[FLOT] I wish we had talked about that before

[masterOfDisaster]

Hello community,

I’m going to copy a conversation between the FLOT members which I started 20 h ago as a private conversation.
I thought it might be good to discuss the matter to find a common ground within the FLOT first. But now I think (we had a friendly reminder from @mhps, thank you for that!) that this belongs in the forum and needs to be discussed openly.

I don’t know for what reason, but sometimes quotes within quotes don’t work properly. I’m sorry for the inconvenience.
Time stamps are UTC
approx. 15:00:00 2015-12-05 , @masterOfDisaster:

FLOT BTC Operations (buy side)

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)

First, I come to a different number of BTC: 10, because the buy side has 10 BTC and the sell side 30 BTC (give or take). 10 BTC need to be moved from one side to the other on Poloniex.

Second: shouldn’t we require the trading partner to deposit the NBT (or in other cases the BTC) to a T4 multisig address first (and how many confirmations do we require?) before we send money?

Third - and just for the record: my buy side gateway on Poloniex (deposit address known to FLOT) is up and running (just in case we don’t find anybody willing to trade until the 10 BTC on buy side are consumed)

nud getliquiditydetails B | grep "BFGMPykfKxXZ1otrCZcsbnTwJjKHPP9dsP" -A 9
    "BFGMPykfKxXZ1otrCZcsbnTwJjKHPP9dsP" : {
        "1:NBTBTC:poloniex:0.3.2a_1449088964364_c6087a" : {
            "buy" : 0.0,
            "sell" : 0.0
        },
        "2:NBTBTC:poloniex:0.3.2a_1449088964364_c6087a" : {
            "buy" : 0.26,
            "sell" : 0.0998
        }
    },

[masterOfDisaster]

shortly after 15:00:00 2015-12-05

If someone would be willing to sell us 10 BTC worth of Nubits and put them on polo sell side I’d say the walls are fine for now.

shortly after 15:00:00 2015-12-05

There’s a lot to deal with. I’m going to ask zoro to deposit before I personally sign the transaction.

I’m stuck with considering volatility issues. It would be nice to ask for a deposit larger than the NBT amount, and then refund the difference when the trade eventually occurs. But that means we require two transactions by FLOT to fulfill one, pretty clumsy.

For Poloniex tier 1, the difference is 20k NBT, so we need 10k to balance the wall.

[masterOfDisaster]

approx 16:00:00 2015-12-05

I’m going to ask zoro to deposit before I personally sign the transaction.

I already did:

I think the effect of fixed compensation is even more important for situations like the current one. Would you be willing to do business with the FLOT - sending NBT to a T4 FLOT address and receiving BTC in turn to put the BTC to Poloniex buy side?

I’m stuck with considering volatility issues.

Anything but doing the trade based on the rate at the time the trading partner deposits, would be unfair for the trading partner.I for one wouldn’t even think about sending the FLOT funds not knowing what I receive.The exchange rate (based on what feed?) at the time of sending the deposit to the FLOT address needs to be used for the calculation - only I don’t know how to retrieve that historical information.For now I think we as the FLOT needs to make a contract saying that we send x NBT for y BTC or vice versa.Anything else seems to be wrong.

[masterOfDisaster]

approx. 16:00:00 2015-12-05

In case of sending BTC, for example, settling the deal after 30 hours is unattractive. Won’t be too bad if it was agreed upon, but the delay could make it costly enough that few people are willing to do business with FLOT. We can make the refundable case an option; if the current price is 400, the trader deposits 600, and we refund the appropriate amount in NBT when there’s a difference.

It will also be less than ideal that we receive BTC but end up not getting enough signatures…

[masterOfDisaster]

approx. 16:00:00 2015-12-05

We could use 2 time points, first one is the moment when we agree upon a sale and basically state:

For now I think we as the FLOT needs to make a contract saying that we send x NBT for y BTC or vice versa.Anything else seems to be wrong.

The second part is if between the moment of agreement and the time we are ready to send the transaction a significant switch in prices has occurred that turns out negative for the person, we agreed to make the transaction with we compensate this difference by sending him this difference in a second transaction.

So person X accepts to sell 1000 Nubits for 3 BTC, between our agreement and the actual moment our transaction is signed and ready to go BTC price goes down 50% this means basically person X has a loss of 50% we agree to send him the difference (in this case 3 BTC) in a second transaction to compensate our slowness.

[masterOfDisaster]

approx. 16:00:00 2015-12-05

In case of sending BTC, for example, settling the deal after 30 hours is unattractive.

I don’t understand - if I have the opportunity to sell NBT or BTC now at an exchange at rate x, why should I accept any other rate when doing business with Nu or the FLOT as representative, even if that means that there’s a delay between sending and receiving funds?

We can make the refundable case an option; if the current price is 400, the trader deposits 600, and we refund the appropriate amount in NBT when there’s a difference.

Why should anybody agree to this?

It will also be less than ideal that we receive BTC but end up not getting enough signatures…

Right. That needs to be insured by Nu, whose representative the FLOT is. If FLOT fails to sign persistently, NSR holders need to be bound to pay by grant for the loss of the trading partner. If the trading partner doesn’t accept and NSR grant (to compensate for not received BTC), Nu needs to grant NSR to somebody else, who sells them and pays in BTC.

[masterOfDisaster]

approx. 16:00:00 2015-12-05

So person X accepts to sell 1000 Nubits for 3 BTC, between our agreement and the actual moment our transaction is signed and ready to go BTC price goes down 50%

Please tell me - would you really do business based on such terms?Or would you rather sell your NBT at an exchange instantly, knowing what you get?Even if you sell so much that you break the peg by a few percent, you might still be better off than taking this risk!

I see no fair option other than agreeing on an exchange rate and sticking to it no matter what.

[masterOfDisaster]

approx. 16:00:00 2015-12-05

Well in my proposal we do agree to an exchange rate, and only if this turns out negative (say it takes FLOT 30 hours to sign) for the one trading with us we compensate the amount he lost by us being slow. I’m basically proposing the same as you are but with an added clause to compensate the one selling to us in case the rates change against his interest in the time we take to sign a transaction.

[masterOfDisaster]

approx. 16:00:00 2015-12-05

Sorry, I understood that wrong.Looks like my Poloniex gateways are not the worst idea - they don’t have that problem, because they deal with Nu funds. Changes in exchange rate play no role like they do when doing business with external parties.

But back to your proposal - how would it look like if the change of rate is not against but for the interest of the trading partner?

I still think settling a trade based on a rate and sticking to is it not that unfair, if both trading partners are aware of the implications.

I consider this post important:

Current Liquidity

Well then it’s not a fair comparison. The correct comparison would be to start the timer after at least 5 FLOT members say they will sign the Txn and stop the timer when they actually sign it, which I think you will find takes a matter of minutes.

If the terms are settled as soon as at least 5 FLOT members (for buy side activity) are aware of the situation and ready to sign, there shouldn’t be very much delay between receiving NBT and sending BTC.

Would we as FLOT accept burned NBT as well?

[masterOfDisaster]

approx. 16:00:00 2015-12-05

If it moves for the interest of the trading partner this is his profit. It should incentivize us to sign as quick as possible so as not to waste Nu funds.

[masterOfDisaster]

approx. 16:00:00 2015-12-05

However fast it is we can’t beat a 20% price swing. The over-deposit plus refund deals with that.

If we’re dealing with tier 3 then 36 hours is probably not too bad whether or not it’s Nu’s money. With a healthy tier 3, mostly likely the operators would be relatively proactive in balancing their funds, so when they trade they don’t expect to liquidate the funds soon.

With tier 1 it’s trickier. But now I think having a smaller spread compared to exchange price is probably fair enough. ALP pays about 0.25% interest per 24 hours; so if the NBT or BTC is about 0.4% cheaper than the spread there would be enough incentive

[masterOfDisaster]

approx. 16:00:00 2015-12-05

I will be away from my computer for some hours, but try to keep an eye on the situation as good as I can. Especially if there’s need to sign a transaction I should be able to do that even from my mobile phone.
At the moment it looks like we are 2 people short to have the minimum of 5 signers.
According to their profile information @mhps, @jooize and @woodstockmerkle were online recently, but I haven’t seen anything FLOT related from them.
So I’m not sure whether they are aware of the situation.

I have the private keys stored in the mobile phone version of KeePass and take them wherever I go

edit: don’t forget that the traded funds are meant to arrive at T1. There they will get traded, but not at the will of the LP. Having an agreed exchange rate with the FLOT doesn’t sound very bad from that perapective.

[masterOfDisaster]

approx. 23:00:00 2015-12-05

Sorry I will be only available to sign BTC txs in 12h or so unless I can work something out on my smartphone.

[masterOfDisaster]

approx. 23:00:00 2015-12-05

I highly recommend reading this:

The cointoolkit can speed up the signing process by orders of magnitude!If you have your privkeys at hand (safely stored in something like Keepass for Android or iOS), you can sign transactions from your mobile phone!

[masterOfDisaster]

approx. 03:00:00 2015-12-06

I won’t be online in the next 8 hours.

I strongly urge to move this discussing to the open forum.

[masterOfDisaster]

approx. 12:00:00 2015-12-06

I agree.This is nothing that should be kept away from the community/NSR holders.I thought we would be able to reach a consensus about some of the topics and present what we consider common ground to the community, but this can and should be discussed from others as well.I’m going to copy the posts to a thread in the forum.

[zoro]

Thanks for this thread.
It seems that flot is not fast enough to handle T1 balance. Even if the time frame was less than 2 hours! Response should be fast since the markets are fast.
I propose for Jordan and/or fsrt to take the role of T3 custodian for now.

[masterOfDisaster]

It seems that flot is not fast enough to handle T1 balance.

Some might have had other expectations but looking at the terms of the FLOT members it’s quite obvious that the FLOT is not designed to balance T1.
T1 needs to be balanced from T2, which in turn gets balanced from T3.
And if T3 starts to get imbalanced from balancing T1-2, T3 needs to be balanced from T4.

I often thought and wrote T1-3 would need to be imbalanced to activate T4 balancing.
Now I think that’s wrong. T3 needs to get imbalanced by balancing T1-2. In total T1-3 could still be balanced then.

The conditions to balance T3 with T4 funds should be:

• T1-2 balanced (or in general: according to the compensation per side; with equal compensation 50:50 ratio of buy side to sell side is considered “balanced”)
• T3 imbalanced to some degree

[Nagalim]

We should give @zoro a credit line a la the T3 custodian thread. @zoro could promote funds T3>T1 himself (at a 0.3% spread in favor of T3) and put them on exchange. We can work on our ability to audit and report the liquidity. So when trying to bring BTC to exchange, if the Bitfinex price is $400/btc, @zoro could pay 401.2 NBT/BTC. Then, assuming the price doesn’t change, he could sell the BTC for something like 402 NBT/BTC on exchange, plus the ALP rewards.

[Nagalim]

OR

@zoro could withdraw a portion of funds from T1, moving them to T3. @zoro can now give @henry T1 money to put directly on exchange at whatever price they agree on. Because they are independent actors and Nu only pays @zoro after each transaction with @henry for the total time the liquidity was provided, the deal has every incentive to go according to contract.