Asymmetrical control in NuBits and the problem it creates

NuBits
#21

@Ben and @masterOfDisaster

Very well put… I’d like to add this. At this point in time, the USD is considered an acceptable form of payment businesses around world. Nubits uses that fact to it’s advantage by introducing a Bitcoin like payment system that represents the dollar in its relative stability.

Bitcoin came out to solve 2 main problems:

  1. Provide worldwide transactional system without 3rd party intermediary. (Short term and long term) which has already been achieved

  2. Provide an alternative currency that is not controlled by political corruption and military force to be used as the main peaceful medium of exchange (long term) which when achieved, all fist currencies would fail but we haven’t reached such a point yet.

Nubits is united with Bitcoin in solving the first problem but it is, by design, not attempting to solve the second problem which is ok for short and long term. This won’t be an issue until the fiat currencies get recognized as failures by the majority business in the world. If that does happen in the future, Nubit will adjust to peg something that is recognized world wide for business (maybe a new peg of 1 NBT = 1 gram of gold for example).

Key point:
Nubits brings fiat stability to crypto world without trying to fix fiat themselves. Please understand the goals of Nubits and don’t mix it with general crypto currency goals of other coins :slight_smile:

Thank you to all the developers of Peercoin and Nubit… I have the utter most respect for you and complete faith in the success of your mission :slight_smile:

3 Likes
#22

BTW, article from @digiconomist on that debate: http://digiconomist.net/details-and-shortcomings-of-nubits/

#23

For a start, credit cards and Paypal charge 3%, but they also provide some limited consumer protection which needs to be accounted for. It would also probably be good to have the spread be lower than the transaction fees you need to pay Bitcoin miners for example to get a fast transaction, and lower than Coinbase’s 1% fee which ends up with a 2% spread (I think I’m using “spread” correctly?).

On the other hand, the exchange takes a 0.2% cut, which effectively adds a natural spread of 0.4%. This could be enough to deter an attack where someone tries to loan a large number of coins and eat through the buy side liquidity, but this fee could possibly go down in the future.

Let’s say we add a spread of 0.5%. If the velocity of money is 2, that generates ~1% per year of the Nubits supply in USD to contribute to a reserve. If Nubits is used as a transactional currency like intended, it’s likely the velocity will be higher than 2, so we might not even need 0.5% to do this, but 0.5+0.4% =0.9% is already a very low transaction cost and I could see this being accepted by the market.

The question is how much USD you need in reserve then. There’s of course the initial USD generated from Nubits sales, but how much of that would you have to hold in reserve if you have a spread that generates additional reserves?

#24

Hello Digiconomist，I believe that the ultimate solution has already been there, from Hayek’s “Denationlized of Money”, in 1976.

Hayek said the private companies should issue money and compete each other in free market. While the governments allover the world have stopped private companies for dozens of years, the DAC will break the barrier！

In charter XI, Hayek told us how to control the value of competitive currency by two methods:

  1. Buying/Selling currency

  2. Short term lending

The Short-term lending is actually the answer we need, IMHO.

Nu system can lend NBT to nushare holders(as custodians)by keeping their nushares which has a bigger market capitalization than Nubits. For example, NSR has a 20million market capitalization, and
Nu system issue 10million NBT. NSR holders have to return the borrowed NBT within one week, otherwise the pledged NSR will be confiscated by Nu system. They can automatically renew the lending contract if Nu system agrees.

If Nu system stops short-term lending business, the NBT supply will drop to zero WITHIN one week, without paying extra interest to anyone if all NBT holders agree to sell one NBT at 1$. And if some NBT holders don’t wanna sell, the price of NBT can be raised to 2$ because those desperate NSR holders(custodians) wanna redeem their NSR which is twice value of their borrowed NBT. Of course Nu system wouldn’t let NBT become 2$, so before that happens, Nu system will start new short-term lending.

NSR holders vote for a ratio of NSR/NBT market capitalization, for instance, 2. That means if I have 1000$ value NSR I can borrow 500NBT from system automatically. The NBTs are already issued by voting and stored in a/some address which can only be moved by voting.

If NBT demand decreases a lot even becomes zero, the short-term lending mechanism could handle it without issuing extra NBT.

If NBT demand increases to a very high level that NBT market capitalization exceeds NSR, the risk is on free market’s side, not our Nu system’s fault. Of course free market will know this and this will natually suppress NBT demands and provide chances to Nu’s competitors. This is called free market mechanism, self adjustment.

#25

It is well known that Satoshi Nakamoto was not a fan of the FEDs and govs destroying the monetary base by inflating the money supply but Bitcoin was primarily invented for solving the double spend problem.
It is natural to think that by opening up its source code, he envisioned a lot of improvements of the original protocol.
This is something that most Bitcoiners fail to understand.
Now, almost 6years have passed since its release and we have seen peercoin and now nubits as real milestones of the evolution of Bitcoin.
As for the inflationary dollar, it seems that the beauty of NuShares is that the network could decide at any moment to create another currency and peg it to any real currency, based on the shareholders decision because of the separation of “shares” from “currency”.
The hope is that NuShares would be able to embrace a lot of shareholders, ideally the whole Humanity.
What would be better than a decentralized bank owned by the people of the Planet?
For example, the founding fathers envisioned a central bank owned by the government, owned by the people.
First of all, it has never been owned by the government, except for some tiny periods maybe and even if it was owned by the government, there would not be any mechanism that could enforce an accurate representation of the people by the government.
This is the illusion of the notion of “democracy” actually.
Cryptography enables such a representation in a trustless fashion.
That is a huge milestone in Humanity’s evolution.
Therefore for the first in Humanity’s history we have a tool to create a central bank owned by the people, which would make the bank in fact decentralized.
And this is exactly what NuBits/NuShares intends to do, at least in my interpretation.

3 Likes
#26

Am i getting this Right ?, Since 90% of the value of every Nubit sold is backed in the buy side, then Nushares holders will not worry about parking or burning Nubits until the selling is exceeding 90% of the Nubits in the circulation which looks like a disaster not a regular event !

Of coarse the 90% threshold will deteriorate after creating too many parking rewards as there is no value added to the buy side to back these Nubits! , while burning mechanism will only affect the Dividends of nushares, personally i see the burning mechanism far more sustainable that it shouldn’t be a second option.

But as long as no significant ratio of Nubits were created from the Parking mechanism, should we worry before the 90% Selling threshold exceeded ?

1 Like
#27

Yes, return the mintage to people! There will be quite some DACs in future which play the role of central bank, money free competition! Of course, govenments all over the world still issue various FIAT but they face competition if they spoil the reputation/buying power of FIAT, people will choose…The war has just begun.

1 Like
#28

@Digiconomist, you are right, the parking rate has problem.