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Market Pegged Asset

Summary:

An MPA Asset or “Smart Asset” on BitShares Blockchain is an asset type that a user can create on BitShares Blockchain which allows Blockchain user to borrow it using collateral *other asset* that was defined initially by Smart Asset creator; hence the responsibility of Smart Asset owner or authorized price feeders defined by Smart Asset owner to feed the price of defined collateral Asset against Smart Asset so Blockchain would automatically margin call collateral of borrowers in case the value of collateral becomes less than the value of “Smart Asset”.

Every Smart Asset has an owner and has price feeders selected by Smart Asset owner; in case of BitAssets on BitShares Blockchain; those MPAs are owned by BitShares committee members hence committee members are BitShares Blockchain users that was elected by Blockchain investors who had locked their BTS tokens to gain power of voting so they would be electing committee members hence there are many other MPA assets on BitShares Blockchain that are owned by different entities.

MPA Input Parameter:

  • Feed Price: The collateral price in the borrowed asset.
  • Collateral Ratio (CR) : = DEBT / COLLATERAL
  • Maintenance Collateral Ratio (MCR): CR for margin calls.
  • Initial Collateral Ratio (ICR): Minimum CR for updating margin position.
  • Target Collateral Ratio (TCR): Sell only enough collateral to reach TCR again.
  • Call Price (CP): = DEBT / COLLATERAL * MCR The price at which short/borrowed positions are getting margin called.
  • Maximum Short Squeeze Ratio (MSSR): Max. liquidation penalty. Real penalty is dependent on market liquidity.
  • Force Settlement Offset (FSO): Fee for MPA settlement, from the MPA holder.
  • Market Fee: Orderbook Exchange Fee
  • Force Settlement Fee (FSF): Fee
  • Max. settle able volume each maintenance period

Borrowing

BitShares network is capable of minting any MPA, with any collateral, without any interest rate.

Margin Call

The margin call sells collateral, to buy shares of the borrowed MPA back to reduce the amount of debt. The margin call will occur, when the CR is lower than the MCR and a bid is equal or greater than the SSP. The borrower is able to add extra collateral or reduce the debt, to increase his CR and prevent further margin calls.

MSSR

Higher MSSR allows faster liquidation and higher penalty on less liquid markets. Market MPA discounts does reduce the effective MSSR.

Settlement

When the asset owner, allows a settlement, the MPA can be exchanged at Feed Price + FSO + FSS after the settlement time and max. settlement volume. The settlement closes the borrow/short positions with lowest CR and sells the collateral to the asset settler.

Covering

A borrow/short position can be closed by hold the same amount of that particular MPA. When the particular debt is payed back to the network, the corresponding supply is reduced and the collateral is released.