I am concerned about the regulations for devaluation and peg break. Having policy to do this or even showing significant support for such policy is likely to harm the value of NuShares and reduce adoption of NuBits.
I addressed the scenario of NuBits losing value in the whitepaper two years ago. My assessment of the circumstances under which this will occur and should occur has not changed at all since then.
NuBits will lose their value if their is a strong and nearly unanimous market consensus that NuBit adoption will decline at a significant pace permanently. Before NuBits would lose their value we would see park rates rise to record highs, and then go much higher, likely into the triple digits (100% plus). This would be coupled with a share price plummeting to zero as a prerequisite for NuBits losing their value.
While I can’t guarantee the system will work as I just described, I can tell you that it was designed to work that way, and that after a year and half of observing the network function, I still believe it will work that way. There are certain caveats, such as the peg may be lost very briefly if an attacker decided to consume all available tier 1 liquidity at once or if there are certain types of malfunctions in the NuBot software. But those cases are unlikely and are not devaluations. They will be remedied in hours, if not minutes.
So, I would like to dispel the notion that the network may decide to devalue our currencies by a certain percentage. While I wish to stress that I believe shareholders, on the whole, are savvy enough to recognise that devaluation is an act of suicide, and therefore won’t approve it or allow it, even in the hypothetical parallel universe where shareholders debate and approve a devaluation, or if it is only approved for hypothetical stringent circumstances, then when the reality nears the prescribed circumstances, you will see park rates skyrocket and the NuShare price plummet to near zero. My point is that even in this impractical and theoretical case we are likely to see park rates at triple digits and the NuShare price at or near zero just before the devaluation.
In brief, devaluation is suicide and I believe most shareholders know this, so they won’t do it. We ought to make it clear to customers that we know this. Devaluation only occurs at the point of the death of the business. There is no more point to regulating what to do after a devaluation than there is to regulating what kind of medical care people should receive after they die. To do so would demonstrate a fundamental misunderstanding of how things work.
