Edit: Check out the beta-test here: [Draft] Proposal for liquidity provision on fiat pairs (LiquidBits.net)
Below a draft proposal for comments. Looking forward to your comments and feedback.
Following the success of the Trustless Liquidity Pool/NuPool I like to submit another proposal based on the same software. I have been testing the software in my own environment with a lot of support from the developer (@creon), who I like to acknowledge in this proposal. I’ve also received support from others in the NuPool team which I’m very thankful for.
This new pool will be known as Nu’s LiquidBits.net
The Pool will be available to provide liquidity on fiat/NBT pairs on CCEDK and BTC/NBT liquidity on Bitcoin.co.id.
You will be able to choose the amount and the exchange in your client. You can even run two clients, each on a different exchange and with different pairs. You can also provide liquidity on this pool alongside NuPool.
Exchanges and currency pairs
The reason to add CCEDK is that there is currently no other exchange available with USD/NBT and EUR/NBT pairs. There is a higher risk to operate on this exchange for the users given recent events with hacked exchanges. This proposal tries to compensate for this with a slightly higher compensation to start with, but I hope overtime that this can be lowered. Unfortunately there are no other exchanges offering this service currently.
As an alternative I’ve added the BTC/NBT pool on Bitcoin.co.id. I think this exchange should be supported as it serves a different and important market. When the fiat pairing receives positive feedback and participation I may try to request a fiat pair at this exchange. I think that will be important going forward.
Attracting new users to decentralized liquidity provisioning
I hope that the ability to provide liquidity on fiat/NBT pairs and not being exposed to the BTC fluctuations which are highly speculative, also attracts users who normally wouldn’t think of supporting the network in this way. I think it is important for NuNet to have many smaller liquidity providers to ensure the peg in the long term.
Hopefully the Nupool and LiquidBits can also serve as a template for others who wish to start their own pool in order to create a competitive, but highly decentralised market across multiple exchanges and many currency pairs.
Proposal, fees and compensation
The full proposal can be viewed below. I would like to have the proposal passed before the point at which liquidity provision is started. The main points of the proposal are as follows:
Intention to provide 5,000 NBT liquidity on Bitcoin.co.id NBT/BTC pair for 30 days
With maximum compensation of 7.5% per month (0.25% per day)
Intention to provide 5,000 NBT liquidity on CCEDK USD/NBT pair for 30 days
With maximum compensation of 10% per month (0.33% per day)
Intention to provide 5,000 NBT liquidity on CCEDK EUR/NBT pair for 30 days
With maximum compensation of 10% per month (0.33% per day)
For both exchanges the minimum payout is 1 NBT and automatic payouts are every 24 hours.
200 NBT pool fee which will be shared equally with @creon
1375 NBT compensation payout for liquidity providers
1575 NBT requested in total
Instructions to join the pool can be found here: <link to manuals/thread>
Liquidity providers remain in full control of their funds throughout the operation of the pool. Liquidity providers also bear the full risk having their funds on the exchange and won’t be compensated by this pool on an exchange default.
The proposed operation is mainly meant to be a test run. Therefore the provided liquidity is relatively low and I won’t guarantee continuing the operations after this 30 day test run. It is meant to be another test run for the software but also for price discovery (interest %), gauging the interest in fiat liquidity provisioning in order to maintain the NuBits peg with the US$ and determining a sustainable compensation for the costs of operations and maintenance of the software.
RIPEMD160 hash: tbc
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Custodial Address: Bxxxxxxxx
Amount Requested: 1575 NBT
@cybnate will start an independent trustless liquidity pool server to provide liquidity on the EUR/NBT, USD/NBT and BTC/NBT markets. A target of 7,500 NBT on the bid and ask side of the order books will be provided by the pool split over 3 currency pairs, resulting in a total maximum liquidity of 15,000 NBT. The operation will end after thirty (30) days.
Liquidity provided by users will be compensated:
with up to seven point five percent (7.5%) per month (0.25% per day) on Bitcoin.co.id BTC/NBT pair
with up to ten percent (10%) per month (0.33% per day) on CCEDK fiat pairs
using the pool’s calculations to allow a fair distribution of returns amongst liquidity providers. 1,375 NBT of the requested amount in this grant will be held as reserve to make payouts to connected users. Payouts will take part every 24 hours. The minimum payout is 1 NBT. The pool fee is 200 NBT and serves as a contribution for the effort of supporting the pool, @creon’s support and work, supporting the users and the costs of operating the server.
After the operation the shareholders will be provided with detailed information about the liquidity provided by the pool. If the target was not reached during some time, or users provided enough liquidity to allow a lower average interest rate, then the remaining funds will be used to continue operations for up to another 30 days or for continuing operations with another grant or a combination of both until depleted.
If, for some reason, the decision is made to discontinue the pool project after the 30 days term has passed, the remaining NBT from a previous grant will be burned.
The provisioning of the pool is based on best endeavours. No claims can be made by users when the pool server software is not available. Exchange failure or loss of funds caused by exchange operations is the risk of the liquidity provider.
Don’t risk more than you can afford to lose!
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