Author Topic: New idea: Negative interest rates to encourage borrowing and spending of an MPA  (Read 8822 times)

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Offline yvv

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The best way to encourage people to borrow MPAs into existence and spend them would be a financial incentive.

AKA High Leverage

Fixed this for you. If you want to incetivise shorters, give them leverage by reducing collateral requirement. After black swan recovery is implemented, this should not be too risky.

Offline JonnyB

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would you buy something that you KNOW is guaranteed to be less worth tomorrow?

me neither.

I explained in my post.

Nobody will want to hold it long term, just like nobody wants to hold cash long term. But short term its liquid and great for transactions.
 If someone wants to dump $100k of bitcoin or ether they can do on uphold, bitfinex, bitstamp because they are deep liquid markets with tiny spreads. It's impossible on the BTS DEX because the supply of BitUSD is so low and illiquid.

With a NIR MPA you could sell large amounts of bitcoin, ether etc to exit your position quickly then move from the highly liquid (NIR MPA) to something else.
I run the @bitshares twitter handle
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Offline oldman

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Using the reserve to borrow bitUSD and bitCNY to increase liquidity is a better option. Take $20M reserve BTS and create a ton of USD and CNY, sell at the feed price.

Offline fav

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would you buy something that you KNOW is guaranteed to be less worth tomorrow?

me neither.

Offline JonnyB

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OK i've got a new idea.

If we want to increase the supply of BitUSD and BitCNY we need to encourage people to borrow it in to existence and spend it.

The best way to encourage people to borrow MPAs into existence and spend them would be a financial incentive.

AKA Negative interest rates.
So the opposite of HERO which increases by 5% a year. We create an MPA that loses 5% each year.

This is what many central banks have been talking about doing for a while but can't because physical inhibits it.

Why would someone want to hold an asset that loses 5% a year?  They won't want to hold it for long but they will like it because theres a lot of it available. Not wanting to hold an asset that has a large supply will create good liquidity.

Why would there be a lot available? Because anyone who borrowed and spent it would have a margin position that would get smaller every year.

Still thinking this idea through in my head, but theres potential here I'm sure.

I run the @bitshares twitter handle
twitter.com/bitshares