One question: essentially, the issuers of a Bitshares asset short it on 200% margin; I got that part. But, are the lifetimes of the assets limited? Are they automatically redeemed in BTS after X days, or is their lifetime forever?
If you buy a bitAsset you can hold onto it forever if you want.
If you create a bitAsset (by 'shorting' it into existence, and providing some of your BTS as collateral), then you are forced to buy back that bitAsset within 30 days, OR if your collateral gets too low.
What is the point of this?
It gives every bitAsset holder a guarantee that within a 30 day period, someone is going to need to buy the asset back, which means that you are able to sell your asset if you want.
One option for the 'short' to cover their position is to 'buy it from yourself', by shorting a new version of the bitAsset and selling it to yourself to cover your old asset. This is kindof like rolling over a futures contract for a commodity, into the next period. When you do this, you have to put in an order at the feed price (the 'fair price' of the asset). This means that anyone else out there could offer a better price than this, and then you would have to sell to them instead.
Usually, there is a small spread of bitassets. For example, people are willing to sell a bitUSD for $1.005, or buy it for $.995 (worth of BTS) or something like that. If someone puts in an order saying "I am willing to sell for $.999", which is below the feed price of $1, then within that 30 day period, when the shot needs to cover, they have to buy from that person first, before they can short a new asset to themself.
If no one is willing to sell for a better price than the feed, then the short is free to roll over their position for a new 30 days.
This system ensures:
* Some buying power will exist every 30 days, for all of the bitAssets in existence. This guarantees you can get out at a fair price by waiting a max of 30 days.
* The creator of the bitAsset (who shorted it) doesnt get screwed over when they have to cover their short. If no one is willing to sell to them at a fair price, they can sell to themself.
