Would there be more support for my proposal if I lower the amount of Hedged funds to 42.000, while maintaining the 10k BKS as collateral? In that scenario the BKS would cover the hedged amount even if BKS price falls to 4.20$ which is 4 cents above the original price of BKS at 4,16$ that was used in the sale.
I don’t really care too much about the collateral. The hedged amount is my concern. 50k is way too much, I’m even starting to go back on 25k and suggest 10k. Can you convince me why we should put so many eggs in your basket?
The idea behind my proposal is that enough collateral is put up to cover the hedged amount, so it doesn’t really matter if 1 person does this or if it is spread out over 5 persons doing the same service for 10k each. Ideally I’d like to see Nu have a 100k USD reserve that is hedging out of BTC especially as long as we keep growing in terms of outstanding Nubits, therefore I am all for having multiple people provide this service so we can insure 100k USD.
Although say a big investor shows up that can put up 100k himself with the best possible collateral we can imagine I would support such a motion as well. As long as we can hedge a large amount of USD while essentially being “risk free” due to sufficient collateral I think Nu is getting a good deal.
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Is access to your discuss.nubits.com account synonymous with access to your collateral? How do we do proof of ownership? Or I guess you set up the address you want your collateral returned to in advance?
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That is a good question, I’d say maybe proof of ownership can be done by successfully signing a FLOT transaction? Then besides access to my forum account one would also need access to my multi sig private key to claim ownership? Although on the other hand the collateral would only be returned after I have returned the USD funds from Nu so the attacker would also need access to my exchange account in order to impersonate me, and claim my collateral.
I am intrigued by this proposal, and I thank Dhume for making it.
I will not be available to hold the BKS as collateral.
I would like to understand how the 50,000 USD would actually be used as part of liquidity operations. Under what circumstances would this be promoted to more accessible tiers? I presume in most cases to actually use it would require conversion to BTC for use on our BTC pairs. This leads me to ask whether there is enough liquidity in a BTC/USD pair on the exchange to be used to make liquidity operations affordable. To the extent the liquidity is used you will end up with a bunch of NBT instead of USD. In that case, will compensation be impacted? How will the NBT be exchanged back to USD, if that is the plan?
Finally, a caution to @Dhume: While it is theoretically possible to find an exchange with a low enough default risk to make your proposal profitable, the average crypto exchange has historically had a default probability that will cause you to lose money in the long term.
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A regulated US exchange like Gemini has FDIC insurance on USD held in the account (but not BTC). So the risk of losing funds - as long as they’re in USD - from a hack or theft is near zero.
The greater risk may be that a government attempts to seize the funds if they are threatened by Nu. For that reason, @DHume should give consideration to how the BTC would be transferred from FLOT to himself with the greatest amount of anonymity possible.
@DHume I like your proposal. As long as the asset is reasonably liquid (and I think BKS will be very soon), Nu has nothing to lose by accepting an offer with >100% collateral. If we can reliably convert a higher portion of Tier 4 to USD our network will be stronger for it. I will support your motion for the full $50,000.
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Hello Gentlemen,
Did you think about USD funds being frozen (or even seized) @ centralized exchanges?
Exchange default risk too?
Government intervention?
Is it worth the risk?
Its not a risk for Nu if we have the collateral. It’s a risk for the person who puts up the collateral. That’s why we have to be super cautious about the collateral we accept.
Do we think we can sell 10,000 BKS for $5/bks within a relatively short time frame?
Like I already said - I very much like the idea to get a part of the T4 funds converted to USD - ideally in no centralized way (a lot more proposals like this would be great, although they’d create more handling effort).
But I very much doubt that a big amount of BKS can be sold in a short time frame at a reasonable price. The BKS/NBT pair at CCEDK has approximately $150 on buy side at $5 or above with a total of $207 on buy side. The BKS/BTC pair has practically no offer on buy side, unless you want to sell 1,000 BKS for 0.0015 BTC.
I don’t think so.
While this proposal solves the BTC volatility risk for the USD value stored in NuSafe,
it creates risk for @Dhume - the exchange could default.
And it creates a risk for Nu - selling or auctioning the BKS might lead to less revenue than the collateral was accounted.
@Dhume should request a lot more fees or have the collateral to be prized much higher to have compensation for the risk
Nu naturally is interested in the opposite: low fees, low prizing of the collateral.
The main problem I see is the low liquidity of BKS. In my view this ruins this great idea.
I wouldn’t feel comfortable with accepting such an illiquid asset as BKS.
That might change soon, but Nu might need T4 buy side funds even sooner!
I could imagine PPC as collateral. But not BKS, especially not as collateral for tens of thousands of USD value.
I appreciate your and others concern, I would however not be making this proposal without the condition that I am free to store them on an exchange or exchanges of my choosing. Without this freedom I would feel uncomfortable holding large amount of funds and I would not have enough liberty to protect the funds from exchange default as I see fit.
I feel the main concern is if the collateral is enough to cover the hedged amount in combination with its liquidity. I understand these concerns and argue that they are very reasonable. I have been thinking about what I can do make shareholders more comfortable with the collateral, therefore I am prepared to add 2M NSR as additional collateral on top of the 10k BKS. Instead of holding the NSR it might be easier to burn them and reimburse them by means of creating 2M new NSR (or the equivalent after the decimation of NSR numbers) whenever Nusafe comes to an end.
Without revealing identities, I’ve done two escrows of over $10,000 each in the past two weeks and I’m sure there are more private sales being completed that I’m not part of. It seems to me that CCEDK is unpopular to use, and so BKS are being traded privately. So, I don’t think $50,000 would be difficult to raise, especially if B&C Exchange is operational.
That’s important information which throws a different light on the whole BKS collateral approach.
Unless you compromise people involved in the deal (which I can’t imagine), would you be able to tell the price per BKS in these escrowed transactions?
I don’t plan on sharing any information regarding the transactions performed, sorry. Any piece of information could identify the participants, who wish to remain anonymous.
That’s comprehensible to me. Thank you for caring for that!
I have updated my proposal, removed the part referring to @Jordanlee possibly holding the BKS collateral. I added in an additional 2M NSR collateral, which does not need to be hold but which I will burn and is to be regranted upon successfully ceasing operations and thus returning collateral. Additionally I added an additional fee, a 30k NSR bonus per month, this due to increasing collateral on my part and thus risking a larger amount of collateral.
I really worry about your exchange USD. It may look ok month after month until needed to be used, because the exchange has become insolvent.
Due to security/privacy issues I won’t entail exactly how I plan to hold the USD but insolvency won’t be a problem. You don’t park large amount of dollars on small illiquid exchanges.
If there are no further objections I will hash this later tonight and update to voting.
This is remarkably similar to what I propose here, but in my opinion the current proposal adds a fatal flaw.
- Nu can’t control the value of the collateral. The current version is basically exchanging BTC risk for BKS and NSR risk. Nu business risks would not be improved.
If I were to choose right now were to store 50k USD I would certainly not save them as BKS or NSR. First option would be NBT and then BTC, by far of any other crypto including BKS and NSR.
Reasons for this:
- Slippage in a trade would drive prices to insanity in either direction, and I would instantly loose money.
- Risk. As mentioned by others, BKS is a share of an unfinished product. I understand there is potential, but the current price reflects the level of risk. It is potentially worth orders of magnitude more, but it is just that, potential. Storing wealth in potential is just investing, not hedging. And in this case Nu is hedging against @Dhume.
I would only support this if the collateral were burned NBT, like this. Safer, cheaper and simpler for both sides.
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