Custodians should not be in the business of speculation. Every NBT “lost” to falling prices on assets that are held in buy walls needs to be thought of as a permanant shortfall (until proven otherwise) and affects the ratio of backed to unbacked assets supporting the Nu network.
There is no guarentee that any asset will rise in value.
@cryptog
Not quite. The theory that everything will average out over the longterm, as prices go up and down, relies on the incorrect assumption that all traders have no idea what they’re doing and all buying and selling is completely random. Imagine this extreme example:
PPC = $2
Custodian holds 1000 NBT and 0 PPC. Custodian value = $1000 USD.
PPC sellers buy all of the 1000 NBT, leaving our custodian with 0 NBT and 500 PPC.
PPC declines to $1. Custodian value = 500 NBT.
PPC goes up to $1.10 and traders decide it’s a good time to buy, so they buy all 500 PPC.
Custodian holds 550 NBT and 0 PPC.
PPC goes back to $2. Now we’re back to where we started but the custodian has lost 450 NBT.
This is an extreme example of what we see happening in both the Bitcoin and Peercoin NBT markets. My point was that Bitcoin buying and selling will be slightly more random than Peercoin since Bitcoin is used for a lot more things than Peercoin. Bitcoin is also a much larger market that we really must be involved in to move forward.
I’m saying all of this to make my case for why I believe we need Bitcoin but not Peercoin, despite losing from both markets. I have no doubt that @woolly_sammoth and @desrever could engineer NuBot to fit whatever liquidity operations require, but I would honestly rather see us putting our time and efforts towards merchant adoption because THIS is what will ultimately cause NuBits to be used for something other than speculation hedging. I want to buy stuff on Newegg with my NuBits that I bought from Coinbase.com. I want to trade my NuBits for NuShares on ShapeShift. I want to play online poker with my NuBits. I want my margin account on OKCoin to be backed with NuBits. These are the directions we need to be headed in and focused on innovating solutions for.
@pennybreaker Tks a lot for your insights. In a downtrend market for PPC and BTC in terms of their USD value, it seems that being a custodian for either NBT/PPC or NBT/BTC will lose money. So this has to be really rewarded in terms of either NBT or NSR.
However, I feel that rather than PPC and BTC, at the end of the day the pair that counts is NBT/USD.
This pair is pivotal for the merchant adoption you are talking about.
For that reason, I am wondering why almost nobody deposits USD into ccedk for example.
If there is a need for that, (and I certainly think there is), I am gonna propose a custodian grant.
@ben In a BTC/USD or PPC/USD uptrend, being a custodian is not risky but in a downtrend…as you pointed out…
@KTm The PPC/NBT buy-side liquidity seems to be missing at https://www.ccedk.com/nbt-ppc. Is the NuBot active?
We don’t need permission or cooperation outside our group to offer liquidity, while merchant adoption is not under our control in any direct sense. I believe deep liquidity is critical to the success of NuBits. With liquidity, stability and a trusted brand will come adoption, and adoption brings merchants.
I would like to second that. Deep liquidity is the first step to be considered as a stong contender as the currency of choice when transferring money in future, well ofcourse buying and selling as well involving the merchants, but they will only accept if they can see there is a strong liquidity behind.
Jordan Lee if you read this please do check my replies on bitmessage, I know your busy, so i apreciate the time you take for this,. thanks.
this buy side has been down for weeks, and now the btc nbt pair is down too on the sell nbt to btc side
I just checked. NBT/BTC has plenty of sell-side liquidity, but it appears trading in the last couple of hours cleared ~210 BTC off the buy side when someone or a group of sellers sold back close to 75k NBT.
Not having NBT/PPC would be would problematic right now…
Most of the buy wall is produced by the buy wall on NBT/PPC on ccedk…
Nu needs a way to replenish automatically the buy wall on NBT/BTC unless we agree on the fact that PPC becomes the backbone liquidity currency for it.
Therefore I am reluctant now to ceasing NBT/PPC .
I second that “Deep liquidity is the first step to be considered as a stong contender
as the currency of choice when transferring money in future” -
I dont support this motion for now.
Please check CCEDK nbt/btc pair, it has stopped, apparently similar to earlier situation with change in value on btc, but or now is not up and running. This for whom it may concern.
Hi Ronny, I contacted the custodian. It was a sudden price change in the btc feeds that led to protection mechanism that shut the bot down.
on it
I would like to re-examine this problem in light of Jordan’s Finalized evolution of liquidity operations proposal, which proposes to provide deep liquidity across many major exchanges. If the proposal is implemented, the scenario with PPC can well happen in the NBT/BTC market in a proportionally bigger scale.
In a major market crash, sellers could be collectively dumping several 10k btc in a short period. Daily volume on BTC-E alone had been 70-150k btc, so having 10k exiting volume on one excahnge is very possible. If Nu operates NBT/BTC bots with deep liquidity, I think we could see our reserve shrink by a significant amount quickly. Bitcoin had gone up to $30 before crashing down to a few dollars and stay there over over several years, then to $260 back to $60. Now bitcoin price is coming down from $1000 to who knows where.
To run some numbers to get a feel of the problem, suppose a total of 50k btc exits, from several exchanges, via NBT/BTC, in a market crash that went from $320/BTC to $170, with an average selling price of 270 NBT per BTC. In the end the bots lost $5M worth of reserve (because they sold 50k x $270 worth of NBT and in the end have 50k x $170 worth of BTC in hand). This could put Nu from deep liquidity to deep in debt overnight. Due to its inherent problems, bitcoin price could well go down to below $100 forever. It could be very hard to recover to previous price level.
On the other hand only operating NBT/USD bots will insulate Nu from such market crash because anyone want to sell BTC for NBT has to buy NBT from someone who has paid $1/NBT to the bots.
I do recognize the value of providing BTC/NBT liquidity by Nu bots. Maybe the best way is capping the liquidity of BTC/NBT to limit the exposure to BTC price that Nu reserve would face?
Currently almost all NBT volume is on NBT/PPC on CCEDK. Is there a reason for this? Is someone trying to do that exploit?
I think the danger is real. The issue should be addressed as soon as possible. Offering high liquidity is nice but at what cost? Right now the risk of a loss could be substantial in a market crash but the spread (between sell and buy walls) is very thin, which means that users (traders) pay almost nothing for accessing this liquidity.
That is why offering liquidity on NBT/USD should be the priority over NBT/crypto but the issue is that most of the exchanges in which NBT is traded do not have a large USD volume…
Getting NBT on BTC-E should solve the issue.
In the mean time, in order to deal with the risks of losses for custodians, capping (alleviating the risk) or increasing the custodians fees (counterbalancing the risk but more expensive to shareholders) or increasing the spread ( counterbalancing the risk but more expensive for traders to use NBT) should be considered.
We have now 50,000 NBT worth on NBT/BTC buy wall at CCEDK.
According to this Nu perhaps has several times more in cash than all nubits on offer by custodians. So Nu is quite high above water. But if a lot of vote-generated NBTs start to be ready to enter NBT/crypto market, the situation could change.
edit: I checked proposals of KTM, jmiller, and Jordan’s strategic reserve. These proposals received about 6 millions NBT generated by voting. That exceed the reserve Nu has. I think we should choose to err on the safe side and curb NBT/BTC if the market keeps going down.
I think selling NBT on payment processor/gateways could be very effective. They are like slightly more traditional version of shapeshift.
Obviously having NBT being sold by a Coinbase is ideal and a natural future step…i believe. Or you could create such a payment processor. 