Quote from: 0x3d on October 17, 2014, 03:46:51 PM

Quote from: QwertyCore on October 17, 2014, 02:24:35 PM

Interesting. What is your reasoning for using market volatility as an indicator other than it can be used as a way to adjust the rate?

Well that's pretty much the only reason. It seemed like a perfect fit to the equation we're trying to find. An incentive to raise volatility and, in turn, trading volume.

The way you're asking: Why wouldn't we want to use it?

Quote from: QwertyCore on October 17, 2014, 02:24:35 PM

A more fundamental question would be: why does the rate need to be adjusted?

Traders make the biggest gains (or losses) when volatility is way up in the sky. I don't see a reason why lenders should be left behind when "surf's up". Sure, they may convert their swap-USD into exchange-BTC and "ride that wave" along the traders, but that only increases your risk. I imagine the swap-market as being the "safe harbor" on the platform... Also, the lent-out money does "work more" during these times of high volatility and like in the real world: the more fish you get out of the sea the more you can sell. Damn, I start to think we're modern day's early fishermen, every damn metaphor fits so perfectly

The current swap-(side-)market is a bit too stressfull in my opinion, constantly re-shuffling, observing and adjusting rates and whatnot. A fixed-rate on the other hand would be as boring as your dusty old savings-account, don't you think? It lacks the feedback-loop, the incentive to inject volatility in the market, hell it could even infect the BTC-market with it's boringness (because feedback-loop), BTC might get glued to 400 like, for years... not that that would be too bad for the stability-fans but come on, a 5.5 year old should move, damned! Even if it's a currency.

A volatility-based swap rate just seems to be something not too boring and not too stressfull, the sweet spot in between.

For the rest of your "essay" I'm not sure I did follow through entirely but if I understand correctly you're saying a variable rate would be pretty bad in quickly falling markets, correct? If so, I don't see exactly why that would be the case, the swap-load factor would pull the rates back to a minimum even if the base swap rate goes way up high so... try again explaining it from a fisherman's perspective, that should do today Wink

What's wrong with a boring fund that makes 100% a year? I would be quite content with boredom like that.

Convert my 'essay' to a fish story? Let's try this - A SWF would own every dock, pier, boat, net, rod as well as the ocean. If you want to fish the SWF is the only game in town. When you want to fish, not only do you have to rent the equipment from the SWF, you have to put the full value of the equipment down as a deposit and pay any expenses up front and out of pocket. You might capsize and die but the SWF is sitting on the safely on shore with no way to lose. If you survive, the SWF will let you keep any fish you catch.

How's that?