[Draft] A Comprehensive Upper Tier Model

[Nagalim]

As a quick back of the envelope:

$1m outstanding NBT. $100k BTC reserve. $50k reserve deficit -> $2.5k dilution (the minimum). If share price is $0.0025, 1m shares will be sold.

Another:

$0k BTC reserve, <$2.5k dilution breaks the model. The outstanding condition for this is <$50k/0.15 = $333,333 outstanding. Below this amount, Nu will fail to dilute NSR to save the network. With that in mind, I have made the minimum outstanding amount equal to 400,000 US-NBT in the motion.

[mhps]

when the standard is below -2,500 US-NBT, the FLOT should seek to sell an amount of NSR within the next week equal to the standard

I’d like this step to be offering park rates. After 4 weeks of staying in this step, moving to the NSR selling step.

[Nagalim]

Shareholders are encouraged to institute park rates in the standard margin between 2,500 and -2,500 US-NBT

Is the margin not big enough?

[mhps]

$2500 is too small a margiin for starting NSR selling I feel. but I have to say this step size should be established by trial and error.

[Nagalim]

$2500 at 5% is a $50k deficit. I tried to show that with the quick calculations. To repeat, the dilution doesnt kick in till we have an effective $50k deficit in btc reserves.

[mhps]

We only have a few data points as how effective parking is. Here is one

Park rates are our method for short term peg maintenance

While everyone is free to raise whatever questions they like, the historical record indicates parking is an effective and economical method for creating buy support. Between a month and two months ago 67,000 NuBits were parked as a result of park rates rising to 9% for just a three month term. The average actual premium paid was likely around 1.5% for parked NuBits. It did raise the buy wall. It certainly works. If park rates remain necessary for an extend period it means NSR needs to be sol…

If Nu only need to spend 0.75%/mo to freeze 67k NBT (compared to paying 8%ish per mo to LPs to provide matching buy-side fund) it’s super effective. If the above data is representative, we should first try parking before commencing NSR sales to solve liquidity problems on month-long scales.

To have better data , I bump this thread -

[feature request] charts for park rates and the amount of nubits being parked

As is shown in discussions here it is important to monitor park rates and the amount of nubits being parked. Please add these data to the charts, starting from the beginning if possible. btw, make the chart data downloadable please..

voting for park rate is slow. So quick, limited NSR selling may still has its place in a comprehensive tiered and dynamic reserve model.

[Nagalim]

Shareholders need direction for when to institute park rates. This motion provides a band of $100k during which shareholders are encouraged to provide park rates. There needs to be real numbers that trigger consensus or no one will know when to react. This motion specifies a band 100 thousand dollars wide during which park rates are the sole action taken to fine tune the peg. Once we are $50k in debt, dilutions begin to trigger (as a $50k surplus triggers buybacks).

If $50k is not appropriate, give another number. By pinning market actions to park rates we put an unneccessary burden on an already complex function of shareholder voting.

[mhps]

By pinning market actions to park rates we put an unneccessary burden on an already complex function of shareholder voting.

The blockchain will adopt a median of voted rates so we don’t have to give a definitive number to the voters. But if we have a real time monitor of parked nbt and buyback number, mark the starting level of park rates, voters can make their decision based on measurement data.

The complicated thing about park rate is that there are two dimensions – rate and duration. I think a good strategy is never voting for periods longer than a month and weekly adjusting the rate.

[Nagalim]

I agree with all of that and think it’s a very compatible strategy with this motion. The current motions (those in the ‘antiquated’ section) attach share dilution triggers arbitrarily to park rate votes so shareholders must consider a third dimension when voting in addition to rate and length. This motion removes that concern so shareholders can strategically set rates based on pure data, like @mhps has illustrated is beneficial for the network.

[Nagalim]

We could do a function for the $2,500 number that relates it to the outstanding nbt in a dynamic way. I fear that may be a little complicated though and there are already a lot of changes here.

Ex:
Standard threshold = ± 0.0025 * outstanding NBT
We could also directly use circulating nbt there instead.

[cryptog]

voting for park rate is slow. So quick, limited NSR selling may still has its place in a comprehensive tiered and dynamic reserve model.

So which method of protecting the peg should be put in use first?

[masterOfDisaster]

I’m quite alone with that, but I’d start selling NSR from the FLOT reserve at least before, maybe even instead of using park rates.
This is much faster than increasing park rates, is possible even if NSR holders are lazy with configuring their votes and removes NBT permanently (instead if temporarily while creating even more NBT through the interest).

[Nagalim]

This motion suggests that park rates be used as a buffer to keep us around 0-standard. It makes no absolute statements about park rates, but it gives a rallying point for consensus to occur.

I’d really like more reaction to the text of the motion and the dilution process it spells out.

[mhps]

So which method of protecting the peg should be put in use first?

The most effective method of protecting the peg is just using the T4 reserve.

The most effective method of replenishing the reserve is parking (becomes effective within a week) and selling NSR (after parking isn’t enough)

[Dhume]

Could you explain again how and when we are buying and selling NSR? I’m not sure I completely understand the mechanism your proposing.

[Nagalim]

How is up to FLOT. Basically, the how is not changed. The only thing this proposal spells out is when and how much. It actually doesn’t really change the buying of NSR (other than doing the ‘circulating nbt’ thing). What this motion does is reflect the point where we buy NSR about the 15% reserve point so that we have symmetry with when we buy and when we sell.

When the reserve goes above 15%, we sell. When it goes under 15%, we buy. When it’s near 15%, we play the park rate game. That’s the basic concept. This is in stark contrast to the current situation, where when we go below 15% we do nothing and wait for park rates to institute for a month before we sell a single share.

@dhume I think these are the most relevant points to your question:

when the standard is below -2,500 US-NBT, the FLOT should seek to sell an amount of NSR within the next week equal to the standard

The method of purchase and sale is at the discretion of FLOT, however it will be noted that in the past

[Nagalim]

The standard will act as a barometer for the health of Nu. It will be a number to rally support for consensus as far as when to implement park rates (putting official numbers and terminology to @JordanLee’s statement that a negative buyback number means we need to implement park rates). It will give the market confidence by providing a semi-predictable manner in which dilutions are done. It will give the network a greatly improved ability to react to NBT bank runs by falling back on NSR within 1 week (or less) instead of 1 month (or more) as is currently the case.

In short, it will provide a solid comprehensive basis for shareholders to begin talking about the health of the network using a single floating number: the standard. In a complex system run by semi-lucid shareholders simple rally points for consensus are vastly superior to a general gyst and feeling of impending doom.

[Sentinelrv]

Your last post helps everything make more sense. I was just wondering though. Is there a way to display this model visually with a simple diagram in paint maybe? It might help make it even clearer for shareholders if that could be successfully done.

[Nagalim]

[masterOfDisaster]

After seeing this diagram and matching it with the text, it’s quite simple to chime in:
please hash it and let the voting begin!

It’s as simple and as efficient as it can be.
I once created a draft, hoping to get Nu in a similar direction, but your draft is so much more elegant!
Kudos!