100% USD Reserves Offers Zero Benefit In terms of peg stability


guys, i haven’t understand the consept of negative interest! is it analogous with freicoin’s demurage?



Emotional responses don’t help much. What specific parts about Benjamin’s logic do you disagree with? The way he explains it makes a lot of sense to me.


Allowing nubits in the wallet to lose their nominal value will radically change the perception of nubits although the Swiss central bank is doing just that. The difference is that the Swiss franc is already the national currency but nubits is still looking for adoption and we can’t yet convince the world that nushares shareholders have the track record of being fiscally prudent like the Swiss. (Now this is an idea: issue a version of nubits whose shareholders are all Swiss :smile:)

If the peg of nubits is totally dependent on nuhshares, the value of nubits will represent a repackaged exposure to nushares. Does this remind us BitUSD ? I am not totally against using nushares to cushion nubits value. But if NuBits wants to differenciate itself it needs to have most of its value in the tracked assets.


I can’t think why would anyone want to hold NuBits for long, consumers will buy it just to buy staff with it and merchants will sell it every couple of weeks to avoid any lose if the peg failed.

So, i can’t think in negative interest as the main revenue, just an incentive to raise the transaction volume and a defend against the long term savers.

Are you suggesting to force a negative interest fees on short term savers for consuming (weeks) ?
This is tricky, in this case a consumer may think that its more cheaper to use paypal which only charge him when they actually facilitates a transaction !


Not at all, if we have a 5,000,000,000 USD reserve, and NuShares market cap dropped to 1,000,000,000 why wouldn’t share holders distribute the reserve and let the peg fall ?
Even what would prevent the custodians from getting away with all the reserve they hold if the total value of their mortgaged NuShares are now less than the money they have already ?


Yes, but NuBits started with no intention to keep any reserve, and didn’t promise any, not in the whitepaper nor in the passed custodian grant proposals.

We only promise that we will provide the USD liquidity in the Buy side if the demand decreased, and @Benjamin Benjamin is arguing that the actual reserve doesn’t insure that we would keep our promise and thus doesn’t affect our creditability while it increases our Expenses and Vulnerability for sure.


I strongly disagree 0% reserve, and 100% reserve will defintely benifit NBT pegging.

NBT pegging depends on NSR, that’s ok, but don’t forget NSR price also depends on NBT successful pegging. That’s arguement in a circle…

If NBT pegging in danger, the NSR price will probably plumb. Money, is essential credit, the confidence people have in their mind that sth. can be used to store value, exchange goods.

If reserve ratio is low, people don’t trust NSR at all, NSR=shit in a insolvency situation.


Freicoin, a cryptocurrency known for its implementation of negative interest rates , is down 99% from its high about a year ago. Clearly, there has been a broad market consensus rejecting it and negative interest rates. It simply doesn’t compare well to alternatives. It seems likely that the adoption of negative interest rates could be enough to cause the market to reject NuBits despite other promising attributes.

Demurrage, especially variable demurrage, makes financial planning difficult if not impossible. Think about this simple question: if I have 1000 NBT now, spend 500 NBT in a month, then another 200 NBT in three months, how much will I have left to spend in a year? The answer of 300 is easy and intuitive when the nominal value remains the same. Add in variable demurrage and it not only becomes unpredictable, but even if you make assumptions about what the level of demurrage will be the calculations are complicated.

Based on my discussion with Benjamin and his writings, I think the reason he is advocating negative interest rates is that it seems like a sure way to control the degree of leverage, or the ratio of the value of all NuShares and the value of all NuBits. Imagine we make a promise that we will not let the ratio fall below 1 without correcting it. If it fell to 0.9, the thinking is we just impose a negative interest rate of 10% for a year and we can restore the ratio of 1. The problem is, this does not take into account the effect that negative interest rates would have on demand and the NuShare price. Negative interest rates would almost surely reduce the NuShare price. As a result, it cannot be used as a mechanism to place a ceiling on the degree of leverage. In order for this mechanism to ensure control of leverage, we would need to know that the NuShare price drop as a result of negative interest rates would be less than the negative interest rate. For instance, if you impose negative interest rates of 10% but the NuShare price drops 10% or more as a result, then it will not reduce leverage. I suspect that negative interest rates would actually increase leverage by reducing assets (NuShares) more than it reduces liabilities (NuBits).

It appears negative interest rates were also suggested as a way of ensuring default doesn’t occur. Some would argue that negative interest rates are themselves a default. I would imagine those advocating for demurrage would say it is not a default because you are telling people up front they might not get access to their entire balance. This is technically true, but who would want an asset almost guaranteed not to gain value (unless there is deflation) but which retains the distinct possibility of losing nominal value? It will still feel like a default to NuBit holders. People want a sure thing, something that absolutely can be counted on over time. Governments will often promise a sure thing, and people are tempted to believe these “sovereign” institutions. The reality is, there is no sure thing, and governments have proven this by failing to deliver on promises in innumerable instances. NuBits is also not a sure thing, as I describe in the last section of my whitepaper “When Nu becomes obsolete”. The default scenario presented there, which would come slowly, only after the tell tale sign of extremely high interest rates, and only after NuBits had passed from the hands of ordinary people into the hands of speculators willing to take high risk for a possible high reward, is preferable to the scenario of sudden default via shareholders casually voting for negative interest rates.

In summary, I am firmly opposed to negative interest rates because they cannot contain the degree of leverage, constitute a sudden default (as opposed the current design where any default would occur in a slow and predictable fashion) and would likely cause NuBits to be solidly rejected by the market.


As I see it, the white paper is the vision (a stable, usable, distributed cryptocurrency) and an initial plan. Benjamin explains the underlying mechanics (not peer reviewed yet). The dev team, shareholders, and the community will find a way to realize the vision. Technical details (e.g. how much, if any, reserve to have ) will need to be adjusted as understanding deepens.


Seems we have irreconcilable differences. Best of luck with nubits.


Everybody has irreconcilable differences, which I don’t think is a problem.

I enjoy your insightful and rigorous analysis of our network. It has shaped my own understanding of it. I certainly think your contribution has been quite positive. I hope you will continue participating.


We have sold 5billion NBT and 5billion USD in our hand, and total NSR cap is just 1billion. In this scenario you would let pegging broken? For what?

Haven’t you seen a bank run? Within several days, 4.99billion NBT will rush to exchanges and wait for transferring back to USD. The customers will never stand still when the rumor spreads. And NSR price loses 90-95% value. Do you like it? That’s the reason you choose a broken pegging?

The customers in free market, are not fool, when NBT cap is going to exceed NSR cap, the NBT demand shrinks, that’s simple. This is the time when we need our competitors to absorb high demand of free market, says hayek’s theory.

Usually the more NBT sold, the higher price of NSR, so NSR capital can handle 99% time, but when an extreme scenario(NBT>NSR) comes up, we have granted custodians just like today’s kiara. Now, kiara has no NSR plegded at all and no running off.


Money has atleast three functions.

  1. exchange medium
  2. store of value
    3)unit of accounting, the hardcore function of money, which demands the most stability.

Bitcoin plus bitpay service can only performs well in “exchange medium”, “store of value”? not good. unit of accounting? impossible! Never!

A private currency’s success mainly depends on the willness of people holding it. If the public don’t believe in our pegging, they don’t trust Nu at all. Why not bitcoin+Bitpay?


@Benjamin says yes, anonymous shareholders would let the peg fail. For what? For profit.

Option 1: Distribute the entire USD as dividends. Let NSR and NBT fall to 0. Total profit for shareholders: $5B.
Option 2: Defend the peg with the $5B USD. Total reward to shareholders: $1B in NSR value.

In this example, letting the peg fail is worth $4B, which is a large incentive.

That makes sense. Do you have any thoughts on how to “contain the degree of leverage”? Do you consider this containment to be a goal for NuBits stability?

  1. This is scam.

  2. You will never sell as many as 5 billion NBT because the customers are not fool. that’s day dream. Usually not so many fools on free market who give you 5B USD for NBT with low reserve.

  3. even you have 5billion USD in your hands, giving up business means giving up the probable 50B USD in future.

  4. Again, the public not foolish, they stop buying NBT when NSR cap not sufficient. Three months has passed, the free market like 7:1 NSR/NBT ratio, isn’t it?

Edit: I am quite suspecious about benjamin’s motivation, in early days, he said Nu has to maintain high reserve ratio(eg. 80%, 90%), and 100% reserve is completely safe and now he advocates the 0% reserve? The customers will be worried. And let pegging broken? oh, customers freaked out. Negtive interest? The remaining NBT customers will flee.


My idea is opposite to benjamin’s. At first we must let customers trust us, this is hard because scams everywhere in crypto world and we are anonymous.

In order to get trusted, we may apply 100% reserve ratio, and let custodians pledge more valuable NSR to Nu protocol, then get decentralized by thousands of LPC all over the world.

We issue more NSR, dilute ourselves temporary to raise fund for software developmnent and marketing activities.

The trust from customers is the key to success. Once you get trusted, the NBT selling is easy. You may even regard anti-inflation as making a show, to demonstrate we have ability to protect customers wealth by raising several percentage of buy back price per year. Finally, a win-win situation comes.

The public have suffered bad infaltion money and distrust on government’s FIAT value stability for dozens of years, “trust” is another form of money.


I don’t care what is money and what is good money !!! I care about what is Nu and what it can be and what it can’t, any non-profitable feature we refuse to give up for ideological reasons will kill Nu in no time, its either a business or nothing, popularity and adoption rate doesn’t make profits, saving have no fees, this is a long term disaster.


Bitpay will charge merchants sooner or later, Bitcoin transaction fees are going to increase dramatically sooner or later, that’s why.

Everybody wants to hold USD despite its inflation, NuBits also could be pegged to some basket of goods with a smooth and lower inflation rate, so long term savers pay their share without a negative interest>


We are anonymous, we shouldn’t ever e trusted ! NuBits is a chance, and many are using it right now (look the Volume/24h) with no any reason to trust it.
And again the only guarantee is the leverage between NSR and NBT, the USD only serve us to have enough liquidity to keep the peg in any time, it is not the critical feature of Nu at all.
Those who are using NuBits today will keep using it if there is no reserve at all, and even if there is long term low inflation rate.

Have you considered the huge Expenses we will have to pay for thousands of custodians to keep those reserves? in NuBits or NuShares it doesn’t matter. no one would mortgage his NSR and keep the responsibility of fiat reserve without an incentive, and it won’t be a small one, how would we pay for it without charging the long term savers?
Nu can be spammed with long time savers with no significant trade volume, how would we sustain the business in this case?!


I am holding lots of NBT now, if negative interest applied, I’ll sell out all my NBT. At least, fiat has only inflation while NBT has extra “inflation fee”.

Btw, my business is earn 4 times money by holding NSR, and don’t care about 10% dividend per year at all, last time kiara gave me 3% value of my NSR, that’s small money, one day NSR fluctuation may be beyond that.

Bitpay charges 1% fee to merchants and they are happy with that cost.