That’s the point: They don’t have to trust the pool operator with their money. They just have to place the order at the right position and then provide the server with the possibility to verify this order without giving it the possibility to do anything with the funds.
Trustless liquidity pool… So the fund is still under random liquid providers’ control, that’s good, and what level reward of their service? 7.5% per month?
People get paid for proving they have their liquidity in the pool, that’s what makes it decentralized. It doesn’t matter whose money it is, if it’s where it’s supposed to be, it gets paid. How much depends on the grants that are passed. My liquidity pool is indeed going to operate for 7.5%/month, assuming we don’t reach target. If we reach target, competition will drive the rate down.
Current operations run with 0.25% max, so 7.5% per month, yes. However, operations have a target limit of liquidity attached to it and liquidity above the target will not get compensated and an auction system jumps in. So in the end you should provide a minimal interest rate you theoretically would be willing to get in the config file.
For instance, I have 100BTC and join the trustless pool, this fund is still under my control and my operation is manipulated by the pool, my buy/sell orders on exchanges is determined by pool operators. Is that right?
Now you give me 7.5%(as BTC) per month, where is the extra BTC coming from?
The pool operator will pay you if you prove your orders are withing .5% of the market price. Your client places the orders, which is open source, run locally, and you can freely change.
We pay you in NBT.
7.5% would be the return on your fund if the value v of the fund F stays the say.
F = x NBT + y BTC
Depending on the trades and the volatility, v could increase or decrease over 30 days.
It’s from the custodian fee the shareholders grant to the pool.
My NBT reward is from custodians whose NBT from shareholders grant.
Could shareholders earn 7.5% profit per month? Tell me if NSR price stable, where does the shareholders’ money(NBT) come from?
The only decent revenue is from NBT users, the pubilc, not from shareholders.
There is no balance concept in your heads from the very beginning. Print more money(NBT)from thin air as reinforcement to support NBT pegging, the reinforcement themselve demands more reinforcement until the collapse of whole system.
You’ve convinced me that Nu is ponzi scheme, this DAC cannot be sustainable.
Shareholders are not making money running pools. The high fee is a direct result of risks in exchange hacks and exchange rate volatility. I propose a less risky way of selling Nubits/USD by internet payment processors, payment exchanges, and currency conversion gateways (PEGs). You are welcome to comment and, if you have Nushares, vote for it.
With two way burning (NBT <=> NSR) Nushare is part of Nubits. The more people buy NBT in order to use it, the higher Nushare prices will go.
@Nagalim suggested improvement of continuous auction-and-burn of NSR to support NBT peg. Together with TLLP it’s not unlike the “thousands of small LPC providing liquidity using their NSR” idea, as you once suggested.
Sabreiib, I haven’t seen you around here for a while now. Are you aware that the whole design of Nu has changed?
Liquidity pools will be funded with NuBits and as demand increases because of the liquidity provided, we can create more NuBits and sell them to satisfy that demand. The proceeds can be used to purchase NuShares and burn them, completing a share buyback. When NuBits demand drops, we can then print NuShares, sell them and use the proceeds to buy back NuBits and burn them, effectively reducing the supply.
Could you elaborate why you think Nu is a ponzi?
The fact is that NSR holders have no NBT to pay liquid providers for their risky work, but they print NBT anyway. Yes, they have NSR.
Without enough earning power, Ponzi cannot maintain their promise of providing good profit to clients, sooner or later the system will collapse.
I am happy about the dual direction burn of NBT and NSR.
Let’s treat the NSR+NBT as a whole thing, the boundary is not how NBT and NSR transfer to each other, but the FIAT flow into or out of our Nu system.
In future there are some liquid providers who get 7.5% or 5% reward per month, and they probably sell those extra NBT they earned for FIAT, and these FIAT flow out of our system, don’t forget NBT is our liability/burden falling on NSR holders, is this right?
For the whole Nu system, the 7.5% per month expenditure is our bleeding. In this senario, the NSR/NBT dual direction burning doesn’t make sense because as a whole system, we are losing money.
In a bull market, the NSR price is climbing and we can easily burn relative small amount of NSR to support NBT, but if bear market comes or NBT/NSR price keeping stable for a long time, who will pay the continuously bleeding in red color?
I have wondered about this as well. I suspect we’ll need to find more ways to earn profit in order to put that toward the interest rates given for providing liquidity, rather than just creating NuBits. In my opinion I believe custodial grants are being used to jumpstart these liquidity pools. I’m hoping sometime in the future we can find ways of paying for this without the grants, maybe through the creation of different services that run on top of Nu that need to be paid for.
Also, keep in mind that with the B&C exchange, it should be cheaper to provide liquidity. Competing pools should drive down the cost as well. There is also the fact that if the target limit in each pool is reached, people will compete with other liquidity providers in the pool to push down the interest rate. So over time I see the cost of liquidity being reduced because of these several factors. Again though, we would still need to find ways of covering the cost in the long-term.
If Nu only sells/buys Nubits with fiat, Nu will be totally insulated from BTC prices. Bitcoin can collapse and Nubits is still $1.
It is only when LPCs are forced to hold a lot of BTC (when selling NBT/BTC) are we in trouble. In a bear market people take NBT and give BTC to LPCs. BTC crashes and LPC loses money. Nushare holders pay the bill in the end.
I think he means we’re bleeding money out of the system by paying the liquidity providers with interest from printing NuBits. They’ll end up taking that interest they made and convert it to something else, taking it out of the system. I’m saying that in the long-term, we should find another way to pay for that interest besides NuBit grants. We could draw money from profitable Nu services to pay for the interest instead.
That’s right, BTC/NBT pair brings extra risk, for simplicity, let’s just talk about NBT/USD balance.
Paying extra NBT to liquid providers is dangerous because we promise to maintian NBT price, so extra NBT may ruin the whole pegging mechanism. If we cannot find enough revenue to cover the cost, we just cut it.
Let NSR holders themselves provide liquid and get extra NSR, since we do the job ourselves, there is no cost.
I agree with both sides. The current method of printing NuBits to pay for liquidity is unsustainable in the long run. It is, however, a necessary evil at this point in time. The liquidity pools are a valuable step in the evolution of Nu. They are a direct response to the losses incurred in February and are the best method we have at the moment to defend the peg. I see them lasting for as long as is needed to get to the point where liquidity risk is practically 0 and Nu is able to pay for it with profit made elsewhere.
We are in a difficult transitional period. The only way we can pay for liquidity is with the grants. I hope that won’t be the case for long but for now it is the method we have.