Text wall alert.
I tried to write the parts I consider important bold - a kind of tld;dr by formatting
It was a totally possible outcome, but it was the preferred way to lean on NSR as the asset that keeps the proceeds from selling NBT.
You need to keep those assets in one way or another to have an opposite side to your liabilities in the balance sheet.
Keeping BTC would have made Nu dependent on the well-being of Bitcoin beyond the fact that BTC is the main trading pair of NBT.
It was necessary to store the assets in a reliable way.
Alas, NSR aren’t as reliable as we hoped they would be. But it could have worked though to improve the demand for NSR with the buyacks.
Isn’t possible in the unforeseeable future. It requires high NSR trading volume and the NSR rate would need to be decoupled from the reserve ratio by and large.
Low reserves are one of the main reasons for shareholders to sell NSR!
Without that decoupling NBT and NSR we’ll always see plummeting NSR rates once the reserves start to get low, because an NSR sale becomes likely and shareholders try to frontrun others in selling the NSR, hoping they can buy them cheap during the sale - or not at all.
Didn’t we want to have the opposite - NBT being backed by NSR, being tightly coupled to it?
It seems that worked: a weak NBT leads to a weak NSR.
Zero reserve is impossible, unless the Nu network is a lot stronger than it is today.
It’s not really a matter of Bitcoin volatility that tero reserve isn’t working at the moment.
It’s a matter of NSR volatility.
My solution would be:
- a drastically increased ratio of reserve (in relation to NBT in circulation)
- a diversified pool of assets that builds the reserve (BTC, PPC, LTC, USD, USDT, etc.)
If we had known it before, or had seen it more realistically, we could have steered Nu in another direction.
We didn’t.
It’s easy to be wise after the event.
We could have known parts of what happens before.
But we were to damn confident that Nu couldn’t fail anytime soon.
Now we need to admit that we’ve entered very rough waters, with a low reserve and being horribly dependent on BTC making a nosedive, if we want to have a good chance to increase the reserve in the near future.
But it’s not over yet.
There’s still a lot of confidence left, that Nu can recover.
I’m speaking not of confidence with this community, but of confidence within the market.
Otherwise NBT holders had abandoned the sinking ship, getting over the 5% or 7.5% buyside offset.
They haven’t!
If we can recover confidence by adjusting and improving our liquidity provision, increasing the reserve and showing them that we haven’t given up, Nu can recover.
At the moment we see that NBT holders don’t turn away completely. We might get in the position again to make people turn towards NBT.
It will be hard to find a good mix of agility, stability and security of reserves.
Nu should continue NuOwned operations, even if ALP continue.
Those NuOwned operations should convert a part of the BTC T2 to USD, USDT, etc., maybe even PPC or LTC.
The exchange risk for Nu by having funds there is real. We faced it in February 2016.
Diversifying across 2 or 3 exchanges would be useful to spread this risk.
But whether you have BTC or USD (or USDT, LTC, PPC, etc.) at the exchange, doesn’t alter the exchange default risk.
You introduce a risk of USDT failing if you hold USDT. But as we need to find a replacement for having most of our reserve in NSR, we can as well pick one that mitigates BTC volatility issues!
You can’t withdraw USD or USDT to a group like FLOT without issues or at all.
That’s why converting a part of BTC overflow to other assets, which can be withdrawn to FLOT is intriguing.
And don’t forget we’re talking about T1-T2 here!
There can - and in my opinion - should be funds from Nu at T1 and T2, if only to have a buffer when ALP or MLP fail.
Unfortunately not. We learn from it. We adjust.
This will be the harder part. Recovering confidence in Nu requires showing present and future NBT holders that they can rely on Nu and on the stability of NBT.
This stability is guaranteed for NBT/USD trading pairs. It should only be guaranteed with a less tight peg for other trading pairs, e.g. NBT/BTC.
With a increased reserve we should be able to keep it quite tight compared to now, though. Maybe it’s possible to keep it below 1%.
I suppose the lack of revenue plays a role.
Together with sorting out liquidity issues and increasing, diversifying stabilizing the reserve we need to create revenue streams.
Supporting trades at centralized exchanges is not really making revenue, but creates an immense cost.
Until NBT are really used as means of payment (that might take some longer…), people need to know they can trade the NBT they receive.
Trading at exchanges can be a prerequisite for bringing NBT towards being accepted for payments.
We can’t sustain liquidity at exchanges forever. We need to build revenue on top of that.
As strange as it might seem: I concur. But I’ve already explained it above:
Nu suffers from a damage of the brand image, but isn’t bankrupt yet.
We need to try to scale and we need to introduce a floor level.
If we had had a reserve of $100,000 + 15% of NBT in circulation, last Friday wouldn’t have made as much as a dent.
These are just random numbers to get at a reserve that is big enough to have.
…it’s easy to be wise after the event.
The thing is:
we need to find a new balance between the risks of having a reserve and the risks of having no reserve.
You’ve been right with that assessment.
I’d be happy to find more contributions from you in the future!
While this is strictly true, the IPO share value adjusted by the dividends that were paid, is around $0.0015.
The recent NSR sale was remarkably close to that value!
It’s below IPO value, but not below net value of shares including dividends.
Tether is done from one day to the next, if the reserve gets seized by the government.
For reference: https://en.wikipedia.org/wiki/Liberty_dollar_(private_currency)
If this were really an attack, why did the attacker stop right before Nu had 0 reserves left?
Do you imagine somebody attacked the exchange rate of NBT to get a chance of buying cheap NSR?
That kind of attack would speak volumes about the long-term outlook this attacker sees at Nu!
An attacker that tried to ruin Nu would only need to sell some tens of thousands NBT more, but I promise, I’ll make it as expensive for him/her as possible! 
You are right with both statements.
We should try to keep the enthusiasts while dealing with the costs of LP.
I’ve made a proposal here: [Discussion] Liquidity operations - a paradigm shift some months ago.
Take the initiative! This approach is good!
Even if Nu fails as the organization that issued the world’s best stable digital currencies, it still provides a reliable PoS network, that is very sustainable, if you get rid of the costs that liquidity provision and all its dependencies cause.
What I’m trying to say is: Nu might fail with NBT. That doesn’t mean Nu fails as network or community.
There aren’t any developer checkpoints like in Peercoin, are there?
PeerAssets is a scheme developed for Peercoin at the moment that is by design suitable for other blockchains as well.
Our Nubox devloper @peerchemist is working on it and seeks funding.
Here’s the road map: https://www.peercointalk.org/index.php?topic=4566.msg43393#msg43393
The related peer4commit procject: https://peer4commit.com/projects/178
