Current Liquidity

Liquidity
#352

This sort of enhances my point that there is no increased risk in thinning tier 1 as long as tier 2 is readily available - any problems we have then would still be a problem under current circumstances.

Either way the separation of interest payouts for different offset values has been something I’ve talked about for some time, and is a necessary feature when combining the parametric order book with ALP. It is great work by @woolly_sammoth. Somehow I further thought that giving yet an other separate interest rate for funds not even on the parametric order book serves some additional purpose, but now I’ve forgotten how I ended up with that.

But it seems that with the parametric order book, combined with the view that there’s no meaningful difference between tier 2 and tier 3 liquidity under BC exchange, it means our top 3 tiers of liquidity would really then become one single thing. We can consider that a huge step towards the final goal of reducing everything to just tier 6, that the value of NSR would be the most direct supporter of NBT.

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#353

Everybody’s always hating on tier 5.

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#354

Now that you brought it up, I think when ALP is deemed mature and decentralized enough, the role of park rates would greatly diminish as we can instead just let ALP pay out (small) interests for excess NBT. Though that kind of ALP requires a seamless integration with decentralized exchanges and our custodian grant system or parking transaction mechanism, so would be much further down the road. Tier 4 would then become a sort of managing body of the Nu network, pointing resources to the right places when needed.

#355

Except tier 2 allows sophisticated algorithm/strategies to be used to control when the fund shows up in the order book.

… if one ignores exchange risk (~50% chance of total fund loss per year I’d say). Risk adjusted return of park interest is very attractive.

#356

So many interesting point have been made in this discussion and you are all spot on.

We are offering too much T1 liquidity, because there is a financial incentive to do so.

However, “Too much” is a complicated concept and the exact “right much” of T1 liquidity provided at each point of time must be studied, empirically and non, and then voted by shareholders.

This is what would be needed - theoretically - to make a distributed liquidity operation smooth :

  • We need a formula to compute the “right” amount of total buyside_liquidity and sellside_liquidity to provide at each point of time, given market condition and other inputs.

  • We need have a (distributed?) oracle that the bots can connect to so they can ask “How much T1 liquidity should I be putting on now, buyside and sellside, given what the other bots are already putting?” .

  • We also need the oracle (if any) to be able to able to suggest to LPs on which exchange that T1 liquidity is needed at each point in time, given market and other factors.

  • Finally we must have a system that cuts off the incentive for providing T1 that exceeds the suggested max.

NOTE : the so-called-oracle might be not necessary if we let NuBot query liquidityinfo to know how much is already being provided and where reliably. It was just an example .to make thinking about it easier.

Once we have that, if that is what we really want, we can achieve the goal of providing the right level of liquidity.

If this is what we want, it must be voted, scheduled, and its development prioritised.

Exactly. LPs probably need very little reward (if any at all) at all for tier2 liquidity because each time one of these order gets filled they are making a profit from spread, as @woolly_sammoth said .

yep.

yes, it is capable of reporting it.

There is now a delay, a bit more sophisticated than described but still very static and rudimental.
This very specific question - i.e. how often should T1 walls be replenished after (partial) depletion? - it is what I hope we can implement with the next scheduled milestone in the roadmap : market-adaptive orderbooks (0.3.3) .

This dynamic is very interesting and must take into account multiple factors.

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#357

It is roughly what I called superbot here

#358

I am not sure it is, I see the oracle more as a source of truth that does nothing but provide information for other bots to consume. Your super bot also acts and place orders and holds funds. Is it correct?

A “suggesting oracle” can be easily added to the existing streamer which is now used by bots to read price suggestion and clocks ticks for shifts :wink:

EDIT: the Streamer has been Indeed designed to support multiple kinds of messages at protocol level, so it will be as easy as adding a new message type

#359

Well, if NuNet is able to make sure that the cost of liquidity provision is less and less (because of BC_Exchange, fixed cost ALPs, parametric order book) while at the same time attracting more and more providers looking for low but steady revenues (a bit like that bitcoin mining currently), we can bet that the sales of NuBits (our primary source of revenue) will outweigh our costs. At that point in time, we will have created a strong confidence in the peg and NuShares’s price will be high.

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#360

the ideal would be to have a “skynet”-like NU network that can monitor real time the liquidity and decide
when there is a need to generate more NBT or burn them instantly and automatically!
no need for MLP or ALP. the perfect DAO. but this could take ages to be made.
(yes, i 've watched the latest terminator movie :stuck_out_tongue: )

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#361

Right. But the fund allocation part of superbot doesn’t have to exist if the pools can somehow roll their surplus/deficit to the next term, when shareholders will decide which pool gets how much fund. Only the oracle function is essential. (By the way the superbot doesn’t place orders, it gradually distributes funds to pool’s wallets, according to pool performance, before a term ends).

2 Likes
#362

@assistant liquidity

#363

Hi @huafei

The current total liquidity in the Nu network is:

Bid: 99388.5169 NBT
Ask: 79739.3896 NBT

It is broken down in the following manner:

    Bid: 34767.5387 NBT
    Ask: 49354.5038 NBT

Tier 2:
    Bid: 3397.48 NBT
    Ask: 11227.9972 NBT

Tier 3:
    Bid: 17142.29 NBT
    Ask: 22089.0 NBT```
1 Like
#364

@assistant liquidity

#365

{“blocks”:568427,“buy”:94634.2703,“sell”:129317.4833}

#366

{“blocks”:568623,“buy”:100481.1705,“sell”:134063.2301}

#367

The buy side liquidity should decrease by 10k every month at least, when contractors and liquidity providers paid in nubits cash out their nubits (hypothesis H).
However it does not seem so.
In fact, the buy side liquidity has more than double compared to 2 months ago.
So it means that there are more and more providers that actually provide buy side liquidity to offset H.
Correct?

1 Like
#368

Reputation is a powerful thing.

#369

Reputation?

#370

Basically, the risk of Shareholder Default, which is equivalent to the risk that the peg will be lost while you’re providing liquidity and suddenly you end up with tons of NBT and nowhere to sell them. This risk goes down as our reputation as a stable crypto grows.

Reputation is also responsible for the growth of the group of people that buy NBT and hold it, but as our sell side liquidity has been growing as well this is most likely not significant yet compared to effects dealing directly with custodians.

2 Likes
#371

{“blocks”:569493,“buy”:89562.5437,“sell”:140682.4926}
It is a pity that all this liquidity remains largely unused.
If the reputation grows and grows (there is more and more trust in the peg), it will grow further on each side but it will not bring Nu shareholders any dividends.
In order to get dividends, the sell liquidity needs to diminish so that Nu shareholders decide to print new NuBits.
But we do not need to wait necessarily for that moment. We can print a small quantity (such as 20k) right now and sell it on the open market. In case all those buyers sell those NuBits back to Bitcoins, it would shift down the buy side from 90k to 70k.
So the buy side would still be half of the sell side. Still tolerable.
I feel we would need to distribute real dividends soon.
Now is the right time to be aggressive, with the competition ramping up and several projects being in the spotlight.
What do you hink?

1 Like