Zero reserve is extremely stupid, have you heard of Bretton Woods System?
Nu has failed in the same way of Bretton Woods System in which USD is pegged to gold. When US gold reserve was as low as 15% of its debts, they just cannot hold the peg, then US government gave up gold peg in 1971.
You dream the big scale of Nu business will make zero reserve possible, but that’s your wishful thinking, totally illogic. Even Nu’s business was as big as USD, the peg would probably fail due to low reserve ratio.
You’ve spent a lot of time.
You won’t like my comments, but I find them necessary; you focus on the wrong parts.
I’ve spent some time for my answer as well.
I hope that helps you stomach my comments
[quote=“Sentinelrv, post:1, topic:4114”]Most of what follows depends on the basic assumption that providing high amounts of liquidity at a tight spread will attract even more liquidity through increased NuBit sales
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Are you sure this assumption isn’t flawed? High amounts of liquidity can attract NuBits sales, but that doesn’t increase liquidity.
It increases the liabilities and the assets each time NuBits are sold.
If you want more liquidity, you need to pay for it.
[quote=“Sentinelrv, post:1, topic:4114”]The most important thing to understand is that a degraded peg with a lower buy side is not a peg at all and will cause customers of Nu to lose money when they cash out. This isn’t desirable, so customers would rather avoid NuBits, causing demand to drop like a rock.
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This depends on how you define a peg. When paying by credit card your USD isn’t pegged perfectly from the perspective of the one accepting the credit card.
There’s a fee required for a payment.
If you pay with NuBits on the blockchain, there’s a fee.
If you use them on an exchange, there can be a fee as well.
As there’s no tx fee, you need another fee -> spread!
[quote=“Sentinelrv, post:1, topic:4114”]The large amount of liquidity provided by this BTC buy wall encourages trading, which over time increases demand for more NuBits, which are then sold on the market. The process repeats with more BTC proceeds being added to the buy wall from NuBit sales. So as NuBits are sold, liquidity increases, which encourages even more demand.
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The BTC proceeds from sold NuBits aren’t put on the buy walls afaik. They are put into the asset store of Nu. Please correct me if I’m wrong.
Further this indeed sounds like a ponzi scheme.
[quote=“Sentinelrv, post:1, topic:4114”]The BTC expenses for maintaining lots of liquidity at a tight spread is a small price to pay for keeping the liquidity engine running, if the end result is the engine picking up even more speed through increased NuBit demand and sales.
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I haven’t found reliable information how big that price in fact is. I suppose it isn’t as small as you might think it is.
Once again: you need accounting information. Especially from the time when the Liquidity Engine was running.
I fear the costs have been tremendous.
But I don’t know. I just speculate.
[quote=“Sentinelrv, post:1, topic:4114”]So in theory, as long as we continue to provide high amounts of liquidity at a tight spread, NuBit demand will continue to increase.
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If you need to attract new money with a Liquidity Engine that consumes a lot of gas, but doesn’t generate revenue, this again looks like a ponzi scheme.
Two words: ponzi scheme
I’m tempted to rename this machine Ponzi Engine
Ponzi Engine. Likely not only slowly burning the proceeds from NuBits sale.
Only sustainable as long as there’s gas left to operate the machine of refilled by people jumping on board.
Valid assumption. How many transactions do you need to pay Nulagoon alone?
And how many, if you even scale up the operation?
Small tx fees appear insufficient to sustain this Nu system unless the adoption is several orders of magnitude bigger than it is now.
You won’t get there without running out of gas to fuel the Ponzi Engine.
This is no reliable business scheme.
From the numbers I could find it looks like you need to have approx. 20,000 tx per day to cover the liquidity costs alone.
Liquidity costs are not the sole costs.
What about development, marketing, etc.?
Where’s the accounting?
The path that has a good chance of succeeding is sorting out your costs and creating revenue that is bigger than the costs.
If you have revenue that’s at least as big as the costs, you will stay solvent for a longer time than with having almost no revenue.
Fully agree.
That’s the reason why Nu needs to make money on the exchanges, e.g. from a spread - the idea suggests itself.
Nu should always have sufficient reserves.
How much is sufficient?
I don’t know. I can’t even make an educated guess based on your lack of accounting information
Evading BTC volatility is a challenge.
Unless you have highly stable and liquid assets that can be sold.
In this case: NSR.
How stable and liquid has NSR been?
Would you bet all on that?
Wrong - this way isn’t capable of buffering a huge drop of NuBits demand in a short period of time.
It’s merely capable of keeping the system running.
How much did that cost?
Was this really organic growth?
Did it cross your mind that this might be the result from feigned trades?
Airtight accounting could help telling.
Without accounting I remain suspicious about the motives.
Only Jordan knows the financial state of Nu in that time.
From then on you know that liquidity costs money.
Withdrawing them to multi signature addresses would have sufficed to mitigate exchange hacks.
BTC volatility would have remained as risk.
You traded BTC volatility for NSR volatility.
Parking was defeated, because it was clear that Nu was low on reserves.
You couldn’t have kept the peg for long with that few BTC.
NBT would have been floating earlier.
No good environment for parking.
If the interest from parking is bigger than the spread, it can be worthwhile.
How many NBT were parked from random NBT users?
Wasn’t a majority parked from Blocks & Chains Exchange?
Who decided that?
For the Blockshare holders it would have been better to buy BTC with them.
That would have brought Nu where it’s now, but Blocks & Chains Exchange would still have a development fund left.
It was only a matter of time until Nu runs out of BTC in a BTC bull run.
It was sour from the beginning.
No transparent figures about costs, no bills, no accounting, almost no revenue, except for a handful of NBT from tx fees.
When you did the buybacks, you already were relatively safe from theft by FLOT.
Is it right that FLOT didn’t provide a collateral? Nevertheless they have been trustworthy with their multi signature funds as far as I can tell.
Missing revenue was a major nail.
The buybacks were another important nail.
I don’t believe so. The way from where Nu is/was to where the tx fees could’ve compensated the costs is a long one.
I can’t show you that I’m right, because I have no data to prove it.
You would end at the same place sooner or later - unless you find a way to make revenue.
Absolutely right!
But it’s easier, if the peg is less tight.
The tighter the peg, the bigger the costs.
The more volume, the bigger the costs.
Try to find out how much liquidity at what spread you can afford.
Make the spread wider and adjust the liquidity.
The result will be different from what you long for when you think back of Nu’s first months.
The title of the corresponding movie: Ponzi Engine Reloaded
I doubt it would have worked. It only looked like good experience and I continue to say that until you convinced be by showing me the little costs.
If I’m right, the costs have eaten you alive and you’d have failed later without the hackings with even more liabilities and even more people who’d have lost money.
You can be glad the Nu bubble burst now. It’s much less damage. That’s why I think it’s not completely over.
If you really don’t understand why revenue is crucial and why high liquidity at a tight peg of a very volatile asset is very expensive, you’re chasing dreams, but aren’t running a business.
If he had no mind for Nu, how could he successfully question the behaviour of those who were more involved in liquidity?
I’ve read in another thread that B&C lacks accounting and the progress of B&C can’t be found in the software repo.
Conclusion
You need to face some hard truths:
without reliable, sufficient revenue you play against time; your funds will be eaten by costs - a lot of startups die this way
if your Liquidity Engine requires continuous new NBT sales to run - to have BTC proceeds to fuel it - it’s a Ponzi Engine
a tight peg at exchanges is more expensive than a less tight peg (increased losses by hedging: your NAV will decrease faster than with a less tight peg. If the peg is wide enough, you might be able to keep the NAV stable or even increase it)
a big amout of liquidity is more expensive than a small amount (more funds at risk of hacks, etc.)
you need reserves
to buffer a drop of demand fast enough
if you peg to USD, they need to be as USD stable as possible/affordable
if USD stable doesn’t work, you need diversified assets
if you serve the BTC/NBT pair, your ideal reserve asset is one that reliably appreciates delayed when BTC depreciates and vice versa (I don’t know one; I doubt it exists - I hope my mind didn’t play tricks on me when it make me sort the dependency this way)
You make great points here. I just wanted to point out again that I wrote this only to interpret what I think Jordan believes. Maybe I am completely wrong in my understanding of his system. I have no idea myself if it could actually work or not. It would be great if @JordanLee could respond to all of your criticism. I really hope he does. I want to find out these answers as well.
Just after the large NuBit sale by a single holder on May 27th, the peg was lowered to 0.95. That is the cause of the failure of the liquidity engine. Period.
We can go on to explain why this single action arrested nearly all functioning of the liquidity engine. The way this makes parking completely undesirable has been discussed by multiple authors already. Abandoning the peg also makes NuShares completely undesirable, because they only have value to the extent there is confidence that NuBit demand will increase. With the peg already sacrificed, it is clear total peg failure will occur, which means additional NuBit demand is unlikely, and can only occur after a long process of rebuilding. NuShares sales have succeeded in raising funds in the past in the presence of an intact peg. They failed this time precisely because of the abandonment of the peg. NuShares sales can be moderately effective before the peg is lost, but their effectiveness is dramatically reduced once peg failure has occurred.
It is very sad, but our story is that at the first sign of trouble on May 27th, the next thing the network did was capitulate and give up without any kind of fight to keep the peg whatsoever. I don’t think the liquidity providers who did this understood that lowering the peg was essentially a complete capitulation because they didn’t have a proper understanding of how their actions were going to impact the liquidity engine.
The liquidity engine failed because the people operating it didn’t understand how it works. This is a really important conclusion to understand. The liquidity engine failed for lack of expertise in operating it. That may put liquidity providers on the defensive, but actually it shouldn’t. What is amiss here is the expectations we placed on liquidity providers. These people are typically shareholders that follow the forum regularly, have full time professional jobs unrelated to liquidity provision, families and so forth. Given that we were an enterprise worth all of 2 million USD and a budget to match, it shouldn’t come as a surprise that we weren’t able to place liquidity engine experts and experts in NuLaw in each of the 20 or so liquidity provider roles we have.
How can we deal with the confusion about how the liquidity engine functions? Well, you either have to pay to hire qualified experts or you have to find a way to not rely on the liquidity engine as much. We can’t afford to pay for such qualified experts, so we must go the route of not relying on the liquidity engine as much going forward. The main way you afford yourself the luxury of not relying on the liquidity engine is by increasing reserves. While reserves still need to be moved and managed, it is much simpler and much more forgiving.
Stated another way, we discovered we don’t have the scale needed to properly operate a liquidity engine. The best way to deal with this and deal with the fact that the market will have no faith in our liquidity engine for some time is to fill our reserves until they are full. This will require more NSR dilution, but if the plan is deemed viable and responsible (it is), then we can expect a rise in the NuShare valuation because investors will see we have a much better chance of additional NuBit sales with the new plan.
We have to use NuShares now to support NuBits. It is very sad we actually gave up on the peg without selling a single NuShare. It is very difficult to argue NuShares back the value of NuBits when there is a history of not using them at all to avert a peg break. It is quite clear NuLaw has been broken in this regard and the community needs to develop methods for dealing with such violations. If this isn’t done, there is no reason to have confidence that motions will be implemented, or to have confidence in anything we say about what we will do.
People will argue that NuShares shouldn’t be sold now because there isn’t much value there and there isn’t much liquidity. There isn’t much value in NuShares at this time precisely because shareholders and their representatives have clearly demonstrated a low commitment to maintaining the value of NuBits. With such a poor commitment to the value of NuBits, there isn’t much reason to think people will want NuBits in the future. To raise the NuShare price, you have to convince investors that you are acting in a way that will create future demand for NuBits. Perhaps the best way to do this is by showing how fiercely we defend the peg. The best way to do that right now is to sell NuShares for BTC, which are then used to defend a new peg.
Only 2.4 million NSR have been sold since May 27th (about 0.25% of total supply), but the NuShare price has collapsed 80% in BTC since then. This isn’t principally due to dilution or the threat of it. It is due to a massive drop in confidence that there will be additional demand for NuBits in the future. And for good reason. To improve the NuShare price, we have to build confidence that we will defend and promote the value of NuBits as our core mission.
We require a comprehensive plan for recovery and NuShare sales to build reserves at this time. I have already outlined a comprehensive one, although there are innumerable details the community needs to attend to. Most of all, we need to quickly develop consensus about how to move forward.
So can we actually sell NuShares to build reserve? Now? I don’t accept that they are currently being sold. The NSR buyback/sales calculation mandated them last week but they didn’t happen. That is a clear violation of NuLaw. Also, the current blind auction has a minimum bid price of 0.001 USD, while NSR are currently selling for 0.00075, only 75% of the minimum bid. I suspect no NSR will be sold in this auction.
I wasn’t quite sure at first, but now I’m pretty confident this is true. I don’t completely understand what the reasoning for it is though. When I think of a Phoenix, I think of the slogan “Rise from the ashes like a phoenix.” Maybe he thinks that’s what Nu is going to do and it’s purely metaphorical.
You are thinking a lot about what Jordan Lee might think. That’s funny. Why don’t you just ask him what he thinks? You could then stop thinking about what he might think.
Btw I want to be called Brad Pitt in the future. If we can’t turn this into a successful DAO, we might provide enough stuff for a Hollywood comic movie.
That’s a little hard to do when he’s been absent for a week (or at least his Jordan Lee identity). So I wrote something hoping he would respond to it in order to clarify things.
Don’t you realize that this is already where the mess begins? He calls himself an innovative leader but leaves the whole community guessing for pretty much anything that a community could be guessing. How many accounts does he have? How many NSR does he have? How many NSR did he sell during the buybacks? How many NBT did he dump? How many NBT are still there as dev funds for BCE? Who the heck is Angela? What are his real thoughts about Nu’s future? Has he always had good intentions and if yes, is that still the case? Could he also be greenbar trying to sell some BKS on this forum? Or the new Bitcointalk account, who is also trying to get rid of BKS? And so on and so forth…
Now you will ask me whether I really believe in some of the stuff I just asked. Well, can you either disprove or prove or answer any of the questions? No, and that is how he loves to operate. Wouldn’t be wondering if in the case of Nu’s total failure an account called “Mr. Bean” pops up and makes some funny eloquent jokes.
It’s like good cop bad cop. Jordan Lee cannot promote a $0.10 nubits but his alter-ego with a glued-on mustache can.
I have to give jordan Credit. He probably is so brilliant that his mind is literally going through a phase of mitosis. However it’s terribly convenient for one of him that it is occurring right now.
Well, for god sake, can you be responsible as a man @JordanLee or @Phoenix? Do you have any introspection？
@sigmike, and @Eleven, could you please come out and tell us about B&C development? I think this is the very basic politeness as software developers who are responsible for the investors.
I agree that handling multiple accounts is not a good thing per se.
But anybody pretty much in this forum can have multiple accounts.
It s clear that jordanlee is not hidding the fact that he is also phoenix.
However, what matters really at the end of the day is motions.
To take an extreme example: a complete AI Bolivian stranger ant can come to the forum and propose a rescue motion so compellig that shareholders vote for it.
This is the spirit of Nu.
Identity, color, race, background, height, and any othet credentials do not matter. What matters is reputation and motion.
Phoenix might not be able to become a reputed signer but he can advance motions.
You could have bought a nice gun for 1600 NBT a few weeks ago, but now you might only get some cheap pills for it. If you bet on the proceeds from option 2 to help you realize option 3, it is definitely gonna be more painful now.
