Discussion: Creation of the first liquidity group pool by KTm or Jamie

[cryptog]

Peershares fork

Why this particular fork would have any particular monetary value?

[creon]

Because you are getting paid in form of interest rates just for owning them.

[peerchemist]

I dont follow you @creon

[creon]

OK I’ll try to clarify. @jmiller’s main concern with providing a liquidity pool is that the pool operator needs to handle other people’s funds. @benjyz also mentioned several good reasons somewhere why we don’t want an exchange to be a custodian because they have trading advantages.

So the idea was to make each liquidity operation a decentralized organization. You can buy and sell shares of the organization and get dividends for holding them. Every BTC obtained from selling shares will be used to support NBT liquidity and in exchange the buyer of the share gets a part of the fees in form of dividends.

Shares are sold by the organization at a fixed price defined at the start of the operation and also bought back by the organization at a price of L/S where L is the current sum of Tier 1 and Tier 2 liquidity and S in the share supply (so if the custodian makes revenues or losses through the operation, then those will be given back to the shareholders).

This way the bot operator legally doesn’t use other people’s money, just like a developer of a premined litecoin clone really owned the money after dumping the premine. The only remaining problem is that shareholders have to trust the bot operator to behave as promised.

That’s the point where I saw a trusted exchange as a possible solution, who is in control of the share market (but NOT the NBT liquidity markets) and who can avoid that the bot operator wipes out the account wallet.

[peerchemist]

@creon, I think people will find this approach too complicated and this solution will hit heavy resistance.

I think we need multisig among pool operator and one more trusted user. Another solution would be to have multisig among pool operator and exchange or professional escrow. But this would require exchange to stop being master of universe and accept another authority that co-holds their funds - which will trouble them I imagine. Downside of this approach is that pool operator need to authorize TX that will pull funds from tier 1 on exchange.

This is complicated to implement I guess, and needs some more polishing but I think I am on the right track. What do you say?

edit:
“Their funds” - are our funds that are leased to them so they can earn fees.

[creon]

What do you say?

With the share concept I was trying to solve this very understandable concern:

I can already imagine responding to 10 emails per day, from angry contributors who don’t understand why their 10% is now only 7.25%. I’m trying to make the point that there would need to be a very strong legal agreement between the manager and contributors that essentially absolves the manager of liability.

So regardless if there is one pool operator with all funds or several pool operators with multi-sig, there is always a service provider and a customer and the service provider manages the funds of the customers. So while your solution solves that the bot operator can not run away with the money, it doesn’t solve the responsibility problem for those funds.

The share concept avoids this - in fact the only funds that need to be provided by the pool operator are the dividends (i.e. the grant). And while the implementation involves some effort, the final solution will be just as easy to use as a regular altcoin from a contributor’s perspective (ok, exporting the keys will be required).

[mhps]

So the idea was to make each liquidity operation a decentralized organization.

This is excellent. The idea of third-party professional bot runner was floating around in the early days of Nu and was not mentioned again because the LPCs then worked. Now we know the “old” LPC setup was not sutainable, I think we should re-examine the idea again. I am on a slow link so I will try to find links for previous dicussions later.

Running a separate peershares system is not a trivial task at the moment (although in principle it could be easy to setup). When/if peercoin side-chain comes out running a separate chain is supposedly much more light-weight. But regardless of the implementation, I think to make money-making pegging bots that answer to their shareholders is a correct direction.

[crypto_coiner]

I think to make money-making pegging bots that answer to their shareholders is a correct direction.

I am intrigued

[benjyz]

Market makers either are unprofitable or they are profitable. The first scenario is unsustainable. Hence, MM’s / LPC’s have to make profit. However on a risk-adjusted basis (constant assured profit and uncertain profit are very different things), and also with some restrictions. One might compare it to a sales-agreements of a care dealer or franchise corporations or similar arrangements, where earnings are capped and rights are granted restrictively.

This separation of concerns is not uncommon - in traditional markets MM’s act as service providers and are granted special privileges from the exchange. So this distinction of critical market functions is known to be important. It’s for similar reasons that the accounts of companies are signed by auditors, not just by managers of a company. Clearly these exchange markets are in their infancy. One could for example look at how some exchange markets developed and learn from that. Exchanges themselves often developed out of association of individual dealers.

[jmiller]

I’d like to poll this thread with a few questions for my brainstorming purposes. Please reply if you would seriously consider participating in a liquidity pool.

1. What percentage of your contribution would you require to be paid as a fee?
2. Would it be possible to make at least 50% of your contribution in BTC?
3. What initial duration of time would you be interested in contributing for (30, 60, 90 days)?

[creon]

I think a new thread would be appropriate for this.

Anyway, although I have a custodial grant proposal running, it didn’t increase much over the last weeks, so maybe this small liquidity would be more suitable for this pool idea. And even if the grant passes, then I will most likely be available after the 30 day term of the operation (well, “most likely” is unfortunately statistically not correct right now thanks to the hackers):

What percentage of your contribution would you require to be paid as a fee?

5%

Would it be possible to make at least 50% of your contribution in BTC?

Yes

What initial duration of time would you be interested in contributing for (30, 60, 90 days)?

30 days since it is a first-timer. Afterwards I can imagine to lock up money for 60 days or longer.

[peerchemist]

1. Dynamic, depending on volume/profit (leave this to situation on market)
2. Yes.
3. This should be part of contract between pool and investor. Why not make it dynamic where investor can choose 30/60/90 days - each with it’s own benefits.
   Pool does not have to run for specific period of time. It can run continuously while investors take shifts and new ones come.

[willy]

1. 5-7
2. Maybe.
3. 30 days first … if it works out longer

[crypto_coiner]

1/ 5~10%
2/ probsbly
3/ 30d for the 1st time - longer if it works out

[irritant]

would it be possible to run some scenarios on a testnet? (I dont think there is a testnet currently)

[tomjoad]

What percentage of your contribution would you require to be paid as a fee?
Would it be possible to make at least 50% of your contribution in BTC?
What initial duration of time would you be interested in contributing for (30, 60, 90 days)?

1. 5% for a large-volume exchange with no prior hackings.
2. Yes.
3. 30 days as a pilot run. Longer stretches afterwards to reduce administrative burden on the manager.

[cryptog]

1- 5~10%
2- yes
3- 30 days

[desrever]

What percentage of your contribution would you require to be paid as a fee?

Should also define the period. 10% - 60 days.

Would it be possible to make at least 50% of your contribution in BTC?

y

What initial duration of time would you be interested in contributing for (30, 60, 90 days)?

60

[KTm]

Shareholders:

It was asked earlier in the thread if I would be interested in managing a liquidity pool. The delay in my response was due to the time it took me to review my own abilities and to seek outside opinions on how it would work in practice.

At this time I recognize that I do not have the experience to comfortably manage a liquidity pool. Maintaining the individual operating ledgers for my past and current custodial work is comfortable for me, but the jump from that to what would be required to manage a pool with multiple participants is not an undertaking that I would want to approach lightly.

I will do what I can to support any community member that is confident in their abilities to do it; either with technical support or even as a possible participant myself with personal funds, but I want to publicly remove my name from consideration.

//KTm

[seki]

i am in the same boat as cryptog