You are right.
And it will get better with fixed compensation scheme.
The thing is: T3 buy side has potentially millions of BTC. Every BTC owner can move funds to a T1 operation. With ALP it requires not much to do that.
So the compensation of T1 buy side should be enough to have sufficient funds there, to incentivize people for putting up orders. At the moment the compensation scheme doesn’t favour putting funds on buy side if the buy side is low.
I think we should wait for the fixed compensation scheme to be widely supported, before we try to find solutions for a problem that I expect to be much less urgent with a different compensation model.
If fixed compensation works like expected, his doesn’t require involvement of any of the higher layers.
The sell side is something that needs more attention. The amount of NBT in circulation is limited and the USD value of NBT in circulation way below the USD vlaue of BTC in circulation.
But that rather belongs in the sell side FLOT thread or in fact even better in the T3 custodian thread
I propose to sell to @zoro 15.8 BTC at a price of 0.00264722 BTC per NBT, which matches the lowest sell side order on Poloniex at the time of writing. The total sale proceeds will be 5968.53 NBT, rounded to 2 decimal places.
(Suppressed until some technical issues are dealt with)
We’ll sell NBT for about 1.003 to @zoro. 1.007 is the standard sell-side price based on the spread regulations. The 0.004 difference pays for volatility risk - about the same rate as Tier 1 interests, for the 36-48 hours of signing time. When @zoro indicates how many BTC he can buy, FLOT should prepare an unsigned transaction and calculate an NBT amount for @zoro to deposit. When FLOT confirms the deposit we should proceed to signing the transaction.
I have sent a pm to Jordan to perform an agreement. The 36-48 time frame is not convinient at all.
The liquidity situation could have been changed from the time i sent the NBT until i get the BTC. If we can have a time frame below 2 hours then i am ok to proceed.
It is much more convinient for NU and FLOT to use the sell/buy gateways of MoD but again the time frame is very very bad for this kind of operations!
This is exactly the spread I suggest for T3 operations. Just give @zoro some credit and let him be his own T3 custodian at that spread. If he puts up collateral, even better, but we should be extending at least 2 kNBT buy and sell side to him. That would give a time of response that is literally as fast as he can sign his own Txn and get it through the blockchain of volume up to his credit. Then, T4 can take their sweet time (48 hours or whatever) to refill it.
If you intend to just send the funds back to T1 the delay shouldn’t be a big problem - we still effectively pay you interest for the delay. Or put it another way, is there a price point at least 1.000 that you could accept for up to 36 hours of delay?
@nagalim I guess somewhere deep in my subconscious I adjusted the figures to fit yours, because 1.003 doesn’t match my arguments very exactly. NuPool’s rates are 0.24% per day so for 36 hours of delay there should be a 0.36% offset from the sell-side price. For 48 hours, the offset should be 0.48%. We may want to adjust for the lack of exchange default risk in the process, but on the other side of the coin we also need to consider the opportunity cost of the trader. The bottom line of the above considerations is that the offset (T1 sell side price minus T4 sale price) for a T1 LP on Polo should be less than 0.48%.
We can anticipate further needs to fund the NSR buybacks, and risk is lessening in the FLOT operations and the processes + toolkits.
For the FLOT members, can we adjust the consensus for FLOT to be responsible for 33% of the Nu BTC and request JordanLee transfer an additional amount to the MultiSig address?
Right now we only have 28.50005 BTC in FLOT BTC address, because of weekly buyback payments. That amount will not likely be enough for even the next week buyback.
I propose this time FLOT BTC address is refilled win 20% of T4 funds, that will amount ~120 BTC to continue with the process of transition to FLOT.
FLOT members agree? Individual transfer amount propositions?
Because half of FLOT (4 members) have asked for 20% or more, 20% of tier 4 funds as accounted for in the last weekly share buyback summary will be transferred within a day. That will be 127.8 BTC going to 3QDWJ2yqJ5iTUg6cSpAwxx95ba3NG97hzG.
I have seen the sell liquidity drop below 40% several times in the last few days, but no action was taken by FLOT. I would appreciate some clarification from FLOT about what their criteria for intervention is. I can understand a high frequency of intervention may burn out FLOT members, and we wouldn’t want that. I am just trying to determine what my own role should be right now. I am willing to provide balancing for the fees already approved by shareholders as a temporary measure. Shareholders would then have a little time to set up tier 3 liquidity providers like what Nagalim is proposing.
It appears FLOT is evolving toward weekly distributions for share buyback and may also balance tier 3 on a scheduled (weekly?) basis. Tier 3 liquidity providers would then handle day to day balancing and FLOT would only step in occasionally on an unscheduled basis when large and sudden changes in demand occurred.
Where does everyone see FLOT operations evolving to and what role should I play in that transition?
I don’t speak as representative - this is just my opinion as a FLOT member.
A drop of liquidity below 40% doesn’t worry me as long as it doesn’t stay for long there. And I think the (total) volume and the velocity of the change should be taken into consideration as well, but I don’t know how.
Regarding the threshold and conditions I consider action by a distributed T4 section necessary, allow me to quote from a draft I once created:
I think FLOT, FSRT or @JordanLee should not be responsible for balancing T1, but only T1-3.
I agree that the means to achieve that are not fully available yet (T3 custodians being one important part) and until they are some sort of action is required, even if only T1 is unbalanced.
The FLOT is by design to slow to balance within hours. I’m not talking of terms here. We all know what response time FLOT members have agreed to have. Not a single FLOT member is hiding behind these terms. But even if the FLOT signs as fast as possible, it might take several hours.
The recent transfer of funds to @NSRBuyback was broadcast in roughly 6 hours.
I consider that very fast.
Still it would be an order of magnitude to slow if T1 is requiring funds on one side.
The sell side can be filled easier than buy side, because the NBT multisig is 3 of 5 instead of the 5 of 8 of BTC. The NSR FLOT address is 3 of 5 as well, but doesn’t have funds and no charter when and how to use them.
Using NSR to support the peg way before BTC on T4 buy side are depleted is still being discussed controversially.
Not very easy to rely solely on the FLOT.
We all know that one drawback of the increased security that can be introduced by distributing responsibility is a slower response time and sometimes even the need to form consensus.
This is another reason why I tried to discuss about the creation of a set of thresholds and actions - to define in advance what needs to happen when; some discretion is always important, because you can’t know all in advance…
I have high expectations of different development advancements which are on the road map:
fixed cost compensation
T3 custodians
NuBot/ALP integration
All should help improving liquidity providing and balancing liquidity across the tiers 1 to 3. All are not yet available.
Until they are, I fear Nu is better off paying you, @JordanLee, a compensation for your efforts in balancing liquidity than endangering the peg.
My understanding of the FLOT role is that it’s more reliable if FLOT members know in advance that they will have to sign. They can try to arrange that with other appointments and maybe even tell in advance that they won’t be available.
Signing (with all the requirements for that!) on the spur of the moment is something the FLOT isn’t really capable of.
FLOT works better with a kind of schedule.
That makes sense and it gives the FLOT time to recognize a situation that needs attention with (hopefully) sufficient lead time to arrange transactions.