To clarify my opinion, the pledge ratio should up to free market.
The NBT market cap may be 50%, 500%, 5000%,50000% of NSR marketcap.
If free market demands more NBT, you can even pledge 1$ NSR to get 100$ NBT.
That’s free market after all. But I predict the NBT/NSR market cap ratio will between 10%-300%, free market knows the risk when NBT exceeds NSR, and either lift price of NSR or turn to our competitors,ie NBT demands drops.
Perhaps the LPCs in future themselves are thieves.
I don’t trust future LPCs indeed.
I am not very worried about LPCs because reasons discussed here. Technically it is perhaps possible to ingest the fund directly to the bot and reduce bot operating LPCs to an ATM maintanence engineer. It is then possible to show that all LPC fundings enter circulation via having been sold by the bots (i.e. backed up by USD).
What is difficult to control is funding granted to custodians who spend it in the real world. These NBTs are backed by supposed value/asset created by the custodian’s work, which is hard to audit.
How do we then convince potential adopters that these fundings are not diluting the real value of Nubits.
@mhps, LPC spend funding in real world to develope software etc, after releasing, everyone knows the output.
Real world works don’t have to be in s/w development. They could be, say PR activities like promoting Nu in conferences. How do you reliablly gauge which PR dirve is money well spent? For software development, only because everyone sees the release of a product doesn’t mean it is not a waste of resources.
The manhours of certain projects can be discussed on forum. There is always risk there, that’s shareholders’ duty.
Fine. How do you convince potential adopters beyond the “shareholders will do their best” line?
I think there will be reports on how Nu is operating and financial situation such as revenue&cost and reserve ratio etc.
How can the system determine if the granted NBT is hacked/stolen, so it should seize the NSR? Do you have ideas on this?
@Chronos, The smart lending contract is short term, ie one week. For example, on 1st Sep. I submit a contract request to borrow some NBTs from protocol where I specify a NBT address and a NSR address of mine. I deposite 3000$ value NSR(on price of that day) and protocol will check if my NSR is sufficient (deny too small contract). Because the pledge ratio is voted at 50%, so I am automatically given 1500NBT by protocol.
When protocol and I sign the lending contract, I actually send 3000$ NSR to protocol but the transfer is intentional postponed by protocol to 7th Sep., and at the same time protocol send 1500NBT to my address.
I use this 1500NBT to provide liquidity by Bot, at 7 Sep, I have to send back 1500NBT to the protocol otherwise my NSR will transfered to protocol.
During 1st to 7th Sep, protocol may check the pledge NSR value and have the option to cancel the contract, and I can cancel contract at any time by sending back 1500NBT. Because I temporarily holding my 3000$ NSR, I can still vote and mint until they are actually transfered to protocol.
Shortly after my returning of 1500NBT on 7th Sep. my wallet automatically submit a new contract with same clauses, and system passes it again.
I can setup an automatically timing of NBT payment from my NBT address with extra NBT in case of Nubot bug/flatform default that lends to stuck of borrowed NBT on exchange, so I can’t lose my NSR accidentally.
For me, every thusday is the contract day when new contract signed and old contracts end. I can check the status mannually or automatically operated by wallet. If NSR price halved, the protocol will sign with me a new contract by sending 750NBT to me.
To sum up, the protocol always keep pledged NSR and in one week, the NSR price is relative stable. Nu system is immune to LPC hacked/stolen/run off and in this way, protocol can control the circulation of NBT because the pledge ratio can voted to 10% which lends to dramatically decrease of NBT supply, or voted to 10000% which can provide 100 times NBT value of NSR market cap. If pledge ratio is 10000%, even 300%. the free market’s organic demand for NBT will definitely decreases or the NSR price will go up. Nu system interacts with free market. We can NOT arbitrarily decides the pledge ratio such as 50% or 100% regardless the free market demends. In fact it is the free market demands drive shareholders to vote a proper ratio. If the market is sane, our pledge ratio is sane, if market is insane, our ratio is also insane such as 1000% ratio.
when pledge ratio is above 100% that means a LPC may run off with more valuable NBT and discard NSR. The risk is taken by both sides: free market may suffer NBT pegging failure and lose money and Nu will suffer reputation demage, so win win solution is NSR price rise since our business is so good just like apple inc.
There’s a problem with this. Exchange rates are arbitrary, and it’s very difficult for the protocol to know what the “correct” price is at any given time. It is possible that there is a way that this information could be encoded, but as a whole, protocol changes are much better suited for things that do not vary much in value. Parking rates are a different condition, because the protocol is what sets and enforces how they pay out.
Maybe it’s possible, but so far, my investigations into a pricing “self-aware” protocol layer have turned up nothing.
@ben, if it is difficult for protocol to determined the NSR price in real world, the duty should be taken by shareholder.
As a NSR shareholder, I have a data feed of NSR price on various platform and I can vote to pass or deny those borrow request in an antomatical or manual way.
Both parking interest rate and short term lending are good methods to control circulation.
But I think we should be careful about picking a reliable BIG LPC who is not a big NSR holder. Assume a bad guy (holding huge NSR sell oder on market) and promise to provide liquidity to NBT, shortly after his duty, he betrays us and spread the rumor, he may get profit by doing such a bad thing.
In future, if we develope an anti-inlfation currency, the protocol still need shareholder’s help to perceive the variable inflation rate in real world.
eidt: The merit of Nu system is that we interact with the real world, while bitcoin is ostrichism regardless real world demand&supply situation. IMHO, bitcoin is just an electronic toy from IT industry, if there is a successful crypto currency in future, it must fit a sound economics theory. Gold is a failure being a good money in human being’s several thundreds real world, any cryptos simulating gold (PPC,XPM) has no future as a currency, they can only be asset.
Bitcoin, from economists view, is ridiculous due to its neglect to real world demand&supply, and doomed to be very deflation, an evil, a costly asset, that’s all, never will be a good currency.
Here’s a thought: NuBits’ core currency, NBT, can be made inflation-protected by having shareholders set the 1-month parking rate to the previous month’s USD inflation rate. Those who wish to protect their NBT from inflation can re-park each month.
Trouble is the asset backing up NBT (i.e. USD) is inflatory. Offering more interest must be balanced by a destroying mechanism to cancel it out. Well I think the mechanism will naturally be NuShares losing value, so that the value of the whole Nunet is precisely the value of asset (USD plus some
adjustment of earning prospect) it ihas.
If we somehow back NuNet with a basket of commodities, then we can issue more NBT (which is pegged to USD) according to CPI.
Not necessarily. In a perfect world, demand can be measured by “stable value of NBT” instead of “total number of NBT” which means that demand keeps pace with supply growth, both at the rate of inflation. In the real world, of course, NBT demand fluctuates…
…on the other hand, I can see the flip side of the argument – the parking rewards are unbacked, so a NBT-burn mechanism is needed. I agree.
@chronos, that’s an excelelnt idea! And we must ensure nu’s profit model to support anti-inflation. My several suggestion:
Leakage is bad, profit is good, not off topic.
I think shareholders can vote a NSR/NBT ratio, such as pledge 1000NSR to borrow 1NBT.
Shareholders will reference NSR price on market and the supply/demand situation of NBT. If NBT supply too high, we “close the valve” by voting 1500NSR to borrow 1 NBT. In this way the protocol may handle it easily.
@Sabreiib This is a fascinating idea, but how does it fit into dividend distribution? If a custodian wishes to distribute dividends with the funds, they can never retrieve their NSR.
Perhaps this is intended, in order to support NBT with a stronger backing? However, if so, there is little incentive to own NSR, which means that it might not be worth enough to serve as collateral for NBT.
@Chronos , the pledge is to resolve decentralization of Nu although it’s a bit off topic here.
If Pledge is applied, we can have 1000 of small LPCs and they may build up buy/sell wall on NBT/USD pair with our BOT if techinical issues resolved.
The smart contract is flexible, if a custodian promises to distribute dividend, he can submit the request of pledging 1000NSR to borrow 1NBT and return 0.8NBT in the end, the 20% NBT is for dividend, this is up to shareholders vote. Perhaps thers is competition between LPCs.
In fact, the main profit as being a LPC is the price rise of their NSR, not just selling NBT income. In my opinion, NBT is our product/service, the Nu company can get profit from product selling/service providing to pay dividend, but the share price increment is also an important incentive to hold NSR.
The more iphones Apple inc sell, the better quality of iphone, the higher share price of Apple; the more NBTs Nu sell, the more stable NBT is (better quality), the higher NSR price.