Question about bitcoinica starfish:
Bitcoinica is charging interest on deposits. Interests is meant to attract funds to give the exchange a reserve (so if btc skyrockets or collapses suddenly zhoutong does not go belly up).
However, I'm a little sceptical that investors will find this attractive with a variable rate. It is too much hassle to keep track of.
Consider this alternative:
bitcoinica could issue fixed term 6-month bonds with a locked in 30% annual interest rate. The bonds would have the proviso that Zhou can choose to pay the bond off either in dollars or in btc with the locked in exchange rate at the time of initial issue. Note here that the actual interest rate is less than 30% per annum because Zhou can take advantage of any exchange rate movement. If the exchange rate moves by more than 30% in either direction, then Zhou will make money and the bondholder will lose. Essentially then bitcoinica can insure itself against large exchange fluctuations in either direction by issuing these bonds. The fixed term would also protect Zhou against sudden collapses in confidence to some degree.
It seems like issuing these bonds could protect Zhou from the starfish and also provide an attractive expected return for investors. Have you considered this Zhou?
Bitcoinica is charging interest on deposits. Interests is meant to attract funds to give the exchange a reserve (so if btc skyrockets or collapses suddenly zhoutong does not go belly up).
However, I'm a little sceptical that investors will find this attractive with a variable rate. It is too much hassle to keep track of.
Consider this alternative:
bitcoinica could issue fixed term 6-month bonds with a locked in 30% annual interest rate. The bonds would have the proviso that Zhou can choose to pay the bond off either in dollars or in btc with the locked in exchange rate at the time of initial issue. Note here that the actual interest rate is less than 30% per annum because Zhou can take advantage of any exchange rate movement. If the exchange rate moves by more than 30% in either direction, then Zhou will make money and the bondholder will lose. Essentially then bitcoinica can insure itself against large exchange fluctuations in either direction by issuing these bonds. The fixed term would also protect Zhou against sudden collapses in confidence to some degree.
It seems like issuing these bonds could protect Zhou from the starfish and also provide an attractive expected return for investors. Have you considered this Zhou?
It's like a dual-currency account. This is a good idea.
However, we have already eliminated the starfish problem. Currently all interest rates are dynamic, and people are shifting their deposits and positions fast enough to provide liquidity when we need.
