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.





