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RE: Who will pay the "interest" on HERO?
That's exactly what should happen.
The HERO is a fungible smart contract that guarantees you can cash out for a pile of BitShares at the well defined price feed. If you paid more for that you did so at your own risk.
This factor alone will keep the 2x scenario from happening. Its sort of like the limits the FDIC places on how much they are willing to promise to insure.
We'll need to make sure the HERO web site explains the risks and nuances to clearly to all buyers.
No different really than paying more than a dollar to get a dollar at a loan shark emporium. If you do that, you are not altering the value of the dollar you are paying a premium you find worthwhile.
Probably, but not necessarily! You don't know a price until you smash a demand curve against a supply curve. If there is enough demand for 2.5% returns (on the HERO demand side), then 2x is consistent with that. It's probably unlikely, because that far from the feed, it would probably be pretty volatile and 2.5% returns with big price swings are probably not that valuable. But who knows? There are a lot of "probablys."
I don't think that's a good analogy, or at least there's a sliding scale that it's missing. If HERO had a totally stable price at 2x the feed, it would be worth buying for anyone who wants 2.5% returns. Rational people would never settle, and shorters who tried to drive the price lower would be selling into stiff demand and wouldn't profit. Of course - the 2x number is just "for instance," and the more I think about it the more I think it's way too high. But 1.4x? Seems believable. This is part of why I'm so intrigued by HERO; it's going to be such a cool experiment.
Am I wrong or are my missing something. Currently prices for the buy orders for hero are all lower than the feed price. Maybe you areb anticipating a demand surge that will cause a price hike to double its feed price because am not seeing it. That is actually my worry asides five percent APR. I hope the PR guys make inroads into people to generate demand or we will be left with excess supply of the Hero exerting a downward pressure on the price. So i keep wondering why you are so sure its gonna sell at a premium.
If you hold a HERO, you can "request settlement," which means you give up the HERO and get paid an equivalent number of BTS (measured by the feed price). So even if many many people borrow HERO into existence, the excess supply can't push the price below the feed price because people would buy the low-price tokens and settle them for a profit.
There is extremely high demand below the price feed because the network enforces the price feed as a floor.
We'll see about the premium. The token still doesn't have much liquidity, so it's hard to judge yet.