Would you consider reducing it to 25,000 USD and putting up 6,000 BKS collateral?
$5/BKS is still optimistic for that volume in my opinion. As for the $50k, well that would be ~7.5% of the circulating NBT supply. I’d hate to see your chosen exchange default with that kind of money.
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If multiple shareholders desire a smaller USD fund then I would lower it. If it is to be 50k I might split it between 2 exchanges, however this is of course my risk. Dumping 10k BKS at an exchange would obviously push price down but I think you’ll find many takes of 5$ BKS shares.
I pretty much like the idea in general, but I keep asking myself: why BKS and not NSR as collateral?
NSR is the asset that is in some way tied to the value and the peg of NBT, but not BKS.
Even PPC would make more sense because they have much more market depth, could be used for dividend distribution and PPC are part of a motion draft to create reserves beyond BTC.
I fully agree with this:
At the moment it’s not possible to sell more than a few hundred USD value on BKS pairs.
And last but not least: I know how much we long for BCE.
But BCE is not finished. We still don’t know whether it will ever be finished or work. Please think about that for a moment before you start bashing me for having said it. I’m not saying BCE will fail. I’m just saying that BCE is not finished with some uncertainty left.
I’d never accept BKS as collateral at the current state of BCE. I wonder why Nu should. And even if I did, only at a brutally discounted exchange rate of like $2 per BKS to take the uncertainty and low market depth into consideration.
Why should the USD remain on the exchange facing that risk?
Is it because of the questions tax authorities might have?
If not, is it really necessary to have this kind of hedge available within one business day? Wiring USD to an exchange shouldn’t take longer than two business days…
Finally I think (and that has become apparent) that T4 should really not be involved in daily business and with little lead time.
I’m pretty sure the whole point is to avoid legal trouble.
I am also not in favor of using BKS as collateral.
About the exchange risk, i think there should be exchanges that secure the fiat deposits of their users.
If i find them, i may be able to make a proposal like this my self 
[quote=“masterOfDisaster, post:4, topic:3169, full:true”]
I pretty much like the idea in general, but I keep asking myself: why BKS and not NSR as collateral?
NSR is the asset that is in some way tied to the value and the peg of NBT, but not BKS.[/quote]
Simple, I do not have that much NSR. If we estimate NSR to be worth 0,00001344 BTC (as in this weeks buyback price) you’d need over 13 million NSR to have the same 64/70k collateral according to market value that I am able to provide in BKS.
[quote]Even PPC would make more sense because they have much more market depth, could be used for dividend distribution and PPC are part of a motion draft to create reserves beyond BTC.
I fully agree with this:
At the moment it’s not possible to sell more than a few hundred USD value on BKS pairs.[/quote]
The exact same problem is there for NSR, apart from the buybacks there is nearly 0 buy side support, currently less than 2 BTC on Bter and less than 3 on Poloniex in total.
[quote]And last but not least: I know how much we long for BCE.
But BCE is not finished. We still don’t know whether it will ever be finished or work. Please think about that for a moment before you start bashing me for having said it. I’m not saying BCE will fail. I’m just saying that BCE is not finished with some uncertainty left.
I’d never accept BKS as collateral at the current state of BCE. I wonder why Nu should. And even if I did, only at a brutally discounted exchange rate of like $2 per BKS to take the uncertainty and low market depth into consideration.[/quote]
I don’t disagree with you, but the alternative is staying in BTC which would not surprise me to go down almost 50% in value back to the 230-250 levels it has been in most of this year. From what I understand progress on B&C is going very well leading me to believe we will not see, at the very least sub 4,16$ levels (the price shares were originally sold for).
If BTC price goes up that’s great the value of our reserves increase. But that is not the scenario I’m worried about, the scenario where BTC price tanks in combination with a huge selloff in Nubits, which becomes more likely as we sell more Nubits could severely endanger the peg and thereby Nu itself. Hence why I think it’s wise to hedge in USD. Currently I’d say BTC price is strongly inflated and I suspect a correction to low 300’s or even back to 2xx’s levels. This would cost Nu 20 up to maybe even 40% of reserve USD value. Hence I think it would be wise to have part of that value secured in a hedge.
[quote]Why should the USD remain on the exchange facing that risk?
Is it because of the questions tax authorities might have?
If not, is it really necessary to have this kind of hedge available within one business day? Wiring USD to an exchange shouldn’t take longer than two business days… [/quote]
[quote=“Nagalim, post:5, topic:3169, full:true”]
I’m pretty sure the whole point is to avoid legal trouble.[/quote]
One hopes that all exchanges secure the fiat deposits of their users. Obviously some do so better than others.
I would welcome your proposal.
Would there be more support for my proposal if I lower the amount of Hedged funds to 42.000, while maintaining the 10k BKS as collateral? In that scenario the BKS would cover the hedged amount even if BKS price falls to 4.20$ which is 4 cents above the original price of BKS at 4,16$ that was used in the sale.
I don’t really care too much about the collateral. The hedged amount is my concern. 50k is way too much, I’m even starting to go back on 25k and suggest 10k. Can you convince me why we should put so many eggs in your basket?
The idea behind my proposal is that enough collateral is put up to cover the hedged amount, so it doesn’t really matter if 1 person does this or if it is spread out over 5 persons doing the same service for 10k each. Ideally I’d like to see Nu have a 100k USD reserve that is hedging out of BTC especially as long as we keep growing in terms of outstanding Nubits, therefore I am all for having multiple people provide this service so we can insure 100k USD.
Although say a big investor shows up that can put up 100k himself with the best possible collateral we can imagine I would support such a motion as well. As long as we can hedge a large amount of USD while essentially being “risk free” due to sufficient collateral I think Nu is getting a good deal.
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Is access to your discuss.nubits.com account synonymous with access to your collateral? How do we do proof of ownership? Or I guess you set up the address you want your collateral returned to in advance?
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That is a good question, I’d say maybe proof of ownership can be done by successfully signing a FLOT transaction? Then besides access to my forum account one would also need access to my multi sig private key to claim ownership? Although on the other hand the collateral would only be returned after I have returned the USD funds from Nu so the attacker would also need access to my exchange account in order to impersonate me, and claim my collateral.
I am intrigued by this proposal, and I thank Dhume for making it.
I will not be available to hold the BKS as collateral.
I would like to understand how the 50,000 USD would actually be used as part of liquidity operations. Under what circumstances would this be promoted to more accessible tiers? I presume in most cases to actually use it would require conversion to BTC for use on our BTC pairs. This leads me to ask whether there is enough liquidity in a BTC/USD pair on the exchange to be used to make liquidity operations affordable. To the extent the liquidity is used you will end up with a bunch of NBT instead of USD. In that case, will compensation be impacted? How will the NBT be exchanged back to USD, if that is the plan?
Finally, a caution to @Dhume: While it is theoretically possible to find an exchange with a low enough default risk to make your proposal profitable, the average crypto exchange has historically had a default probability that will cause you to lose money in the long term.
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A regulated US exchange like Gemini has FDIC insurance on USD held in the account (but not BTC). So the risk of losing funds - as long as they’re in USD - from a hack or theft is near zero.
The greater risk may be that a government attempts to seize the funds if they are threatened by Nu. For that reason, @DHume should give consideration to how the BTC would be transferred from FLOT to himself with the greatest amount of anonymity possible.
@DHume I like your proposal. As long as the asset is reasonably liquid (and I think BKS will be very soon), Nu has nothing to lose by accepting an offer with >100% collateral. If we can reliably convert a higher portion of Tier 4 to USD our network will be stronger for it. I will support your motion for the full $50,000.
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Hello Gentlemen,
Did you think about USD funds being frozen (or even seized) @ centralized exchanges?
Exchange default risk too?
Government intervention?
Is it worth the risk?
Its not a risk for Nu if we have the collateral. It’s a risk for the person who puts up the collateral. That’s why we have to be super cautious about the collateral we accept.
Do we think we can sell 10,000 BKS for $5/bks within a relatively short time frame?
Like I already said - I very much like the idea to get a part of the T4 funds converted to USD - ideally in no centralized way (a lot more proposals like this would be great, although they’d create more handling effort).
But I very much doubt that a big amount of BKS can be sold in a short time frame at a reasonable price. The BKS/NBT pair at CCEDK has approximately $150 on buy side at $5 or above with a total of $207 on buy side. The BKS/BTC pair has practically no offer on buy side, unless you want to sell 1,000 BKS for 0.0015 BTC.
I don’t think so.
While this proposal solves the BTC volatility risk for the USD value stored in NuSafe,
it creates risk for @Dhume - the exchange could default.
And it creates a risk for Nu - selling or auctioning the BKS might lead to less revenue than the collateral was accounted.
@Dhume should request a lot more fees or have the collateral to be prized much higher to have compensation for the risk
Nu naturally is interested in the opposite: low fees, low prizing of the collateral.
The main problem I see is the low liquidity of BKS. In my view this ruins this great idea.
I wouldn’t feel comfortable with accepting such an illiquid asset as BKS.
That might change soon, but Nu might need T4 buy side funds even sooner!
I could imagine PPC as collateral. But not BKS, especially not as collateral for tens of thousands of USD value.
I appreciate your and others concern, I would however not be making this proposal without the condition that I am free to store them on an exchange or exchanges of my choosing. Without this freedom I would feel uncomfortable holding large amount of funds and I would not have enough liberty to protect the funds from exchange default as I see fit.
I feel the main concern is if the collateral is enough to cover the hedged amount in combination with its liquidity. I understand these concerns and argue that they are very reasonable. I have been thinking about what I can do make shareholders more comfortable with the collateral, therefore I am prepared to add 2M NSR as additional collateral on top of the 10k BKS. Instead of holding the NSR it might be easier to burn them and reimburse them by means of creating 2M new NSR (or the equivalent after the decimation of NSR numbers) whenever Nusafe comes to an end.
Without revealing identities, I’ve done two escrows of over $10,000 each in the past two weeks and I’m sure there are more private sales being completed that I’m not part of. It seems to me that CCEDK is unpopular to use, and so BKS are being traded privately. So, I don’t think $50,000 would be difficult to raise, especially if B&C Exchange is operational.
That’s important information which throws a different light on the whole BKS collateral approach.
Unless you compromise people involved in the deal (which I can’t imagine), would you be able to tell the price per BKS in these escrowed transactions?