Quote from: dacoinminster on August 07, 2013, 12:00:40 AM

Quote from: bytemaster on August 06, 2013, 11:57:20 PM

It is more attractive because they get to double their gains as MC appreciates against GC. Say 1 Oz of Gold is worth 100 MC. Suppose Alice has 100 MC she could create 1 GC by selling it for 100 MC. You now have an escrow fund with 200 MC (100 from buyer, 100 from seller) that is owned by Alice and 1 GC owned by Bob. Alice is not allowed to spend the Escrow fund until she buys back the 1 GC.

If GC goes down 50% (MC doubles in value) then Alice can buy back 1 GC for 50 MC and walk away with 150 MC, a profit of 50 MC. These 50 MC are also worth 2x as much.

As long as the network forces Alice to cover her position before 1 GC is worth 150 MC then Bob has nothing to fear and can be 100% certain the GC will always be worth 1 Gold Coin.

That is very elegant, but of course then I have the "margin-call" problem you alluded to. And I promised myself I wouldn't argue with you about that

Still, this could be part of the solution . . .

No need for a *massive* short position, you can allow many people to take out short positions in the same currency and collectively they form the short position and are the 'creators'.

If you have a problem with the margin-call, the least you can do is enlighten me to return the favor.