[Draft] Restrict liquidity operations on BTC/NBT

[dysconnect]

We are seeing an apparent downtrend for BTC/USD, which may be due to a looming financial crisis and the recent consensus issues. Meanwhile we are still supporting liquidity operations on BTC/NBT, and I’m afraid at current rates we would be unable to hold on to significant parts of buy-side liquidity. Nor do I support increasing rates, as that would be equivalent to us subsidizing a BTC/USD exit at a significant scale.

Overall I wish to see a reduced support for high quality BTC/NBT liquidity, and an expansion to liquidity with respect to fiat pairs. I see the issue as urgent enough that I could not spare the delay of forming the motion body right now, before getting the message out to the community. For the meantime, I’ll make the following suggestions:

We should aim to reduce the overall rates and targets for BTC/NBT liquidity. Then, we can either (a) increase the minimum spread or (b) reserve a large portion of liquidity targets e.g. 80% of the current liquidity target at 0.015 offset either side, with lower annual interest. I prefer the latter, as it would also allow us to discover the trade-offs that liquidity providers would tolerate, before we formulate suitable compensation schemes for liquidity provision under the parametric order book.

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Hash: TBC

[masterOfDisaster]

Why that before the parametric order book is available and integrated in ALP pool operation?

[dysconnect]

One thing is we haven’t established a good way of compensating the parametric order book. If we use it in TLLPs, either different people put down different orders at any given time, or every person has to put down multiple orders every minute. The latter is not generally feasible (think BCE) and the former introduces more uncertainty, as some people would be exposed to more risk than others. Randomization may help, though it might simply be more attractive to offer tiered compensation for different offsets.

The other thing is we should try to do something right now, if it’s simple enough, instead of waiting for the bot to be fully integrated with nupool.

[mhps]

When most people see a down trend in BTC prices the buy side will be low because people sell BTC for NBT. Our standard tool to increase buy side is offering high parking interest., hoping people will sell BTC for NBT and park. But when most people see a down trend the interest would have to be as high as being able to counter the price drop (e.g. 30% in a month) of BTC. This is printing NBT to pay for these people’s loss of BTC value.

It’s time to take action to mitigate exchange risk of NBT/BTC liquidity provision.

[cryptog]

Overall I wish to see a reduced support for high quality BTC/NBT liquidity, and an expansion to liquidity with respect to fiat pairs

At the end of the day, what counts is the fact that 1NBT=1USD. So maintaining the peg via NBT/FIAT would be direct and economical for Nu. This would be ideal and this is what was intended when Nu was released back on 23Sep14.
The issue is that most exchanges do not deal with FIAT and BCE would not deal with FIAT either, at least directly.
So it seems that crypto pairs would be the main instruments to keep the peg for a while.
Furthermore the vision formulated by JL back in Dec is to make NBT an irresistible instrument for traders that are looking for liquidity.

Finalized evolution of liquidity operations

I’m going edit the OP to make it finalized motion. I’m confident offering cheap liquidity is the key to NuBits adoption at this stage and that my proposal will dramatically reduce the presently high cost of providing liquidity.

So it seems that @JordanLee 's strategy is still to acquire customers by offering free hedging fees basically, which is at a loss for Nu. I feel it makes sense only if the perspective for regular NuBits sales is substantial.