How does the liquidity model for NuBits work?


#1

Hello everybody! I want to write an article on steem. Can you give a link, or describe here the operating principle of the liquidity model, and the entire NuShares-NuBits system? I’m not very good at fluent English (I use an interpreter) and I will be very grateful for the simple description of the model.


#2

NuBits are sold for roughly $1 worth of a crypto asset and bought back for roughly $1 worth of a crypto asset. The fiat value of the crypto-asset reserve fluctuates with the value of the crypto-assets and from NuBit customers buying and selling their NuBits. When the fiat value of the crypto-asset reserve is below the target reserve level, NuShares are created and sold. Likewise when the value of the crypto-asset reserve is above the target reserve level, NuShares are bought from the open market and eventually burned out of existence.

We are currently in the latter scenario and performing NuShare buybacks. In my opinion we are still missing a NSR market with deep enough liquidity to handle a dramatic decrease in NuBit demand. With that said, the daily NSR buybacks nearing $20,000/day, I think that last line of defense for the NuBit peg may become a reality over the next couple months. Currently Nu has over 100% reserve backing, which is an accomplishment even Tether is having a hard time convincing people of.

This liquidity model has been contentiously debated on this forum since it was implemented, including by myself, but over the last few weeks I have become convinced that I was severely underestimating the model and the vision of the proponents for the model. I have exhausted as much skepticism as I could, but the model does make a lot of sense to me now.

Nu is doing a great job, and I’m very hopeful that this community will become densely populated with people who see what a disruptive project this can become in the wake of Tether’s current PR problem and the future of B&C Exchange.


#3

great comment!


#6

Two posts were merged into an existing topic: Conversations removed


#7