My apologies my comment is not always valid, its only valid if the “outstanding” nubits are not used in T 1-3. So in case they are Nubits held in a private wallet not doing anything this should not affect tier 1-3. In this case the contractor is payed back for his burned Nubits with BTC currently in T4, this leads to a decline of T4 funds held by Nu in favor of a contract between Nu and the contractor.
There is a small effect on T4 requirement since this is a decline in outstanding nubits due to the burning and thus requiring a slight reduction in the 15% we require in T4 (this effect is small but makes examples far more complicating so I’ve ignored it )
If the Nubits are currently held by someone involved in Liquidity provision in tier 1-3, this will remove Nubits from the sell side and thus create a similar imbalance as when they are bought from this sell side and burned, however now the imbalance is only a reduction in sell side funds not an increase in buy side BTC (since they are not bought from the sell side but removed by the contractor).
Edit: [quote=“ttutdxh, post:41, topic:3163, full:true”]Edit: Ok I think I got what you are trying to say: Burning NBT reduces circulating NBT and thus reduces T4 15% equivalent creating an excess because the 15% is now less money.
That should not happen because those burned NBT collateral should be accounted together with circulating NBT, even thought they are not, so the 15% of T4 does not change.[/quote]
Ok, but that changes a lot since then it’s like @mhps said and they are not actually “burned” or at least they are still being counted in the money supply.