It’s not that it’s impossible, it’s an artificial cap. Basically, when we are in a period of devaluation, if the core bitcoin reserve is under target devalue the buy side of NBT by how much we are under target. If we are over target do not make the buy side use a higher value than $1/USNBT because the we would be buying NBT for more than we sold it for…
By the way, when I mean ‘old price’ I really mean with reference to a particular Nu product. So US-NBT are worth $1 a piece. If the bitcoin reserve is 80% full, FLOT should be using a price of 80 cents per US-NBT when buying back NBT and a price of $1 when selling. If the reserve is 110% or 120% full, buy back at $1 not $1.1 or $1.2.
Instead of ‘devaluation’ maybe I should use language like ‘built in spread’ or ‘T4 spread’.
Sure, but that trigger is very much subject to change. I’m still thinking about that one, it may be a bit before I settle on something concrete.
I can’t help but think that’s masochistic as a general statement. Surely there is some amount of RNA you’d be comfortable with before resorting to directly damaging your own investment? As this entire motion is about general statements, I do think it is important we discuss statements such as this in depth.
Understood. Thank you for the detailed explanation.
I’m not speaking of the 20%, but of “annually”.
It depends. It has to do with the focus.
Short term RNA might save Nu money.
Long term the damage for the brand might be bigger than with dilution.
In the end it’s impossible to determine which creates the bigger efforts for Nu and it boils down to a kind of religiuous belief.
I say it’s impossible, because you have no identical “Nu” corporations of which one chooses one way and the other, well, the other way.
That way you could gather which measure is the better one depending on the time after the measure you look at the market position.
As we can’t make that test, we’ll never find out what had happened, if…
While I’m a strong proponent of having metrics, thresholds, etc, I wouldn’t dare putting a preference of one to the other (RNA dilution) in such a plegde.
My current stance is that I prefer dilution to RNA, but that could change rapidly based on the experience made on the way to it.
I’d rather leave that preference out of the Pledge (I wouldn’t want to have a preference for dilution either, although I think I prefer that in general!) or replace it by options that seem viable from our current point of view.
I agree. I think controlled dilution is better than RNA.
General comments about the draft: we can’t even explore and converge to the best LP interest rate, it will be a long way before we decide what numbers to take for so many parameters. OP is good as a strawman model to be improved upon.
Interesting that there’s a section on devaluation. Hmmm. I think the best way to do that might be via a change that multiplies all NBT holdings by a fixed amount (example: 90%), rather than announcing that 1 NBT = 90 cents. That way, the “peg” is still stable at 1NBT = $1, but it’s still a percentage cost to all NBT holders.
Even talking about devaluation is pretty bad for the network, though. Nobody wants to hold NBT if it is going to be revalued downwards. Self-fulfilling prophecy.
It’s not a complete devaluation, only the buy side gets lowered. We would still sell nbt at $1, we just wouldnt buy them back at that price.
I think customers would prefer a full black-swan policy to a magic promise that the peg will never fail because ‘reasons’. Anyway, i agree the language of this motion is vital, and perhaps the entire purpose of the motion.
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.
This is the situation in which exhorbitant park rates arent keeping the network up and the nsr reserve is empty. This is the exact situation spoken of in the whitepaper, one in which the network has no means by which to reestablish the peg. The whitepaper, as you say, calls for a consensus on peg devaluation. This will clearly happen at a very extreme and stressful time. How can such a coordinated consensus be formed, other than by spelling it out in advance via a motion like this?
Just because it seems like nbt demand will permanently decrease does not mean Nu should roll over and die. Instead, we should have advanced shareholder consensus to buy back the nbt using any means necessary other than unlimited dilutions. Once the nubits are bought back the system can right itself once again.
Demand cannot permanently decline, as it will bottom out at 0 circulating nbt. The network should have a plan for how to achieve this. Currently, we only have 3 mechanisms to achieve this:
Unlimited dilutions
Extreme RNA and absurdly high network fees
NBT devaluation
I prefer to use all tools available in an absolute extreme circumstance.
In any case, devaluation will occur when nsr price hits zero. It’s just a matter of whether it happens in concert using shareholder consensus or if it just black swans on its own and everyone gives up. One scenario Nu can walk away from, the other it can’t. This motion is aimed at giving Nu the tools to survive every possible doomsday scenario.
We have been paying LPs 80% p.a. to put their funds in the walls in the last year. I don’t see park rate, which Nu pays for someone to put funds out of circulation, reaching 100% for a while a sign of disaster. It is rather unsustainable, however.
How come there are many POS coins with less features than Nu – no voting, no duality, no parking, no pool infrastructure, no FLOT – have non-zero value? Shouldn’t PPC have died a long time ago? It’s traded at ~$0.5. Or let’s ask this question, if a coin acquires the above functions and form a supporter’s community, can it not rise to $1 ?
I would also be comfortable with a declaration about the conditions under which we give up protecting the peg. If this hypothetical situation exists as a potential future, as the white paper so clearly spells out, then what is the condition for it? What does it look like? If we don’t know the answer to that question, how can we avoid it?
If the reaction to the ultimate emergency situation is ‘every man for himself’ then we are already there. A PoS blockchain requires continuous human consensus and validation to exist, and as long as it exists it has value. This motion leverages that value on a periodic basis in time; existence through time is precisely what gives the blockchain its initial worth at a fundamental level. It then attempts to define a particular scenario in which Nu will seek to maximize the effects of that leveraging.
I don’t necessarily agree that shareholders will blow up park rates to infinity in any scenario. I don’t disagree with the triple digit numbers, but I’m unconvinced it will go much beyond that without drastic action being taken.
I’d be comfortable removing specificity from the motion in favor of more general text, however I would like there to be a declaration in our covenant about when Nu will give up on share dilutions as a means to protect the peg. And when we mention that, we need to assure our Bit users by telling them what happens. If we decide to simply drop the peg without devaluation, so be it, but let’s say that. Attempting to have these kinds of discussions in extreme circumstances just begs for manipulation and political corruption.
In my opinion, now we’ve talked about it at the very least. I also disagree that a well thought out monetary policy would harm the value of NuShares in the long run.
Unsustainable, in other words the road to disaster…
The rates for LPs also have benefits for Nu, so I’m ok to pay premium for that. e.g. advertising volumes and people getting interested as response to that. Not so for parkrates, will try to pay the absolute minimum and hoping for a bargain with a lot of keen people parking
I want to add a clause that says FLOT will be provided with 50,000 NBT to be replenished each quarter, but I’m still thinking about what exactly I’m trying to say there.
Just as much as you need NSR to support the peg on one side, you need NBT to protect the peg on the other side.
The main reason why FLOT controls reserves in the first place is that FLOT is more agile than voting on grants is.
Replenishing FLOT NSR reserve is already part of the draft:
Doing so with FLOT NBT reserve can be derived from that thinking.
FSRT singlesig:
Balance of BFTnCyMX1nsTNp6X7Bcm1qVocvShdbwtMi is 151500 NBT
JordanLee singlesig:
Balance of B5Zi5XJ1sgS6mWGu7bWJqGVnuXwiMXi7qj is 150000 NBT
JordanLee singlesig from liquidity ops
Balance of BT9AWq9r1i6kghZc6LtrvNb2wRFh7JLCdP is 31553.044 NBT
But as these are singlesig, the amount of NBT on these addresses should be reduced rather sooner than later, leaving NBT funds more or less only to FLOT.
Right but currently the plan is shareholders just keep printing nbt with no regard. So if i stick a limit there it naturally begs the question: what happens if FLOT runs out of nbt and shareholders refuse to go beyond their obligatory grant? For nsr the answer is network spread. What is the answer for nbt?
I don’t think there’s anything anyone can do to keep the price down if shareholders refuse to print nbt and total demand exceeds total supply. We could do something like beg BCE to sell their nbt i suppose. Try to reduce demand by liquidating central bit owners.
I don’t understand that.
If NSR reserves are depleted and park rates don’t suffice, the USNBT price will fall below $1.
If NBT reserves are depleted and no other means to reduce NBT demand is available (I know of no other) the USNBT price will rise above $1.
So spread is the answer for both - albeit in different directions.
I don’t know a good reason for doing that. But a grant might be too slow if USNBT demand surges unexpectedly.
You can mitigate that risk by increasing the number from 50,000 USNBT to, say 250,000 USNBT.
The only problem with those USNBT is that they could get lost or abused. They are not prone to volatility risks.
At the moment over 500,000 NBT are on multisig or singlesig addresses and can be used to support the peg.
No it’s not. Spread is a means of getting mor bang for our dwindling buck. If NBT runs out, how can we sell nbt at a higher price? We don’t have anymore! The difference is that when the nsr reserve runs out we still have other buy side liquidity to leverage.
We should split it into two funds. One is operational and the other is for the peg. For example, if we run out of nbt for the peg we still need nbt to pay NuLagoon on contract.
If there are no reserves left to support the buy side (wouldn’t other reserves be depleted before excessive NSR sale starts?), NBT price moves down.
If there are no reserves left to support the sell side, NBT price moves up.
Before the reserves are dry, you can increase the NBT sale price (USNBT > $1) to support a weak sell side or increase the BTC sale price (USNBT < $1) to support a weak buy side.
In both cases Nu can only sit and watch once all reserves are empty - or grant NBT or NSR to support the drained side.
Separating funds into peg support and contract payment would be great; either by forming another group in addition to FLOT or by splitting FLOT funds to different addresses for different purposes (to make accounting easier or possible at all).
No, that’s the entire purpose of the standard and core motion. If we run out of btc the peg is lost. We start leveraging nsr before we run out of btc. When we run out of nsr we start leveraging nbt price to avoid running out of btc. Never run out of btc, it is our core.
Making declarations like this is a recipe for disaster. Nbt supply can be recreated and sold at the drop of a hat. This problem is fundamentally different from nsr dilutions.
Only in the event of buy side running out should we institute additional network volatility. It is not a solution to the inverse event.
That’s not true, that’s the whole point of this discussion. Ive already mentioned two ways to combat, network spread and asking our sister company for help.
Having an additional fund for operations gives us another avenue to leverage with special rules and conditions, like network spread.
