  You are borrowing bts from yourself because you are the owner of that bts being used as collateral.  The system itself does not own any bts.

It's bitUSD (not BTS) that's being borrowed.

The system does not own bitUSD.  I cannot borrow an asset that no one or no thing owns.

Yes, you can. System creates bitUSD for you from the air on your demand and it becomes your liability, aka debt. All banks do this.

[jakub]

You are not borrowing bts from the system.  You are borrowing bts from yourself because you are the owner of that bts being used as collateral.  The system itself does not own any bts.

It's bitUSD (not BTS) that's being borrowed.

The system does not own bitUSD.  I cannot borrow an asset that no one or no thing owns.

When you click the "Borrow USD" button you ask the system to create some new bitUSD and lend them to you.
So you borrow these bitUSD from the system and you'll have to return them to the system in the future.

(Technically you are right - the system never owns bitUSD because the very moment it creates them, it lends them to you so at no point in time it has the opportunity to own them)

[Helikopterben]

You are not borrowing bts from the system.  You are borrowing bts from yourself because you are the owner of that bts being used as collateral.  The system itself does not own any bts.

It's bitUSD (not BTS) that's being borrowed.

The system does not own bitUSD.  I cannot borrow an asset that no one or no thing owns. 

[Helikopterben]

I lent it on the network and charged a premium for that service.

What?? What premium are you talking about? You paid a fee. You will pay the fee one more time when you terminate your debt.

I was joking a bit man.  I have done this many times over since 2.0 launch.

[jakub]

You are not borrowing bts from the system.  You are borrowing bts from yourself because you are the owner of that bts being used as collateral.  The system itself does not own any bts.

It's bitUSD (not BTS) that's being borrowed.

[yvv]

Did you try to do exercise which I suggested? Just go and press the damn button, then check your account overview.

I have created usd, cny, gold, silver, and bitcoin, but I did not borrow it. 

Perfect! Now go to account overview page and check the "Collateral Positions" section. The leftmost column is your debt. You will be forced to pay it off when your collateral goes below the threshold.

I lent it on the network and charged a premium for that service.

What?? What premium are you talking about? You paid a fee. You will pay the fee one more time when you terminate your debt.

[Helikopterben]

In this case you borrow one type of money (i.e. bitUSD) against a collateral in the form of another type of money (i.e. BTS).
So one might say there is no premium or interest rate involved because the size of the collateral itself is enough to compensate the lender (i.e. the system) for their risk.

Perhaps you could say that the short seller is borrowing security from the system... but in that case I would say it is the bitusd buyer who is actually paying the premium to borrow security from the system... but this still doen't make sense because the system charges tx fees for this security.

Lending to yourself and borrowing from yourself - this concept does not make sense.

It makes about as much sense as this:

It's similar to borrowing money from a bank at zero interest and keeping this borrowed money safely in a bank account of the same bank.

You are not borrowing bts from the system.  You are borrowing bts from yourself because you are the owner of that bts being used as collateral.  The system itself does not own any bts.  I get what you guys are saying but I am still unconvinced that the smartcoin creator is a borrower.  They may not be a lender in the traditional sense but they are not a borrower either.

[GaltReport]

So what premium or interest rate does the system charge for this loan?  Borrowers usually pay a premium or interest rate for borrowing money.  Its more like lending to yourself and borrowing from yourself at the same time, instead of the system.  As I said before, maybe lender is not the correct term to use.  The smartcoin creator is more like an options seller.

In this case you borrow one type of money (i.e. bitUSD) against a collateral in the form of another type of money (i.e. BTS).
So one might say there is no premium or interest rate involved because the size of the collateral itself is enough to compensate the lender (i.e. the system) for their risk.

Lending to yourself and borrowing from yourself - this concept does not make sense. Similarly you cannot sell something to yourself or buy something from yourself.
In our case you borrow something (i.e. bitUSD) from the system and as long as you remain in control of this borrowed thing, you are not exposed to any risk (and any profit).

It's similar to borrowing money from a bank at zero interest and keeping this borrowed money safely in a bank account of the same bank.
Theoretically you have a debt but still your financial situation is not affected in any way as long as you do nothing with this borrowed money.

Yes, bold part is how  I understand it.  Short is putting up their BTS collateral to Borrow BitUSD from the system and sell it (when someone buys it).

[jakub]

So what premium or interest rate does the system charge for this loan?  Borrowers usually pay a premium or interest rate for borrowing money.  Its more like lending to yourself and borrowing from yourself at the same time, instead of the system.  As I said before, maybe lender is not the correct term to use.  The smartcoin creator is more like an options seller.

In this case you borrow one type of money (i.e. bitUSD) against a collateral in the form of another type of money (i.e. BTS).
So one might say there is no premium or interest rate involved because the size of the collateral itself is enough to compensate the lender (i.e. the system) for their risk.

Lending to yourself and borrowing from yourself - this concept does not make sense. Similarly you cannot sell something to yourself or buy something from yourself.
In our case you borrow something (i.e. bitUSD) from the system and as long as you remain in control of this borrowed thing, you are not exposed to any risk (and any profit).

It's similar to borrowing money from a bank at zero interest and keeping this borrowed money safely in a bank account of the same bank.
Theoretically you have a debt but still your financial situation is not affected in any way as long as you do nothing with this borrowed money.

[merivercap]

The short actually borrows BTS from the long bitUSD buyer.   I think the confusion is the 200% collateral, because it seems like the short is providing both sides.  What's not explicitly seen is the BTS collateral that the long bitUSD buyer brings to the table on trade execution and that's what is used by the short to get leverage.  The short borrows BTS to get more exposure to ups/downs. 

The extra collateral for the short is unnecessary even though the intent might have been to be more conservative with the protocol.   

[Helikopterben]

yvv is right. Short position holder borrows bitUSD from the system and one day s/he will have to return these bitUSD.
S/he can do it voluntarily (by buying back bitUSD from the market) or involuntarily (by being margin called or forced settled).

So what premium or interest rate does the system charge for this loan?  Borrowers usually pay a premium or interest rate for borrowing money.  Its more like lending to yourself and borrowing from yourself at the same time, instead of the system.  As I said before, maybe lender is not the correct term to use.  The smartcoin creator is more like an options seller.

Empirical1.2 makes sense:

I don't think the short seller is a lender/borrower.

The current BitAssets are bit like a contract for difference so it's just a market that matches buyers and sellers.

If the shorts were extremely bullish they'd be wiling to pay a premium to longs to take the other side of the contract and vice versa.

I don't know though.

[Helikopterben]

Did you try to do exercise which I suggested? Just go and press the damn button, then check your account overview.

I have created usd, cny, gold, silver, and bitcoin, but I did not borrow it.  I lent it on the network and charged a premium for that service. 

[jakub]

Wrong answer.  I will give you the correct answer.  The short seller is a lender, not a borrower.

You get it 180 degree wrong. Go to bitshares.openledger.info then "Trade" tab and press "Borrow USD" button. See what happens.

yvv is right. Short position holder borrows bitUSD from the system and one day s/he will have to return these bitUSD.
S/he can do it voluntarily (by buying back bitUSD from the market) or involuntarily (by being margin called or forced settled).