BitUSD is collateralized by more than 100% of BTS. The person making BitUSD has to lock up 2.5 times the necessary amount, I think. No BTS is ever created by the BitUSD create/destroy process.
Today BitUSD kind of works, as it has a minimum floor due to something called “forced settlement” where you get the underlying BTS back, but the price does move around from the peg, because (surprise!) it operates in a free market.
Good point. It would only be valid if BTC were at an all-time low. Imagine BTC falls to 50 cents each. Then almost everyone could use that logic, because nearly everyone bought higher. Of course, the “NBT is a peg” changes things, too. So there are differences, you’re right.
I realize this. I’m talking about a BTS black swan. When the statement is that the ‘peg’ survives it, the statement is simply that you can get back BTS at the rate denoted by the price feed. This assumes that the BTS price isn’t black swanning, which is spelled out in the white paper.
You’re right that BTS isn’t created or destroyed by the BitUSD process, but by locking and unlocking it, it effectively is. So what this would look like, is people holding BTS start locking it up in BitUSD, BTS increases in price due to this locking up process (This looks like a buyback). The network grows, prosperity (like Nu had), expenses grow, the network over extends with BTS dilutions to pay for new projects. A BTC bull run causes BitUSD holders to suddenly all sell at once. The protocol starts dumping the BTS price and people rush to get them to market. Buyers dry up as they start to realize that BitUSD has reached new lows of 90 cents, 80 cents, practically giving money away to anyone willing to deal with the conversion of BitUSD to BTS then selling them on the illiquid open market. And everything crashes. Oh so familiar.
You’re right that the BTS protocol would handle this situation way better than Nu, which at this point has broken contract with the Standard and Core motion by not selling any NSR this week.
@Nagalim Yep, that could happen in BTS, where the collateral crashes so quickly that none of the BitUSD can be recovered for their nominal value. It is called a “black swan” and would required a sudden and large drop in BTS price. A slow but steady price drop wouldn’t cause it, because the “bad” BitUSD would be liquidated before it was under-collateralized. This kind of sudden crash hasn’t ever happened (yet).
@Dhume and @nmei I believe it’s the “sunk cost fallacy” to say: “I paid $x for what I own, and so did everyone else, so I won’t sell it for less than $x, even though it’s currently trading for less.” In a perfectly rational market, traders wouldn’t consider their purchase price, but instead only the current and future market price (except when gain/loss matters for tax purposes). EDIT: But again, a reliable peg changes things. So I do see what you mean.
The situation I described won’t happen with low adoption. A black swan can, that’s easy, just a bug in the software or whatever. But the sitation where people cash out BitUSD all at once will be one like Nu had, a bunch of people are actually using the tokens to hedge and they all want to sell their hedge at once because of some external event to the system, which causes a crash on the collateral. This can only happen if the BitUSD to produce such a crash actually exist, which implies adoption of some form or another.
“Low adoption” is difficult to define. But the total supply of BitUSD right now is 108179 units, so I don’t know if that’s “low” or not. I’d say that anything can happen, just to be safe, haha.
It’s true, and that says something. BitCNY is actually being used a good bit too. I’m not sure of the history with that one, but I do know that BitUSD had >$100k before BTS 2.0, which says to me that the BitUSD supply isn’t really doing much. The BitCNY supply has increased, though, if I’m not mistaken. I’d love to see a chart of that.
Anyway, my point is that the system remains untested and BTC or ETH or whatever is a bucking horse for stable crypto. If the DAO is smart enough to not bite off more than they can chew, it may do alright.
Nu, on the other hand, is about to show some really interesting things about how DAOs work (or don’t) under pressure.
Till today, none, however, Peershare can implememt Hayak theory, B&C is the best candidate, B&C’s function is an(semi)decentralized exchange, but there is a coproduct: BKC, a potential Hayek money.
I see potential, that’s why I stay in this community, otherwise your Nu already pissed me off.
I’d say that anything can happen, just to be safe, haha.