Burning custodial grants

[Cybnate]

Could you just make a draft for the burn?

Thanks for your response. I guess I could, but maybe jumping the gun a bit. I think I’d better wait until the NSR grant functionality is available.

Your position making it my decision is interesting. I’m not into the speculation part of it, although this could be a consideration, to me it is more about reducing the liabilities of the network when creating larger amounts of NBT for grants. I’m just wondering how other Shareholders think about that.

[Nagalim]

For me, it all depends on what price you choose to ask for. If you ask for a price lower than market, sounds good to me. If it’s higher than market, no thank you.

[creon]

We are currently auctioning 100 million with a minimum bid of 0.2 cents, so I would say anything above that is interesting. Also we need to make the full calculation here: The alternative we have to consider is that Cybnate sells those NBT otherwise, such that we need 1000 NBT new buy side liquidity. So decreasing our current NBT supply will reduce our required liquidity and therefore its cost.

[Nagalim]

Or put it up as sell side liquidity, or park it. Or even just put a bid in for the B&C auction. Why doesn’t she do this option?

[creon]

The NSR auctioned will not reduce Nu’s liability, burning NBT will. So burning is better for Nu than bidding. I am surprised that shareholders don’t see an urgent need to reduce our NBT supply given the sell pressure in the following months. So far the auction did not increase the buy side liquidity, so I assume that every NBT that will be used in a bid of the auction is an NBT which was held before.

If we wait until it is almost too late and then desperately ask people to burn NBT, then these people can ask for much much more.

[masterOfDisaster]

Taking into consideration the cost of providing liquidity at current rates, I’d like to say that 0.002 NBT/NSR would be an acceptable rate.
I feel more and more need for an ongoing vote upon the burn ratio and like the idea @creon introduced here:

Another paid article about BitShares?

I think its more more appropriate to vote on a pledging rate continuously, i.e. in every block / minute and to take the weighted median over the last 1440 blocks (1 day). This doesn't have to be very accurate, as long as it is significantly larger (x3 or more) than the market price of NSR. They use just their regular private key to mint blocks and write their rate in it. This sounds interesting. I already thought about an optional layer on top of the Nu peer2peer network that simply allows…

@Nagalim, providing sell side liquidity could very well only be a way to receive BTC and trade them to NSR.
As @Cybnate has asked for that burning we can assume that she might prefer NSR over NBT - or maybe she only wanted to spark a discussion on that matter.
Either reason is a good reason to discuss this.
Putting the grant into the sell side doesn’t remove the NBT from circulation like the burning would and that’s a good reason to burn the NBT.

I think that the buy side is more important when one looks at the peg.
It’s fine if 1 NBT doesn’t exceed 1 USD, but the worse case is that 1 NBT goes below 1 USD.
So in my opinion (which doesn’t need to be the same than shareholder’s opinion) buy side liquidity is much more important than sell side liquidity.
The main guarantee Nu gives to NBT holders is that they can sell 1 NBT to Nu for 1 USD.
Nu can’t prevent you from buying 1 NBT for 2 USD from me. As you aware that a price of 1 USD/NBT is guaranteed by Nu you will take that into consideration before making the deal

Or to express it less biased:
Nu can create NBT at will and no cost, but removing them from circulation needs to be done with money (or assets) and can be costly.
That’s why I’m for burning the NBT from the custodial grant.

And for the future:

Trust-less liquidity pool

pay these persons in NSR and only in NSR, no single NuBit must be printed for that

[Nagalim]

If she can get a better price at auction than creating her own burn motion, it would certainly be more efficient. The way I see it, every nbt we burn in a separate motion is one less nbt that could be used to help drive auction prices up. If she is willing to take the price @masterOfDisaster lists ($.002) then she is a fool because she could get the same or better at auction. That said, I would totally vote to allow her to be foolish for our benefit.

[creon]

I don’t understand. If we grant her NSR for 0.2 cent then she can in no way get a better deal through the auction, which has a minimum bid of 0.2 cents.

[masterOfDisaster]

That’s the thing.
She can get an equal price at the auction. But bidding 0.2 Cents (thanks for implicitly correcting the wrong price per NSR I listed!) at the auction is in no way a safe bet.
Maybe the auction isn’t successful at all.
Maybe the floor for successful bids is at 0.3 Cents.
Who knows?

That’s why I consider the 0.2 Cents an interesting price for the burn:
it’s the lowest price at which bidding at the auction can be successful, but the burning would be a safe thing - which is good for @Cybnate.
It would remove NBT from circulation at a low price that the Nu network has to pay - which is good for Nu.

Thinking twice about the thread title, I think it finally worked - the intention was to spark a discussion.
If it were only about her grant, I’m sure the title would read “Burning my custodial grant”

[Nagalim]

Oh sorry, I was thinking the wrong way. If we’re allowing burning for $.002, I’d also like to burn some nbt. Let me just sell my nsr for some…
I would only vote if the price were competitive. $.003 I would definitely vote for. $.0025 I would have to think about. $.002 I would not vote for.

[masterOfDisaster]

You might receive such a ratio if you do a service for Nu (like @cybnate does) and the shareholders consider that reward fair.

In general the burn rate would need to be much worse, because otherwise it would lead to a loop of buying and burning, draining all the money from Nu.

But with regards to custodial grants, the shareholders could vote for a coefficient moving custodial grants somewhere in between market price and the burn ratio that is available for all (I’m aware that neither the NSR burn and the burn ratio are already in place…).

Being fascinated from the idea of offering NSR for custodial grants, I’d like to see it the other way round in fact:
grant NSR to custodians, but allow to burn NSR for NBT at a rate that is worse than a rate that is available to everyone, but slightly better than the market rate.
This way you reduce sell NSR pressure at the market and the NBT that are created by burning are the price that Nu has to pay for the service the custodian provided.

[Nagalim]

service for Nu

So we are to see this as an additional reward on top of the NBT already awarded?

I realize I’m being somewhat facetious, but burning has been a note of contention all over this board. If @Cybnate is looking for the minimum rate I would vote for without hesitation, it would be .00275 NBT/NSR. Of course, this number would change if tomorrow NSR went over $.003, which is why burn motions are inherently difficult.

I feel differently about motions and grant proposals that are written with NSR rewards instead of NBT rewards: I am all for that and think it’s important to be giving out pieces of our network to trusted members who do work for Nu. However, burning after the fact is a touchy subject. Personally, right at this moment I’d rather see her drop the NBT on the peg and buy NSR on the open market, or put up an auction bid. Burns are highly circumstantial and right now we have a lot of downward pressure on NSR from the auction and upward pressure on NBT from the high parking rates.

[Cybnate]

. If @Cybnate is looking for the minimum rate I would vote for without hesitation, it would be .00275 NBT/NSR.

That’s why we need a market adjusted rate, but that might be an open checkbook for the Shareholders. An option is to cap that when the market rates grow strongly which probably will offset the need for immediate burning anyway.

Just to clarify, with the Android grant I’m not the receiver of most of the NBT. That is the developer. The developer most likely needs their bills paid and will put pressure on the peg by selling them. I would propose to buy them back around the same time in exchange for an NSR grant from the Shareholders to protect the peg. Being a Shareholder myself I’m not looking for profits in the first place, but more protecting a self interest. The alternative is that we need to increase interest to protect the peg which also comes at a cost. I’m looking to protect the peg at the lowest cost. Burning for NSR might be that.

Edit: there are limits to my appetite of obtaining NSR of course. So I might need to find other Shareholders willing to buy the shares which will have to be under the market price.

[creon]

It doesn’t matter what our current situation is, its the perspective. There will be an upcoming sell pressure on NBT, for one through the B&C development and also through the parking in midterm (our short duration rates were quite high recently). Actions we take today should be planned to have the desired effect in a month or so.

We saw this with the parking rate. Buy side liquidity dropped over weeks and one day was suddenly below 10k and all shareholders panicked and heavily increased them in order to correct them top down now. This is not the right thing to do.

I would immediately vote for any half way reasonable NBT burn grant. Actually, I would almost vote immediately for any grant offering to burn 10,000 NBT or more.

[Nagalim]

I would almost vote immediately for any grant offering to burn 10,000 NBT or more.

The burn rate doesn’t matter to you? I see everyone’s point, and would be much more likely to vote for .0025 NBT/NSR or even lower now than I was earlier today, but I still think the rate is vital. I would vehemently oppose any NBT burn motion less than .002 NBT/NSR.

[creon]

In general I agree, especially if some random person comes here and offers this service then I would also take the market situation as most important reference. Again, this value should actually be a shareholder determined spread as often discussed.

But the price is not the only quantity here, you have to see all consequences. If these NBT will be removed from the buy side and taken out of the system, then we will have to encourage more buy side liquidity and also pay for this. So if NBT demand is low, then an NBT burn will always decrease the ongoing costs for shareholders, and this should be taken into account.

Here in Cybnates case I have to say that I see it differently: Its a very unique situation, which should never happen again, that someone wants to transform an NBT grant into an NSR grant. So Cybnate actually would have asked for an NSR grant initially, but since it wasn’t possible, she used NBT and now wants to take the step to NSR using the burn mechanism.

So let’s assume Cybnate came up with the Android proposal today and would ask for NSR instead of NBT. How much would you be willing to grant her? I would be willing to grant more value than the NBT, because it is just stupid to ask for NSR if you want to dump them directly considering the liquidity of the market and the price fluctuation. And I see somebody who builds a part of our infrastructure as someone I totally want to be part of the distributed decision process. So also giving NSR grants has various intentions which go beyond the value of the grant.

I like this discussion It’s actually very overdue. Note that all above problems with the risk of dumping could be avoided by making NSR unspendable, and I gave a lot of thought about unspendable share units over the last weeks because its very exciting regarding the incentives. For NSR this is not doable in the current state, however, if we continuously shift NSR trading activity to pure NSR / NBT switches on the protocol, then we could even discuss this further and hard fork to unspendable shares.

[Nagalim]

Cybnate came up with the Android proposal today and would ask for NSR instead of NBT.

I would totally be all for that, and if we treat this situation as a special snowflake of situations then I would be happy to reevaluate what I think the Android work was worth in terms of NSR. I just don’t want to see this setting precedent, because I think it is inherently flawed compared to simply writing proposals with an NSR grant in mind rather than an NBT grant. Basically, I agree with everything that has been said, I’m just super hesitant about burning at a loss.

How much NSR does @Cybnate think the android work was worth?

[Cybnate]

Here in Cybnates case I have to say that I see it differently: Its a very unique situation, which should never happen again, that someone wants to transform an NBT grant into an NSR grant. So Cybnate actually would have asked for an NSR grant initially, but since it wasn’t possible, she used NBT and now wants to take the step to NSR using the burn mechanism.

I’m not so sure about that. As I’m not the final recipient but literally the custodian for most of the grant. I have a contract and in order to fulfil my contractual obligations towards the developer I need a stable coin like NBT and not NSR which are volatile. For my own fee I probably would have asked for NSR at the time when that option was available.

So basically I think it only makes sense to ask for NSR as custodian when you are the final beneficiary of the grant.

How much NSR does @Cybnate think the android work was worth?

The Android grant is worth 27,840 NBT or just under NSR 10m currently (market price). So that would be a reduction of about 1.25% of the value of each Share assuming 800m Shares.
BTW I don’t have the intention to buy that many Shares right now, but others might. Or I might with future smaller grants.

[cryptog]

I would be willing to grant more value than the NBT,

Yes, in a grant NSR should be valued much more than their current market value.

[masterOfDisaster]

Having a grant at market value (and not much more) could still be a good deal for both Nu and the grant receiver.

Benefit for the receiver:
it wouldn’t be possible to buy a big amount of NSR in a short time without pushing the price up because of the low volume. That might change in future, but it would then for sure affect the NSR/NBT burn rates as well.
That makes it beneficial for the receiver considering a NSR grant.

Benefit for Nu:
it’s unlikely that a grant receiver would prefer NSR grants over NBT grants (under these conditions and depending on the rate), if the intention were to sell them soon, because the NSR couldn’t be sold at market without pushing the price down.
In the end Nu has paid a bill by printing some more shares instead of caring for liquidity.

One might say that without NSR grants a NBT receiver would have to buy NSR at the market, which could be good for the NSR price. So not offering NSR grants could be better for Nu than offering NSR grants.
It all depends on the rate.

I think that is short-sighted, because it inhibits the motivation to propose for a grant if you have a desire for getting NSR, but you can’t ask for a fair NSR grant.
Plus Nu has to decide what Nu’s business shall be based upon - customers or owners?