New mechanism to reduce NBT supply: NBT Burning

[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.

[tomjoad]

However, I don’t think a majority of shareholders would vote to replace the parking mechanism with a Nushares generator.

Fair enough. For what it’s worth, as a holder of NuShares I greatly prefer the NBT-for-NSR burn option because it makes the entire system more attractive for NuBits users. I think this design would enable far quicker growth for shareholders.

As currently designed, NuBits users all know that at some point in the future - whether it’s 1, 5, 20, or 100 years - the system will collapse and the mountains of NBT that exist will either be worth 0 or some fractional amount. That knowledge will be enough for most people to not use NuBits as anything beyond a quick transactional tool held for a day or two to make purchases and cash out to fiat. The white paper mentions that the damage from this collapse will be localized to speculators who decide to invest in revitalizing the network in pursuit of a new demand high and fail. Shouldn’t these speculators be owning NSR rather than NBT if they have daring plans to rejuvenate the network?

When NBT demand is contracting, the responsibility should be on NSR holders to come up with bold new ways of re-inventing the system, and the risk of system failure should be on their shoulders as well. When NBT no longer have a functional purpose, the supply should be 0, not billions or trillions.

[Chronos]

The beauty of NuBits is that we can put any of these proposals forward as a motion, and let shareholders decide.

The not-so-beauty is that multiple conflicting motions can pass. Hm.

[JordanLee]

I will be writing quite a bit more about the idea of destroying currency for NuShares soon.

Briefly, this idea is very intriguing because it provides a better separation of the speculative asset (NuShares) and the sure thing (NuBits). It lowers the risk of holding NuBits by raising the risk of holding NuShares. Creating a safer product may benefit the value of NuShares. This creates a number of problems that will require solutions. I will detail these soon.

Burning currency for NSR is something we should discuss more with the aim of crafting a motion on the matter.

[cryptog]

Without a mechanism like this, we know NuBits will fail, eventually, due to oversupply of NBT. With this mechanism, the network can last much, much longer. Perhaps indefinitely.

Can you detail a bit why an oversupply of NBT will destroy the system ultimately under the current design?

[masterOfDisaster]

If you don’t have a way to reduce the volume of NBT you might sooner or later end up in a situation where a lot of NBT are in circulation, but no USD are available to buy each and every of those back.
This can be prohibited by feasible ways to generate revenue in the Nu ecosystem to back each NBT with 1 USD.
But those revenue models need to be developed. Destroying tx fees alone is not sufficient (until there are way more tx executed or the tx fees are adjusted).
Meanwhile you can use NBT burning to adjust the NBT to USD ratio.
Without ways to adjust this ratio there will be a level from which on the trust in the NBT system will fail and a bank-run will cause the end of NuBits. If you can level the ratio between pocketed USD and emitted NBT out by removing NBT from the game, that will resovle this problem.
Just like Jordan summed it up by saying

It lowers the risk of holding NuBits by raising the risk of holding NuShares.

it shifts the risk to those who are resposible for sustaining a sound framework and away from those who only want to use a currency.

[Ben]

it shifts the risk to those who are resposible for sustaining a sound framework and away from those who only want to use a currency.

As it should be. It’s my firm belief that those that use a token as a currency—and not as an investment—should always be afforded the least amount of risk possible within a system.

[masterOfDisaster]

And the more and powerful tools are developed to control (especially decrease!) the amount of NBT

• …the easier it will become to defend against Ponzi scheme allegations
• …the better base for adoption will be created
• …the easier it will become to enjoy people’s confidence
• …the better the projection for the whole Nu will become

Controlling (decreasing!) the amount of NBT by “paying with NSR” (in one way or the other) is the key to really make NSR the speculative asset and NBT the sure thing.

[cryptog]

So my understanding is that in case there is not enough demand for NBTs, parking will remove the sufficient corresponding amount of NBTs from circulation in order to get the exact right equilibrium between demand and supply (to get 1nbt=1usd)
When unparking is triggered, there will be interests paid out to shareholders, which would increase supply.
There is an issue to that when demand has not picked back up meanwhile (during parking), which would trigger another wave of parked nubits, implying even more supply at unparking…
In this scenario, basically the lack of demand (or the oversupply) gets worse and worse, triggering a vicious circle ending up with the destruction of Nubit’s value.
This is what Chronos alluded to.

Sorry if I repeat something that has already been described but I am trying to understand myself.

So the parking mechanism is not enough to guarantee in any circumstance the prosperity of the network.
There is a need for a mechanism that destroys Nubits.
Destroying tx fees would not be enough since the fees are too low.
That is why “shapeshifting” Nubits into Nushares has been proposed.

I am amazed by the actual openness of the dev team to implement any changes that improve the network and by the high level of flexibility of the design to adapt to new findings, even 1w after launch.
This is something we have not seen with traditional asset cryptos such as bitcoin or litecoin…

[masterOfDisaster]

I am amazed by the actual openness of the dev team to implement any changes that improve the network and by the high level of flexibility of the design to adapt to new findings, even 1w after launch.This is something we have not seen with traditional asset cryptos such as bitcoin or litecoin…

The dev team seems to be clever enough to understand that they might be able to create something you can start with, a good base for further evelopment, but that they are not able to create a soution that is final and perfect from the start.
The dev team is also aware of the consequences decisions might have for the NuShares holders.

The start has been made.
Now there are discussions going on about how to improve the system. And I appreciate the constructive way of discussing ideas so far.
The voting mechanism grants the right to finally decide which way to go to those who are accountable for the chosen way.
That is as close to my understanding of democracy as it can be in such an environment.
I really love this concept as it has integrated the voting for those who have something at stake right from the start.
Something Nu has just begun…

[Chronos]

I will be writing quite a bit more about the idea of destroying currency for NuShares soon.

Briefly, this idea is very intriguing because it provides a better separation of the speculative asset (NuShares) and the sure thing (NuBits). It lowers the risk of holding NuBits by raising the risk of holding NuShares. Creating a safer product may benefit the value of NuShares. This creates a number of problems that will require solutions. I will detail these soon.

Burning currency for NSR is something we should discuss more with the aim of crafting a motion on the matter.

Thank you. I am impressed with your openness to consider such drastic changes to the Nu ecosystem.

We all look forward to your further analysis on these ideas.

[RobertLloyd]

I am amazed by the actual openness of the dev team to implement any changes that improve the network and by the high level of flexibility of the design to adapt to new findings, even 1w after launch.This is something we have not seen with traditional asset cryptos such as bitcoin or litecoin…

For a day or two, I was worried that the Nu development team might be demoralised by the dissection of their work. But everyone is being transparent and constructive, and we are all pulling forward together. I think it’s great

[masterOfDisaster]

For a day or two, I was worried that the Nu development team might be demoralised by the dissection of their work. But everyone is being transparent and constructive, and we are all pulling forward together. I think it’s great

I sincerely hope that the Nu development team is not demoralized.
I’m almost sure that they are not demoralized, but rather encouraged, because the dissection in this forum was done to enhance that great Nu framework it already is.
Just like you already said: everyone is being transparent and constructive.That’s the style I already got to know and love in the Peercoin community.