We have been micromanaging. Nu auctioned NSR off because the buy side was 268NBT less than the sell side. If that motion isn’t modified we should at least be consistent when the sell side is too high for a week.
The design of the network calls for sell-side custodians to be elected when liquidity is imbalanced though. With the percentage imbalance hovering at and above 20% the past week, at what threshold would you consider the imbalance structurally significant? Our network generates revenue and profit from the sale of new NuBits, which will probably be needed soon if demand is growing again.
My understanding is that this is neither revenue nor profit as it creates a liability - a liability to keep the peg and therefore the need to buy each of the sold NBT back if the NBT owner desires to get back USD, BTC or whatever currency or asset is offered by Nu.
At the moment only the transaction fees can be counted as profit.
Sell-side custodians will be elected when there’s more demand for Nu than the liquidity operations can handle.
Soon there might be buy-side custodians (after protocol 2.0 is productive and NSR grants are available) to handle oversupply of NBT as well.
But a revenue model beyond transaction fees is not yet established.
Still this might be enough to build a sound business on it.
With the NuDroid wallet and use of NBT beyond hedging BTC volatility there might be lots of transactions.
Nu is still young and needs to evolve.
Selling NBT is not generating profit.
Yet I think dividiends is a matter that can be discussed. It’s a viable way of distributing money to the NSR holders who collecively keep the peg with the value of the NSR they hold.
In times of NBT oversupply they suffer from a dilution of their property and pushed down NSR exchange rates by NSR being sold for NBT.
So it might be considered to distribute dividends in times of NBT shortage (sell NBT, buy PPC, distribute them).
This might sound like I ultimately consider sale of NBT profit. On the contrary I consider sale of NBT the creation of a liability and want to compensate the NSR holders for that by distributing dividends.
The only other option I see to compensate the NSR holders would be a share buyback; this would keep the money in the Nu network.
The decision whether to distribute divideneds or to buyback NSR is up to the NSR holders as they are the owners of the Nu network.
With the thin NSR market liquidity I doubt that a NSR buyback is the better choice compared to dividend distribution.
A buyback might push the NSR price far up - far enough to let those who are willing to dump to make some money. And once Nu needs to buyback NBT by selling NSR the NSR price plummets and former sellers can buyback cheaply.
That is only one of the possible scenarios, but a not totally unlikely one.
So I think two questions needs to be answered by NSR holders:
- under what circumstances / at what thresholds shall wealth be distributed to NSR holders
- what’s the appropriate way of doing that (NSR buyback or dividend distribution)
If the thresholds are not chosen wisely, sell-side and buy-side custodians would be continually coming and going - I think that’s where @Ben tries to point at.
With the coming months and expecting B&C Exchange to sell NBT to fund the exchange development I rather see buy-side custodians coming and agree that now is not the perfect time to talk about distributing dividends AND share buybacks.
This statement is a misunderstanding of the design of Nu. I’m not sure why so many shareholders seem to view NuBits as a promissory note; it’s a digital currency. As far as I can tell it is impossible to have a decentralized promissory note with 100% guaranteed perpetual redemption value. Currencies are flexible tools that reflect market sentiment, and are always able to completely collapse in value if demand disappears. This is true for every national currency in the world. NuBits should be no different. Currencies scale far more effectively than promissory notes too; it’s a reason why BitUSD will never be a global tool.
It’s important to emphasize that it is impossible for shareholder funds to be held by a custodian in a zero-reserve system if we want to advertise that we are free of counterparty risk. If NBT demand increases, the revenue from NBT that are sold to meet that demand will need to be distributed as dividends, used for share buybacks, or used for projects like NuDroid.
Yes, it has. The sale of new NuBits are a source of revenue for shareholders. This has been true since Day 1 of the network. That revenue can be used for dividends, share buybacks, or shareholder projects, but it cannot be held by a custodian acting as a bank. That would introduce counterparty risk to our system, and would introduce the risk of another catastrophic event occurring like the February exchange hackings.
Would you prefer seeing the $1.00 peg lost instead? If NuBits demand increases, either dividends, share buybacks, or allocation to existing projects like NuDroid must occur. Otherwise, we are not a network free of counter-party risk. I agree there’s a discussion to be had about what level of imbalance between liquidity walls constitutes a need for additional sell-side custodians, but if the imbalance worsens we must act decisively or risk our peg’s integrity.
I’m always interested what you are referring to when you talk about the ‘design of Nu’ as if it weren’t a distributed and autonomous organization. Surely you are not referring to the design as it was a year ago, before burn mechanisms and NSR grants were acknowledged as being integral to the function of Nu. Surely you are speaking of some grand design that has yet to be accomplished, as we still have not realized the vital concept of NSR grants and burn gateways. And in that grand design you have no more insight than any of the rest of us.
My perspective on the design of Nu is that of tiers of market control by shareholders, tiers that we are building as we grow:
- Directly compensated liquidity provision, displayed in the Nu wallet
- NSR/NBT burns, portrayed solely by auction prices that Nu participates in
- Parking and PPC distributions, revealed on the block chain
- Variable Fees, not yet implemented
- Future motions and revenue
Nubits will not collapse in value if demand disappears, that is a naive perspective. If NBT demand disappears overnight, shareholders will create NSR until the peg is reattained. They would have very very little incentive not to, especially if automated burn mechanisms like my auctions are more prevalent. The only situation where the peg is fully lost is equivalent in principle to the situation where NSR hits $0 value and our consensus mechanism is worthless.
I’m puzzled by your comments. My comments were limited to pointing out that - as currently designed - one of Nu’s primary sources of revenue is from the sale of NuBits, as specified in the white paper. This is an indisputable fact of our current operations. Of course I have no deeper insight than anyone else, my comments are based on the white paper and successful shareholder motions. I didn’t mean to imply any special knowledge.
Jordan Lee recently announced that we have successfully transitioned to a zero-reserve system. I don’t see how shareholder funds can safely be held without counterparty risk if not used for dividends, share buybacks, or shareholder projects. If you have a solution to how this can be done, all shareholders would be very interested in hearing about it.
I think our shareholders have taken to saying “Nu has no revenue model” as a habit and it is very damaging to our brand and public perception because it isn’t true. Even secondary revenue mechanisms like variable transaction fees are just methods for encouraging the purchase of new NuBits to replace those that are destroyed.
History is littered with failed currencies, so I disagree with you that Nu has some sort of special immunity to basic economics. NuShares derive the majority of their value from the expectation of future NuBits demand. An unimaginable crisis that leads to zero NBT demand is likely to permanently impair the value of NuShares if NBT is the only product/service of the Nu network.
This is a most likely occurrence, but not a direct consequence. Nu can indeed theoretically recover even in the event where every single NBT is bought back and burned. That is where Nu differs from all other currencies that have ever existed, aside from BTS.
“As currently designed” and “specified in the white paper” are distinctly different. The difference is the transition to a zero reserve system via NSR grants. We used to be a reserve-based system where NuBits were sold for revenue. We are now a zero-reserve system where NuBits are created by pushing value into NSR via dividends, buybacks, or infrastructure. Being able to continuously turn revenue into NSR buybacks allows us to leverage NSR auctions for NBT burns on the flip side of the coin. You can model this as ‘selling NBT’ but it is a much more enlightening perspective to see it simply as allowing NBT to freely flow into and out of NSR. We are not really buying and selling NBT, we are instead issuing it and backing it with our consensus mechanism.
Nice way to put it regarding the backing of NBT.
NBT is backed by NSR, which represents a piece of ownership into the first decentralized central bank in history of Humankind, independent from Rotschild’s influence, called Nu.
So NBT is backed by the inventiveness and the high moral of Nu’s shareholders.
In this view, NBT is a liability compared to NSR which is an asset.
Still, I still think that selling NBTs is Nu’s first way of generating revenues because I do not have any issue right now with selling liabilities.
But with NBT/NSR bi-directional exchange via the issuance/burning mechanism for both tokens, emphasized by your idea of automatic auction by the way, makes potentially NBT/NSR both sides of the same coin.
So we could argue also that NSR is a liability and NBT is an asset, if I play devil’s adocate.
This is exactly the duality that I hope we can bring to the table. Parking rates are the way to use NBT as an asset to increase the price of NSR when NSR price is low. That realization can only happen once frictionless burn gateways are acknowledged as a necessity to the basic function of Nu.
How about +20k? We’re at 62.5% buy and 37.5% sell.
Can anyone present some revenue figures here? - I almost lost sight of nubits custodians
What other product can we imagine?
Although I am in the camp that wants to be careful with treating NBT proceeds as revenue, there is the perspective that we might be taking it too seriously.
As @tomjoad partly implies, currency is a numbers game. Say there’s 10000 USD in town and then Jordan comes along with 10k NBT. People buy 10k NBT for 10k USD. Then suddenly both Jordan and the people who now hold NBT think they have 10k USD - which means there’s somehow 20k USD.
It doesn’t really matter what is in place of NBT - BTC or food (barter) or securities or other fiat. Just bringing about an alternative currency already implies a fractional reserve system, unless there’s devaluation of one side. BitUSD requires “300% reserves” but even so one has to acknowledge that 25% in their books was created from thin air, and relies on market principles to support that 25%.
Some of us want to think of Nu as a company that has to balance its books, and must be able to buy back every NBT it’s sold. On the other extreme, Nu can be considered purely a service that enforces a mechanism that keeps the peg of NBT as stable as possible while keeping itself afloat, relying on participants to “balance the books” themselves.
Real world currency management lies in between these two. On the “far left” - “book balancing”, it can be a company that issues private currency, or any small political entity that doesn’t have a comprehensive economy. On the opposite side, it can be a large country like the US that borrows money to buy tanks, fighter jets and build nukes, which are sometimes even lent to other countries, to get people to lend them more money, trying to be perpetually in the state of “just because we can”.
Both of them can break down; the left side basically uses accounting principles that are designed for relatively small entities to keep track of their finances, which can be rendered meaningless by external factors, and I don’t have to explain for the right side. Currency value is an illusion that kinds of lets you measure how much people want the things that can be bought with the currency, until it doesn’t.
Note that BTC and Ripple are basically on the right. By trying to balance to books somehow, even to a limited extent, and taking responsibility for the peg, we are already much more conservatively on the left compared to other cryptos. We can give ourselves a pat on the back for being more “honest” than our competitiors, and at this point I wish we can show for a strong ability to balance the books.
But one day we will become large, and NBT will be far out of our control for this style of maintenance. Ultimately we want to build a social force that supports a stable currency for a robust internet economy, and hopefully be rewarded for our efforts - so we need to look towards to right side sometimes, as that’s what’s needed when NBT gets big.
TL;DR: I do not support dumping NBT for dividends now, because we want to be as solvent as possible to keep track of developmental hazards (and partly for my selfish hope to be able to afford more NSRs before this gets big ;)), but I support, at least in part, Jordan’s long term vision of selling NBT for revenue.
The first part is what I think Nu is now and in the near future. The latter one might become of Nu as soon as it goes viral.
Then and only then I consider sold NBT revenue as then it’s unclear when (if ever) all NBT need to be bought back by Nu. A growing part of NBT will be used for payments and will not flow back to Nu in that future.
So I’d consider that a kind of revenue.
There is some way to go.
I wonder how Nu can make use of B&C Exchange once it’s finished and has some features like OP_CHECKLOCKTIMEVERIFY can be utilized to get to that future.
What about multisig custodians who sell NBT for NSR (and vice versa) and keep NBT and NSR in multisignature addresses at B&C Exchange?
Can OP_CHECKLOCKTIMEVERIFY send NBT and NSR to a burn address after time x has passed (to renew the custodial cycle and effectively balance the liquidity sides)?
Could that be a way to keep the Nu network liquid without external counterparty risk (the B&C Exchange default risk is with OP_CHECKLOCKTIMEVERIFY not existing) reducing the need to vote for NBT and NSR grants to the cycle of the OP_CHECKLOCKTIMEVERIFY or being triggered by NBT or NSR grants running low?
On a related note, there are 545,000 blockchain NuBits. 190,000 NBT are currently in the development fund, so that means 355,000 NBT are in circulation. About 175,000 NBT are held by B&C Exchange. This leaves about 180,000 NuBits in other hands.
Tier 4 buy side liquidity currently stands at 48,000. Tier 1 has 40,000 on the buy side. NuLagoon also has some in Tier 3 (around 10,000 I believe without looking it up). This means total liquidity for Tiers 1 through 4 is nearly 100,000 on the buy side. Park rates and NSR sales could provide additional buy side liquidity if needed.
If Tier 1 liquidity gets to be more than 60% on the buy side, we will balance it by selling development fund NBT for BTC. If Tier 4 buy side liquidity gets too high (such that the risk of it having a counterparty is greater than the benefit of quickly available liquidity) then we will need to discuss whether it should be used for a share buyback or dividends.
Edit: Nagalim reminded us correctly that parked NuBits were not included. This means 135,000 unparked NuBits are in circulation, excluding the B&C Exchange funds.
Most of the NBT are held/issued for development purposes - very interesting.
On that issuance of the 545,000 nbt, how much money did Nu make?
If we go by the logic that NBT roaming free are profit, we can calculate it. 180 kNBT free. Sell side reported in wallet: 22 kNBT. Tier 4: 48 kNBT. Parked: 45k. Not sure about the Tier 3 stuff, but that gives 75 kNBT completely roaming free (i.e. ‘profit’). With our 100 kNBT buy side, we’re doing juuuuuust fine. We could basically take everyone that owns NBT dumping literally all their NBT and still be able to pay off our developers.
These are facts we should be screaming from the rooftops.
I agree. Nu is in a highly solvent state and well-positioned to reach higher NSR prices in the future as NBT demand increases. I think the repercussions of the February exchange hackings have passed.
This is a good idea. I personally think we should consider changing the bar from a % of buy over sell to something like ensuring tier 1 sell is at least 50k. I would also like to point out that this is centralization (counterparty risk as Jordan clearly points out) and we should avoid such mechanisms in the future. We don’t necessarily have to eliminate tier 4 liquidity: it may be the case that as Nu grows we will keep a small percentage of our liquidity for continuous payment of employees. With B&C, we could timelock funds for periodic payment of employees and call this tier 4 liquidity.
Given that there are only several thousand NBT liquidity is on the NSR market, if we are to buy back NSR, it makes sense to do with micro increments – maybe 1k or 2k NBT at a time. It;s not micro managing. It’s just managing according to liquidity.