Feasible profit model discuss

[Sabreiib]

[quote]BM：
I don’t throw around the ponzi accusation lightly, but nubits is the first crypto I have seen that fits the description.
Propping up demand by increasing future supply hoping to sucker in a greater fool with the promise of more unbacked assets.
Sooner or later you run out of suckers willing to hold out for increased future demand at any interest rate.[/quote]

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He said NuBits is a ponzi, we need to clarify our profit model. This is really important. I’ll tell out one of mine

1. Custodians provide 100% reseve by puting all his/their FIAT income from selling NBT into building up buy walls.

2. Make profit from charging transfer fee. For instance, custodians sell wall is 1.02$ and buy wall at 0.96$, this assures Nu has profit after exchanges taking off their own transaction fee.

3)If profit is enough, we peg NuBits or other unit to 1$ buying power to offset the fiat inflation rate.

This solution may or may not provide good profit but it’s sustainable.

My another suggestion is that any custodian grant should be backed by his/their Nushare value which is kept by Nu system. If a custodian run away, his Nushares(several times of granted NBT value ) will lose and return to Nu sysytem so that we can make up for a loss.

In this way, we can assure that the issued NBT value is below our NSR market capitalization. Sounds like BTSX, but we vote for custodian to issue money, that’s the difference. Perhaps the NSR price drops after a custodian is granted for some NBT, but the buyers on free market will notice that and will not buy more NBT.

Only my two cents. Criticism is welcome.

[Sabreiib]

This was Hayek’s suggestion. we have two ways to control the quantity in circulation…

1. by selling/buying

We sell a little higher and buy a little lower, this can be adjusted to sell@1.02/buy@0.95 or even lower. (transaction fee)

In this way, we complish two missions in one step: make profit and buy back NBT. So that we can control the NBT quantity in circulation.

2. by lending

Nu system lends NBT to custodians by using their Nushare as a guarantee because nushares is our system’s only controllble asset. Nu sysyem could confiscate the nushares if a bad custodian run away. What’s the benifit from lending? Nu system will receive profit by custodian activity(transaction fee etc.)

In this way, we do two things in one step. Issue money and lending.

Interest rate is also a good way to control the quantity in circulation. But where is the interest(extra NBT) come from? I think it should be from our profit.

We sell@1.02 and buy@0.96, so that we have more fiat than the whole NBT value in the world, thus we can afford extra NBT.

If we manage to make profit, we are NOT panzi at all.

[masterOfDisaster]

We sell a little higher and buy a little lower, this can be adjusted to sell@1.02/buy@0.95 or even lower. (transaction fee)

In this way, we complish two missions in one step: make profit and buy back NBT. So that we can control the NBT quantity in circulation.

This is what was the essence of @Indigoman’s and my thoughts here:

Asymmetrical control in NuBits and the problem it creates

I find the idea great. It introduces a spread between buy and sell of the “central bank” represented by the custodians. But that spread kicks only in once you trade the NBT for something else at an exchange. As long as they are kept in circulation it is no drawback (and they are meant to be kept in circulation!). The +/- 5 % might be a bit too high, but I’d like to let a proper calculation of a feasible spread for the economists. I like this proposal, because it can be done without changing …

I think it is worth to discuss this buy/sell spread further.

[Sabreiib]

Agree, transaction fee(from buy/sell spread) is our stable profit.

Furthermore, we can negotiate with exchange about sharing tansaction fee because main volume belongs to custodians.

[masterOfDisaster]

This topic might be more important that we’re currentyl aware of.
The success of Nu might be connected to outline successful profit models.
I don’t consider selling NuBits a profit. Here’s why.

The thing is: if the dividends for the NuShares holders are paid with money that was earned by selling NuBits, then the system is in danger.
Because that money would be lacking to buy NuBits back. As long as you keep all the money that you earn by selling NuBits for buying them back, all is fine. If only a fraction of that money gets used for paying divideneds, the equivalent fraction of NuBits can’t be bought back.
…and then there’s the premium for parking. That premium should be paid by revenue that is made somehow. If you pay that premium with NuBits that are created out of thin air but not sold for 1 USD, then you have NuBits in circulation for which there’s no dollars available to buy them back.

Using a buy/sell spread to earn money is one idea. We need more ideas for generating revenue!

[Sabreiib]

Yes, this is the balance issue.

The dividend and parking interest should be backed by our revenue, if not, our system is in danger, maybe OK, maybe a bank run.

You know from beginning our credit/reputation is zero, we need to convince our customers that we can buy back all the issue NBT.

There are lots of speculators and hostile attackers on internet and anomynous, if we pay out dividend more than our renenue, they may find a chance to attack by suddenly sell all of NBT in their hands and spread rumors we are near bankrupt.

The public always easily get panic. Wealth investors may save our system once but can’t withstand continuously leaking. If we can’t maintain 1$ and build up a buy wall @0.9$, our reputation is damaged.

If all the shareholders sell their dividend(PPC) and build buy wall @0.99$, which means the dividend return back to system, that’s fine. If there are only several shareholders, maybe all of them are helpful. But if there are 1000 custodians, I guess quite some holders will NOT return money to system. That’s tragedy of commons: more and more selfish people ruin the whole thing.

[mquandalle]

That premium should be paid by revenue that is made somehow. If you pay that premium with NuBits that are created out of thin air but not sold for 1 USD, then you have NuBits in circulation for which there’s no dollars available to buy them back.

The other solution would be to pay the premium using newly created nuhares, see Asymmetrical control in NuBits and the problem it creates

[Sabreiib]

Let shareholders vote to dilute their own shares…And change the quantity of NSR.I am doubt about this solution.

[mhps]

We often hear that nubits transaction fee (on blockchain) generates profit; nubits transactions within an exchange don’t.

This is not true. If the spread is greater than exchange fee, LPs earn a transaction profit. If exposure to BTC price is greatly reduced such that it is smaller than transaction profit, Nu will ultimately make profit.

This is obvious in NBT/USD pair. If Nu greatly reduce loss from BTC exposure, on-exchange transaction volume can make profit.

[masterOfDisaster]

If the spread is greater than exchange fee, LPs earn a transaction profit.

That’s a side effect of the NuOwned gateways.
If the spread is big enought, it can even compensate parts of the volatility risk.

[Cybnate]

LPs earn a transaction profit

But profit is with LPs, which except for the gateways is not Nu.

[Sentinelrv]

So what will happen once B&C is released? NuOwned gateways operating on safe and secure B&C Exchange while ALPs and MLPs deal with the more risky centralized exchanges?

[masterOfDisaster]

That’s a justified question.

In my opinion this can at least be the start scenario for BCE.
Having NuOwned operations at BCE means the funds are as safe as they can be with multisig.
If it’s possible to have access to “BCE accounts” via multisig, you effectively merge T1 to T4 to a new tier.
Groups like FLOT can provide liquidity at BCE on T1 with funds that are currently on T4.

A reason to start the BCE business is, because it’s easier to make deals with Nu or FLOT, respectively, to sort cost issues out than to make deals with ALP.
Placing and deleting orders costs money.

If BCE wants the deep liquidity Nu can provide, they should agree on a compromise how to share the tx fees that are created with the order management.

You can try to compensate LP, that provide liquidity in ALP, by an increased compensation, but that will hardly match the true costs, if applied to “liquidity -per time frame” (which is the ALP compensation scheme) - the BCE fees are higher in tines of high BTC volatility than they are, if BTCUSD is rather stable.

[mhps]

But profit is with LPs, which except for the gateways is not Nu.

It will propagate to Nu’s liiquidity cost. Imagin that liquidity providing is a profit making business and LPs pay Nu so they can access price feed realtime and access deep on-exchange USD reserve.

[Sabreiib]

But profit is with LPs, which except for the gateways is not Nu.

Profit should be with LP. After almost two years operation of Nu, here is my summary:

1) Hardcore Function Sustainability(profitability).

Bitcoin’s hardcore function is mining, because mining activity itself is probably profitable, people are driven by internal incentive to do so, in fact the criticises focus on PoW is exact the profitability(sustainability) of mining in future.

Nu’s hardcore function is liqudity providing, because strict pegging itself(NBT/BTC NBT/USD) is not (enough) profitable at all, Nu has to compensate LPs which means high expenditure and run out of fuel within 2 years, Nu has much worse sustainability than Bitcoin.

2) Encourage people to hoard currency

Bitcoin encourage it by fixed quantity of 21million, and people are driven by internal incentive to hoard, sometimes, some of them earn a lot, sometimes they lose, but the speculation chance is there, lots of BTC have been kept by the public.

Nu’s strict pegging USD token has no incentive to hoard, seldom people will keep a continuous devalued paper money.

Therefore, Nu has done very badly on this two fields, if Nu has a future, it must provide profitable liquidity providing business and induce people to hoard NBT. Use loose pegging making LP as a profitable business, and add anti-inflation feature to NBT, because people love anti-inflation money said by Hayek.

If you guys continue to do business on “Rape Mode”, i.e Provide liquidity with force(expenditure), let people hoard NBT with force, otherwise decrease their balance, you will fail this business. The right way is “Seduce Mode”, just like Satoshi’s style.

Conclusion: before any smart community launching a Hayek money, Bitcoin is always the best!

[cryptog]

Use loose pegging making LP as a profitable business, and add anti-inflation feature to NBT, because people love anti-inflation money said by Hayek.

I see. That makes sense.
What about hoarding NSR instead of NBT?

[Sabreiib]

What about hoarding NSR instead of NBT?

When more and more hoard NBT, they also hoard NSR.