Nu started to be so complex so I was thinkning about a future situation where the Code itself is a robust system to:
Obtain close “enough” NBT/Usd price feed
Obtain NBT/NSR price
provide both NBT and NSR liquidity on daily basis.
Inforce a rough peg around $1, so LPC’s and pools are not critical any more.
reward nushares holders with both automated buybacks and automated dividends, which basically support NSR price and therefore support NBTs trustness.
First of all, all the following ideas are not mine (except for the automated dividends system) sorry for not linking the original posts and papers as I post from mobile.
Second, I know it seems too naieve and I admit not to be a Nu expert, but I thought about this for too long so I have to post it.
What I wish to see in Nubits code in the future, can be explained as the following algorithm that runs every time a new block is accepted:
//daily duration check//
Is BlockChain height dividable by 1440?
No? >> accept NBT/Usd price vote (more or less than $1?)
Yes >> proceed
// finish daily price voting //
Not sure if we keep the voting to the NSR holders or would we need an open voting for all NBT to get much more voters who are more geographically distributed also.
But if needed the Code will distribute the reward + voting fee to the most common vote.
// Seeded auction //
This was explained in detailes by more qualified members than myself but it basically will either provide NBT or NSR sell liquidity each day and effictively Supress any market movement away from the peg with daily 1% of the NBT market cap.
But the most valuable advantage in my opinion that it will provide the Code with a valuable piece of information: what is average NSR/NBT price.
// Check If Nushares contains more value that it needs to back Nubits //
Once the Code have NSR price in Nubits it can calculate NSR market cap in relation to NBT market cap
if the ratio is more than 3 >> proceed
// Daily dividends //
I assume that developing seeded auctions will give us the appility to pair NSR and NBT adresses!
If this is possible, the Code will distribute 2/365% of the the average NSR market cap through the last 365 days in NBTs to Nushares holders Paired NBT Adresses relative to how much NSR they own.
if not, code will distribute the same value in NSRs to all the NSR adresses where they can be exchanged manually for Nubits in the next days seeded auctions.
…
Interesting thoughts:
1- If we used open voting by all Nubits users we can even roughly affect the NBT price offline as the voting will use the inputs of distributed users and how each of them locally access Nubits and how much they pay to aquire them.
2- Through auctions, every nushares holder will be a possiple local offline liquidity provider for Nubits.
3- the daily dividends will not affect the NBT or nushares at all since you need the seeded auction to burn Nubits just one time to absorb the dividends issued through ~70 days! [ (1*3) /(2/365)]
4- Nushares holders will have single metric to keep their eyes on which is the NSR market cap / NBTs, and this is the same metric that NBTs users will care for once the liquidity is available, then share holders will try rvery thing they need to enhance this metric and theirfore their profits.
5- I didn’t mention other Nu coins that are planned to be issued for the simplicity, also I am not sure yet if this system will function in a multi coin ecology.
I hope this isn’t a total mess and it could be helpful and considered by the community.
The valuable thing, in my opinion, is the NSR/USD price that the auction provides. However, one cannot simultaneously adopt the picture of the auction being an indicator of NSR/USD price and picture the auction as a mechanism to keep the peg. It’s an interesting dilemna, where you can have your cake but not eat it too.
The issue is that a shareholder that sees a low NSR/USD price will want to buy while often also looking at a weak NBT/USD peg. Without liquidity providers, this conflict will basically doom the system, in my opinion, because it enables an attack vector:
Have NBT
Sell for NSR
Vote to Pump NSR short term and let the peg fail
Sell NSR for NBT
Watch the system recover and dance that you’re back at step 1 with more NBT
With liquidity provision, the peg won’t break and no one can profit off of speculating that NBT will go down by 5%. Liquidity provision basically nullifies that attack vector by creating slack in the system that the attacker needs to pay for in order to affect the NSR price directly.
So if your question is “Will we ever be able to replace T1-4 with just T6?” my answer is I doubt it.
So you think liquidity provision is a very robust way to maintain the peg. Historically it has been proven true.
Conversely, how do you think Nu will be able to scale?
In other words, what is the biggest challenge that liquidity provision entail in order for Nu to deal with hundreds of millions of NuBits in circulation?
The answer to this is the OP, actually. Basically, everything @Raythma described is what we need for Nu to scale properly. However, we will always need to struggle with liquidity provision and market making (T1+2), or at the very least reserves and exchanges (T4+3).
It’s interesting to compare how BTS deals with this, by creating a virtual spread on their BTS/BitUSD price upwards of 100%. Note that the end effect of this is just to ensure that no one ever uses their service. It’s much better to use liquidity on the pegged asset side than a spread on the floating asset side, in my opinion.
Nice to find that you agree with me that this should be the future of Nu.
May be you are right about T1, but as I said, if the share holders found that they need it to keep profiting through daily Dividend, they will manage it and any other nessecary stuff, as long as profiting is guaranteed at the protocol level as long as NBT is legit.
But, I wonder why would any one invest in hurting the peg while holding NSR or NBT as they can both reach the bottom as a result of this investment?!
Also, is losing the peg for a day or two by some spread, say 5% is that big deal? I mean no one can buy or sell NBT for perfect $1 now, considering the fiat to crypto hassle, transaction and exchange fees, so keeping the peg at exchanges means nothing, while with enough distribution of NSR, buying and selling NBTs locally will be achievable and profitable but still cheaper than the exchanges.
As long as enough NBT liquidity is available for $1 at least once every week, people will always use NBT as perfect one Usd.
If NBT equals 0.95 now on the exchanges, I will still accept NBT for my online goods and services, nowing that I will definitely have the opportunity to sell them for more than or equal to $1 any time before I have to pay my pills!
Dont you agree?!
Any way, If we still need T1, it should be incentived automatically rather than managed manually, one way could be an Abra-like app with reputation system to reward tellers who sell or buy NBT for the least spread away from the perfect $1
Edit: such an app will either need a proof of individuality, or sacrifice privacy with regestring and central servers.
By the way how much of time would it take before somebody profit from Nu more than Nu does, by building a cnetralized wallet with much less transaction fees than Nu can afford?! I am worried about that for so long with no guarantee that we could find a turn around.
NBT dividends are a good addition even if it can’t support the entire Nu. For instance, if the sell wall is short by 10k, then 8k can be injected to exchanges, and 2k goes to dividends. It can also create some natural volume for NSR/NBT if shareholders decide to invest back into NSR, or it can go to the sell wall.