You are viewing a single comment's thread from:
RE: HERTZ FBA Created!
If the token trades at the price feed, then you're right. However, my bet is that the token wouldn't trade at the price feed - it would trade much higher. Probably 10x higher or something like that. In this way, the market would set the effective interest rate - just as it will with HERO.
Because there is a shortage of tokens. Nobody would create the tokens if that were true, meaning an illiquid market. An illiquid market will be plagued with price swings and margin calls, plus a huge loss of money to the issuers.. especially if it were trading at 10x the price feed, which I don't think could be sustained due to the price fluctuations
Trading at 10x the price feed is an unbelievably good deal for the issuers, because it would mean they are on the hook for only 10% of the market value of the token. I agree that that far from the price feed is not very attractive to buyers, but it's still a token that's guaranteed to be worth more than an index that doubles annually. That's actually worth a good deal.
I also agree that it's not a great use case for smartcoins, but I bet it wouldn't be totally illiquid.