Lack of commitment to liquidity is our biggest threat now

#45

I’ve agreed with @JordanLee’s intermediary currency strategy since he first presented it. The cryptocurrency market is mainly made up of trading and speculation with payments being only a very small part of that market. The fact that the payment side of the market is so small is most likely due to the fact that most cryptocurrencies like Bitcoin are volatile in price.

But we can’t simply turn the payment market around and significantly increase its size just by introducing NuBits as a stable crypto. Our network is too small and we don’t have the necessary liquidity, reputation and trust level in order to significantly impact the size of this market. Refocusing our attention on such a tiny market and reducing liquidity may likely mean the end of Nu.

I see the crypto payment market as our long-term goal and Jordan’s strategy as our only chance of reaching it. As Jordan said, the time we were providing our highest quality liquidity was the same time the value of NuShares and the usage of NuBits were at their highest level, $3-4 million in daily trading volume. Our product was in high demand. It’s a stark contrast from where we are right now.

I believe we need to focus on providing high amounts of liquidity for as tight a spread as possible. We can regrow and maybe even surpass our previous volumes if we can do that. If shareholders don’t fully commit to this strategy, then I fear we will never reach a state where becoming a payment network is possible. As Jordan said in one of his quotes below, we have to create this role for NuBits in the cryptoasset trading markets first. I believe it is our only viable way forward.

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#46

Or it could be mistaking correlation for causality.
A lot of cryptocurrencies went down since March while e.g. Ethereum started to rise.
Maybe people shifted some investments? I don’t know.
But I know that continuing the path of Nu on assumptions rather than evidence is very likely dangerous.

What revenue does that trading on exchanges bring?
We don’t know. Will it create demand for Nu?
Why not raising park rates permanently to create demand?
Because it’s no sustainable business model?
…could be a reason…

Nu was new and interesting. Was it really because of the trading volume? Who can tell that?
Can anybody tell whether that trading volume made revenue or cost money and how much?
Trading on an exchange costs 0 fee. So there’s 0 revenue from that by fees.
If Nu can’t make revenue from the trading itself, it’s a costly endeavour, because either LP in ALP require a high compensation (decentralized liquidity) or Nu loses money in the Nu funded operations.

Wanna know whether it’s that simple to prop up the NSR rate?
Stuff some tens of thousands of USD in a gateway operation at Poloniex, configure a tight spread and watch,
Or increase the compensation of NuPool while decreasing the spread.
Or have NuLagoon move the funds from NuLagoon Tube into the Poloniex MLP at a tight spread.

Why is no single comment here?

I might back out of this dicussion for now.
I think I’ve addressed my concerns.

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#47

I tend to agree. BTC price has been in a upswing, causing sell pressure in NBT and SNR, reducing T4 and buyback. We are in a cyclic economy.

Interesting fact to find out. The tx fee and liquidity cost in that period can be calculated. i don’t know how to pull the tx fee data out from the blockchain and where the fee record for the liquidity operations.

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#48

I don’t know enough about liquidity operations to make any arguments of my own and I know we don’t have much data to go on, but Jordan’s strategy just seems to make sense to me. These are only my opinions here without having an indepth understanding. Jordan called Nu a liquidity engine in this thread. I think about it like this, using his engine analogy…

Nu started up and was running fine, but then we hit a bump in the road and the engine stalled out (exchange hacks and low liquidity). What we need to do is jumpstart the engine (high liquidity, low spread) to get the vehicle moving forward again (higher NuBits demand). The process of jumpstarting and keeping this particular engine running is likely going to be very costly though (high liquidity fees). As long as we keep the engine running though, we’ll continue to pick up speed (higher trading volume). The cost of keeping the vehicle moving forward will start decreasing (lower liquidity costs through competiton). At some point in the future, the engine will achieve a state of self sufficiency (intermediary currency role surpassing Bitcoin, extremely high volume and liquidity. Well known and trusted reputation leads people to start using Nu as the payment network it was designed to be, finally creating real revenue through fees). Without jumpstarting that liquidity enigine though, the vehicle will remain dead on the road and it will be impossible to achieve a state of self sufficiency. Again, these are only my opinions.

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#49

I’ve read so much, but what’s the reason of NBT demands declined? No idea.

#50

One of the biggest problems of Nu right now is that we do not have a precise idea of Profit and Loss.

It seems that shareholders, including me, seem to forget that Nu is a business, a decentralized one but still it is a business.

So the primary goal is to make revenues.

And to make revenues, we must remind ourselves, I believe, of the value proposition that we offer to the business world out there.

It seems that we do not have any other market than the traders market right now.

So I must say that I agree with Jordan here: we need to focus on the traders and the hedgers market for a while.

In order to get revenues (= sell NuBits in bulk), we need to bring NuBits to market, which means liquidity.

That trigger immediately costs.

But costs are ok if we make more revenues.

So now the question is: will a generous liquidity trigger more NuBits sales than the costs it entails to reward its provision?

In order to answer that question, I believe we have some historical data that we need to dig up.

We need to know when we sold NuBits since inception.
Then we can ask ourselves: what was the level of liquidity when we made those sales?
Was a high level of liquidity the cause of those sales? is a crucial question.

I think I will need to resume working soon on the monthly P&L but perhaps @JordanLee or someone has keep track of when and how much we sold NuBits at times over the life of Nu.

2 Likes
#51

Agree, A DAC is still a company, and a company can become bankcrupt.

Nu’s BTC/NBT pair makes Nu into a BTC speculation activity, because none BTC speculators can precisely predict the BTC price trend, LP may get profit or loss randomly., so the future of BTC/NBT pair is uncertain.

The biggest weakness of Nu is the uncertian revenue, while B&C has a relative stable revenue from trading fee. People believe that if B&C stop issuing BKC, the BKC will consumed up sooner or later, this gives the confidence of BKC’s FIATvalue. However,I have little confidence with NBT’s pegging.

Assume that in this summer BTC price soars to 1000$, and an old BTC whale sell 1000 BTC for 1 million NBT to keep his BTC speculation profit. Unfortunately, in the end of this year, BTC declines to 400$, he begin to dump 1 million NBT for 2500BTC. Can our buy wall withstand this kind of dumping? From tier 1 to tier 10, bring up all the money, whatever the **Bot!

We may call help to borrow BTC and give high rewards to lenders, but that whale’s sell wall is at 0.9$, the Market believe Nu is insolvent, NSR price plumbs, situation get even worse when shareholders burning NBT for NSR. In the end, the whole NSR market capitalization less than our debt: NBTs on his hands. The less money you have, the less people/banks wanna lend you money. :frowning:

Is this possible? Since I have no confidence on NBT’s pegging, why should I use NBT at all?

#52

The Impossible trinity (also known as the Trilemma) is a trilemma in international economics which states that it is impossible to have all three of the following at the same time:
1)A stable foreign exchange rate
2)Free capital movement (absence of capital controls)
3)An independent monetary policy(such as interest rate)

Nu as a centralbank, a stable foreign exchange rate is the hardcore fucntion, 1:1, NBT vs USD. Here USD is the foreign currency. So option1 is the must.

Option2 is still the must, since in cryptoworld the free movement is inevitable.

So we have to give up option 3, we cannot vote for parking rate. What’s the interest rate of USD in America now? All in all, if we make NBT=1$ and cannot control capital movement(of course we cannot), Nu is just a slave of FED, that’s why some liberalist dislike FIAT strict pegging cryptos.

For me, as a Hayek fan, dislike FED and any other central bank, they are monetary monopolists.

#53

So now the question is: will a generous liquidity trigger more NuBits sales than the costs it entails to reward its provision?

More Nubits sales does not mean more profit. An example as I raised above, if a BTC whale buy 1 million NBT in June,2016@1 BTC=1000NBT and dump NBT in Dec.2016@ 1BTC=400NBT. This is a disaster, the proceed of selling NBT is temporary, all NBT wil rush to exchange when Nu in danger.

#54

Is it though?

I have been ruminating over the function of nubits. There was a curiosity recently if a pool of currencies would be more stable, like the SDR of the IMF. The problem with that argument is 1.) IMF began stable exchange with a fixed priced to gold 2.) currencies can become contaminated and volatile and infect stronger currencies

Part of the problem with demand for nubits is that it doesn’t have any volatility. The crypto space is nothing but a Vegas for geeks, big dreamers, and sharks.

This problem isn’t nu, it’s the dollar. It’s the wrong instrument to peg to. Nu needs to break ties with being paired with another currency.

Silver would be a great asset to fix to, where settlements procure the immobile storage of physical.

Further, the dollar is toxic. There has been a global consorted effort to undermine the dollar. Eventually, you guys are going to have to scramble to find something else. That is just reality.

#55

Precisely. :+1:

How about the idea to offer better gamble tools, which is built on top of NuBits, for them? Would like to hear your comment on NuLagoon’s new pool proposal.

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#56

Would be nice to have a 1broker.com with Nubits. I talked to JordanLee about that a while ago, but if I remember correctly he said it can’t be done in a decentralized manner.

#57

According to inflation rates, there are three types of currencies.

1)inflated. eg FIAT, loved by central banks

2)deflated, eg, gold, bitcoin, loved by liberalist? gold fans

3)relative stable buy power curency, advocated by Hayek.

2 Likes
#58

Just check the period where BTC went from 200$ --> 400$.
Nu was in better shape than it is now where BTC is “stable”?
I think that the low NU transaction volume started the time where ALP and MLP
were missing from Poloniex and only Nubot gateways were keeping the peg with a 2-4% spread!
That is why i agree with JL, although i have little experience in economics (in fact what i have learned is from this forum!)
And it is very possible that our efforts to keep the peg had an impact in liquidity operations.
Moreover, don’t expect the use of Nubits for payments even for some more years!
All my friends still have the same old question "how can i be sure that they will buy my NBT back at any time and in any quantity?"
No answer to that, yet!
Still riding the learning curve :slight_smile:

#59

Start small, think big is my answer. Depending on your disposable income it is relatively safe to have some ‘change’ in your wallet. Just start with what you had cash in your wallet 10 years ago or ask your parents for those who never had.

Motivating people to hold some cash and showcasing them how quick and easy it is to spend will go a long way. The challenge (cost and effort) is still on exchanging the fiat you earn quick and easy into NuBits.

Having said the above that is the mid to long term strategy. Short term liquidity is the indeed the answer I believe. I just struggle with the cost of it and there are barely benefits in the short term. We have to play short term losses and hope for long term gains. Tough and possibly rough game indeed.

I do believe in decreasing the spread to <1% for a first tier which represents up to 75% of intended liquidity on a pair. The other 25% should have more friction/cost and can be up to 1.5%. The latter can be provided by tiered ALPs or Nu funded NuBots/PyBots as we have now. This doesn’t need to increase the costs significantly when keeping the target liquidity on Poloniex roughly the same.

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#60

Good question. But before NBT becomes a storage currency, why not use it as a payment tool?
There are huge content on the internet, every day when I check some papers, articles, and post thread on forums, download something from forum, I am usually asked for “credit”,“points”,“fuel” etc. With unhappiness, I have to deposite some USD via paypal to buy those ridiculous “gasoline”. In fact all this can be replaced by NBT.

if Youtube is far from us, let’s talk about the adault website! When you pay several bucks for something on internet, you don’t care about the long term pegging safety, as long as the content providers can transfer their NBT to FIAT, they don’t care either.

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#61

The higher the liquidity and the lower the spread, the higher the resulting costs.
Liquidity creates no revenue. Revenue may be made from the spread, though.
So there’s need for a spread that is high enough to compensate the costs of liquidity provision at least in parts.

The vehicle is moving forward. The tank is not exactly full at the moment and we try to reach a destination. We are on fuel-saving mode and for good reason.

High liquidity at low spread doesn’t necessarily create demand for new NuBits to be sold. It might just cause more trading.
Trading at exchanges creates no revenue!
Using NBT for transactions creates revenue.
That’s currently the only revenue model Nu has.
Other potential revenue models like lending aren’t even modeled!

But even if increased liquidity creates demand, selling additional NuBits creates additional liability for which we have no insurance and NSR buybacks in the illiquid NSR market caused surges of NSR rate.
So NSR buybacks are currently not the ideal instrument to avoid BTC volatility.

…the risks of an increased liquidity provision stay reduced.

Nu needs to do some homework, before it’s wise to increase the liquidity at a reduced spread.
One part of that is to find a sweet spot at which Nu (or the LPs) can make some money from the spread to compensate the costs.
That requires data we currently don’t have.

Other parts of the homework are ways to control the risks caused by Nu’s liabilities

  • BTC volatility insurances are required
  • alternatively/additionally the NSR market needs more liquidity (to trade BTC for NSR back and forth without loss from moved NSR rate or spread)

Even B&C Exchange can’t fix those two important tasks out of the box!

The spread was much smaller.
I need to look in the old logs, but off the top of my head I dare say it was most of the time <1% and only after I realized that I can’t keep sustaining that alone up to 2%.

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#62

Having T1.1 at <1% (maybe even much lower), T1.2 at >1% makes sense.
But I’d like to put the weighting upside down: 25-40% on T1.1 (ALP), 60-75% on T1.2 (Nu funded bots).

Those who are in a hurry to trade big amounts of NBT may pay a price for that (buying/selling into the T1.2 orders).
A considerable amount of liquidity is always available at a low spread.

This way Nu can provide a tight spread by decentralized liquidity operations (ALP) while providing backup (that actually might compensate big parts of the costs by the spread) through Nu funded liquidity operations.

Just for the record: T1.1 can be provided by Nu funded operations, but that is a different matter.
This is an attempt to evaluate that: [Passed] Dual side gateway at hitBTC by masterOfDisaster

1 Like
#63

Glad to see more and more talking about the revenue, but sadly Nu has little revenue now.

If Nu is in short of profit to pay for the LP, situation is very serious. Then let’s take some drugs, several years ago, my mind was blow off when reading an article about the internet porn industry, saying (in 2006)

General pornography stats
Every second 28,258 users are watching pornography on the internet
Every second $3,075.64 is being spent on pornography on the internet
Every second 372 people are typing the word “adult” into search engines
40 million American people regularly visit porn sites
35% of all internet downloads are related to pornography
25% of all search engine queries are related to pornography, or about 68 million search queries a day
One third of porn viewers are women
Search engines get 116,000 queries every day related to child pornography
34% of internet users have experienced unwanted exposure to pornographic content through ads, pop up ads, misdirected links or emails
2.5 billion emails sent or received every day contain porn
Every 39 minutes a new pornography video is being created in the United States
About 200,000 Americans are “porn addicts”
All sites in the world, 12% of porn sites, which means that there are about 24,644,172 pornographic websites. According to Google’s advertising services, Double-click statistics, traffic and data traffic porn sites is extremely impressive, before the global unique visitors 500 sites, dozens of pornographic Web site. In all search engine requests, and one-quarter are related to pornography, in all Internet downloads, more than a third of all pornography. The world’s largest monthly visits porn sites Xvideos is staggering 4.4 billion. Users on pornographic websites far more than the residence time of the residence time on the news page, because the porn sites tend to offer more video.

No, this is not moral, but if Nu is really in need of revenue, just contact them because that industry is very fond of new technology.ie New technology Pioneer! Below are the new technologies supported by this industry and become popular finally.

Broad Band internet access( 1990s to 2000)
Online Payment (in mid 1990s!)
Online streaming media player(2000s)
O2O (online to offline)
VR (now!)
Porn also promoted the development of the hard disk industry. The first use of porn sites or spam, pop-up ads, malware, browser hijackers, and other technology, domain name hijacking “pioneer.”

I don’t know whether it’s legal in some big countries, but this is the last resort before Nu starving to death. Reasons are below

1)People browsing this kind of content usually want to be anonymous, any leaking information of ID, email address etc is joyless.

  1. Some people may not view such content for months, but still need to pay fee monthly. What they want maybe just pay for what they are interested.

  2. Website owners are among the most new tech welcomer.

  3. People usually don’t care much about the price(1$ vs 1.1$)when they find a favorite video.

So we can just develop a browser plugin that connect to NBT wallet, so that whenever customers wanna get content, just click the mouse and payment done for specific content. Of course, we may negotiate with the website owners that 3-5% of payment is destroyed by default.

Is this the potential big revenue for Nu?

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#64

And don’t forget that once BitBay is pegged, Bitcoin investors hedging their profits by converting to BitBay will cause the volume to skyrocket!
What better way is there to do that now? Nubits has issues.

From: https://bitcointalk.org/index.php?topic=1456464.0

Can anyone verify this rumor?