Idea for Bond market. This is just a quick idea i came up with. It not fully thought-out but like to see if it's worth spending more time fleshing out.
Smart Bond Lending System
Smart BondsSmart Bonds gives the ability of users to loan money to the Bitshares network. Users buys a Smart Bond asset at 1:1 with their BTS. These funds go into a pool for the network to use.The 0network pays out yield to the bondholders. The funds will be held on a 30 day cycle. The holder can have the bond auto renew at the end of the 30 days. If the holder buys more bonds during the 30 day period, the term length is extended 30 more days from the day of purchase with the new balance. Interest is calculated daily based on the amount of coin days that day in the bond. Interest will be vested and only available for withdrawal at the end of the Bond term. There will be a 5% penalty for closing the Bond early along with loss of interest.The interest percentage is based on a 30 day rolling average set by the network. If the user has not auto-renewed or bought more bonds during the cycle, the bond officially ends. The principal is then returned in BTS with the accumulated interest in BTS.
The Smart Bond supply will be used for generating Smart Loans,Smart Asset supply, Market-making and other uses. A maximum of 40% of the Bond will be used for loans, up to 10% for asset creation. A minimum of 20% of the Smart Bond supply will kept in reserve in order ensure liquidity of Smart Bond holders.
Smart LoansNow that the network has all these funds from the Smart Bonds, what should it do with them? Well one use is to lend them out. A Smart Loan is a loan made to users who wish to trade on margin for Smart Assets. In order to get a loan, the borrower must put up collateral. This is done by buying Smart Bonds. A maximum of 40% of the total supply of Smart Bonds will used for Smart Loans at any giving time. Smart Bonds will be the collateral for Smart Loans. The maximum margin for lending will 2.5x. The borrower chooses the Smartcoin they wish to borrow (usd,gold,silver), the length in days (2 to 30 days), and then assigns the amount of collateral. Whatever amount remaining in the Bond is treated as Bond with the terms at creation.There is no penalty for converting some or all of the bond to a Smart Loan. The conversion is one-way. The borrower can not convert the Loan back to a Bond. Interest is calculated daily based on the rate at creation. The borrower can add more collateral but the rate and margin are fixed to the original terms of the loan. For each Smart asset loaned into existence, the network reserves will 100% collateral. This insures the assets a backed by 200% collateral. This will allow the borrower to trade the coin on the market.
The borrower can close the loan at any time after but will have to pay penalty if it is less than the original term length. At the end of term the borrower can renew the loan. The loan will renew with the current interest rate. At close of the loan the borrower's remaining collateral is returned along with any profit to their bts account. The loan will closed out automatically if the collateral backing the loan is lost.
The mechanics would work similar to POLO, have not worked through the formulas yet.
Interest RateThe Interest rate will be set by the ratio of supply and demand. We Will first need a basis rate. Let’s assume an initial daily rate basis of 0.5%. Then the rate can be calculated by,
(Smart Loan / Smart Bond) x 0.5 = Daily rate
Of course this will need adjusting based on the ratio. The ideal rate should float between 0.2% to 5% roughly.
Smart Coin SupplyA portion of the Smart Bond can used to generate Smart Coins. 10% of the supply will be set aside for coin creation. The assets will be created at 200% collateral and created in proportion to amount of demand based on outstanding loans for that asset. A minimum of 125% collateral must be maintained at all times. If the collateral falls below 125%, Coins will be destroyed until minimum is reached.
Still working out rest...
Topic: Idea for a Smart Bond Lending System (Read 1833 times)
