You need a collateral if you want to back the value of NBT.
Some say Nu is free of collateral, but it isn’t. It’s free of external collateral.
Tether keeps the USD they receive for sold USDT. They hold USD as collateral. That is obviously centralized and in several ways dangerous.
Nu does that differently.
In the beginning Nu’s capabilities have been somewhat limited, but the NSR developers, holders and the Nu community evolved the Nu network formidably.
With 2.0 and NSR grants one can truly say that the NBT value is effectively backed by the value of NSR.
If NBT get sold from the Nu network to the market, share buy backs or dividends incorporate or distribute, respectively, the value of the sold NBT to those with a financial stake in the Nu network: the NSR holders.
A share buy back is expected to increase the price per share leading to a higher market value. The difference between the increased market value and the market value before should ideally be close to the value of the NBT that was meant to be incorporated into Nu.
With distributing dividends the value is leaving the Nu network if you look at it on a blockchain level, but economically it’s still in the Nu network: in the pockets of NSR holders.
Share buy backs intend to increase the value of NSR, distributing dividends might increase the value pf NSR as well, but in the first place aim to distribute the value equivalent of the sold NBT to NSR holders.
If NBT need to be bought back by Nu, because NBT demand on the market is very low, NSR will be issued and sold.
This will have an effect on the NSR price, it will be pushed down.
But NSR holders have been rewarded for that way earlier with share buy backs or with dividends.
They are incentivized to agree with issuing NSR and selling them, because if they don’t, they risk the peg and endanger all their stake in the Nu network.
Is it more clear now?
addendum
if the February exchange hacks wouldn’t have happened, there could have been much more dividend payments.
Back then the NSR grants were not available and it would have seemed a little bit strange to distribute the value of sold NBT as PPC dividend.
But now Nu has NSR grants.
If Nu were to sell 100,000 NBT to satisfy market demand tomorrow, there would be no viable way to keep the collateral for the NBT, but by distributing dividends to NSR holders or by performing NSR buy backs.
Practically the 100,000 NBT would be taken from the funds of the tier 4 sell side custodians. After having sold them, PPC would be distributed to NSR holders or a share buy back would be started (or both; and maybe even BTC dividends if NSR holders vote for developing a client to do that).
The funds of the tier 4 sell side custodians would be equipped with 100,000 NBT granted to them by NSR holders (NBT grants do work with multi signature addresses, right?).
