Benefits of the Parking Mechanism

NuBits Parking
#1

We’ve had a couple interesting threads recently, discussing how to add a NBT burn mechanism to reduce supply of NBT in times of crisis. Some ideas propose replacing the parking-for-NBT-interest feature entirely. I disagree with this view, because I think the parking mechanism is a great thing for NuBits. I do think that NBT-burn should be added, but not at the expense of parking.

Some of the benefits of the parking mechanism, as it exists today:

Easy to Understand
The general public is familiar with savings accounts or certificates of deposit that work in the same way: lock up your funds, and earn an interest rate. NBT burn (or park) in exchange for NuShares is not so simple.

Appeals to Newcomers
A new user considers the option to park as a nice bonus to owning NBT. For this reason, I think we should offer low (not zero) interest rates in times of stability. For recommended interest rates, see Chronos Park Rates Feed.

Supports the Peg
We have yet to see what effect moderate-to-high parking rates will have on market demand for NBT. However, as the white paper describes, this tool is expected to be useful in increasing short-term demand to defend the peg.

Fights USD Inflation
It’s well-known that the Federal Reserve currently targets a 2% inflation rate for USD. If we have parking rates at about this level, users can feel confident that they won’t lose value to inflation by parking NBT. An option to burn does not give the same peace-of-mind.

I look forward to further discussion on how to implement a NBT-burn mechanism into NuBits. In the meantime, I think it is best to keep Jordan Lee’s parking invention the way it was originally intended.

Open to your thoughts.

3 Likes
#2

My thoughts have been going towards an upgraded model of parking, a model that works similarly to bonds. If a Nu network entity/ a custodian, is capable of successfully investing a provided amount of capital, the network might issue bonds in times when parking alone doesn’t give the projected effect. The bonds might be bought directly for NBT, provided that USD (or other value) goes along with it- that the Nu shareholders pass an appropriate amount of USD (value) for investment.

This has a double benefit- NBT bond holders earn 20%/year paid out not in NBT but in PPC (value) calculated on the basis of the Bond maturity length. The excess (over the 20%/year) of what is earned is passed as a bonus to the Nu network and can be counted as additional revenue that might be consumed for dividends, bounties, tech.

Such bonds might be issued regularly, in lower amounts to allow people to experience the mechanism (and create the Nu network additional revenue), so people feel comfortable with it when bonds need to be used as a regulatory instrument to take off an excess of NuBits of the market. This would be a strong incentive for people to “bond-park” their NBT, as they know that those wouldn’t be just NuBits parked, but that those are NuBits with underlying monetary value.

#3

Do you have to keep computer on when nubits are parked?

#4

No. Once you park your nubits the blockchain does the rest.

#5

You must open your client when the duration has passed though, to release the nubits and the premium.