(2nd Version - Expanded) My Interpretation of Jordan Lee's Liquidity Engine Model & Why its First Attempt at Pegging Failed

[Sentinelrv]

I assumed Sunny was talking about your post here…

[ANN] PeerKeeper: Backend implementation started

[Sabreiib]

The founder of WWW gives me big confidence that the micropayment is the future,Nu may charge 1% fee after our lightning version cloned.

[cryptog]

I feel you are right.

[crypto_coiner]

My interpretation of this model is that it would work just fine if all the shareholders and nbt users were just bots or AI and not simple human beings!

It that were the case, that would defeat that which the blockchain has been made for – to prevent sybil attacks from fallible and corruptible humans

[crypto_coiner]

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.

Good point –
So let us state it once and for all –
Nu provides a tight spread.
Liquidity custodians dont make money at this tight spread and are subsidized by Nu to provide their services, and recoup their costs.
However, because we provide a tight spread, customers are satisfied and Nu share value goes up in time.
NuShareholders are rewarded for providing a tight spread.
Whenever we have an emergency and need a large buy side wall, we should not/never HESITATE to use our Tier6 = NSR burning.
Am I correct?

[crypto_coiner]

For now, Nu is not a profitable business because our first occupation is to establish the peg –
Once established and relied upon, ppl will want to transact with it or raise money with it or borrow money with it and that will be our second step coming in: profitable money expansion

[ConfusedObserver]

So let us state it once and for all --Nu provides a tight spread.

Let us state it once and for all:
Nu provides the tightest peg it can afford.
Anything else is not credible, especially not after the recent events.

Liquidity custodians dont make money at this tight spread and are subsidized by Nu to provide their services, and recoup their costs.

Where does that money to pay the liquidity custodians come from?
If it did come from revenue, you could afford it.

because we provide a tight spread, customers are satisfied and Nu share value goes up in time

If you manage to make revenue, current and future customers can be satisfied.
Btw. your current customers are your debtees!

Nu is not a profitable business because our first occupation is to establish the peg

Nu is no profitable business, because your costs outperform your revenue.

[crypto_coiner]

Like @JordanLee said, what caused the break of the peg is someone who dumped several dozens of thousands of NBTs at once.
We held the peg for 20months perfectly before that, despite several adverse events.
Empirically, if we account correctly for that kind of event, we must be good –
We know how to do it.
To Sell dynamically, and smoothly in real time NSRs so that we can buy back the NBTs that are being sold.
That is quite simple.

[Sabreiib]

Like @JordanLee said, what caused the break of the peg is someone who dumped several dozens of thousands of NBTs at once.

The reason they sell NBT because Nu is runing out of money, don’t fool me by saying that the customers are fools. They are as smart as us, otherwise they have to sell NBT at 0.3$ now.

Don’t fool the freemarket.

[zoro]

The reason they sell NBT because

btc halving is coming, thus btc will grow in value. The same exact thing had happened during the previous halving. NBT wasn’t alive then
And don’t tell me that it is not possible to predict how the market is moving!

[Sabreiib]

btc halving is coming, thus btc will grow in value. The same exact thing had happened during the previous halving. NBT wasn’t alive then And don’t tell me that it is not possible to predict how the market is moving!

Both btc halving and low reserve are the reasons of pegging failure.

[ConfusedObserver]

We held the peg for 20months perfectly before that, despite several adverse events.

You held the peg and printed more and more NBT - more and more NBT, for which there was no corresponding asset in your treasury.
On the contrary, you sold BTC for NSR.
How many NBT were demanded by the market, because of the buybacks?
How many NBT were demanded by the market, because of Blocks & Chains Exchange funding?
Is it possible that the biggest demand for NBT in the last 12 months was originated by Nu and its architect?

We know how to do it.

I doubt it.
You haven’t even started to get your accounting sorted out.
I might better save my time!
Chase your dream.

Sell dynamically, and smoothly in real time NSRs so that we can buy back the NBTs that are being sold.That is quite simple.

It isn’t.
You need relatively stable or at least a liquid NSR market for that.
You have neither.

Both btc halving and low reserve are the reasons of pegging failure.

That’s what brought Nu where it is.
It can only escape from this situation, if revenue can restore confidence in the ability to fill reserves and sustain a peg (at whatever level).

[mhps]

Hi @Sentinelrv, I have read it and was confused sometimes as it partly reads like what Jordan had said and meant and partly like a account history. It’s good that you cleared it up by

I just wanted to point out again that I wrote this only to interpret what I think Jordan believes.

So you are trying to show what it looked like through Jordan’s eyes, except you are not sure if Jordan meant what you think he meant.

OK. I don’t know what Jordan meant exactly by “liquidity engine”, something he said he had never heard before. I am glad that Jordan has his vision and is able to sell it. Entrepreneurs need to have that. But I can’t help questioning whether the architect is able to make the idea understood by the community, by the operators of the engine. As this timeline shows, months passed after the gateways ops had set to increase offsets before JL stepped in. The relation between spread and effectiveness of T5 wasn’t explained until the “firing” thread.

Now we still hear this

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.

So how many other critical kill-switches this engine has? Is it that this engine has so many critical inter-connected moving parts it is just a matter of time something catastrophic happens? That is a systemic, architecture question. I am glad to see the latest idea of simplifying the system:

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.

It’s worrying to see the kind of profound lack of people skill in the architect. Will the architect be paying more attention to liquidity ops, working side by side with the ops? Will those who step forward to contribute their work be blamed again for future mishappening of the engine of which I am sure there have to be many?

without reliable, sufficient revenue you play against time; your funds will be eaten by costs - a lot of startups die this way

Yes it’s been in my mind all the time. I regret not to have brought this up at least once a week.

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.

Good guess. Liquidity cost was about 10k NBT a month (5% - 7% per mo liquidity provided) which is difficult to cut down due to exchange default risks (100% loss in 2 years assumed. you have 4%/mo right there) and Nu has to compensate btc price risks. NBT/BTC volatility has been identified as the main near-term risk (it is the cause of our situation now). The rationale to focus on the nbt/btc pair for now, as accepted by the community, is that pegging through nbt/btc is for the initial phase of Nu when custmer acquisition is the main goal. BCE will elinminate exchange default risk, lowering liquidity cost. nbt/btc pegging will be phased out after nubits are widely used and Nu figures out a working profit model. So getting new customers to pay old ones was not the plan. Nu plan to have a large stable user base.

[Sentinelrv]

nbt/btc pegging will be phased out after nubits are widely used and Nu figures out a working profit model.

I forgot about this. You mean phased out and NBT/USD phased in?

[Sentinelrv]

I believe I understand the reason for the multiple user names now. He’s simply trying to make a point that there is no single and ultimate authority here, even Jordan Lee himself. It doesn’t matter what your identity or user name is. As long as you can convince a majority of shareholders to vote for your motion or grant, that is all that matters. That is peer-to-peer authority. See his recent posts below…

[Passed] Temporarily cap NBT supply with full reserve

In our DAO, anyone can propose an idea. If it has support, you can quickly change the direction of the entire organization, as I am. It is about ideas and principles here, not about authority and obedience.

Introduce yourself to the community

No introduction needed here. I am Jordan Lee. I am a stubborn heretic denouncing faith in authority. Once there was faith in the King and the Pope. Today we know better. But do we really know better, or have we just placed the same naive faith in other authorities? I know better, and I won’t rest until every tongue confesses:

The only acceptable authority is a peer-to-peer one! (like our blockchain)

Are you Jordan Lee too?

[MaVo]

As long as you can convince a majority of shareholders to vote for your motion or grant, that is all that matters.

Yep, even better if you hold more than 50% alone and ignore any request for financial transparency. Great.

“Hey, I seem to be proposing good stuff. All motions I set up go through in no time!”

[MaVo]

Jordan has a nice vision but he himself fails to help it become reality. He stands in his own way if what he proposes really is the way he actually wants to go.

[ChrisS]

So many here are captivated by the Stockholm syndrome.

[cryptog]

Yep, even better if you hold more than 50% alone and ignore any request for financial transparency.

Where do you see that?
It is obvious that nobody has more than 50% right now.
What is your main criticism?
If someone wants to steer the project to another direction, you can write a motion and put it for voting.
That is all that matters.

[MaVo]

f someone wants to steer the project to another direction, you can write a motion and put it for voting.That is all that matters.

I would love to believe that.