Both of these are sustainable and ongoing USNBT burn programs. @smooth is on contract to continue the weekly burns for an additional 51 weeks. The liquidity operations burn is even more sustainable, being fueled by profits in our trading operations.
While the burn rate is variable, under current circumstances the annual USNBT burn rate is 3.8 million, out of a supply of around 14 million, or about 27% of the entire money supply. It is a large sum.
What will impact the variable burn rate? The USNBT price, the BTC price, participation by others in the burn program and the profitability of liquidity operations trading programs. It could increase or decrease. However, market participants should be aware we have large and sustainable USNBT burn programs in place and running. Of course, it is my goal to expand them. This is my highest priority.
We are on track to restore the USNBT peg. The more hands we have supporting the effort, the faster it will be. Buying USNBT or NSR to help with the effort has risk, but it also has remarkable profit potential. It is a risky investment not suited for poor retirees. However, I sincerely believe the risk to reward ratio is remarkably favorable to investors.
I bought about 23k last week, although they are not burned. Still, that is 23k not sitting on exchanges, and it shows some confidence from me that the peg will eventually be restored, just like it was before.
May I ask what’s caused your change of heart? I remember you being very critical before.
I have bought a few as well.
Personally, I take some confidence from the efforts to seek new sources of revenue, and new peg support mechanisms, which I feel is necessary. Just giving an unchanged model another go wouldn’t be enough.
@Phoenix: Do you plan any further changes to the model to improve resilience, e.g. higher reserve ratios when new USNBT are sold, or further revenue sources?
I hope Nu can succeed despite the rocky past and big challenge, as achieving a decentralised stable coin is still required, and while there’s a way to go, Nu is aiming for that goal.
I too would like to see some changes to the model, including higher reserves. The thing is, reserves shouldn’t be looked at as a cost, which seems to have been the case in the past, but instead as an opportunity for revenue (which the trading bot initiative demonstrates, but there are other diversified sources of revenue to be tapped as well).
The reserve that is needed depends a great deal on the liquidity ratio ( NuBit : NuShare). Near the time of the peg break, the liquidity ratio was as high as 1500, owing mostly to a delisting of NuShares. This is not a ratio where sales of NuShares can provide any substantial peg support. For the last 30 days, the liquidity ratio has been radically different: 1.4. That is a range where it can be used to support the peg. Due to large sales to @smooth and BarterTrade, we aren’t selling NSR in the open market to support the peg. I suspect the sales to @smooth and BarterTrade will be sufficient. Because the pricing on the BarterTrade deal is still pending, selling NSR at the moment would unnecessarily dilute existing NuShare holders.
I think there is broad agreement to have near 100% reserve for Chinese NuBits and any unreleased product, such as Euro NuBits, Japanese NuBits, Korean NuBits and X-NuBits (which are designed to use a basket of currencies similar to Facebook’s plan with Libra). However, there are practical barriers to having near 100% reserve for US NuBits, owing to the outstanding currency supply.
There is a balancing act at play: reserves help secure the peg, but pose all sorts of security and default risks. Clearly, the optimal way to secure the peg is a deeply liquid NuShare, based on dozens of exchange listings in many countries. We haven’t had an opportunity to test that, though the opportunity certainly remains. Fundamentally, Nu is very flexible in how it maintains its peg, owing to its pioneering governance structure. One circumstance it can’t withstand is when interest is high in NuBits but low in NuShares with modest reserve. However, the system is robust enough to recover. I am proud to demonstrate that recovery.
That is a great question. The answer can depend quite a bit on circumstances. However, I suspect a peg could be maintained (which is different from restoring) in almost all circumstances with a liquidity ratio of 8 or less. The current ratio of 1.4 is very favorable to us.
Of course, no one disagrees with this. I believe these comments (at least mine certainly) are made with some future state in mind, where the supply and reserve have been brought back into a better state of balance first.
Also a good point. Perhaps we can creatively come up with ways to minimize some of these risks. I have a number of ideas in mind which I may present in the future when they are better refined.
My point is mainly that reserves are a revenue opportunity and not only a cost, but there are also costs, surely.
If Nu restores the peg and grows significantly from this point, the current overhang of USNBT will become less and less significant, hopefully to the point of irrelevance (and could even be completely removed from profits if desired).
My thoughts are just that any new USNBT issued should have a high reserve ratio.
This is very true.
Reserves could be lent out on various reputable platforms to generate income (e.g. Nexo & Celcius - at the moment around 8% per year is possible, which could be a great opportunity).
There are definitely security issues with reserves, but that problem needs to be solved whether reserves are small or large.
Having better liquidity for NSR is important, but unless the model is seen as resilient and profitable, NSR may not retain its value, as has been the case in the past.
I would think that profitability and the ability to ensure the peg is maintained is essential to build confidence, and expect that confidence in the model is more important than NSR liquidity alone.