Interest on BitUSD - A Proposal for Review

[oldman]

FYI... I have already implemented the rewards program   at the blockchain level.  I just need to add a few wallet operations and do some testing on a test-net, but it should be ready to go next week.

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

[tonyk]

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.

I think guaranteed interest is a great idea via a "CD" where people selling the "CD" take the variable rate (rewards from USD) and give the holder a "fixed rate".   To implement on a blockchain would require the lender to post 100% of the interest up front as collateral.
Yes
This particular instrument would only be of interest (no pun) to those who absolutely *need* a predictable income... however, the average yield you would get from such an instrument would be lower than the average yield you would get from just keeping the rewards yourself.
True
So how relevant is the "volatility" in the rewards program to people?
Let's see!!!

[bytemaster]

Will the balance have to be locked during that time?

No restrictions on use of your balances.  Entirely automatic behind the scenes. 

[Pheonike]

Will the balance have to be locked during that time?

[bytemaster]

FYI... I have already implemented the rewards program   at the blockchain level.  I just need to add a few wallet operations and do some testing on a test-net, but it should be ready to go next week.

[bytemaster]

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! 

[bytemaster]

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.

I think guaranteed interest is a great idea via a "CD" where people selling the "CD" take the variable rate (rewards from USD) and give the holder a "fixed rate".   To implement on a blockchain would require the lender to post 100% of the interest up front as collateral.

This particular instrument would only be of interest (no pun) to those who absolutely *need* a predictable income... however, the average yield you would get from such an instrument would be lower than the average yield you would get from just keeping the rewards yourself.   So how relevant is the "volatility" in the rewards program to people?

[bitcoinerS]

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.

[tonyk]

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.

[yellowecho]

This proposal sounds great to me

[oldman]

There is no need to represent a fixed interest rate.

This will be interpreted more as deposit interest and folks are accustomed to banks changing the rate frequently.

Per my last, all that is needed is to market the interest as 'receive up to  5% interest on bitUSD holdings' and then show a graph of historical interest rates.

Who among us wouldn't buy bitUSD with that kind of offer?

Imagine merchants being able to earn interest on their float... imaging APPL being able to get 5% on their cash pile.

I hate the phrase 'up to' personally, I hope it works and I am the odd man out.

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?

I think it should apply to all bitCurrencies. As for bitGold/bitSilver, my first reaction is -'NO'.

Gold and silver are a currency/commodity combo and I agree that inclusion with pure currencies is a bit a arbitrary.

That said, the amount of wealth stored in those two metals is enormous and I think too much would be left on the table not to include them.

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.

[oldman]

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

This makes me think gimmick and I don't think investors would take it seriously. My personal experience with reward programs is that are designed to entrap and extract.

'Interest' is universally understood and will require no explaining, a critical point when releasing a new product to a global audience.

The bitUSD5 concept will be met with heavy scepticism upon release, no one will believe it is not a scam/ponzi. Best not hand out ammo.

Of course, once there are a couple years of ROI on the books (proof of concept) the flow of wealth will be unstoppable.

[bitcoinerS]

Is this proposal for all BitAssets or only for BitUSD?

[tonyk]

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

I do not think it will get the full market potential of 'Interest'.

I also wonder what Toast thinks on this issue, as this idea of yours, is the best thing after the sliced bread (I mean, as yours go, after bitUSD [edit] I probably lack the technical knowledge to appreciate DPOS enough in the middle of those, so excuse me in that regard[/edit]), imho.

[bytemaster]

This would apply to all BitAssets. 
This would reinforce the peg because the "best of all worlds" trading strategy is:

Short 100 USD
Hold 100 USD

if BTSX goes up,  borrow 100 USD on your credit card, and cover at a profit, pay off your credit card with 0% interest.. keep the profit.
if BTSX goes down, Cover with 100 USD and keep the rewards.

Thus there will be heavy demand to enter this position, but the only way to enter this position is to be the "first in line to short" which means paying a high initial shorting fee *AND* that the peg is holding at parity.

Thus I believe this rewards program will make the peg stick no lower than the feed price.