Monthly P&L of Nu

[cryptog]

Nu being a business, tracking down the P&L is crucial, I believe.
In this thread, I would like ideally to track down the P&L of Nu on a monthly basis.

---

REVENUES

• sold NuBits
• tx fees
• NSRs sales

---

EXPENSES

• liquidity pools expenses
• other grants
• paid parking interest
• development
• marketting
• NBTs burning

---

2 questions:

• what were the profits for July 2015? (0NBT)
  – sold NuBits: 0

• what were the losses for July 2015? (at least 4751NBT)
  – liquidity pools expenses: NuPool 4 (1125NBT) + NuPond 3 (614NBT) + NuLagoon July (2767.80NBT) + LiquidBits Term 2 (245NBT)
  – other grants: 0
  – paid parking rates: no idea

So Nu is in the red (at least -4751NBT) for July 2015.

Besides, any forgotten fields? Any mistakes?

EDIT: typo

EDIT 06SEP15

• changed terminology
• added elements

EDIT 03OCT15

• added elements in EXPENSES and REVENUES

[mhps]

any forgotten fields?

Great effort. Off top of my head, tx fee is profit. 1k NBT was burned from auction.

[masterOfDisaster]

Whether or not sold NBT are accounted as profit is a philosophical question, because it creates a liability.
For the sake of this calculation it should be possible to treat it as profit.

If you count sold NBT to the profits, burned NSR should have a place on the profit side. Although NSR and NBT are not tied as directly with each other as I’d find necessary (and although NSR burns haven’t taken place yet in bigger amounts) I think NSR burns belong there.

Burned NBT would have a place on the loss side, right?

This would be relevant for past months.
April 2015:

[Passed] Motion to end LPC operations of KTm, Jamie and NSR sales of Jordan

Shareholders: This morning I conducted the third burn of shareholder funds (NBT and NSR) under custodianship as required by this passed motion. NBT Burn Amount: 257,031.985 NBT (50% of remaining 514,063 NBT held) Transaction ID: 874477c08257837cc32d0238699a7b536f3bf6c1e6d2cb86c512ab3660bd5d80 NSR Burn Amount: 2,760,487.6 NSR (50% of remaining 5,520,975 NSR held) Transaction ID: 10981786a8d87009bd4e672f97666c6fa0cf4601172ff9d77878f33e288c78bf Baring any changes to the requirements, the …

May 2015:

[Passed] Motion to end LPC operations of KTm, Jamie and NSR sales of Jordan

Shareholders: The final set of currency burns occurred earlier this afternoon. NBT Burn Amount: 257031.885 NBT Transaction ID: 399b6bae558c91a4f374083b88277601d033300c73939d79f19d859e7c4128c1 NSR Burn Amount: 2,760,487.6 NSR Transaction ID: 6b6d8be172355276b62d9a7918dc9aa8085cc261088390f61903598c1832352b This represents the full amount of funds held (grant NBT and NSR from the settlement) that are not currently on exchange in the form of “buy-side” EUR, on CCEDK, or funds that were lo…

as well as for the future:

[Passed] Motion to end LPC operations of KTm, Jamie and NSR sales of Jordan

Within 60 days after the protocol is altered to permit custodial grants of NuShares, Jordan Lee must burn all undistributed NuShares.

[mhps]

I think this should be analyzed in asset-liability point of view. @Benjamin discussed this here. Asset has been discussed before. Today NuShares is the main form of Nu asset. Development funds is also part of asset.

Nubits can be seen as the product Nu sells. When selling happens, the proceeds should go to raise the marketcap of Nushares or go to the development fund, both should increase Nu asset.

Nubits in circulation is also a liability. Of the 4589985.404 NBT money supply, 4040000 is the Strategic Reserve. 549985.404 NBT is in circulation. If we ignore the risk of Strategic Reserve unexpectedly entering into circulatioin, Nu liability is $0.55 M. NSR marketcap is about $2 M. So Nu is well above the water.

@cryptog’s calculation is the monthly change of asset and liability, which is very important. That Nu hasn’t been doing this all along is NOT GOOD. In the calculation any increase of NBT in circulation (including selling) is an increase of liability. Any decrease of NBT in circulation and appreciation of NSR marketcap is an increase of asset/liability ratio.

For accounting data, from my debug.log I find the last block in July was found on 2015-07-31 23:58:28
Block #463,681
hash 982f7c775f5a39ad3c60364856b145eeab08d9ba56d8ee1c3b6a0049cbf43bad
moneysupply(S)=1006831118.028 moneysupply(B)=4589987.1517

I don’t know how to pull money supply from the blockchain and I don’t have June debug.log. So can someone help to find moneysupply(S,B) at the end of June?

With price data of NSR we can calculate liability and asset changes.

[masterOfDisaster]

I don’t know how to pull money supply from the blockchain and I don’t have June debug.log. So can someone help to find moneysupply(S,B) at the end of June?

The blockexplorer would be perfectly suited for a task like that.
It already provides current supply information.
Having access to historic supply information would be useful for NSR holders as well as (interested) customers.

[mhps]

With price data of NSR we can calculate liability and asset changes.

Take the easy way … according to coinmarketcap

June 30
NSR marketcap: $2.281M
NBT marketcap: $0.636M
Asset-Liability Ratio*: 3.58

July 31
NSR marketcap: $1.772M
NBT marketcap: $0.550M
Asset-Liability Ratio*: 3.22

* asset only includes NSR marketcap. Development fund, tangible assets belonging to Nu, liquidity reserves in BTC etc are not counted in.

I don’t understand why ~$86k of NBT marketcap was lost (mostly on June 4) while in the OP @cryptog only found ~$5k and auction only burned $1k.

Anyway Nu has a very high Asset-Liability Ratio (although it is decreasing). Inspired by @cryptog’s OP, I itemize changes of asset and liability

Asset change

• proceeds from selling Nubits
• (NSR creation + minted total - NSR burnt - NSR tx fee) * price at the end of accounting period
• marketcap change of the NSR amount in the beginning of the accounting period (Marketcap of NSR is subject to mostly random price fluctuations, so I list it separately)

Liability change

• liquidity pools expenses

• other grants paid

• parking interest

• NBT sold - NBT tx fee - NBT burnt

[Nagalim]

Minting is a source of inflation (I.e. expense)

That 80k or whatever was a custodian I believe. We don’t really “owe” the full 500k, it’s complicated and the real amount we “owe” should be closer to 200k.

Seeded auctions can provide an official price to report this automatically while being resistant to manipulation (theoretically).

[mhps]

Minting is a source of inflation (I.e. expense)

Doh. Forgot that. Will modify my message. Minting increases moneysupply of NSR and theoretically has no effect on marketcap, but negative effect on NSR price (dilution). Technically minting is asset creation until the minted amount is sold to push down the price.

That 80k or whatever was a custodian I believe.

You mean a custodian burned 80k ?

We don’t really “owe” the full 500k, it’s complicated and the real amount we “owe” should be closer to 200k.

The reason of this thread is bringing transparency to that complicated beast.

[Nagalim]

Current Liquidity

On a related note, there are 545,000 blockchain NuBits. 190,000 NBT are currently in the development fund, so that means 355,000 NBT are in circulation. About 175,000 NBT are held by B&C Exchange. This leaves about 180,000 NuBits in other hands. Tier 4 buy side liquidity currently stands at 48,000. Tier 1 has 40,000 on the buy side. NuLagoon also has some in Tier 3 (around 10,000 I believe without looking it up). This means total liquidity for Tiers 1 through 4 is nearly 100,000 on the buy …

The nbt debt needs to be understood in terms of what we know will be held in a given time period based on factors like development fund, sell side liquidity, and parked nbt. We can lump what we know will be sold (development and the like) in with the free floating nbt and subtract off the buy side liquidity. Then, compare that result to the total nsr marketcap defined by nsr in circulation * most recent auction price. You should find that we come out over an order of magnitude ahead.

[mhps]

We can lump what we know will be sold (development and the like) in with the free floating nbt and subtract off the buy side liquidity.

Where does the buy side liquidity come from? In the beginning of Nu they were from fund paid by shareholders at IPO. The NSR marketcap already reflects this fund (why else the NSR price hovers at IPO price?) which is part of Nu asset. They are already counted in the asset part.
Then self-funded LPCs provide both sides with their own fund. Foundamentally Nu has no control of pegging liquidity fund. Only when Nu demonstrates very good financial health can we expect LPCs not to pull their NBT (to sell for other currencies).

It was right to count different sources of liquidity when analysing health of the peg. But these days I think it’s irrelevant in asset-liability analysis.

[cryptog]

proceeds from selling Nubits

I do not think we can consider that as asset. To me it is just revenues (renaming P&L as Revenues/Expenses should be more accurate in reality) that need to be immediately distributed as dividends or used to buy back NSRs and burn them.
Oddly, you can see here by the way that revenues can reduce the NSR supply, reducing NSR market cap, reducing the assets of Nu but then if the supply is reduced, it should increase the unity price of NSR, so at the end, there is no contradiction.

Another thing is that normally, dividends should be created from the profits.
Profits = Revenues - Expenses.
So sensu stricto, shareholders should not distribute dividends directly from the NuBits proceeds, but wait to have the monthly profit statement, which assumes the calculation of the expenses.

[mhps]

I do not think we can consider that as asset.

What is that you refer to?

so at the end, there is no contradiction.

Right it seems to be a paradox but it is not.

normally, dividends should be created from the profits.

We just happens to call it dividends when using peershares client to distribute fund to shareholders. Maybe we should give the fund distribution a different name.

[cryptog]

What is that you refer to?

The proceeds of NBT’s sales.

Maybe we should give the fund distribution a different name.

Right. Since the “dividends” are taken directly from the earning, it is closer to some form of salary.
So what about compensation or remuneration?

By the way, the wikipedia def of a dividend.

A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits.1

[cryptog]

Attempt to determine the P&L of Aug 2015.

The parts mentioning a ? are unknown to my calculation. Please feel free to complete it if you have some info or hints.

---

REVENUES

• sold NuBits: 0
• tx fees: ?
• burned NuBits: 0

---

EXPENSES

• liquidity pools expenses:
  – LiquidBits term 3: 596 NBT
  – NuLagoon Aug grant: 4315.19 NBT
• other grants:
  – NuDroid server grant: 300 NBT
• paid parking interest: ?
  –> At least: 5211.19

PS: According to this, at least 25k NBT were unparked in Aug. So that implies that some interests have been paid in Aug.

---

Since the tx fees are negligible, the above-mentioned calculation suggests that Nu is at least 5211 NBT in the red for August 2015.

[crypto_coiner]

sold NuBits: 0

How do you define “sold”?
Many NBT sold is being bought back by LPCs.

[cryptog]

How do you define “sold”?

Yes. Well just the ones that were brought to market and sold by elected custodians that got a grant from shareholders.

[crypto_coiner]

brought to market and sold by elected custodians

NBT never get to be sold, as per the common meaning of the term, since they are re-bought back.
I think one should indeed talk about tiers and which one side (buy or sell) the funds were originally placed onto.
For now, Nu is not in the business of selling NBT because people still want to redeem them for dollars or other cryptos -
Nu is in the business of providing liquidity of selling AND buying NBT, according to the demand. One day perhaps the demand would be so great that it would be reasonable to say we SELL NBTs?

[masterOfDisaster]

I think one should indeed talk about tiers and which one side (buy or sell) the funds were originally placed onto.

Please don’t confuse liquidity providing with issuing and selling NBT!

For now, Nu is not in the business of selling NBT because people still want to redeem them for dollars or other cryptos

At the moment it isn’t but some months ago it was

One day perhaps the demand would be so great that it would be reasonable to say we SELL NBTs?

How do you think the 562,036 NBT came into circulation if not by having been sold to people?
This was in a time when liquidity providing wasn’t decentralized but handled by @KTm and @jmiller.
A lot of the value that was retrieved for selling the NBT got lost during the February exchange hacks.

If Nu were to sell 100,000 NBT tomorrow, the revenue needs to be distributed to NSR holders, because they are the ones responsible for keeping the peg. Being responsible for the peg includes at worst case issuing NSR via grant to sell them, buy NBT and burn them.
As NSR holders are ultimately reliable for the NBT peg, they need to get the revenue from sold NBT.
Whether that is done by dividend distribution or by NSR buybacks is another topic.

[crypto_coiner]

Please don’t confuse liquidity providing with issuing and selling NBT!

Would you have any rigorous definition for both?

[crypto_coiner]

562,036 NBT

I don’t have a clear idea on how we reach “562,036 NBT”