These constraints are artificial. The market is much bigger than your system.
I must be losing my mind after so many posts with bytemaster. This is another post which makes no sense to me. Maybe I just need to be done for the day . . .
I'll elaborate: Your response was that your system prevents fully solvent competitors from stepping in and wiping out a currency that has just become insolvent, by the mechanism I described. Namely, where the simple existence of the better positioned competition forces the market price of the currency below its target, and thus forces perpetual buying by the escrow fund until it's emptied. My point is that there will always be competition from outside your constrained system that you must take into account, and as soon as the backing of a currency in your system drops below 100%, then it's automatically at a competitive disadvantage with any freshly created one in an outside system.
Now THAT is an interesting point. An escrow fund could continue to operate successfully in a closed system, but given another competing GoldCoin launched by someone else, people might flock to the new one which would start at 100% backing.
Of course, over-funded escrow funds would work just fine, but it may be that under-funded ones will immediately face competition.
Very interesting. I'll need to think about this.
The freshly launched coin can be in your own system even was the point I was aiming at in my previous post; I suspected that was at least part of the 'larger market" d'aniel was pointing toward though of course there also could be DigiXAU on various Open Transactions servers, Pecunix unlike e-gold hasn't been killed by the Feds yet, there might come more on the BitShares system and so on and so on...
My own Open Transactions server for example I run in a way that should force there to always be more than 100% backing, because my policy is that cold wallets are frozen solid, hopefully until some future when I foresee no future use for supporting a particular currency at all. Hot-wallet providing is a totally separate business, which I'd actually prefer not to do myself. So for example the 200 BTC that I froze in order to issue 200 DigiBTC (dBTC) on my server I hope never to move on the blockchain until there seems no future use for having such a thing as DigiBTC exist ever again on my server; and I have no plans to freeze more until I foresee a continuing need for my server to be able to provide a transaction pipe fatter than "200 dBTC at a time" going forward...
(I don't plan to issue new dBTC on receipt of blockchain BTC and un-issue dBTC when someone wants to sell some dBTC for actual on the blockchain BTC. I prefer the model e-gold used where if you want to cash in or out you go to third party market-makers aka exchangers; it'd be those exchangers I'd consider selling bullion or blockchain-coins or fiat or barrels of oil or whatever to or buying bullion or blockchain-coins or fiat or barrels of oil or whatever from, greatly limiting the number of people at whose prompting I'd ship stuff into my fortress of solitude vaults or dig stuff out of those vaults - if indeed I'd ever consider digging anything out of the vaults before the time comes that I no longer plan to support that commodity going forward. So, I have 100% backing for all my assets and anyone offering to get people in or out of the system would be doing so using commodities that are over and above the frozen ones that my digital tokens serve as a way of keeping count of.)
-MarkM-