Liquidity Suggestion

NuBits
#1

Fund the creation of a NuBit based cryptocurrency exchange with the following features:

  1. Sells NuBits for $1.00 of any cryptocurrency (no exchange fee for purchasing NuBits). It may be best to only exchange NuBits for cryptocurrency initially, since dealing with USD involves tricky regulations and greater costs. USD based markets can be safely mirrored on this exchange without having to worry as much about an attack on USD (as opposed to a cryptocurrency).

  2. Purchases NuBits for $0.99X, with an exchange fee that is less than $1.00 - $0.99X. This allows room for private buy side liquidity providers to profit, while still offering a very small spread.
    Decrease X in order to increase the incentive for private liquidity providers; increase X in order to decrease incentive for private liquidity providers. With substantial volume, this could become an attractive and competitive source of profit for liquidity providers.

  3. Mirrors trusted cryptocurrency / USD exchanges, and has a verification period before finalizing a transaction in order to protect the exchange from various attacks. During the verification period, the exchange waits until a mirrored trade successfully executes on another exchange (or set of exchanges for a major purchase). This allows traders to purchase from any exchange (or set of exchanges) that are integrated and trusted. As a result, it would afford traders the ability to get the best available price with sufficient liquidity to satisfy their order.

Such an exchange could decrease NuBit liquidity costs while substantially improving the utility and convenience of NuBits for trade. It would allow us to effectively mirror trusted markets with far less risk and cost. Even relatively vulnerable cryptocurrencies could be exchanged for NuBits safely. For example:

  1. Imagine someone attempted to simultaneously sell a large amount of a vulnerable coin for USD while also buying a large amount of NuBits with the vulnerable coin.
  2. The exchange would wait until it could sell the vulnerable coin for USD before executing the order.
  3. Since the exchange would be unable to sell most (or perhaps any) of the coins for USD, it would not execute the order.

Once perfected and profitable, such an exchange could potentially be decentralized.

This would also pave the way for further advancement (NuPay, NuLoan, NuBank, NuWage, NuGames, NuMessage, etc).

Possible solution to custodian loss of value due to BTC exposure
#2

We did considered this option several times in the past. Such a solution will require someone to step up and deal with all the legal and fiscal requirements of running an exchange.

Assuming we can find an organization who wants to take the risks, and provided we fund such an expensive operation, then we will have a centralized solution. A single point of failure.

I think that the direction should be in working together with existing exchanges and ask for customised solutions.

I envision a future where NuBits can be purchased on instant exchanges (shapeshipft-ish), traditional exchanges where we will put just enough liquidity to maintain the peg, and partner-exchanges where we will be fully able to provide a multi-tier liquidity with low fee.

Then is up to the user to decide where to get an account.

#3

Thanks for the response! I agree that it is important to avoid centralized outcomes and single points of failure. However, I am confident that creating a NuBit exchange would not necessarily result in a more centralized outcome or a single point of failure.

Existing exchanges would still be used for NuBit / USD exchange; the primary intent of this exchange would be to enable safer, less expensive mirroring of cryptocurrency / USD markets. An attractive secondary advantage would be to lower liquidity costs by allowing private liquidity providers room to profit. It is true that creating an exchange would be expensive and time consuming, but mirroring cryptocurrency / USD markets on existing exchanges is even more expensive and potentially dangerous.

Furthermore, a NuBit exchange as outlined above could be implemented in a decentralized manner. Rather than having a centralized system acting as an intermediary, it could be a P2P system that facilitates, coordinates, and records exchange between individual users. Such a system would be especially attractive in today’s climate with all the exchange troubles in the news. With an open design that could be replicated, it could function as more of a protocol than a centralized business.

#4

It sounds like a good business opportunity. I think someone should try to startup a such a business, as a side venture which is not “officialy” affiliated, and see how that goes. Or maybe try to contact existing exchanges that already figured out how the rules of the game and see if they are interested.