I designed Nu to maintain stable currency pricing as currency passed through cycles of increased and reduced demand. Cyclical changes in the level of demand are inevitable and the system can gracefully handle those changes while maintaining the peg. We can see that we are in the midst of a time of reduced demand as indicated by the recent decline in buy side liquidity. This means it is time to use interest rates as well as issuing new NSR where the proceeds will be used to buy NuBits or increase buy side liquidity. Shareholders won’t have the ability to create NSR by themselves using the protocol until the next protocol change is introduced. However, I have the ability to simulate this with the undistributed NSR I control.
It is true that much of the reason why this is needed is the losses that have occurred as a result of poor shareholder speculations. Shareholders have lost value in the BTC held by myself, KTm and Jamie. They have also taken large losses with the shareholder funds lost at BTER and Excoin. It only makes sense that shareholders would experience a dilution of their shares as we take steps to regain this lost value. Some people have the perspective that shareholders have been unlucky by having experienced these losses. While it is possible there is some validity to that perspective, it is not helpful. A much more helpful and empowering perspective is that shareholders made poor choices that increased risk far beyond what it needed to be. We are essentially a subset of Bitcoiners, who can be characterized as aggressive risk takers. So shareholders have taken risks on the value of BTC, on the reliability of exchanges and on the reliability of myself, KTm and Jamie. The risk taken on myself, KTm and Jamie have worked out so far. The speculation on BTC price and exchange default risk went quite badly, on the other hand. The notion of taking large unnecessary risks with network assets is very much at odds with trying to maintain a sure thing like a pegged currency. It won’t create trust in the stable value of NuBits. It is a serious mistake. It is contrary to the design I first revealed last April and have reiterated loudly ever since.
Here is a quote from my opening paragraph in Decentralized liquidity without counterparty risk not yet implemented, globally pinned for weeks, so that it has been the most prominent message on our forum. I believe it needs even more attention than it has received:
The urgency and prominence I assigned to this message has proved very appropriate. If we want the Nu network to succeed, we must send a strong signal that shareholders are committed to containing risk by implementing the design in full, and not a centralized, deformed variant laden with counterparty risk as shareholders have decided to do to date. I certainly wouldn’t bid on NuShares unless I saw shareholders make this commitment to quit their gambling ways. To demonstrate this commitment, shareholders need to pass this motion and they also need to quickly pass additional (existing) LPC proposals that provide liquidity with zero systemic risk by utilizing private funds. If this is done, our solution will have the credibility needed to have a successful NSR auction.
So, I’m proposing that we hold a blind auction for 100 million NSR in two weeks time. Bids would be accepted via Bitmessage or an email address dedicated to the purpose. Bids will only be accepted from business partners, which means you are or will be active in creating value for the network outside the scope of being a shareholder. The top price, lowest price and total funds raised will be revealed publicly at the conclusion of the auction. NBT, BTC or PPC will be accepted as payment, with a 2% surcharge added to bids when PPC or BTC is used. The exchange rate used for PPC and BTC will be the price at the time bids are due. Multiple bids from the same individual will not be accepted.
I invite comment on these proposed actions, both the implementation of the original design that excludes counterparty risk and the NSR auction. I see the former as necessary to ensure the success of the latter.