ConfusedObserver's alternative liquidity ideas

[jooize]

Continuing the discussion from ConfusedObserver's post removal discussions:

@ConfusedObserver believes Nu should focus on USD and remove or significantly reduce reliance on cryptoassets for tier 1–4 reserves, correct? Shareholder support for the ideas has been low, and many posts are considered disruptive by the two current agents of shareholders. I am making attempts at fairly containing that discussion instead of outright removing it.

Hopefully, this brings the most value to everyone. Let’s try.

ConfusedObserver's post removal discussions

I’m well aware that this is no easy task, but a very important one. That’s why I’m again and yet again stressing it.

ConfusedObserver's post removal discussions

The only ways I can see to hold real USD as reserve is to trust centralized exchanges or a custodian with collateral like NuSafe. Is that what you want Nu to do?

That’s a version of what I’m a strong proponent.
The way to collateralize is subject to development. NuSafe may be a good match for a certain tier. I suggest focusing on NSR as collateral.
And I really, really recommend looking for @Sabreiib’s post where he suggested short-term lending.

ConfusedObserver's post removal discussions

USD on decentralized exchanges is impossible. B&C Exchange won’t trade real USD.

You could cross that bridge when you reach it and profit from having less trouble with reserve on the way there.

ConfusedObserver's post removal discussions

Was that point in the previous quote not just attacking tier 6 in the liquidity model? Keeping USD doesn’t preclude holding BTC, if we would focus on USD.

The problem with the model is that it deals with NSR, which are priced in BTC while you deal with NBT priced in USD.
If you only provide liquidity in NBT/USD and let the market do the rest, you don’t need to worry about holding BTC. Just make (NSR) collateralized lending of NBT attractive for liquidity providers.

ConfusedObserver's post removal discussions

We can try HAYEK short-term lending model on bks/bkc, it’s decentralized.

[jooize]

How do you suggest USD reserves would work in practice, as an immediate shift? Only USD on exchange, but keep using cryptoassets for tier 4 reserves?

An issue with only supporting USD pairs is that today relying on the market to provide liquidity on the BTC pair seems unlikely to function satisfactorily, do you not agree?

Customers will want to avoid the extra step of trading their asset to USD first and then to USNBT. That little friction ruins the magic so to speak.

Additionally, as long as we’re holding cryptoassets outside exchanges, we’ll be subject to their volatilities. Funds in NuSafe agreements are currently slow to retreive, which would be a problem.

We could use a competitor’s product, but I don’t think that’s very attractive to anyone.

If we’re to switch to USD as a primary asset until liquidity is self-sustaining, there has to be a real plan for how that will work and not bring worse issues. Feel free to include automation in the plan. We should not have to manually execute the current operations either.

[lissajous]

Why even bother with this discussion after the disregard for concerns from shareholders in the @Phoenix reimbursement? You clearly don’t need any advice from the community.

[Sabreiib]

How do you suggest USD reserves would work in practice, as an immediate shift? Only USD on exchange, but keep using cryptoassets for tier 4 reserves?

An issue with only supporting USD pairs is that today relying on the market to provide liquidity on the BTC pair seems unlikely to function satisfactorily, do you not agree?

Customers will want to avoid the extra step of trading their asset to USD first and then to USNBT. That little friction ruins the magic so to speak.

Additionally, as long as we’re holding cryptoassets outside exchanges, we’ll be subject to their volatilities. Funds in NuSafe agreements are currently slow to retreive, which would be a problem.

We could use a competitor’s product, but I don’t think that’s very attractive to anyone.

If we’re to switch to USD as a primary asset until liquidity is self-sustaining, there has to be a real plan for how that will work and not bring worse issues. Feel free to include automation in the plan. We should not have to manually execute the current operations either.

Because I didin’t closely follow your discussion before, after reading your words, I don’t know whether you agree or disagree using USD as backing asset for NBT. Is my english bad?

[jooize]

I’m not opposed to holding USD on exchanges for liquidity provision, but believe it’s impossible to replace the cryptoasset and backbone reserves with USD outside exchanges, and I strongly oppose trusting exchanges to secure our intermediate reserves (tier 4).

I believe the model of cryptoasset volatility risk being offloaded to actively investing shareholders in combination with a cryptoasset reserve is the best available for core backing of our issued currency units. We should seek ways to involve decentralized liquidity for reduction and hopefully obliteration of risks from shareholder-operated liquidity.

For a real standalone cryptocurrency which is reasonably stable, I will try to understand your proposal for Hayek currency in just the way you suggest. If not applicable for that in particular, is it correct that implementing it with B&C Exchange would have no effect on the functionality currently intended in BCEx?

Your English usually seems fine.

[Sabreiib]

I’m not opposed to holding USD on exchanges for liquidity provision, but believe it’s impossible to replace the cryptoasset and backbone reserves with USD outside exchanges, and I strongly oppose trusting exchanges to secure our intermediate reserves (tier 4).

Agree.

I believe the model of cryptoasset volatility risk being offloaded to actively investing shareholders in combination with a cryptoasset reserve is the best available for core backing of our issued currency units. We should seek ways to involve decentralized liquidity for reduction and hopefully obliteration of risks from shareholder-operated liquidity.

Shareholders can be decentralized, assume there are 1000 NSR shareholders with 60% of them pledge their (partial) NSR and borrow NBT to act as LPC, working on 15 different exchanges and 10 types of cryptoasset pairs/ FIAT pairs.

Isn’t this shareholder-operated liquidity? Isn’t this decentralized at the same time? Isn’t this immune to certain exchange/crypto risk? Yes, some of them may suffer business fail, but the whole system is safe! Just like real world’s business.

Our operation is too artificial now, let’s be natural, let the free market decides, let those decentralized LPC choose the trade pair and peg spread. They are as smart as you, and have more time/energy/resource, if they cannot survive in the market, how could your centralized liquidity? Some decentralized LPC may adjust their spread to survive(just like the experiment carried by @someone on BTC/NBT pair just before the 2016 crisis), in the end, the free market reaches equilibrium: too higher or lower spread pegging will die. That’s the answer from free market! The equilibrium may be something like 1% spread on USD pair, 2% spread on BTC pair, 3% on ETH etc… On each pair, too high/low spread has insufficient income.

For a real standalone cryptocurrency which is reasonably stable, I will try to understand your proposal for Hayek currency in just the way you suggest. If not applicable for that in particular, is it correct that implementing it with B&C Exchange would have no effect on the functionality currently intended in BCEx?

In B&C’s white paper, there is no pegging for BKC at all, we encourage but not guarantee the BKC’s pegging implemented by Hayek’s model. If we fails, we lose nothing, just like nothing happened.