Indigoman, thanks for reply. Here are some contrasting views, although we are dealing with complex dynamics so I'm open to changing them.
It is impossible, especially at an early stage, to predict how much demand could fall at any point in the future and for how long. The only way to ensure the peg is to have an ability to remove as much supply as needed and for as long as required. Otherwise the buy-walls can always be depleted and the peg will break.
We agree that parking and paying interest in NBT will not achieve the desired protection. If the market perceives that spiralling interest rates become meaninglessly high, the system looks broken, they will eventually sell and break the peg.
Your idea of paying Nushares to burn NBT is interesting, but I think in the end if there is a demand shock for NBT (reflecting say that a smaller weight of capital has confidence in the ability to maintain the peg) then Nushares will not be attractive to the sellers either. They see NuShares as having limited growth, potential large dilution, and losses from the last attempt to maintain the peg (as they buy up NBT from their custodian reserves). This part of the market still sells NBT and breaks the peg.
What would instil confidence in my view is if the bulk of all sale proceeds were available to buy and burn NBT as required. This would be capable of reducing supply down to the level where the supply is less than the weight of the market maintaining confidence in the peg. I accept there would be volatility in the reserve, but its better than no reserve at all.
I think it is highly ambitious for shareholders to think they can keep most of the proceeds of NBT sales as you suggest. The value shareholders provide is building a system people can trust, not in selling a product that cannot be sustained. Paying a dividend from reserves each year is much more reasonable, similar to an insurer.