100% NBT reserve and elastic NSR supply

[Sabreiib]

So my thought is that there needs to be a mechanism and policy to keep reserves, while having the ability to leverage the budding wealth of the currency to continue its development and fund its increasingly necessary operations. (All the headaches of a central bank are now ours to own, fyi.)

Imagine in 2016:

There are two types of custodians, one is granted custodians just like Kiara today, another is collateral custodians who pledge their NSR to borrow NBT.

There are 1000 collateral custodians, averagely each has 10000$ value NSR pledged to Nu protocol and 5000$ NBT held in hand, they provide NBT liquidity on various exchanges such as Bter, ccedk, btc e, btc38…The incentive of their being LPC is that Nu protocol will reward them extra NSR(e.g. 10%annually ) for their LPC work. The more they contribute for Nu, the more NSR they have. Those lazy NSR holders get diluted/punished.

Totally there is 5 million NBT on sell/buy wall when you check it in your wallet.

In this way, Nu system get decentralized and hack/stolen/run off risk is almost eliminated because you cann’t steal 1000 persons’ private keys and one government can’t control 1000 persons all over the world. FOR EACH LPC, THEY CANN’T STEAL THEIR OWN MONEY.

If NSR price attacked by vicious parties and plumbs, or the NBT demands so high that NSR Cap insufficient to issue extra NBT, our classical granted custodians come on the stage, Kiara will be granted for millions of NBT and play LPC role, and work together with other 1000 collateral LPCs.

[henry]

I do agree that shareholders can’t treat the sale of custodian’s NBT as profit earned. Transaction fee is the only profit made and thus can be distributed as dividends.

I do like open NBT lending business based on NSR collateral for shareholders. That’s a better way to increase NBT amount to the market.

I suggest NSR collateral just freeze the fund so that can’t transfer to other address, no effect on minting and voting.

[Sabreiib]

We can vote NSR/NBT lending ratio to 1000:0 so that NBT supply will become zero within 5.7/11.4 days given that all NBT holders wanna sell it at 1$, if some holders keep NBT, it takes less time to shrink supply and maintain peg.

[backpacker]

Nice crystal ball you have there

[masterOfDisaster]

Yah, and for that challenge

how do you keep the reserve? In USD at the exchange (could be too easily attacked by government regulations)? If not on the exchange, where? If you keep the reserve in BTC or something else (to prevent from having the funds locked/confiscated) you are doomed if that price goes down.While I completely second the arguments for having as high a reserve as possible, the question how and where to keep that reserve needs to be answered as well…

that allows keeping a high reserve to tackle attacks, we have a solution: NuSafe.

[mhps]

Nice crystal ball you have there

Excellent foresight all around in this thread. Many points are not theories but experiences for us now.

I hope now is not the beginning of the end, but the end of the beginning.

[masterOfDisaster]

This depends on the lessons we learn and on the near future.
The brand image of NBT has been damaged; how much can be seen in the next bearish BTC phase.
Is there enough confidence in Nu to buy NBT for hedging BTC drops?
We need to do our homework to give reason for that confidence!

[Sabreiib]

100% reserve only feasible at NBT/USD pair because on BTC/NBT pair the ratio is fluctuating.

Currency’s success comes from customers’ confidence, and their confidence comes from company’s profitability.

[masterOfDisaster]

100% reserve only feasible at NBT/USD pair because on BTC/NBT pair the ratio is fluctuating.

Not strictly true, if you have sufficient means to convert the BTC to USD with little friction.

Preparations are being undertaken:

[Passed] NuSafe - An 30k hedge of Tier 4 funds in USD

@Dhume, would you feel comfortable to have FLOT keep your collateral a bit longer? Just in case BTC were about to nosedive, Nu were to sell NBT and had BTC to be put into NuSafe again? I can even imagine oversubscribing NuSafe. By that I mean putting more BTC into NuSafe than is backed by collateral, because even if you ran with the funds, Nu might be better of with that than trying to sell NSR. Let’s see what the outcome of the NSR sale is. What do the other FLOT members think of that? @cry…

And regarding

customers’ confidence

I suppose that can be fostered by reviving liquidity at a lower offset, or spread, respectively.
We are working on that as well:

Current Liquidity

What offset do you imagine? How many BTC? Why not letting ALP fill the gap with an increased spread? …Ikr, because of the motion… I have a second NuBot account at Poloniex that could be operated at a buyside offset between the current gateways and current ALP. If we want to do that, we (FLOT) should talk about the parameters. Trying the liquidity provision by trying to revive the buyside is crucial for the confidence in Nu. Offering a buyside offset, that is too low, will not accomplish …

[mhps]

if you have sufficient means to convert the BTC to USD with little friction.

Preparations are being undertaken:

NuSafe is not a good example for reserve to be used soon. Send the btc to an exchange to convert to usd and leave it there will do.

you had an idea of doing this routinely before i remember.

[masterOfDisaster]

I called it “proxying” BTC to USD as far as I remember.
I was very afraid of the volatility risks associated with assets like BTC and tried to mitigate those risks.
I shy away from the exchange default risk when leaving funds on exchange beyond those, you need for liquidity provision.
Keeping some funds at the exchange is no bad idea.

It would be great, if T2 could be “proxied” from NBT to USD and back (through NBT/BTC and BTC/USD) to protect proceeds from NBT sale against BTC volatility.
It would require liquid markets and cost a fee.
Automization for that is necessary.

A considerable part of the reserve needs to be kept in a safe place.

[mhps]

It would require liquid markets and cost a fee.

Polo has a liquid tether-btc market. the fee is very small compared with btc volatility.

[masterOfDisaster]

I don’t know how to automate that, but can do that manually - just in case my NuBot sells lots of NBT…

What do the other FLOT members think of that?
@cryptog, @dysconnect, @jooize, @ttutdxh, @woodstockmerkle, @Dhume?

[mhps]

What do the other FLOT members think of that?

Great. Just posted a robot idea.

[Sabreiib]

customers’ confidence

I suppose that can be fostered by reviving liquidity at a lower offset, or spread, respectively.We are working on that as well:

Stupid customers will check the offset/spread ONLY, smart customers will ALSO check the financial status of this company. Rememer one week ago, we had strict pegging and good liquidity? Everthing was fine. But I knew at that time that Nu was in very bad financial situation because of the big liability:net asset ratio, Nu may lose everything overnight.

In my personal assesment, if a DAO cannot pay off its debts within 6-12 months with its revenue , I’ll keep away from it. What’s Nu’s payoff period?

[cryptog]

What do the other FLOT members think of that?

Sorry. Of what exactly?

[ChrisS]

The fact that another crypto currency is held as reserve cannot be a viable solution to stability.

Rather, the concept could theoretically be a pool of negotiated assets/commodities which the shareholders agree to purchase. This could be things like the flooring of inventory to the purchase of silver an gold. Liquidation of NuBits would be determined by the NuBit holder exiting at a lower price and new NuBit holder takes share of Investment Pool Fund. The goal would be to grow the general size/net worth of the Investment Pool Fund. Interest could be earned by risk (ROI capital) and transaction fees.

[masterOfDisaster]

Sorry. Of what exactly?

Of that:

I called it "proxying" BTC to USD as far as I remember. I was very afraid of the volatility risks associated with assets like BTC and tried to mitigate those risks. I shy away from the exchange default risk when leaving funds on exchange beyond those, you need for liquidity provision. Keeping some funds at the exchange is no bad idea. It would be great, if T2 could be "proxied" from NBT to USD and back (through NBT/BTC and BTC/USD) to protect proceeds from NBT sale against BTC volatility. It w…

Polo has a liquid tether-btc market. the fee is very small compared with btc volatility.

[cryptog]

if T2 could be “proxied” from NBT to USD and back

Oh I see. So you would want to keep some of funds of T2 into stable instruments.
I think it makes sense.

[masterOfDisaster]

Then let’s fight for that!
It made sense when I wrote about it the first time in a comprehensive way, almost exactly one year ago:

[Passed] Motion to regulate spread values for liquidity operations

That’s right and that’s why Tier 1 liquidity providing is the most costly one. The parametric order book is going to mitigate that and once the spread is increased in times of high transaction volume, it might be possible to cut losses to a certain degree. Tier 2 (and in some rare occasions even Tier 3; but that is another story and can hardly be automated) can be protected from hedging risks by proxying NBT/crypto pairs to USD (only the buy side is affected from this risk): I don’t know wh…

But it lead to no action.
Maybe I textwalled people away.

How do you explain complex matters without going into greater detail and providing explanations?
Should I rather say: we do it this way, because I know it’s right?
I prefer to explain, provide a rationale and let others validate, falsify or improve them.