i dont see it working out.. its a good theory, but in practice it wont work.
i understand it would do-away with binary based database balances that represent someones fiat balance on an exchange and instead be a blockchain ledger, allowing more security.
i understand that if all the exchanges moved over to blockchain based swapping instead of database based it would decentralise things because the funds are not locked into one exchange, making arbitrage easier.
but there are issues:
initially bitUSD has to come from somewhere to cope with demand of the first lot of customers that want bitUSD. this involves a pre-mine.. so i take it Charles Hoskinson will mine and manage this and be the supplier... making him the 'mint' creating bitUSD
whats stopping him or anyone who has access to his secret mining pool from just mining excessive amounts and then raiding fiat withdrawal gateways dry while those that have bought in now hold a bitUSD and no gateway to withdraw to, because there are no fiat reserves left.
this is why okpay, mtgox, bitstamp need regulations already, because although they trade a digital database representing a bank account dollar. bitUSD is the same, a blockchain representing a US Dollar.. meaning a regulated blockchain would occur... to monitor everyone and prevent 'printing more money' (mining excessive amounts). so whoever mines BITUSD initially would be regulated.
speed of transactions would be slower. people have done this before on the OTC channels using their 'coin-QT wallets, swapping litecoin for bitcoin. confirm times can be a problem.
i can think of many more issues..
Please read the bitshares white paper in my sig and then come back. Your understanding is so far off base that I can not answer it here. No premine. No IOU No debt. No trusted third parties. No way for any party to default.
Now that I am at my keyboard vs phone, I will respond in some greater detail:
BitUSD is the long position balancing out a short position of BitUSD vs BitShares. The market forces between longs and shorts control the supply. BitUSD can track the value of USD without any real USD ever trading hand or being held in escrow.
No one has done this before.
