Interest on BitUSD - A Proposal for Review

[luckybit]

With regard to 'up to' I'm not sure guaranteeing an interest is possible or desirable. The interest will essentially vary with the market activity of the asset and no representations or guarantees should be made. What I would like to see is a cap and then additional revenues used for liquidity or lending.

Read my proposal - Guaranteed interest is possible, and of course desirable for some people/situation. Of course it will very over time, but after the 'deal' is entered into, it will be fixed and guaranteed, as it should be. The current state of affairs is made 'the norm' because it suites the banks' interest (no pun intended) better than what is actually fair and normal.

Then it should be guaranteed to be at least 5%. If it ends up being 10% then no one will complain.

[maqifrnswa]

I am think of calling them "USD Rewards" like a credit card "rewards program".

Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.

Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?

Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards?  It's actually not unusual for people to get interest on their cryptocurrency deposits.

dividends might be more accurate since it is a distribution of profit (fees). I agree the "rewards" sounds like a marketing thing. Interest and dividends sounds like a finance thing.

[Akado]

2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE

what about the inactivity fee if you dont move your funds once a year? or is that applied to BTSX only and not BitUSD?

[luckybit]

I am think of calling them "USD Rewards" like a credit card "rewards program".

Definitely call it interest.
It's already been done in the crypto community https://mcxnow.com/ .
So it's already accepted as interest.

Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?

Rewards is terrible. If every other exchange is calling it interest why should Bitshares X be the one to call it rewards?  It's actually not unusual for people to get interest on their cryptocurrency deposits.

[biophil]

1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.

2) Does this apply to all BitAssets or just BitUSD specifically?

Wouldn't that create unbacked bitUSD?

No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.

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So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.

Yeah, so burn some and convert others to bitAssets. Some of the burn is implicit dividends for BTSX holders, some is explicit dividends for bitAsset holders.

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[Riverhead]

Is the term "Rewards" already decided? To me that sounds more like frequent flier miles than money. Does the word "Reward" have certain legal advantages over dividend or interest?

[tonyk]

Wallet now has a method / API call to report your accumulated rewards.   
Now all that is left is to implement a wallet method to generate the transaction to claim them

wallet_saver_withdraw_pay <saver_name> <to_account_name> <amount_to_withdraw> [memo] 

in re of:

wallet_delegate_withdraw_pay <delegate_name> <to_account_name> <amount_to_withdraw> [memo] 

[luckybit]

But isn't is usual that the interest is NOT fixed? at least in germany that is the case

No I am also searching for workaround because we do not actually know how much fees will be collected, so promising 5 or 10% is kind of misleading. And I want to be able to tell them 'our interest is higher than the one in the bank'.

Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.

True, but as explained above, telling the people it is higher than in the bank is a powerful selling point, imo.

Just call it a variable interest rate. Other exchanges have something similar.

[bytemaster]

Wallet now has a method / API call to report your accumulated rewards.   
Now all that is left is to implement a wallet method to generate the transaction to claim them

[Riverhead]

1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.

2) Does this apply to all BitAssets or just BitUSD specifically?

Wouldn't that create unbacked bitUSD?

No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.

Sent from my SCH-S720C using Tapatalk 2

So said another way the burn rate isn't sending shares off into oblivion but being donated to the network to pay out as dividends/interest to bitUSD holders? That's pretty interesting. It could't be all of it though as the burn rate is the only mechanism to reduce supply.

[luckybit]

BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:

1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)

Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account.  To do this BitUSD needs to offer a return that is explicit.  IE: it shouldn't be done via the value deviating from the peg.

Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD).  This income is saved for a "rainy day" which we don't actually expect to happen, but could.  The value as an insurance system could be better used to pay interest to USD holders.   If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.

So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading.  This is about .4% yield every 2 weeks or about 10% per year.   I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders.   The more people hold BitUSD the more BTSX is worth.   So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.

I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount.     (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2

The result is that long-term holders of BitUSD earn much higher yields than short-term holders.  The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:

1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.

This feature would have a greater impact on adoption than just about anything else being discussed. 

Discuss.

That idea is genius!
So what you're saying is we can get compound interest just from holding BitUSD?

That gives us the incentive to literally put our life savings in BitUSD ASAP if we don't believe in BTSX and if we do then it encourages the believers to buy as much BTSX as possible and hold or perhaps short. There will come a point though where even the bulls will find BitUSD with 10% interest attractive if that is a realistic number.

In the short term it should be marketed to merchants because now they'll have a reason to hold BitUSD over Bitcoin or anything else. BitPay for example could adopt BitUSD so that merchants like Overstock can choose to collect interest.

I would say approach Overstock immediately if this works.

[maqifrnswa]

I like it - bitAssets in a way becomes a DAC inside of a DAC...

get ready for the kick

[tonyk]

Anybody else get the feeling BM is changing the world with every stroke of the keyboard?

Ever since, my good luck brought me to this forum.

[biophil]

1) What are your thoughts on putting the "daily burn" toward BitUSD? This way, there is more electoral control over the interest rate.

2) Does this apply to all BitAssets or just BitUSD specifically?

Wouldn't that create unbacked bitUSD?

No, since you could use the burned BTSX to purchase bitAssets on the open market. It would be pretty cool, no? You'd have constant buying pressure for bitAssets.

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[biophil]

A side effect of paying variable interest to BitUSD holders, which depends on income levels generated by BitShares X, would be that holders of BitUSD would have incentive to promote BitShares X to others, becoming a special kind of stakeholders in the system.

Exactly!

Well, sort of. There's an incentive in the other direction too: the more bitUSD that exists, the smaller each person's share of the trading profits. What bitUSD holders will *really* want to promote is day trading, since that's where their income comes from.

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