Changed rationale about borrowing price

Author: pmconrad

bsip-0071.md

@@ -46,14 +46,14 @@ At this moment, the system should accept the fact that the smartcoin will possib
 In my view, a good way to handle bad debt need to follow below principles:
 
 1.  Do not punish good traders who have managed to maintain their collateral ratio well.
-2.  Do not stop the smartcoin features, including borrowing, margin call and force settlement, and all these operations should refer to the same price.
+2.  Do not stop the smartcoin features, including borrowing, margin call and force settlement.
 3.  Ensure the debt positions/margin call orders be settled in the order from lower CR to higher CR.
 
 In above mentioned 5 solutions, only "5. Prevent Global Settlement" fulfills all 3 principles.
 
 Partial GS is another attractive solution: it is similar to Global Settlement but differs in that (a) only takes over the bad debt positions and moves them to a settlement pool without touching the debt positions with CR>1, and (b) users can issue force settlement from the pool, from the margin call orders, or from the good debt position depending on which has the lowest CR.
 
-The problem of Partial GS is that borrowing and force settlement may refer to different prices which will lead to obvious confusion and unfairness.
+The problem of Partial GS is that it does not resolve itself automatically when the price recovers.
 
 The "Prevent Global Settlement" solution adopts a new idea to handle bad debt: while bad debt appears, the smartcoin will be devaluated at a ratio of the lowest CR from among the bad debt positions, yet all the smartcoin trading features, including borrowing, margin call and force settlement, will all switch to refer to GS price to ensure the continuity and fairness of all the features.
 
@@ -89,6 +89,10 @@ FP<sub>M</sub> is still used for determining if a debt position is margin called
 
 # Discussion
 
+## settlement_price / feed_price
+
+Some may perceive it as confusing or unfair that borrowing and force settlement may refer to different prices. However, in a period where the least collateralized short position has insufficient collateral in terms of FP_m, it would be dangerous to use the resulting settlement_price for borrowing as well, because that would allow creation of short positions that are undercollateralized from the start.
+
 ## Least collateralized short
 
 Two variants for the *call execution price* have been discussed.