So what happens in black swan, when the shares people have locked up become worthless? Then NBT floods the streets, that is the key fault of BTS. I think NSR and NBT should only be paid by the blockchain in response to a burning event or other motion. Lending would require shareholder action or some other kind of automation.
We are not talking about backing of all NBT in circulation, but about a personal deal between Nu and one particular shareholder which parameters are available to every shareholder and specified over voting. So it is only your individual grant which is backed, Nu itself uses the normal liquidity system.
If NSR crashes to zero, and shareholders provide the opportunity to lend NBT, and people will just run away with these NBT, then a lot of NSR will get burned, the NSR supply decreases heavily and the price should recover a bit. As long as people have trust in NBT, this shouldnât harm the peg, although it is of course extremely certain that nobody will trust in the NBT peg if NSR crashes.
This is correct if we donât over lend. With automated lending one could take out a huge loan just before intentionally crashing the market. With shareholder oversight this is far less likely. The only way around this is to cap how much Nu can loan automatically at any one time.
edit: nevermind, that would require a huge stake in nsr.
I donât understand, how could this person crash the NSR price, if she or he had to lock them up to get the NBT? [didnât see your edit] The only thing I could imagine is that you now through insider information that the NSR price will crash and want to take advantage of the low lending fees now. However, in this case you can also just short your NSR on an exchange of your choice.
Of course shareholders take a risk, like every bank. Although it sometimes appears to be not the case, banks should actually be able to die because of wrong decisions regarding their lending strategy. This shouldnât be different for Nu, and taking the risk can also create profit.
Yah, alright, so what is the strategy for Nu as is? B&C is clearly going to pass, but it seems like we can treat it as a precursor to burning so that a strong NSR/NBT market can develop along with the NSR burning. Why canât we put forward a motion that takes effect after the burn mechanism is added, since B&C has to happen before then anyway? Or what if we make an amendment to the burn mechanism motion?
Burning is there, just switch to the correct branch on the repo. The RPC command however only accepts an amount (and a comment). Since the whole process above can also be realized through a normal custodial grant on Nuâs side, I think I will rather focus on the DAC implementation and implement it there. If there should be interest by the shareholders then Ben can merge it into the main repository of Nu (after a corresponding motion).
For Nu I would rather think about moire efficient possibilities to interact with other blockchains, i.e. Nu DACs. DACs are companies, Nu is a bank. Companies are customers of banks. Nu should make them happy 
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yah but the shareholder voted prices like park rates. Does that require a fork?
Of course, the voting has to be extended by two parameters r and q with r * q = 0, where r is the rate to exchange NBT for NSR and q is the rate to exchange NSR to NBT. Both values have a maximum cap, which in the case of NuBits is also voted on in both cases (share and unit). Nu DAC shareholders are only allowed to vote on a max cap of shares, the cap of the credits is defined by the blockchain and does not allow to overspend.
The lending process furthermore requires to implement OP_CHECKLOCKTIMEVERIFY. This was done for blackcoin and was really extremely easy. Then of course the lending rates will be additional parameters to vote for.
All these parameters are 16bit or maybe 32bit words. In order to reduce the blockchain bloat, motions and grants can be indexed on the blockchain and specified over IDs in the voting, but it would take longer to go into detail about that.
So yes, its quite some stuff, but totally doable and if its only about the decentralized burning, then I expect it to be very safe because a lot of (well tested) code can be reused from the park rate voting mechanism.
So you would have the OP_CHECKLOCKTIMEVERIFY and the r, q happen in the same motion?
Also, what do you mean by r*q=0? Isnât r completely independent of q as long as r < 1/q ?
Also, the long and short term trader model you were talking about, would that even need a new API call to run? In server.py, in credit(), the submitted=[] variable, does that contain the order number as known by the exchange?
Thatâs up to Ben or whoever intends to step up to merge this into Nu. Iâll write it in my branch and Nu is always free to merge it into its repo.
I donât see any reason why shareholders should provide a positive rate to burn NBT and a positive rate to burn NSR which are not equal, because then you can make money by clicking buttons in your client. Having r = q > 0 would work, but would be very dangerous because the blockchain is actually not fast enough to come up with an exchange price and it will allow for opportunities on the cost of the shareholders.
So in my opinion either r or q or both should be 0 and if one is not 0 then shareholders should take care that it will stay below the exchange price. Note that all this should be solved by a professional data feed provider who just has a script running that takes the data from a ticker.
I am looking forward to such a motion.
Would you regard b & c as a nu dac ?
Why canât we have something like 1 NBT burns for 1,000 NSR and 1,000 NSR burns for 0.1 NBT?
Totally! B&C has a private credit system. However, so far it is not intended to be pegged but to be valuated by the market. But B&C shareholders could decide to switch to a pegged credit and contract Nu to provide this service.
You are totally right! The spread should be gigantic as proposed by you, to react quickly enough in a fast market movement (note the 1 min block time). But this would work I think.
EDIT: However, I would really suggest to vote for a second parameter that specifies a maximum amount that may be burned at this rate. Shareholders can basically build up an order book at different price levels. This is important to control inflation better.
We canât adjust the maximum burn volume via motion without forking if burning is decentralized like this?
When you say rate, you donât mean volume do you? You think there should be a cap to the NSR/NBT price?
Indeed.
Would you think that using a non-pegged credit ( though 1 credit would be sold for 1 usd therefore for 1 nbt ) is design-wise a right decision?
A motion is a hash and doesnât trigger anything on the blockchain when it passes. We can only elect a custodian to do the job for us in a trusted way.
I am almost afraid to answer but no. B&C holders will have to vote on fees and should pick the fees which maximize the profit. In a non-pegged credit system you have two random variables which determine the optimal fee, the credit price and the valuation of your service and no, in a low volume market with no liquidity as a credit of a DAC will have the valuation of the service is not calculated in the price, before someone starts with stock market examples now. The fee of a pegged credit only has one random variable and that is the user demand of the service, which allows for much more robust estimates.
So a DAC has a clear incentive to peg their credit and should be willing to pay a corresponding fee for the promise that the peg is stable.
I see. Tks for sharing your view.
Would we have confidence implementing this for liquidbits before the motion?:
Thatâs not hard to implement, but it is a crucial change in the system dynamic. You would have to ask the pool operators if they would want to do that. Actually my conclusion is, as stated in the post that made us totally go off-topic, that liquidity operations are not the right tool to encourage buy or sell side liquidity over the other side.
Maybe Iâll write a modified client that lets you place orders at an arbitrary spread on one exchange and rebalance simultaneously using existing LPCs on other exchanges. I think this could provide some more buy side liquidity(!) or at least it could prevent the peg to break too seriously.