[Draft] LiquidBits TLLP trust less liquidity pool - term 3

NuShares Grants
#1

LiquidBits term 3 draft

Custodial Address: TBC
Amount Requested: 596 NBT

Custodial grant request to continue to operate LiquidBits.net, a liquidity pool for NuBits.

The independent trust less liquidity pool (TLLP) will provide liquidity on the EUR/NBT, USD/NBT and BTC/NBT markets on both CCEDK.com and Bitcoin.co.id. A target of 10,250 NBT on the bid and ask side of the order books will be provided by the pool split over 4 currency pairs, resulting in a total maximum compensated liquidity of 20,500 NBT. The operation will end after thirty (30) days when a motion or grant to continue operations haven’t passed before.

Liquidity provided by users will be compensated as follows:

with up to 6.6% per month (0.22% per day) on CCEDK’s EUR/NBT pair on both sell and buy side to a maximum of 3,000 NBT ( max pay-out 198 NBT/30 days)

with up to 6% per month (0.20% per day) on CCEDK’s USD/NBT pair on both sell and buy side to a maximum of 10,000 NBT (max pay-out 600 NBT/30 days)

with on average 9% per month (0.30% per day) per month on CCEDK’s BTC/NBT pair to a maximum of 2500 NBT in total but split as follows:

0.35% per day up to 1250 NBT on sell side ( max pay-out 131.25 NBT/30 days)

0.25% per day up to 1250 NBT on buy side ( max pay-out 93.75 NBT/30 days)

with on average 9% per month (0.30% per day) per month on Bitcoin.co.id BTC/NBT pair to a maximum of 5000 NBT in total but split as follows:

0.35% per day up to 2500 NBT on sell side ( max pay-out 262.50 NBT/30 days)

0.25% per day up to 2500 NBT on buy side ( max pay-out 187.50 NBT/30 days)

using the pool’s calculations based on the Dutch auction model to allow a fair distribution of returns amongst liquidity providers. 1473.00 NBT of the requested amount in this grant will be held as reserve to make pay-outs to connected users.

Breakdown grant amount
The current grant has 1237 NBT left as of 26 July UTC with about 15 days to go at a current payout rate of 14 NBT on average. 15 * 14 = 210 NBT. Allowing for a minor increase there will be approx. 1237 - 210 = 1027 NBT left. Total required 1473 + 150 (fee) - 1027 (left) = 596 NBT.

Terms and conditions
Pay-outs take place every 24 hours. The minimum pay-out is 1 NBT. The spread continues to be 2% on either side with 0.0075 tolerance on both exchanges. Operations and pay-outs will start within 3 days after the custodial grant has passed successfully. The pool will continue to operate under the name LiquidBits.net. Remaining funds will be settled with future grants or when the pool is discontinued, burned.

Fee
The pool fee is a one-off 150 NBT and serves as a contribution for the effort of supporting the pool, the website, reporting, supporting the users and the monthly costs of operating the server.

Instructions
Instructions on how to participate in the pool can be found here: http://cybnate.github.io/index-liquidbits.html

Disclaimer and risks
The provisioning of the pool is based on best efforts. No claims can be made by users when the pool server or client software is not available or not working properly.

Liquidity providers remain in full control of their funds throughout the operation of the pool. The pool operator won’t have access to any of the funds hence the reference to trust less liquidity pool. Therefore liquidity providers bear the full risk having their funds on the exchange and won’t be compensated by this pool on an exchange default or inability to withdraw their funds.

Liquidity providers are exposed to the risks of speculators hedging against them on other pairs than USD/NBT like EUR/NBT with the BTC/NBT pairs a particular high risk due to BTC’s high volatility. Therefore the compensation on the riskier pairs is higher.

Finally, please be reminded of the following:

Don’t risk more than you can afford to lose!

----------------------------- END OF PROPOSAL ------------------------------------

Proposed changes term 3 (starts 10-Aug)

  • Added NBT/BTC pair on CCEDK (on trial / on request)
  • Reduced rates for EUR and USD pair
  • Reduced rates on BTC pair
  • Increased max liquidity on both USD and EUR pair
  • Increased pool fee from 100 to 150 (NuPool’s is 300)

As there are a number of proposed changes, I thought it would be good to have this draft for discussion this week.
I’m also seeing an increase on liquidity provision (>7k) and number of users/addresses (over 10). Not bad for the Summer Holidays on the Northern Hemisphere.
The pool software is stable and with the latest fix the bot on the volatile NBT/BTC behaves as it should. Currently reviewing the memory requirements on the pool server as we had at least one outage because of that.

Looking forward to your feedback on the proposal.

2 Likes
#2

USD/NBT is the pair Nu wants the world to use. If you could make a motion for fiat pairs alone, I’d vote for it and not for any nbt/crypto pair.

Since this pool has the only USD/NBT pair in the world, I think this pair should have so much liquidity that monthly turn over (now ~$2700) should be dwarfed by liquidity existing, to attract big buyer/sellers. This suggests that the USD/NBT alone should aim at $10k on each side.

Deep liquidity also incentivise other exchanges to add nbt/fiat pairs, especially usd/nbt.

For the above reasons I think this pair should have higher reward than any nbt/crypto pair to attract liquidity providers, and only lower it in a new term until the above target is met in an existing term.

2 Likes
#3

When you provide liquidity in USD:

  • It is (almost) immune to exchange hack
  • It is at little risk of bank default (Denmark has been nice to cryptos)
  • It is at risk of exchange default
  • It is at risk of NBT price drop (where people dump NBT and never redeem it again)

USD/NBT is probably the best pair for us to have well-informed discussions on interest rate. I think in the long term the interest can even be a bit lower than NuLagoon’s Pool C at equilibrium (i.e. when Pool C & D are balanced).

Said equilibrium hasn’t been reached yet so that’s not immediately relevant, but 6% monthly (>100% annualized) is much more expensive than NuLagoon’s Pool C (~33% annual). Perhaps we can consider lowering it further to, say, an annualized 50%? That means a monthly rate of about 3.44%.

1 Like
#4

BTC/USD has been in an up trend since the announcement of Pool C&D and that is why Nu Lagoon has been making good profit. If there is a big downward movement in BTC prices there would be an exodus of Pool A and especially D, constant interest of pool C will be unattainable when the entire Nu Lagoon is getting deeper and deeper into the red. It will take several big up and downs of BTC price before Nu Lagoon can find a proper lasting interest rate for pool C.

I suspect foreseeing this Nu Lagoon has already set a relatively low interest rate in pool C.

I think interest rate in TLLPs should be set according to liquidity target, which is set according to turn over data and affordability. Pool C interest rate is not a good yard stick for TLLP because TLLP operations are not quite concerned with balancing the book.

1 Like
#5

Just for context, My pools are 9.9%/month for BTC (higher than Cybnate’s proposal) with the same target and 4.5%/month for Fiat (lower than Cybnate’s proposal) with the same target as the proposed USD pool.

Also, is that 0.075 tolerance not in error? You’re allowing over 7% spread to either side? Why do you state it as 2%? A 0.075 tolerance means your software accepts orders that are off peg by 7.5%.

If we assume you meant 0.0075 and 0.2%, then your tolerance is bigger than my fiat pool and smaller than my btc pool. As your default value is 0.2%, your default spread is less than both my pools, despite having a bigger tolerance than my fiat.

1 Like
#6

Thanks for the discussion. It becomes more clear to me that the rate setting is a combination of:

  1. Shareholders’ policy e.g. which pair are preferable? Also tied with 2
  2. How much liquidity is appropriate? We haven’t had that discussion? Is 60k across TLLP pools enough for now? How to arrive at a sensible number?
  3. Market demand The amount of liquidity provided
  4. Risk on a certain pair on a certain exchange

I’ve tried to find a price point with emphasizing 3 and 4, but maybe we should think more about 1 and 2?

@mhps, maybe I should split up the pool and make two different ones? One for fiat pairs and one for BTC? That comes at some overhead though.

@nagalim, the tolerance should be 0.0075 as it currently is, always sharp spotting the typos in the numbers. Thanks.

1 Like
#7

It will be good but not necessary. As long as BTC price is not tanking people will keep supporting nbt/crypto, and won’t vote for nbt/fiat only. For now an increased interest rate to establish deep liquidity in nbt/usd is the best way forward, I think.

As @dysconnect pointed out, fiat on exchange is impossible or very difficult to steal by hackers, so nbt/fiat pair has a very low hack risk, which is good for maintaining deep liquidity.

1 Like
#8

So spread is the difference between sell side and buy side and tolerance is maximum between (difference of sell side to 1.00 usd, difference of buy side of 1.00 usd)?
Sorry I am getting confused once again :frowning:

#9

Only when on one side of the bidding. As soon as you hold NBT or any other crypto one is still vulnerable. You will have to keep your funds in USD or EUR. It gives another perspective on risk assessment on fiat pairs on exchanges.

6% monthly counts for ~72% annually. You would expect this pool to be oversubscribed at these levels. This is not the case and that is where the rates are still relatively high. Once this pair get oversubscribed it is time to lower the rates or consider whether the Shareholder should invest in more liquidity. We haven’t really got to that stage yet.

1 Like
#10

By the way, this is promising.
Is this the case of other pools? cc ( @Nagalim @henry @woolly_sammoth ), I am curious.
I think it is important to know the current trend.

#11

I too have seen a big boost in liquidity provision. I’m up to something like 2 kNBT and 4 users.

#12

Awesome!

#13

As for nupool:

https://nupool.net/index.php/Charts

1 Like
#14

What is the status on this - it still says draft…
It would be nice to see increased liquidity on USD and EUR. I would actually think of raising EUR a little more…

#15

It is still draft. As I announced I will keep it open for comment till the weekend. The current grant only expires on 11 August.

Have been thinking about the EUR/NBT pair. However uptake in Euros is still way behind of US Dollars. Current utilisation is only just over 60% on one side, on average lower than 50% for both sides ( https://raw.nupool.net/?pairs=true ). Without clear uptake I’m not very keen to ask the Shareholders for a higher grant. The current draft is already slightly higher and I also priced Euro liquidity slightly higher than Dollar liquidity. When uptake is high during next period, I will certainly raise the EUR/NBT pair.

#16

Thanks. And thanks for running the pools.
I know what to throw some EUR at then. :slight_smile: