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)
