New mechanism to reduce NBT supply: NBT Burning

[Chronos]

A twist on the whole thing could be that new shares are never issued either. Instead the cost is socialized and all existing share holders have to give up a fraction of their holdings, to the parked coins. That way there is no share holder dilution. Since the number of shares stays the same, the price of a share should not be affected.

This is a neat idea, though not necessary. Share supply is already growing, so there’s nothing magical about the 1 billion initial supply. Every time a block is minted, a 40 NSR reward is created for the minting shareholder.

[towel]

towel said:
A twist on the whole thing could be that new shares are never issued either. Instead the cost is socialized and all existing share holders have to give up a fraction of their holdings, to the parked coins. That way there is no share holder dilution. Since the number of shares stays the same, the price of a share should not be affected.

This is a neat idea, though not necessary. Share supply is already growing, so there’s nothing magical about the 1 billion initial supply. Every time a block is minted, a 40 NSR reward is created for the minting shareholder.

Increasing the existing supply or redistributing the existing supply is, if I’m not mistaken, is nothing different as long as the price of a share is revalued proportionally.

A reason for suggesting this method of doing it, is that I think the shareholder will fail to recognize this and emotionally perceive is as a worse thing, which is good.

Example if the GUI says that “voting for X interest rates will generate Y number of new shares” I think is less troublesome then if it says “voting for X interest rates, will reduce the number of share you have by Y”.

It’s essentially the same thing, but I think people will be more reluctant to do it.

Disclaimer: I’ve not studied the minting mechanism in NuBits, so this could be totally wrong.

[Chronos]

Example if the GUI says that “voting for X interest rates will generate Y number of new shares” I think is less troublesome then if it says “voting for X interest rates, will reduce the number of share you have by Y”.

That’s a great point. We should consider redistributing existing supply as an alternative. You’re correct: it’s functionally equivalent.

[Indigoman]

Hey guys… great discussion. The proposed solution have already been suggested on this post : [Proposal] Solution to the problems of Asymmetrical control in NuBits

I’ve included a humble analysis of the matter on that post. Let’s keep the discussion central to one post for effectiveness.

[Chronos]

Indigoman, the proposal in this thread has a key difference, because it keeps the parking mechanism the same, as it exists today. I believe that parking with a NBT percentage reward is imperative to keep the currency user-friendly, so that the general public can earn a simple and easy-to-understand return on their parking funds.

Also, your proposal requires the network to have knowledge of the current NBT/NSR exchange rate, which is not currently possible.

[tomjoad]

Indigoman, the proposal in this thread has a key difference, because it keeps the parking mechanism the same, as it exists today. I believe that parking with a NBT percentage reward is imperative to keep the currency user-friendly, so that the general public can earn a simple and easy-to-understand return on their parking funds.

I like Indigoman’s proposal better. The parking rate for NBT - as an interest rate paid over a specific duration - is included in the system to maintain price stability. There is no need for it if a superior (in my opinion) option is presented in the form of a NBT burn function that converts them to NSR.

Indigoman has presented the beginnings of an elegant solution that transfers the speculative risk onto NSR holders, which is entirely where it should be. His suggestions would mean that the NBT supply should be 0 once all demand has been exhausted for the system, which is perfect. I added my own thoughts here: [Proposal] Solution to the problems of Asymmetrical control in NuBits

[Indigoman]

The parking mechanism could remain as at is while another mechanism for burning NBT for NSR could be introduced. As long as shareholders can balance their votes on both rates in , that could work.

I still think that focusing on a user friendly way of earning NBT was never the true goal on parking. To my understanding, it was introduced to solve the shortage of demand/ excess of supply issue and that was and has always been it’s main goal. If it doesn’t fulfill that role then a great reconsideration of the protocol is needed.

As for the NBT/NSR exchange rate, that could easily set up to voted on until better options available in future.

Both proposals share the common ground of burning NBT for NSR. Let’s focus the discussion on that first and if that’s accepted a valid of dealing with the problem, then the specifics can be worked out afterwards

PS: in class. Can’t type will lol

[CoinGame]

Okay so here’s a wild thought. I think it builds off your idea quite a bit.

When you have at least 10K shares and you mint a block you’ve made a decision that impacts the future of the network. The impact of a failing network should not fall on all the shareholders when only the ones who minted a block derailed the train. We need a system that slowly removes shareholders who make poor decisions and allows for new shareholders to take the place.

Just like shares are “staked” (locked away for a period of time) when you mint a block we can have a new kind of stasis.

When you mint a block the block reward is not given to you right away. it goes into a new type of “staked” locked position. Plus some percentage your shares used to mint the block will be locked in this same way. These shares will be locked away for four months. You cannot use them for minting or move them.

That’s at least 5,259,490 NuShares (plus the holders percentage of staked from minting) locked away at any given time from the people who voted in that time.

We now have a fund of shares from people who made decisions about the network locked away. Removing a portion of their shares will give an opportunity for others to have a chance of voting on the network too, and that’s important to allow the following:

If we need to have an emergency reduction of NBT supply NuShares owners can vote to have these locked away NuShares used for burning NuBits and trading the supply to new sharesholders, or as parking rewards. I think burning NBT is the best way to go. It requires people to spend something to get something. The NBT would not have appreciated in value. But if they make better decisions than the holders who had the shares they just bought they could get a great return on this investment.

Now this may not be technically possible, but I think it meets a lot of good criteria.

It doesn’t inflate the NuShares supply. It doesn’t punish all the shareholders, just the ones who have been making recent decisions that impacted the network poorly. We’re redistributing NuShares from people who have made poor decisions, reducing their ability to make decisions in the future. We’re bringing in new shareholders who have a chance to steer the network in a better direction that have invested by helping to correct the oversupply of NBT

Just a thought.

[tomjoad]

The impact of a failing network should not fall on all the shareholders when only the ones who minted a block derailed the train. We need a system that slowly removes shareholders who make poor decisions and allows for new shareholders to take the place.

This is great in theory, but almost impossible to execute. Determining who is responsible for what decisions is very difficult in a broad economic system. All kinds of economic attacks could be performed that would cause honest shareholders to lose their assets. I still like Indigoman’s proposal as it is simple and dilutes the impact across all shareholders equally.

[CoinGame]

There’s a lot of wishful thinking in there. You’re totally right. Things could happen that are not the fault of the shareholders at the time in which they occurred. It seems that maybe there will not be one tool to solve this problem, but a diverse set of decisions that shareholders should have a their disposal to make an adjustment that makes most sense. I’m doing anything I can to steer the conversation away from NuShares inflation (more so than is already built into the system I mean). I really think that’s a bad idea, but there may be times where it does make sense.

[Indigoman]

This is a very interesting idea. I’ll have to re-read your post after i’m done class to disect it better. First impression though, in a decentralized world, how is a “poor decision” defind? and who gets to call a decision poor? By protocol determination? but if the protocol can determine that a decision is poor, then it should be able to come up with the correct decision without need for voting (like in the case of interest rates… as long as the protocol is aware of total supply of NBT, why can’t it just adjust the interest rate based on a predefined mathematical equation that economists come up with without needing votes? random thought) … In the case that other shareholders decide what’s poor and what’s not, who do we trust to truly categorize truely poor decisions as such ? … lots of thought swirling in my head but i’ll re read your post later after class

[Indigoman]

I understand the fear of Nushares inflation… it would be very volatile if at every step of the peg falling, Nushares would be created… I’m rethinking the implementation of my proposal in terms of when to allow the functionality of burning NBT for NSR. I’ll post my thoughts later on my thread to keep it concise and gathered in the same spot and i’ll note them as amendments without editing the original proposal.

[masterOfDisaster]

I like the idea of @Chronos because he has started a valuable discussion.
And I like what @CoinGame has made out of it.

The idea of “stake locking” NSR for some time makes it impossible for those who have made bad decisions to get out of the mess by selling the NSR.
I think that is an important idea.

But it affects all others who have made valuable decisions in the same way as their NuShares are stake locked as well.
This poses a disincentive to vote, because voting locks NuShares in a fund.
You could hold only those NuShares that are locked because of bad decisions responsible, but that’d require a kind of consensus which of the decisions has lead to the disaster.
Unfortunately I have no solution for that, but I like the way this discussion evolves

[Indigoman]

Completely random thought that i haven’t really analyzed yet but wanted to throw out there…

What if a voting fee was introduced that get burned with voting? Either in NBT or NSR … This way there is a further financial incentive to only vote on matters that one feels strongly about and therefore not on bad motions that are likely not to get accepted assuming the general public will not support a vote on “poor decisions”? Maybe the fee is flexible that the voter could assign its value and his vote would be measured in accordance to the weight of the voting fee he’s paying?

Totally random thought that i haven’t analyzed and not sure how to implement. Please don’t address the implementation of it yet. Just focus on the merits of it whether it makes sense and whether it’s feasible in the economic sense.

PS: I believe this discussion of voting power and “poor decisions” warrants its own thread as it is a major aspect of the protocol that requires further discussion regardless whether the burning of NBT for NSR gets implemented, I invite you @CoinGame to start a thread since it’s your idea and include links to these posts for reference for the start of the discussion

[Chronos]

I would rather see us try to expand the current deflationary mechanism in NuBits. Which is destroying NuBits to provide a service. Sending a transaction is essentially a service we provide that costs .01 NuBit. I think this could be expanded in other ways and areas.

What if a voting fee was introduced that get burned with voting?

These can be a good ideas, but I think they can’t solve the underlying problem. There is too little motivation to provide a service in exchange for some else’s money being destroyed. Although this can have a small effect on NBT supply, in the large scale, it can’t rescue a failing peg.

In the end, we are looking for a way to permanently remove an arbitrarily large amount of NBT supply, in the case of a failing peg or extended contracting market.

[Indigoman]

Hey @Chronos … my last post was focused on the issue of voting on “poor decisions” as @CoinGame put it. It was not meant as a suggestion to solve the NBT supply. I apologize for the confusion. That’s why I suggested @CoinGame to create a new thread for the matter to seperate the discussion

[Chronos]

@Indigoman Yes, I’m primarily addressing CoinGame’s suggestion, that we might use micro-fees to protect the peg.

[towel]

I get the feeling that things are getting complicated. I thought about how to make a very simple solution and came up with NeuBits. It is such off-topic that I decided to create a new thread: NeuBits: The new NuBits ;-)

I’m stealing the Chronos thing where NSR’s are being issued and then I remove the dual side custodians and also make it so that the NBT’s are 100% backed without any requirements of future users.

[Indigoman]

I’ll go over it later tonight and post my thoughts. Thanks for taking the time to write it down. All innovation is appreciated

[Chronos]

I like Indigoman’s proposal better.

I like it, as well. However, I don’t think a majority of shareholders would vote to replace the parking mechanism with a Nushares generator. This change isn’t in their own best interest. For this reason, my proposal leaves parking as it is, and instead adds an “emergency failsafe” in the case of NBT oversupply.