[Discussion] Proposal Think big, start small

The Plaza
#1

With the auctions underway, it is getting more important to get into actions. The actions I’m proposing are not unique and have been proposed by other in some way or the other so I’m not taking credit for them.

My proposal will certainly move some dust around the place but I believe this is a chance to get things restarted while we continue to think and start building profitable solutions. This is not a quick fix, it will take time and it will only for those in for the long haul or those seeing opportunities to create profits in the shorter term (e.g. through B&C).

Act small
With limited resources we will have to think big, but act small and built from there. My idea is to start establishing a first notion of a peg on the only fiat pair we currently have. This can be with a NuBot or Pybot gateway depending on which one can be made ready quicker. This will be a full peg of $1 with no more then a balanced 3% spread in total (1.5% on either side) to start with. Any trading on this pair will be a profit for Nu while still making a statement on the peg even though the spread initially is a bit high. The objective is to maintain parametric orderbooks with small amounts on an even tighter peg and larger amounts up to the 3% spread. The LP could be paid from the spread to make the liquidity provisioning sustainable. As part of the contract they should maintain a spreadsheet with all sales and profits on behalf of Nu at least on a monthly bases (initially more often to monitor our baby steps).

The chances that this will be overrun by traders dumping are relatively slim as fiat has a lot of friction, so only a limited amount of people will run at it as the only way out is through USD withdrawal. To reduce the risks even further:

  1. the liquidity provided should be no more that 10k and
  2. be backed by 100% reserves to provide the amount of confidence we need.
  3. only start until we have successfully completed at least three auctions rounds with at least another 60k NBT (US$20k against current rates) and with that removing further sell pressure from the markets. The auction may need to be ramped up for that.

Think big
When the previous steps prove successful for say 3 months, we can expand to other exchanges providing fiat pairs and/or create fiat gateway ourselves and pay LPs from the spreads as long as the spreads provide some amount of profit. Or a deal can be made on decentralised exchange (e.g. B&C or Openledger through CCEDK) where some profit sharing is possible and a NBT/BTC pair can be carefully introduced appreciating the volatility of BTC. For the first 3 months 100% reserves should be maintained and only excess funds can be used for further developments.

Capping expenses
One of the first developments I suggest is a way to vote for the NSR/NBT price in the blockchain or continue to use the auction system as is in place right now. Any future NBT creation can only occur when the equivalent of NSR are created and auctioned off say every month by something like FLOT. This to keep the checks and balances right and prevent shareholders from going on spending sprees without obtaining the required investments and balance the books.

Going forward
I don’t want to set further detailed steps too far into the future as we need to remain agile and being able to respond to new developments which may occur. I offer to run NuBot or PyBot on fiat pair on SouthXchange without any fees for the first three months. I might need some support though to withdraw the USD and convert them back to BTC, ETH, LTC or PPC reserves for Nu. There are only a few aliases/people I would trust with this. This will need to be discussed further.

A plan
It is not without risks (bank run), not without controversy (wider peg) and not certain that any trades will occur.
But it is a PLAN calling for action through babysteps for those who believe it could work and believe like me that it would help keeping momentum over doing nothing.

Please vote with likes if you think you would support this proposal. When I receive 10 likes or more I will work on it and tailor it further towards a motion to submit for voting.

8 Likes
Our options to save Nu - June 25th, 2016
[Passed] Elect Phoenix as Chief of Liquidity Operations (compromise version)
#2

I like these 2 suggestions:

#3

I’m glad to find a proposal that takes care of the biggest problems!
Your plan provides liquidity as cheap as possible: small volume, spread to cover expenses (at least partially).

I have one question: who owns the NBT or USD on the exchange?

“On behalf of Nu” means, Nu owns them, right?
Nu has no USD. So the LP can’t start supporting both sides.
This can be a problem to get the trading started. And without trading no revenue from the spread.
Who would want to buy 1 NBT for 1 USD if 1 NBT costs only one third USD when paying with BTC?
If it works, expect heavy arbitrage. People who have passed the regulations stuff will buy NBT cheap with BTC and undercut your NBT sell orders in the NBT/USD pair.

What about the NBT that have already been created?
When they are used for payments, NSR are auctioned off to balance this, right? At least I’d suggest this.

This is a much more feasible plan than moving the peg to $0.10.
Once you moved it there, you’ll never get it back to $1 unless you make enough revenue to even buy the NBT, that were sold for $0.10, back for $1.
That’d mean you have to make a whole lot of revenue to afford that!

Stick with the idea of a 1:1 peg.
Buy as many “cheap” NBT as you can with the profit you make.
The more you recover, the more the NBT rate will recover.

Supporting NBT/USD instead of BTC/NBT seals yourself off from the BTC rate.
You evade the problems you’d have in case the BTC bull run would continue or were to switch from bull run to bear run, forcing you to buy BTC that are depreciating.

#4

I like this idea a lot. I think, one little thing we absolutely need to do, prior to this, is quietly buy back a very large quantity of NBTS at their current low price.

I think, once there is commitment to a peg again, possibly even once it’s visible in the forum, the chances are very high, that the market could bring the price back to near $1 in no time. I see other coins 3xing in a day all the time, and buying free money is too good of a chance to miss.

If the Nu network is able to be the largest party profiting off of this, it would be a great boost to its bottom line.

#5

Buy as much as possible!
Accounting wise it makes a lot of sense to buy as many NBT below $1 as Nu can afford.
But don’t do it quietly.

Lack of transparency played a crucial role to bring Nu where it is.
Using lack of transparency to get out of it will Nu do no favour in terms of reputation.

If the world sees that Nu hasn’t lost faith in it’s product by proudly announcing it buys as many NBT as it can afford, this can reputation wise be of double benefit - in difference to when done sneaky and getting caught in the act.

#6

You believe you know what “the world” would think. I think you’re way, way off. It’s not being sneaky, in a way that being caught is immoral, it’s not telegraphing moves that are very very easy to exploit. If we telegraph brining the peg back, without smart preparations, “the world” that matters to us in the short term, namely, the traders, would drool over us, and will beat us to the punch, and sell us our own product back to us at a quick and easy profit. Then “the world” that matters to us in mid term will lose confidence because we would look stupid. I would rather put my money on a team of sneaky market players, than a team of stupid ones.

The Fed usually plays it’s cards close to its chest, for good reason. Then it makes announcements once plans are in place.

1 Like
#7

You are right.
I can’t know what others think, let alone what the world thinks.
I like the proposal.
And I like the idea of buying NBT at that rate.

Selling NSR not only for NBT (to reduce the debt directly), but for BTC as well (to reduce the debt indirectly) makes sense.
Just don’t try to put the BTC on order at $1!
Use the BTC to buy NBT from the market at the current low rates.

The NSR rate is low, but so is the NBT rate.
The deal to sell NSR for BTC to buy NBT with them isn’t that bad, if you look at the NSR/NBT rate.

At current Poloniex rates, you might get 0.000001 BTC per NSR and pay 0.0004 BTC per NBT.
That makes a NSR/NBT rate of 0.0004 BTC/NBT / 0.000001 BTC/NSR =400 NSR/NBT

Turning the clock two months back you had 0.0000065 BTC per NSR and 0.0025 BTC per NBT.
The NSR/NBT rate was 0.00256 BTC/NBT / 0.0000065 BTC/NSR = 393 NSR/NBT

That’s more or less the same amount of NSR you need to pay per NBT - “thanks” to the NBT depreciation.
The BTC rates look differently, but 2 months ago, the BTC rate was at $430. It went 60% up from that.

Use this to your advantage!

3 Likes
#8

Yes. Keep us away from providing the liquidity in BTC.

1 Like
#9

I’ve been thinking about this the last few days. I think I’ve settled my thinking on the following:

1- re-pegging to $0.10 “makes for a trend” … first $1.00, then $0.10, then $0.01, then what. $1.00 is in the whitepaper, in the messaging, in the brand. I am not in favor of changing that messaging.

2- Paying liquidity operators and maintaining a tight peg are a cost. Bitcoin volatility introduces a risk and some factor of cost as well. In reference to “Accounting”, Nu should operate at least a revenue-neutral pegging operation, if not one for small profit – perhaps evaluated monthly. “The spread” is where many in finance make revenue. Look at the spreads on gold coins buy/sell for example. Pegging to USD should be tight(er) than to cryptos due to less risk of loss due to volatility.

3- with great reluctance the org pivoted to service the BTC trader community as a hedge, and this became our primary customer. In this model a run on the bank was inevitable if BTC were to go on a tear. We should discuss how we interact with that user base. In relation to #2, I still think there would still be value to hedgers and traders even with a spread (which would be much lower than BTC volatility); is it so bad for us to charge an exit fee for the benefit one got for parking your Crypto wealth in the stable Nu ecosystem? A trader would see the sell wall and can make the informed decision when they buy into NBT in the first place. Now would be the time to change that model / approach.

4- buying NBT while it is cheap – this is a good way to lower our liabilities. The lower NBT goes, the easier it is to mop up NBT and establish a better reserve ratio. @Hyena snagged a bunch of NBT.

5- Nu is cut off from a source of funds since there is about $17k between the current price and $1 on Polo, that will need to be bought out by someone. It’d be great to keep an eye on how deep the hole is, so we know how bad the situation is.

6- I can’t tell if taking action on #4 or #5 is more impactful. While BTC is on a tear upwards, the wind is in our faces. We may have to wait out the BTC bull market before taking action – for however long that is – 1 month, 1 year, 1 decade.

4 Likes
#10

I like this proposal in general. Mainly because it puts emphasis on putting the peg where it needs to be: USD/NBT. I’ve been a proponent of more FIAT gateways for a while. And I fully believe that if Nu has a reliable USD/NBT network it won’t have to worry about NBT/BTC because it will make itself.

3 Likes
#11

The buying cheap NBT part should be done by individual investors voluntarily. That way it is somewhat equivalent to buying NSR to save the network. Those who are convinced Nubits can become healthy again will make their best bets quietly. If Nu does that itself, I’m afraid it’ll lose money to speculators and manipulators like with NSR buybacks. All the community has to do is to push through a revenue plan and the rest will follow.

1 Like
#12

You will certainly get a bank run. A trader will sell NBT for USD then sell USD for BTC then sell BTC for NBT at $0.3 then repea. The 10k reserve will run out maybe in 30 minutes.

If one has to withdraw fiat, a trader will only to register to get ~7k profit. It’s hard not to find such a trader. The reserve will run out in one trade.

3 Likes
#13

+1

But there’s no reserve in the beginning. There’s no USD, only NBT.
Traders doing what you outline, will close the spread in the BTC/NBT pair doing the arbitrage.

You could very well think about promising no peg at all in the BTC/NBT and let arbitragers do the main part of the job, while Nu can have some funds at a big spread in the BTC/NBT pair and earn money from trades.

#14

It’s not been getting worse than 23btc in the last few days. see record BTC prices at different exchanges or in different USD tokens

1 Like
#15

Agree

That’s why we need those auctions before we even start. We also need to make a deal with our biggest creditor B&C. A competing proposal offers basically $0.10 out of $1 to B&C and other NBT holders right away. Not sure whether all the B&C shareholders already realise this, but I think we can at least offer the same with this proposal, about 10-15k. It might take us a few months with NSR selling but it will get us eventually debt free.

TL;DR I won’t put up any buy offers until those 60k are off the market and a deal with B&C shareholders is made.

We will need to buy USD from the remaining reserves to kick-start the peg. The risk is that we don’t have adequate reserves to buyback the remaining NBT. This will only happen when those NBT holders have no confidence in the plan. Not unthinkable, but with the mitigation in place, the risk is reduced. No plan without any risk.[quote=“mhps, post:14, topic:4129”]
It’s not been getting worse than 23btc in the last few days.
[/quote]
I think there is still a lot off the markets. Hopefully kept to participate in the auctions for NSR.

#16

I followed the conversations quietly and these proposals seem to be the best to save Nu. They must of course be specified, but can we already have a hash to indicate our support towards this direction with our shares?

#17

To make this happen we need NuBot (or Pybot) to support the fiat pairs.
Only the SouthXchange NBT/USD pair qualifies for this at the moment. I expect that CCEDK will also support both EUR and USD fiat pairs and an API (interface) for NuBot.

@desrever @woolly_sammoth What would it take/cost to make NuBot work on SouthXchange?

And what would it take/cost to prepare it for the CCEDK APIs? I believe Ronny already dropped a message to you guys about this, didn’t he? If not, I can follow up and ensure the ‘specs’ can be provided when available.

#18

I can;t speak for @desrever as I’ve not spoken to him in a while. I know he was very busy on other tasks though.

I can certainly take a look at the SouthXChange wrapper. I believe the bones of it are there already (maybe much more than bones, it’s been a while). I’ve not had any communication with Ronnie since February last year. Some instruction on the API would be good if we can get some prior access.

My main concern at the moment is that there are a few conflicting ideas around how to proceed as Nu. They all seem to require dev time which is still fairly scarce. I want to make sure that what time I do spend is towards the final goal.
I’ve been quiet the last week or so as I’ve been concentrating on new projects with an aim to bring a revenue stream into Nu as I believe that is our only way out (although it will take a while). I can see the attractiveness of a temporary 10 cent peg although I do think it will be hard to move from that back to a Dollar. With regards the tightness of the peg I swing between the two positions. A lot of the tool development that went on over the last 12 months or so was designed to maintain the price at $1 but to penalise those who wished to make large, rapid trades in which Nu always comes off the worse. I still believe that is the way to go with liquidity provisioning.
My views do align with yours though @cybnate in that providing a revenue stream should be top priority. That will take time though so I’m happy to do work towards a goal in the interim, once it seems one or other view is winning among shareholders.

5 Likes
#19

I will post a few revenue-generating ideas. For the one that gets the highest likes, I’ll start a thread so we can discuss the idea further, technically and from a business standpoint.

Vanity addresses

  • Nu maintains a registry of names to addresses
  • Users or businesses pay to register, and an annual renewal to maintain
  • Shorter addresses (1, 2, 3 letters) cost more … perhaps some sort of log or inverse-power function based on length
  • Addresses that are not renewed go into a pool for 1 year – and transactions to the address fail
Transferring all Nu assets to B&C? - Liquidating or 'archiving' or mini-Nu?
#20

Variable Fees / Avatar mode for change

Previously discussed in Discussion about the transaction fees

  • Nu client would automatically generate outputs in transaction-friendly amounts (powers of 2 or 10 or something)
  • Extending Avatar mode to NBT; making change to self would cost only $0.01, if it was necessary to make change from outputs
1 Like