Here I try to make a centralized and coherent post to stimulate discussion on how to make it easy to sell and buy Nubits with e-currencies. Hopefully we can draw up a strategy, formulate a plan, and come up with proposals for relevant motions or custodian votes.
tldr; here is a summary
It’s important for Nu to make selling/buying Nubits by e-currencies issued by payment processors and gateways.
There are three ways to accomplish it:
- official installation of Nubits to the processors with members,
- to the payment gateways,
- provision of easy to use code so everyone with moderate webpage creation skills can let other buy/sell Nubits.
Here we use payment processors to refer to internet payment processors, internet wallets, payment exchange and currency conversion gateways, unless specifically noted.
Payment processors are not new. PayPal is the one best known. Other heavy weight international players currently include PerfectMoney, OKPay, WebMoney, Payeer, EgoPay etc., which collect users’ fund and allow users to pay bills and buy things. The e-currencies and credits issued by payment processors are converted by gateways. Liquidity, in the form of fiat (usually USD), is very deep, probably hundreds time more than that of all typical crypto-exchanges combined.
It’s not a coincidence that payment processors are often not founded in the US or Western Europe, but in places where traditional financial sectors do not provide quality services, leaving market space and regulation room for internet based payment providers.
The importance of NBT/USD liquidity
There have been discussions and foresighted suggestions of buying/selling Nubits via payment processors dating back to less than a month after the launch of Nu.
More suggestions have been made but the matter was not felt urgent because people thought trading NBT/BTC is better for adoption.
Maintaining a peg by NBT/BTC subjects Nu to volatility of BTC. Nu is guaranteed to lose money. When BTC falls, Nu buys falling BTC and suffers loss; when BTC rises, Nu pays high park interest to defend the buy wall. Hedging and other ways have been proposed but they seem complicated. At least hedging hasn’t helped LPC fighting at the front line.
I believe it is imperative to curb and eventually eliminate shareholder-paid LPC of NBT/BTC (or NBT/Crypto in general) pairs.
Even if you don’t agree that with its volatility NBT/BTC is toxic in Nu pegging operations, and Nu should run most of its pegging through NBT/USD pair, you probably agree that direct NBT/USD conversion is an important to make widely available with deep liquidity. It is directly linked to the “$1 coin” idea.
CryptoExchanges are not the place to support NBT/USD trading
Running LPC operations in the NBT/USD pair has problems at typical crypto-exchanges. Not many crypto-exchanges support USD deposit/withdraw. Even they do, trading the pair is not really trading
So doing NBT/USD, of which the price chart is a flat line, is just boring currency conversion that’s not attractive to crypto-exchanges. Exchanges perhaps don’t make real money accepting users’ fiat. They probably lose money doing so due to regulatory overhead. So there are very few exchanges that offer USD transfer.
In contrast, there are many times more payment processors than crypto-exchanges. Better yet, unlike crypto-exchanges, most payment processors have some forms of USD liquidity.
Enable buy/sell Nubits with payment processors
Now comes to the logical conclusion: Nu should actively expand Nubits adoption by payment processors, to tap into their deep USD liquidity, customer base, existing real-life business penetration, geographically decentralized connection among partners, internet-based infrastructure and APIs.
As Satoshi pointed out, cryptocurrencies will need a somewhat centralized business layer (maybe hubs) for highly efficient processing and clearing. Expecting a blockchain to support hundreds of transaction per second is not realistic. So expanding into payment processors is needed even Nu were not a pegged cryptocurrency.
I see several methods to go ahead based on limited experience, as given below.
Method 1. Official integration to payment processors that have user funded accounts
Top payment processors have members depositing fund into their accounts. Nu can help these payment processor to accept Nubits as one of their an official payment/accounting method. OKPay as example:
If supported by OKPay, Nubits could have hundreds of thousand private and business users, and can be exchanged with fiats of tens million dollars in liquidity, transferable with banks, credit cards, other payment processors and xchangers, even BTC-e USD code. I consider the bittylicious proposal one tep in this direction.
However this method has its problems. Nu has to deal with payment processors on a case by case basis so the cost of integration varies, and the results also vary.
For example different payment processors support cryptos to different degrees. Take OKPay, it only accepts BTC, LTC, and DOGE for deposit and withdrawal. It doesn’t have internal cryptowallets, which may not be what may expect.
Another example is that every payment processor has different requirements for identification. For example you can’t withdraw fund unless you have verified your physical identity with OKPay. This could limit its help to Nubits adoption if end users just want to spend small amount with minimum hassle, or don’t have IDs or don’t want to leave ID copy to OKPay. PerfectMoney and Payeer, on the other hand, allow withdrawals and transfers to numerous electronic channels without requiring identification.
My impression is that OKPay has better developed infrastructures and business reach, but may not be as easy to deal with from crypto perspective.
Method 2. Official integration to payment exchanges and gaveways
There are many more exchanges / gateways that don’t have (much) member fund themselves, but mainly make money by exchanging fund in one external form (such as BTC, PerfectMoney-USD, OKPay-USD, BTC-e USD, bank wire, creditcard ) to another. Examples include http://rchange.net on the complex end and, for example, https://exch.cc/ on the simple end.
To integrate Nubits to payment gateways is to place Nubits as one of the fund options there, so customers can buy/sell NBT with other forms of e-currencies. The gateways will pay for liquidity themselves. This is equivalent to setting up Liquidity Provider Custodians unfunded by Nu shareholders.
The advantage of integrating Nubits to payment exchanges / gateways is that the complexity is less compared with method 1, both for the gateway owners and for Nu to help them. This makes it possible to have Nubits integrated to many places. There are hundreds geographically distributed payment exchanges / gateways, having a lot of them serving Nubits to customers will greatly increase the robustness of Nu ecosystem against economic volatility, loss of major exchanges/processors, regional regulations.
Method 3. Providing code that sells/buys Nubits with e-currencies
The third and perhaps the best way to expand Nubits buy/sell/conversion is to make the transaction points decentralized to the extreme, i.e. provide code that one can use to setup conversion between e-currency USD and Nubits anywhere.
All major payment processors have APIs (Payeer, webmoney , OKPay, PerfectMoney …) so if Nu provides wrapper interfaces to handle fiat payment/reception, any server can be set up to sell Nubits to customers in essentially three steps:
customer enters Nubits address and e-currency USD (for example by entering a PerfectMoney e-voucher code, or by pressing a pre-made OKPay payment button);
server verifies that fund has arrived at own PM account;
server sends Nubits to customer’s address
and buy Nubits from a customer as easily:
customer enters a payment processor account number and amount NBT to sell;
server gives a Nubits payment address of own Nubits wallet (with QR code);
customer sends Nubits to the address;
server verifies Nubits payment has arrived and sends fiat from own account to the account provided.
The final result web interface can be simple like this or this or more sophisticated like this.
The code plus a nubits wallet is so lightweight it can be deployed anywhere – on a personal page, on a disposable droplet, on a Raspberry pi…
The customer doesn’t have to register. It’s like roll-your-own shapeshift with fiats. The code is simple with Nubits because there is no need to have an exchange rate feed for conversion.
The code doesn’t have to be stand-alone, or for trading Nubits per se. For example, a small webshop owner can add nubits to payment method to her shop by simple web programming based on the reference code. The possibilities are endless.
It’s up to the service owner how AML/KYC is handled according to local regulations.
We provide the underlying currency and simple tools to enable wide-spread adoption.