NBT/USDT instead of BTC/NBT for peg on Poloniex?

Liquidity
#1

I don’t think this has been specifically discussed, so I thought I would bring it up.

After much reading of previous discussions, I gather that maintaining the peg on the BTC/NBT trading pair on Poloniex is proving costly, perhaps too costly. This is being done, however, because there was no USD on Poloniex, and Poloniex is NuBits most important exchange (as way more volume is done there than any other altcoin exchange).

Now that USDT (Tether) is prominently featured on Poloniex, perhaps it would be better to switch efforts to a NBT/USDT pair, rather than focusing on BTC/NBT. I see four issues with this approach:

  1. NBT/USDT trading pair does not yet exist on Poloniex. Does anyone here have a line into Poloniex’s management?

  2. USDT is somewhat of a competitor to NBT. This may not really be an issue if we instead view USDT and NBT as unique and complimentary crypto-assets. USDT allows for USD deposits/withdrawals with your bank account (through Tether’s website, something you cannot do with NBT), and NBT allows for storage of your funds on a decentralized blockchain (USDT is not decentralized). NBT will also have many other uses in the future including trading on B&C Exchange.

  3. Risk of Tether, LLC default. This seems unlikely, as they hold $1 USD for every USDT.

  4. Risk of regulatory shutdown of Tether, LLC. I have no idea how likely this is. Does anyone else?

Thoughts?

3 Likes
#2

A tether reserve motion has been up for voting for a month now, i just put it on cold reserve today. Without a tether reserve, how do you expect custodians to rebalance the nbt/usdt peg? We would have to sell btc for usdt using the market on polo itself, thus imposing additional costs over btc/nbt. Still, i would be happy to see an alp operation running on an nbt/usdt pair, sure. Ask polo to add that market and in a couple months once alp v2 is well tested we can get an operation up and running there.

The risks you mention would be intrinsic to the ALP operation and shareholders wouldn’t need to concern themselves with it. It would come down to what gives cheaper liquidity, usdt or btc. Also, trade volume and marketing, but those are harder to measure accurately.

1 Like
#3

At best complimentary, there is a large overlap though. I think it is an issue.

Haven’t dived into this, but are these funds publicly accounted for and independently audited? Or is it just a statement on their website somewhere?

That is the $1m question. The whole Bitlicense law creates a lot of uncertainty. If they can obtain a bank license they might be safe, I wouldn’t be surprised if they do that or have that already underway. That is probably the only legal way in the future to compete with other centralised organisations like banks.

I would support an NBT/USDT pair in addition of BTC/NBT not instead.

#4

I was just about to post something along these lines and found this! Thanks @catcow!

TL;DR:

  • SGTM, let’s do something with USDT…
  • Nu picking up the tab for hedges against BTC has to stop…
  • Can we get onto an exchange that has support for USD (ie, BTC-e) ?

I see two topics here, one stemming from another:

  1. We want a USD-NBT peg, but to get that we’re actually running a USD-BTC-NBT peg on Poloniex. Since we’re using BTC (a very volatile, yet popular currency) as a proxy for what we actually want to peg our value to (USD, a not-all-that volatile currency), we’re putting something pretty rocky in between two very calm currencies, which means we provide all the benefits of the calm while eating the cost for all the downsides of the rocky. :’(

  2. There’s another currency (USDT) with a lot of overlap, and happens to be backed by USD rather than having a peg maintained to USD. The question becomes… is it safe to start using that currency as a proxy for our aimed for USD-NBT peg (ie, USD-USDT-NBT)? Are the downsides (discussed below) offset by the benefits (avoiding the volatility of BTC)?

Onto the risks of USDT

(Easiest ones first…)

No NBT-USDT pair on Poloniex

This probably isn’t all that bad and I’d bet it’s easily fixable, so let’s punt on this one for now.

Overlap of USDT and NBT

I’m also not all that worried about this one – though I’m new here. (“I’m nu here” ? :stuck_out_tongue: )

Since USDT is based on Omni, which itself is based on the Bitcoin blockchain, USDT will suffer from all the underlying technical problems that trouble BTC has been running into. The biggest one IMO is the super variable (and sometimes really slow) transaction clearing time – even paying large fees. There are lots of proposed fixes but the problems are still “being fixed”. Nu is still an experiment (so it may have different problems) but so far we’re not seeing the same problems plaguing BTC (ie, Nu transactions clear quickly).

The centralization is an issue for USDT as well, though I’d argue that NBT-users are subject to similar risks with the potentially centralized NSR-holders. The big difference between the two seems to be that while it’s possible that all NSR-holders are the same person, it’s unlikely. It seems like attacking a decentralized anonymous group of people is a bit tougher than suing a single corporation in a single jurisdiction, but again I’m not an expert in this area.

Risks of default and/or regulatory shutdown

The risk of default and shutdown are both valid concerns IMO, even Tether acknowledges something like this in the whitepaper:

We recognize that our implementation isn’t perfectly decentralized since Tether Limited must act as a centralized custodian of reserve assets…

The funds are actually held by Tether Limited, based in Hong Kong – and HK has had some recent scary stuff with the mainland. Further, a company is a company, with their funds held in a bank account somewhere, providing a few avenues for attack. With all the craziness regarding money laundering and calling the act of selling BTC “unlicensed money transmission”, it isn’t impossible that someone says “Tether is facilitating terrorism – shut them down” and while the courts work through this, all those dollars in bank accounts could be frozen. In the case of a full shut-down, all the dollars backing the currency are gone, so it’d be like “taking away the gold standard”…

This would obviously be very sad, but unfortunately that’s the risk when you’re dealing with fiat currency.

OK so what to do then?

I’m glad to see this being discussed because the USD-NBT peg really being a USD-BTC-NBT peg is pretty frustrating to watch.

I don’t think a USDT avenue for liquidity would be a bad thing, but I suspect that the only way to get rid of this volatility problem is to remove automatic pegs involving BTC.

In other words, the goal should be to encourage trading of BTC-NBT, but not hedging BTC into NBT. If people want to hedge against BTC (ie, if they think the BTC price will drop so they dump their BTC for something stable, and then after the BTC price drop they buy back the BTC at a discount), they should do it using real USD in an exchange like BTC-e, not with NBT.

In other words, I don’t think hedging should be a thing we do automatically – I see that as an abuse of what we’re trying to do here with Nu.

3 Likes
USD walls only?
#5

I agree and as long as it’s a part of the reserve next to BTC, PPC, USD (thanks to NuSafe) etc. it improves the situation of Nu. Nu can have USD stable USDT as a part of the reserve, which stabilizes the value of the reserve against fluctuation.
If USDT fails for whatever reason, only a part of the reserve is lost; diversification!

You took the words right out of my mouth!
It’s one of the major reasons why I advocate decreasing the liquidity in BTC/NBT pairs that can be had at a small spread and offering big volume only at a decent spread.
I’d like it even better if the BTC/NBT pairs could be abandoned, but as there’s only a few NBT/USD pairs, that won’t work, if Nu wants to offer its products…
…and B&C Exchange won’t (can’t!) have USD pairs. So there needs to be a solution for the BTC/NBT pairs.

2 Likes
#6

Some of the good options can give you the way of converting the bitcoin for making the best cryptocurrency options.Most of the people want to get the best Altcoin Exchange rate which can be good for making the good profit easily and this kind of option is always good for many people .