Lack of commitment to liquidity is our biggest threat now

#21

I don’t think anything in my RNA proposal was poorly disguised - it is quite obviously a default mechanism. Shareholders continue to ignore contingency planning for a scenario where 90% of NuBits demand evaporates overnight. Default preparations are not a standard part of our operations; it is an end-game plan to preserve the network. To avoid these preparations is irresponsible.

If there are 1,000,000 NBT worth of currency demand today, and only 100,000 NBT worth of currency demanded tomorrow after a permanent crisis event (such as a government declaring it will prosecute anyone who holds NBT), it doesn’t matter how tight we keep our spread. Some NBT users must lose USD value of their holdings.

My RNA proposal attempted to add a semblance of fairness by providing a differentiation mechanism to ensure those who are willing to pay the most to redeem their NBT do so. The alternative to RNA in my permanent crisis scenario is at least a temporary collapse in the peg, and possibly permanent if no speculators arrive to purchase NBT.

I wholeheartedly believe in tight spreads and high liquidity in regular operations, as there is no question it improves the value of NuShares. I also believe in having a plan for a disaster situation. My RNA proposal is still the only mechanism that would preserve a 1.00 USD peg for users (provided they wait until the emergency state is lifted, which could be days, weeks or months as available supply reduces to match demand) in the event of a complete demand collapse. It is a common mistake to confuse continuing operations with crisis planning, and nothing in this post addresses the second concept.

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#22

We would like to share our understanding of liquidity operation and what it means to NuBits

A stable decentralized currency should have enormous demand. We believe only the case that people want to transfer money freely and to hold liquid asset anonymously could generate thousands times of NuBits current circulation. Then, why we don’t see those demands come? Just simply because people don’t 100% believe they can cash out their NuBits for Dollars for any amount and any point of time.

A few month after NuBits launched, I began my role of liquidity provider with my own money. I remember I not only asked for a high compensation, but also raised a special request. I requested my money was less than 20% of the total LPC liquidity size. Because I didn’t really believe I can 100% get my money fully back in future. But if there are 10,000 in liquidity operation, I tend to think the chance to cash out my 2,000 NBT in short term is high. I guess there must be lots of people have similar ideas.

That leads to the conclusions we would like to draw:

  1. The more liquidity the better confidence people will have on NuBits. If the daily trading volume is 10k, 100k fund on liquidity wall is NOT waste of money. For example, 80k fund on the Tube walls doesn’t have any trades in last three days, but we don’t treat it as a waste, we even want to add more fund into the walls if we have more. Because those money can just simply sit there to give critical confidence to people on their holding on NuBits. “Hey, we have plenty money to cash out your NuBits”

  2. The guaranteed duration of liquidity is crucial. Although I can cash out 10k NuBits in the 100k liquidity wall easily today, I have no idea on what it will be in one month or in one year. I still not comfortable to store my money which needs to be spent in a few months in NuBits. Imagine if there are 1000 BTC are guaranteed to sell for NuBits at the price $1 for 1 month, 500 BTC guaranteed for 2 month, and 200 BTC guaranteed for 6 months. I will be very comfortable to hold 10k NuBits for 3 months, and it is high possible to hold another 3 months when I found NuBits is in a good liquidity shape in 3 months.

However, guaranteed duration is much more expensive than tight spread. Liquidity provider will ask for much higher compensation. The innovation in NuLagoon ETP(exchange-traded pool) is to address this issue. In ETP, there are two exit doors for pool investors, one is redemption, another one is to sell on exchanges. The latter one will become the most liquid one and major one when the exchange is established. If BearBTC/BullBTC is sold on exchanges, the buyers money will replace their share in ETP, leaving the size of money in ETP and the size of money in liquidity operation not changed. That is a significant value point, resulting we could extend the ETP’s close period while doesn’t negatively affect the liquidity in pool investors’ respective. Therefore we can reduce the cost for locking the funds in liquidity operation for a guaranteed period of time. This mechanism is original from exchange-traded close-end fund, which can lock a certain amount of fund for a few years while provide very good liquidity in exchanges. It is a very mature idea and already been proved work well.

7 Likes
[Voting] Proposal for granting NBT to NuLagoon to create exchange-traded pool A, sub-funds BearBTC, BullBTC and build-in exchange
#23

I have made a proposal to decrease the spread on my ~20,000 in liquidity to 0.5% from 1%. Please read and comment.

#24

I have seen several people on Reddit say that this is the reason they no longer use NuBits. They gave it a try, but liquidity wasn’t consistent and they had problems cashing out when they wanted to.

3 Likes
#25

I’m only aware of one trader who said he couldn’t trade 2,000 NBT at Poloniex whenever he wanted to.


The average liquidity is much higher at Poloniex, except during price adjustments.
While I’m grateful for feedback, I don’t understand the nature of the complaint.

Who else complained about lack of liquidity and what order of magnitude of liquidity was expected from those who complained?

Even if traders can’t predict the market or use NuBot price adjustment delay to their benefit, liquidity costs increase, if more liquidity shall be provided.

Traders at exchanges don’t need to pay tx fees.
They provide no benefit for Nu.

It’s regular use of NBT for payments that needs to be fostered.
To trade some thousand USD worth of NBT there has always been enough liquidity at a quite tight spread.
But it didn’t allow a breakthrough of NBT.
This was not due to lack of liquidity.
How shall more liquidity fix that?

1 Like
#26

The one you mentioned was one. Unfortunately I can’t remember where I saw the other comments. If I find them I’ll post them.

#27

For one writing and complaining about it, there are usually several others only voting with their feet.

2 Likes
#28

Can any Nu community member help to broadcast the existence of NuLagoon Tube to the Reddit. We really appreciated it.

[Passed] NuPool 9
#29

LPC and customers are opponents offers?

If LPC get profit, the customers suffer loss, vice versa, isn’t it?

How can a company(Nu) survive by bleeding blood of its customers?

That’s why I choose B&C, which is neutral in trading.

#30

B&C also charges customers fees. Every business does.

#31

If gambling is a business…The “bankcrupt” probility is quite high.

Nu company is a pure gambler. As early as Sep. 2014, I asked David “what’s your profit model”. The answers never satisfiy me till now. Every NBT sold on market is our liability, because we promise it is worhty of 1$. NBT is Nu company’s bond(with zero interest rate).

The BTC proceed by selling NBT is Nu’s asset, if the backing asset devalues, the probility of insolvency goes up, if BTC price soars, we have a holiday, we can easily buy back NBT even promote the NSR price!

However, gambler is gambler, I have zero sense of safety on it.

BTW, It seems I shoud not say something bad on Nu anymore. All I can say is that when the gambling house(B&C) ready, welcome & good luck!

#32

That one was complaining about not being able to trade 2,000 NBT any second he wanted to on Poloniex.

source: https://www.reddit.com/r/CryptoCurrency/comments/4gtqs4/why_nushares_are_a_good_investment/d2lmnay

Should we really worry about making traders, trying to trade swings, not perfectly happy?
Is that the type of customer we want to attract?

source: https://www.reddit.com/r/CryptoCurrency/comments/4gtqs4/why_nushares_are_a_good_investment/d2laby2

Why didn’t he use USDT instead?
Not withdrawing USDT should make it as convenient as using NBT.
I suppose he tried to profit from the delay between the BTC price moving and the NBT orders being moved.
What other explanation makes sense?
If my assumption is right, I don’t care about making that customer not 100% happy.
If there are several others in the same position, I care as much about them.

#33

Not on a large scale I believe. That’s why I advocate for keeping the target on NuPool, but lowering ALPs spread to encourage trading within a certain bandwidth. 15k on NuPool is enough to play with. Higher amounts come at higher spreads/costs which the NuBots take care of. Once we have B&C we can increase targets as transactions will go directly into the blockchain and thus attract fees.

#34

what? where this comes from?
Of course you should say what ever you are thinking about NU. This forum is not censoring
anyone that is why i love this community!

3 Likes
#35

Jordan’s point is they are what we have now and decreasing spread actually increase profit.

Maybe we should fund @muchogusto’s controlled experiment if just to test the theories.

#36

If decreasing spread increases profit, there’s no need to fund @muchogusto’s experiment, because he will make more gain by reducing the spread.

We should rather offer an insurance:
if @muchogusto makes a loss with the reduced spread, Nu covers that loss or even overcompensates that loss honoring the experiment in a financial way.

@muchogusto, what do you think about that?

1 Like
#37

Absolutely.
However, as @PinkyAndTheBrain has pointed out, as per basic economics,
liquidity will not be provided if the provider does not feel correctly rewarded and incentivized.
IMHO, that means:

  • the guarantee to make money (statistically, that has not been proven I believe)
  • the right and easy tools (transitioning from manual monitoring to much more automation)
  • the visible and obvious market driven demand for nubits (public evangelism and marketing plays an important role here, a la ethereum team)
#38

The problem is many fold. but the crux is I think we’re losing ground to Tether because of a lack of a use/strong tie to fiat. If we had the absolute and quick fiat exchange, we wouldn’t need to pay for the BTC/NBT peg. It would create itself.

Cross post from Liquidity provider profitability experiment:

As I see NBT is loosing ground to Tether because polo fully integrates tether. In times of volatility NBT and Tether are used a lot by speculators. Without the volatility we see decreased use. Tether is on the rise because you can get to fiat readily through Bitfinex. NBT simply doesn’t have that - sorry to say but CCEDK doesn’t have the mass that Bitfiniex does.

NBT claims usability because it is tied to USD, but its hard to get there without easy fiat exchange. As it is tether is doing our job “better” because all the users are creating the peg without being paid.

1 Like
#39

I have long thought Nu should do that to all LPs. LPs bid on reward for providing balanced liquidity with own fund in a given accounting period, and Nu pays the lowest bidder such that the bidder takes away the the amount put in plus the reward at the end.

#40

Yes, we should worry about making traders and arbitrageurs perfectly happy using NuBits. They are the low hanging fruit in terms of NuBit adopters. We can provide them with something they really want right now, at the size that we are today. We could experience major growth merely from having 2 or 3 automated arbitrage operations use our product. All we need is liquidity and for them to be aware of us. They are actually likely to be aware of us because such people are closely connected to the blockchain space, so if can’t attract them it will be because of poor liquidity.

I would like to ask those that are suggesting traders and arbitrageurs are not the right market for us to articulate what they think our ideal market is at this point in time. I don’t see any type of customer that will be nearly as easy to please as traders and arbitrageurs. A claim that this isn’t the right market can’t really be intelligently evaluated without comparing it to what you think is the right market.

3 Likes
[Voting] Proposal for granting NBT to NuLagoon to create exchange-traded pool A, sub-funds BearBTC, BullBTC and build-in exchange