Liquidity provider profitability experiment

[muchogusto]

Results as of 22/05/2016:

NBT Balance: 18,693
BTC Balance: 3.53

Simple NAV: 20,232, a 1.16% profit

Bitcoin Price Adjusted NAV: with current price of 436.40, the adjustment is -348, so 19,884, a 0.58% loss

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 488, so 20,372, a 1.86% gain. Annualised and compounded rate of gain is 18%.

The major improvement of the last week is mostly due to holding mostly NuBits in a declining BTC market.

[muchogusto]

I have published a motion draft here:

https://daology.org/proposals/f6f6eea2e5c8d00b6ff287c8906b93219feae759

Please make suggestions to change it if you like. I hope to start voting soon.

[zoro]

By spread 0.5% you mean a 0.0025 offset in each wall?
I like the proposal and the compensation scheme. A very good compilation of MLP+ALP
Moreover i am feeling very relaxed with your provided liquidity in Poloniex. Something i want to say about NuLagoon too, but i cannot

[masterOfDisaster]

Shareholders will guarantee a minimum profit of 3% per month, compounded monthly

Requesting a guaranteed compensation of 3% monthly without capping in case the NAV makes an immense loss for whatever reason will not make it to my data feed.

It would be interesting to know the results for the NAV from reducing the spread from 1% to 0.5%, but having no capping makes me shy away from it.

You receive a compensation from NuPool for liquidity already. Filling the revenue to monthly 3% is different from asking another 3% on top for reducing the spread.

MuchoGusto assumes all exchange default risk.

You already bear the exchange default risk and get compensated by the ALP compensation.

[zoro]

Filling the revenue to monthly 3%

This is what he is proposing. Am i mistaken?

from daology
"After more than a month of the experiment the actual rate of return has been 1.86%. If it were still 1.86% at the end of the first 2 months, then either FLOT or shareholders must pay me enough to make a 6.09% profit"

[masterOfDisaster]

Right.
If he makes 10% loss, Nu needs to compensate the NAV up to 103%.
That means if the NAV goes down by 10% (10%*$20,000=$2,000), Nu needs to pay $2,600 for that month.

[zoro]

$2,600

OMG!

[masterOfDisaster]

No one knows what happens to NAV.
That’s why I can’t put this proposal in my data feed.

It would be different, if @muchogusto did ask for x% monthly on top of the ALP compensation for reducing the spread from 1% (SAF 1.3%) to 0.5% (SAF 0.8%).

[Sentinelrv]

@muchogusto, I think it would be best if you created a separate thread under the motions board for your proposal. Including it in an existing thread can make the proposal hard to find or invisible to others not paying attention to this thread.

[muchogusto]

By spread 0.5% you mean a 0.0025 offset in each wall?

Now I use a 0.0035 offset with a 0.15 tx fee which makes a 1% spread (0.0035 + 0.0015 + 0.0035 + 0.0015 = 0.01). To make a 0.5% spread, I will change both offset values to 0.001.

[masterOfDisaster]

So you are at more or less break-even (including the pool compensation) at a SAF (spread after fees) of 1%?
What tolerance do you have configured (before orders get moved) at 0.0035 offset and what will be the tolerance at 0.001 offset?

[muchogusto]

Requesting a guaranteed compensation of 3% monthly without capping in case the NAV makes an immense loss for whatever reason will not make it to my data feed.

I added the following clause to the motion:

Shareholder payments will be capped at 3% of the NAV for each month.

[masterOfDisaster]

Thank you! That’s game-changing to get it in my data feed
I recommend to consider including a backup plan that allows you to switch back to a spread of 1% while forfeiting the 3% compensation, if the trading situation gets dire and you feel increasing the spread could help.
I mean, you guarantee to keep the orders up no matter what. Such a backup plan seems warranted.

[muchogusto]

I think it would be best if you created a separate thread under the motions board

Here it is:

[Voting] Fund liquidity provider profitability experiment

Motion Hash: 29d364f8677c7c955d423747fcf5005fd00f2e6b This motion has been discussed here. The finalized text is available on Daology here.

Voting has begun. The motion hash is 29d364f8677c7c955d423747fcf5005fd00f2e6b

[masterOfDisaster]

Please have a look at the ninjaedit of my last post…

[muchogusto]

So you are at more or less break-even (including the pool compensation) at a SAF (spread after fees) of 1%?

So far I am up 1.86% at a 1% spread before fees.

What tolerance do you have configured (before orders get moved) at 0.0035 offset and what will be the tolerance at 0.001 offset?

I don’t see a tolerance setting. I thought the tolerance was a composite of the offset and tx fees. Am I mistaken?

[masterOfDisaster]

Isn’t there a tolerance setting in the NuBot config?
ALPv2 is based on NuBot, right?
Oh man, I’m lost. I only know NuBot from operating gateways…
Maybe @woolly_sammoth can help here?

[Nagalim]

Are you certain that an offset of 0.001 will not result in collisions with others running nubot? Because that will drastically lower your NAV.

Is there ever a point in time with 0.001 offset when a buy order you have on the books is at a higher price than the price feed? Because if this were pybot you’d definately have collisions at that offset.

[muchogusto]

Are you certain that an offset of 0.001 will not result in collisions with others running nubot?

I have no idea.

What is the minimum offset that will not result in collisions?

[Nagalim]

Depends on who you ask i suppose. I usually talk about deviation of 0.25% and that an offset equal to half the deviation will result in collisions. That’s my model of it, i dont even know if 0.25% is what’s used in nubot though (my analysis comes from using pybot in alp v1). @willy might know.