2.4. Privatized BitAssetsΒΆ

Alternatively to regular MPA like the USD, LocalCoin also offers entrepreneurs an opportunity to create their own SmartCoins with custom parameters and a distinct set of price feed producers.

Privatized SmartCoin managers can experiment with different parameters such as collateral requirements, price feeds, force settlement delays and forced settlement fees. They also earn the trading fees from transactions the issued asset is involved in, and therefore have a financial incentive to market and promote it on the network. The entrepreneur who can discover and market the best set of parameters can earn a significant profit. The set of parameters that can be tweaked by entrepreneurs is broad enough that SmartCoins can be used to implement a fully functional prediction market with a guaranteed global settlement at a fair price, and no forced settlement before the resolution date.

Some entrepreneurs may want to experiment with SmartCoins that always trade at exactly $1.00 rather than strictly more than $1.00. They can do this by manipulating the forced settlement fee continuously such that the average trading price stays at about $1.00. By default, LocalCoin prefers fees set by the market, and thus opts to let the price float above $1.00, rather than fixing the price by directly manipulating the forced settlement fee.