That actually happened with the Gridcoin equivalent smartcoin - it spiked after the smartcoin was created, resulting in a Black Swan Event, which means there wasnt enough collateral to buy back the smartcoin. Bitshares is built so that such events affect only the MPA (Market Pegged Asset) in question, and the Bitshares network is otherwise completely unaffected. The Gridcoin MPA is now in a locked state, where the holders can claim back an equivalent amount of BTS of that point in time, but trading that asset is discontinued.
There is a proposal to enable reviving Black Swanned assets and markets, but for now they are semi-permanently locked.
Interesting, thank you for the background! That does make sense as an approach. It's like a permanent market circuit breaker when collateral dips too low.
I find I am not confident in my ability to assess these kind of risks with Hero, so I worry about how those that aren't even in crypto could possibly feel confident investing large amounts here.
HERO won't spike by definition. Gold and other traditional assets also move so slowly in comparison to crypto's, that they will be no problem at all. The other side of the problem is the volatility of BTS. However, all these MPA's survived the death trap of past years, where BTS dropped down to 10% of it's peak value. So I think it's safe to say that they have been proven to work as intended. Probably the asset most likely to suffer a black swan today is BTWTY. It is an index fund-like MPA which follows the value of the top 20 crypto's. The value of that could suddenly soar...
MPA's pegged to crypto's are unpopular, as they serve no purpose. MPA's make sense when they are pegged to non-digital assets, which are usually also relatively unvolatile. Thus the risk of Black Swans are usually related to crypto-MPA's, which are of little interest anyway.
Is your argument here that we can't have a black swan in something like Gold (Comex levered, what, 100:1?) or the USD?
No, not at all. Just that margin calls - and hence Black Swans - are less likely to happen with traditional assets than with crypto's. I mean the respective MPA's. Gold, Silver, Oil, USD, CNY are very unlikely to spike 100% in one day, while it is very normal with crypto's. Black Swans can still happen with any MPA.
The shorters have an incentive to support the BTS price if they are short some MPA. Thus, the more MPA's that are issued, the more stable they are likely to be. Bitshares is still relatively young, but it is starting to grow. Black Swans are a part of the growth pains.
Thanks for the added color.