NSR burning instead of dividends --- why it's bad

Although I would rather see the price of NSR rise than receive dividends, the method of burning nushares instead of distributing dividends is risky.

The decision to buy or sell nushares from the open market will be known in advance and it would allow people to front run us and reap the benfit. For example, if a selfish nushareholder knows that NSR will soon be bought from the open market they would buy nushares and set a sell order at higher price.

What is more, if they knew that nushares will be sold on the open market to enforce the nubits peg a malicious nushareholder would dump their nushares on the open market. We cannot allow secrecy either because then the person responsible for buying/selling the nushares could abuse their power for their own good.

The same problem is actually with dividends too. If we know that peercoins will soon be distributed as dividends, speculators could try to pump the PPC price up prior to the dividend acquiring.

This has probably been discussed before somewhere in the forums but since I still see insights about seeing the NSR + NBT system as a whole, I suspect that such risks need more community attention.

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Nsr and nbt burns should be a daily thing, done in a decentralized way such that anticipating them is equivalent to anticipating the market. In that case, you can easily see that market shorters are not bad, they are in fact the necessary market makers.

With my proposed nsr auction, we may end up with people selling before the motion passes so that they can buy back lower, that is why I am proposing small volumes over longish time periods, to decrease market influence. But yes, centralized auctions are far less preferred than decentralized offers for traders to burn themselves. However, with nsr grants still unimplemented, centralized auctions are our only choice.

Dividend distributions should be done as the opposite to parkrates, and therefore should never occur while we have nonzero park rates. We should also make a decentralized method for dividends, but I think we have a long time to refine that as park rates are a long way away from zero.

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Yes, slow and gradual buying/selling could solve the problem. About dividends, perhaps dividends should be paid in nubits? Then there would be no point in front running the dividend distribution :smiley:

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Distributing with nbt is equivalent to distributing nsr (as the nbt will eventually be burnt for nsr anyway to protect the peg) which is equivalent to increasing mint rates. Increasing mint rates may be a good alternative to ppc distributions, I’ll have to think about it.


A market by conception is centralized - what does it mean to have it decentralized and/or distributed?

If we allow the burn protocol to be used by daily traders and control the burn rates via continuous shareholder voting, like we do with parking and we plan to do with fees, it will decentralize the burn operations. Centralized is when Jordan has a reserve, decentralized is when no one has a reserve, that’s the fundamental difference.

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That’s interesting -

Isn’t this how burns were originally going to be setup by Jordan? We ended up going with the simpler approach of NuShares custodians.

Right, we decided 4 months ago that we needed NSR grant proposals and that decentralized burns are the step after that. I still agree and think it’s the solution to everything in this thread. A proper NBT>NSR burn cannot even be done without NSR grants, so clearly that’s first. The step after that is to decentralize, which I personally believe should happen by allowing for a continuous vote on the rates via a hard fork.