[Discussion] Proposal Think big, start small

[ConfusedObserver]

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.

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.

[Confucius]

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.

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.

[ConfusedObserver]

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!

[nmei]

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

[woodstockmerkle]

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.

[nmei]

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.

[dysconnect]

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.

[mhps]

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.

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.

[ConfusedObserver]

You will certainly get a bank run.

+1

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.

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.

[mhps]

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.

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

[Cybnate]

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.

Agree

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.

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.

3. only start until we have successfully completed at least three auctions rounds with at least another 60k NBT (US$20k against current rates)

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.

But there’s no reserve in the beginning. There’s no USD, only NBT.

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.

[infergnome]

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?

[Cybnate]

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.

[woolly_sammoth]

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.

[woodstockmerkle]

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

[woodstockmerkle]

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

[woodstockmerkle]

Receiver pays the fee

Benefits:

• makes NBT feel like cash and credit cards where the total you send = what is on the register
• could enable NBT to charge higher transaction fees on a nominal basis (peer-to-peer), but provide a “discount” to merchants who elect for their addresses to support the “receiver pays the fee” model

Potential implementation:

• merchant registers an address as “receiver pays”; this is held in the blockchain. This may require annual renewals or something.
• a different type of transaction denotes the ‘fee’ has not been paid, and that the receiver must do so
• minimum transaction amount for anti-dust
• maximum transaction size (in bytes) so a receiver doesn’t get burdened rolling up dust transactions

[woodstockmerkle]

“Instant payment, guaranteed”

• merchant establishes relationship with insurer, who will guarantee a transaction and provide compensation if there is a double-spend / Nu network crash, etc.
• Insurer and merchant can be the same entity, if merchant is willing to pay for a guarantee (i.e.: to speed up checkout or reduce financial risk on big ticket items)
• insurer funds a “guarantee account” on the Nu network that is deducted at a per-transaction rate
• insurer, who has a relationship with merchant, is made aware of the transaction and issues a “guarantee” transaction (a ‘lightweight transaction’ that is cryptographically signed to the “guarantee account”):
• once a node sees a “guarantee” transaction, it will:
  • not permit a different transaction on the original output, because it wants the guarantee fee
  • sign the guarantee by a way of an NSR address that has outputs that can mint, and broadcast it across the network as an “Ack”
• For a minter, first valid “guarantee” transaction received wins, permitting multiple insurers for a given merchant, and incentivizing insurers to be well-connected
• an insurer can provide a “green light” to the merchant after:
  • it determines a sufficient number of legitimate signatures from minters have been received for that transaction (regardless of which insurer the minter received the guarantee from)
  • it determines the output is not being used in any other transaction, and has not been seen in any other “guarantee” transactions or minter “acks”
  • the presence of multiple insurers, and the cross-checking can provide additional confidence to the merchant, since it is still a bit of a lottery as to who makes it in the blockchain
• By way of special blockchain protocol, Nu will settle with the insurer daily:
  • the settling node will earn a fee
  • half the “guarantee” fee will go to the NBT side of the NSR address for whomever minted the block with the guaranteed transaction
  • half will be burned
  • the “settling” minter will also receive a fee of $0.05 NBT, also deducted from the insurer’s account

[woodstockmerkle]

Shared content subscriptions

Enable subscriptions and microtransactions across multiple content providers

• Cross-community content passes are established i.e.: “$2.95 for 500 article views this month”
• User funds the subscription – and this could be done automatically by their wallet
  - this transaction is recorded in the blockchain, but not yet settled
• To access content, user is presented with a challenge to “use a view”
  • User’s wallet signs the challenge
  • Content provider issues a transaction that places a claim against that user’s subscription for that month
    • this transaction is recorded in the blockchain, but not yet settled
• At the end of the month, Nu distributes funds:
  • For content creators, best case: 1 view = they get the full $2.95 of that users’ subscription. Worst-case is bounded at (example) $0.0059
• Nu Network takes a 1% cut by way of burning some NBT
• The node that does the distribution takes a cut of the lesser of $1.00 or 1% of the total subscriptions it is settling.

[woodstockmerkle]

In-chain Crowdfunding / Escrow

• Fundraiser creates a special transaction and address of how much to raise and by when, with a transaction fee
• Funders commit their NBT, and the transaction is recorded but not settled
• If the funding threshold is reached:
  • A node settles the transactions, and splits the transaction fee between itself and as a burn to the Nu network
• If the funding threshold is not reached:
  • A node indicates the transactions as canceled, thereby reverting the funds. The transaction fee is split between the Nu network and the node that settles