Author Topic: New idea: Negative interest rates to encourage borrowing and spending of an MPA  (Read 6810 times)

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Offline Crypto Kong

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https://bitsharestalk.org/index.php/topic,24158.msg309598.html#msg309598

Not a new idea, but I like the idea.

Effectively, shorters will experience debt destruction whilst holders experience the slow deflation of holdings.

I believe that such a proposal will have a one-sided market, with an over abundance of sellers (shorters) and a lack of buyers.

HERTZ style assets have the best of both worlds, both appreciation and deprecation.
In theory if it’s opposite to the hero coin a balance should be achievable as they cancel each other out


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Offline Crypto Kong

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

me neither.
Your missing the point. You wouldn’t buy it, but you would definitely sell it if you were holding. Therefore people will borrow to sell it to make a profit. This is the theory.


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Offline lafona

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I believe that such a proposal will have a one-sided market, with an over abundance of sellers (shorters) and a lack of buyers.


I think in some cases it would be better to have an overabundance of sellers than buyers. Particularly for businesses which expect to buy and sell quickly(traders, remittances).
BTS Witnesses: delegate-1.lafona     Witness Thread: https://bitsharestalk.org/index.php/topic,21569.msg280911/topicseen.html#msg280911
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Offline R

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https://bitsharestalk.org/index.php/topic,24158.msg309598.html#msg309598

Not a new idea, but I like the idea.

Effectively, shorters will experience debt destruction whilst holders experience the slow deflation of holdings.

I believe that such a proposal will have a one-sided market, with an over abundance of sellers (shorters) and a lack of buyers.

HERTZ style assets have the best of both worlds, both appreciation and deprecation.

Offline yvv

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You didn't fix it, you suggested an alternative. lower collateral requirements might incentivise shorters but it would make BitUSD less safe.

Less safe, but probably still safe enough to not worry. It all depends on details of implementation. Who said that safety threshold is at MCR=1.75? Why not 1.5? Still far above 1.

At the moment, there are only two MPAs with relatively big supply - bitUSD and bitCNY. What about decreasing MCR for these two in small decrements, e.g. 0.05 every 6 months? Both bitUSD and bitCNY survived latest big price decrease, after hard fork it would be even safer.

 +5% I would support such gradual decrease, after black swan revival is online.

Offline paliboy


You didn't fix it, you suggested an alternative. lower collateral requirements might incentivise shorters but it would make BitUSD less safe.

Less safe, but probably still safe enough to not worry. It all depends on details of implementation. Who said that safety threshold is at MCR=1.75? Why not 1.5? Still far above 1.

At the moment, there are only two MPAs with relatively big supply - bitUSD and bitCNY. What about decreasing MCR for these two in small decrements, e.g. 0.05 every 6 months? Both bitUSD and bitCNY survived latest big price decrease, after hard fork it would be even safer.

Offline lafona

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I have been thinking about this more and more lately. There are most likely scenarios where users/customers are more than happy to pay a few percent depreciation. Possibly one of the biggest strengths of bitshares is that we can have many versions to see what works best. One example of a customer which might not mind is a high frequency trader looking for lower fees. In that particular case a few percent a year may be much less than a fraction of a percent of thousands of trades. The other benefit of this idea is it incentivizes a different type of use. Instead of holding an asset users would only find this valuable if they are making lots of trades, and thus generating lots of fees...
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Offline yvv

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veryone who has a HERO margin position is doing just that. holding a position guaranteed to lose 5% a year.

So what? What is hero liquidity?

Setting positive/negative interest rate on MPA and UIA would be a nice feature, which could have some use cases, but don't think that negative interest would certainly solve the liquidity problem.

Offline JonnyB

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People who keep saying nobody would hold something that loses 5% a year.

think about this.

Everyone who has a HERO margin position is doing just that. holding a position guaranteed to lose 5% a year.
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Offline yvv

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I have to be honest, I'm struggling to understand why anyone would want to create USD with negative interest if they barely want to create it with no interest. Where's the incentive?

Incentive for those who create USD would be ... the negative interest (your debt is decreasing with time). Not much of incentive to buy such asset though.

Oh ok right. So what is the incentive to hold USD - You basically want to create and dump it.

You always create and dump it. There is no point to create and hold it. But in case of negative interest you would have a hard time to find a buyer.

Offline yvv

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You didn't fix it, you suggested an alternative. lower collateral requirements might incentivise shorters but it would make BitUSD less safe.

Less safe, but probably still safe enough to not worry. It all depends on details of implementation. Who said that safety threshold is at MCR=1.75? Why not 1.5? Still far above 1.

« Last Edit: October 18, 2017, 07:41:44 pm by yvv »

Offline renkcub

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I have to be honest, I'm struggling to understand why anyone would want to create USD with negative interest if they barely want to create it with no interest. Where's the incentive?

Incentive for those who create USD would be ... the negative interest (your debt is decreasing with time). Not much of incentive to buy such asset though.

Oh ok right. So what is the incentive to hold USD - You basically want to create and dump it.

Offline yvv

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I have to be honest, I'm struggling to understand why anyone would want to create USD with negative interest if they barely want to create it with no interest. Where's the incentive?

Incentive for those who create USD would be ... the negative interest (your debt is decreasing with time). Not much of incentive to buy such asset though.

Offline renkcub

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I have to be honest, I'm struggling to understand why anyone would want to create USD with negative interest if they barely want to create it with no interest. Where's the incentive?

Offline JonnyB

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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.
You didn't fix it, you suggested an alternative. lower collateral requirements might incentivise shorters but it would make BitUSD less safe.
I run the @bitshares twitter handle
twitter.com/bitshares