Desrever Park Rates proposal : 5 APR for all periods

NuShares Park Rates
#1

Rationale

NuBits adoption rate is solid but slow: most of the subscribers to this forum are peercoin community members, shareholders, or people in contact with shareholders. While we aim at organic growth rather than explosive growth to accommodate a proper infrastructure to emerge, we cannot afford to be stagnant.

I propose we use parking rate interest as a promotional instrument.

I have the feeling that ‘Parking’ feature of NuBits, it is something that the crypto community has desperately needed for some time. We built an amazing tool that can serve a huge variety of purposes, even without a premium on the parked amount. Most people seems not to realise it, and they are very skeptical when they read the word nubits. I want to see the community constantly growing with new people, ideas, and proposals.

To attract new people we need to make three things : focus on the keeping the peg, target specific use cases and niches that need a 1$ coin, attract talents and techies to try out NuBits and spark their curiosity. At the same time, until you download the client and try to park, you are very unlikely to perceive how easy it is and how many things you can build on top of it.

We must offer a premium on parking rates to convince people to take the leap and try out our client. Even if they don’t (think they) need a 1$ coin.

Proposal

Here is my proposal and this is what I am casting right now :

I propose that we all vote for a 5 APR for all durations. Starting with a 2.8 days duration.

Its even very easy to advertise : “Park Nubits, get a 5% APR” , instead that show crazy curves

Since the interface use APR as unit for park rates, this will result into a fair compensation which is directly proportional to the length of the duration :

2.8 days premium : 0.013%  (not even worth the tx fee of 0.01 probably)    
...
2.5 months premium : 1.25 %
5 months premium : 2.5%
1 year premium : 5%
2 years premium : 10%
...

A short duration is needed : online attention spans from 3 seconds to a couple of minutes for very interesting stuff. I don’t expect anybody (slightly curious) to download the client, and try parking if the minimum duration is one month.

Inflation does not worry me at all now, we have an incoming grant of 4 MIL nubits, so the introduction of some hundreds nubits next year when people unparks, is not of any concern. Worst case scenario : let’s say we already have a Nuwhale with 200,000 nubits in the wallet (I doubt we are anywhere near), and she decides to park for two : in 2017, new 20’000 nubits will be created in the hands of this lucky whale. I expect that in 2017 NuNet will be able to handle much more than that. So, no problem.

sidenote: From now on, unless exceptional cases apply, I will always cast the same vote for all durations, until we change from APR to period-rate. I even wonder if its wort giving this an an option in the client

EDIT1: submitted idea

EDIT2: use this spreadsheet to make your own linear rate math

4 Likes
Parking rates are needed in the short-term due to the recent exchange hackings
Ways to improve the "Vote" section of the application
Chronos Park Rates Feed
#2

I think inflation caused by paying for a parking APR is a problem, but a minor one.
A bigger problem might be to miss the chance to attract people’s attention.
Although I repeat myself - paying with some NBT by inflation for a good advertisement sounds fair to me.

Revenue models need to be developed for the economical sustainability.
But the success of those revenue models need a ground paved by adoption of NBT.
Creating that adoption might cost some money…

A linear APR is easy to explain/understand; just like 1 NBT = 1 USD is easy to explain/understand.
That’s the beauty of that idea!
There might be times when non-linear APR are more suitable.
For advertising NuBits a linear APR is in my opinion better, because it’s easier.
And 5 % APR is enough to catch some eyes, but not so much that it can’t be afforded by Nu.

1 Like
#3

could you please make an example with some numbers? I want to be able to understand this, since you are not the only one worried. Howcome I don’t see it so clearly?

Let’s say I am incredibly wealthy and want to use my wealth and the parking feature with a 5APR to harm Nu. What would I do? Buy 1 MIL nubits, park them for one year, get back an extra 50k, and then what?

Because that’s the maximum number we are looking at with the current available NBT on sale. In the meantime we had 1 MIL in revenue that we can use in several way (included putting them back on buy liquidity) , to cover that extra 100K bits generated.

With 1 MIL there are others things I can do without waiting one year anyway.

Chronos had a good arguments that once made me think : those are nubits not in the hand of custodians and shareholders will not get dividends from them.

#4

It’s a conceptional problem which is in my opinion related to the perception of people. I don’t want to argument with numbers, because the math is quite simple and straightforward.
And I try to avoid the fractional reserve discussion here the best I can.

Paying interest rates can be viewed from different angles.

  1. For some people paying interest rates sums up to:
    by paying interest rates, you have NBT circulating for which are no USD (or equivalent) available in case someone wants to sell the NBT back for USD. This is for sure only a problem once everybody wants to sell the NBT back (and should only be relevant in the “end game” of NuBits, shortly before ultimately failing…).
    It creates a psychological problem of OMG-there’s-not-enough-money-available-at-the-NuBank-to-buy-all-issued-NBT-back!
    It might shift people’s assessment of NBT from “might be able to work” to “can never work this way”.
    The way NBT is perceived will gradually be changed by paying an interest rate
    -> less adoption

  2. For other people the interest rate will be mainly attractive. They will start to investigate NBT because of the APR, find out that the system offers a lot of possibilities that other crypto coins don’t offer and start to use NBT
    -> more adoption

I hope that the effect described at 2.) will be stronger than the effect of 1.) and that’s why I like the idea of paying interest rates, especially the flat interest rates.
But only because I assume that the “being interested” effect will outweigh the “being concerned” effect doesn’t eradicate the latter.

This question is related to attack vectors caused by interest rates.

Here’s an attack scenario:
paying park rates creates a hypothetical problem for the peg that @Chronos did line out.
With the park rates an attacker can attack the peg free of costs.
Attacker buys a large amount of NBT, parks them, receives interest and sells all the bought NBT keeping only the earned interest.
The NBT received for parking the NBT are offered for an insanely low price.

It’s for sure (by dimensions!) worse if the peg is lost in the other direction, but even being able to buy NBT at exchanges for way below 1 USD may harm the reputation.

For sure you can do that at any time (buy NBT and sell them cheap), but only with the park rates you can do it free of cost (you even get some money for selling the NBT cheap).

#5

I agree with everything in your analysis. What you cannot skip are the numbers.

No harm to the peg will happen after the average-crypto-joe parked his 1000 NBT savings, waits one year to get back his hardly earned 50 NBT .He had to put all his trust that after one year the peg will still be there . He had to trust a some-weeks old technology and if everything goes fine, he is rewarded with 100 NBT. He sells it at 0.1, I will buy immediately and sell them back at 1$.

#6

This can’t happen on an exchange, because order books don’t work that way. When making a market sell order, and the best offer to buy is at $0.998, that’s the price at which the order is filled.

#7

And I agree with your numbers.

But that still leaves the problem caused by parking rates which I described (depending on the perception of the people…) as:

As long as the buy walls are significantly smaller than the sell walls, this can be annulled:

This is even easier at exchanges where no NuBots are active and the volume is small.
I still don’t think it is a big problem when NBT are being sold for low prices (I’d be glad to pick them up!).
But I don’t know how other people might perceive NBT transactions for far below 1 USD.

Taking into consideration the FUD and myths that are spread about Peercoin and other things, I’d rather not ignore the drawbacks of supporting NBT being sold for anything else than 1 USD :wink:
…but as I said before: I consider the positive effects to outweigh the negative effects (by far).

#8

Promotional interest rate is good. But it has to be promotional - advertised and executed as such. Offering any fixed interest rate (i.e. not set for mopping excessive liquidity off the market) greater than USD inflation rate will be seen as money-printing-out-of-thin-air and will ruin Nubits’ reputation. The 4M reserve grant to be created is a different matter – they won’t enter circulation if no one buys them.

#9

Distribution of Nushares might also accelerate the adoption of Nubits.

#10

Thank you all for the feedback. After all, is a proposal and everybody is free to choose what interest rate to cast.

But don’t tell me that distributing shares via the exchange (having a large chunk of share not voting and loosing control over the network) is better than offering a 5% APR =)

BTW:

2 Likes
#11

A fixed promotional rate is a good idea. The only question I got from someone clueless about but interested in Nubits, is how to park with Nubits. Parking generates interest… sorry for the pun.

1 Like
#12

Any interest rate might be seen as money being made out of thin air.
If you want to undermine the base for that we need to have 0% interest.
This has basically nothing to do with limiting the interest rate to the USD inflation rate.
…although some people might tend to accept that (and ignoring that this interest rate would be paid with NBT made out of thin air as well!)…

#13

I must disagree, there is no thin air here.

Miners get bitcoins in reward from leaving their CPU computing random hashes, minters gets their PPC by leaving their client open, parkers gets some NBT by making their own NBT unavailable. Is PoP , proof-of-park =)

1 Like
#14

In difference to mining and minting where (hopefully) valuable assets are created, I perceive the NBT business differently.
NBT claim to be pegged to USD 1:1. Mechanisms are in place to keep this peg, to guarantee this peg.
Selling 1 NBT for 1 USD in huge sell walls is one of these mechanisms.
But that leads people to the assumption that there should be funds available to buy each NBT back to the Nu bank.
I’m not saying that the NuShares represent a “Nu Bank”. But I’m saying that people might perceive Nu exactly as this.
Paying interest for parked NuBits with NuBits for which no Dollars are available to buy them back, might be perceived as a problem.

NBT are different from BTC, PPC and NSR. NBT are a pegged currency. Other terms apply. Paying park rate interest without having business that brings money to Nu will look the park rates as being made out of thin air, because there’s nothing to back them.
The sold NBT in difference are backed by the USD, BTC, PPC, etc. that are paid for them.

#15

I’m also a proponent of a rather conservative view, and mOD, while being a Nu enthusiast, like most of us here, is trying to address matters or point our attention to issues that “ordinary” NuBit users-to-be may find disturbing or even discouraging. mOD’s taking the perspective of hesitant, potential users, if we can correctly diagnose their concerns and come up with solutions, the may see an increased NuBits adoption.

The way people view the mechanisms behind Nu network is the most crucial issue that will either drive people towards NuBits or drive them away for good. Most of the potential users won’t consult this forum to find answers to the questions that bother them, they won’t go through numerous topics and posts to get a firm grasp of the idea. People are quick to judge, this is why reassuring efforts, or PR/marketing methods should target the issue of trust, of how “NuBank” is going to keep up to its obligations.

In different threads we’ve been raising issues of sustainability and revenue, sometimes our reasoning was based on mimicking real-life organizations (banks), which might not necessarily be in line with the decentralization model, but the more I read the more I begin to understand how important it is to find the right balance.

I’m finally finding time to catch up on topics and discussions that have surfaced before I was able to contribute the right amount of time, this forum is indeed a wealth of knowledge owing to a number of people contributing, discussing, sharing, talking, commenting. We need to keep it this way, as Nu is still a toddler that requires our attention.

3 Likes
Easy way to see current motions
#16

It’s not a given that Nu networks cannot have business that makes money. For example the buy/sell spread could be seen as a fee charged to keep the network running. The value of Nubits is obvious when bitcoin volatility is high and many people and their bots trade BTCNBT frequently. If over a long period of time we manage to let the interest paid only by the spread income, we are not printing those interest out of thin air. That does set a limit on interest rate we can choose.

#17

Bumping this thread. :smiling_imp:

Maybe its time for me to publish a feed with this flat rates ?

1 Like
#18

I highly recommend to think about voting for a parking rate interest.

I have changed my mind.

Although I basically believe what I wrote in the formerly quoted paragraph I think it’s just not the right point of time. Nu is not prepared NOT to pay an interest right now.
With bter and excoin being down it’s necessary to think about park rates short-term to mid-term.

1 Like