Anti-Inflation Parking

[Shiroe]

I’d like to bring up this topic from a past thread, Inflation-Protected Asset vs Anti-Inflation Parking. You can check the link below.

While I don’t agree with all points brought up in this thread, I do think there are some important aspects that need to be reiterated. This is pricing parking rates to be anti-inflation. In this thread it was CPI backing for shorter monthly intervals. I don’t think this is possible. 1 month is quite a short period of time, and so some might even consider the nubits to be partially liquid.

While monthly isn’t possible, I think we can support 1-2 year anti-inflation parking rates. Currently, it seems that parking rates are a liability. And the method to pay for it would be through exchange margins and transaction fees. I think something could possibly be done better by investing in 2 year plans. If NBT is parked for a year, couldn’t that money also be invested into some interest bearing investment?

Inflation-Protected Asset vs. Anti-Inflation Parking

We have seen a little discussion about the addition of an inflation-protected asset inside Nu, to be offered in conjunction with the NBT-dollar peg. This new currency unit would be something like a peg to a market basket of goods. Benefits: A clear branding of inflation protection on the alternative currency unit No change to the current NBT currency unit Drawbacks: Cannibalism of market share: users would be divided between the two currency units Complexity for merchants who must accept a…

[Raythma]

If NBT is parked for a year, couldn’t that money also be invested into some interest bearing investment?

Too much risk for a DAC / DAO.
Anti-inflation Nubits is out of the question anyway IMHO until we reach 150% reserve ratio.

[desrever]

How do you compute the reserve ratio? What if tomorrow a LPC custodians comes in with 1 mil usd buy liquidity? Will you count that into the equation?

[Raythma]

Edit : you mean temporary like in jordan’s bounty for 30 days buy liquidity? , if so then i wouldn’t count it, i am not convinced why we need it in the first place !

[desrever]

Jordan proposal aims to attract permanent liquidity providers. Would you count it if someone commits for 1 year?

[Raythma]

Mmmm, No, for Nubits to be secure i would -personally- only count permanent USD reserve that reserve custodians are holding for an annual fee and if possible mortgaging their Nushares (with at least 200% market value of the reserve they hold) until they finish their contract and handle their reserve to another custodian.

Until we figure out a robust reserve keeping system, we may count any custodians buy wall but we have to raise the reserve ratio threshold to >= 200% before distributing dividends or change the beg to make Nubits inflation-proof.

Edit: i think such high reserve ratio can’t be achieved with the current fixed and very low transaction fee.

[mhps]

Higher than 100% reserve is not efficient use of capital. Low efficiency usually means extinction in a free market.The balance is not easy to find. The most robust survival method for nu might be to have multiple Nunets instances that have different monetary policies and products (such as anti-inflation products), competing for themselves.

[Raythma]

The >100% reserve is not for anti-inflation peg only, it is mainly to compensate the risks of exchange failure or custodians fraud. plus having extra liquidity for urgent parking rates and paying for the development and marketing without risking loosing the peg.

We have to secure the peg and any urgent need for liquidity before rewarding ourselves with dividends or our customers with raising the peg to compensate the USD inflation.