Nu can thrive. Here's how!

The Plaza
#1

There’s been a flurry of talk about winding down Nu. I don’t think that needs to happen. Here’s what could work.

  • The first order of business is to establish a peg. @Phoenix is right about this. Nu is useless without one.
  • We’ve seen that Nu needs better reserves to cover the peg. I suggest 50%.
  • Therefore, Nu should establish a peg at whatever level yields equals 50% reserves with the remaining BTC in FLOT.

A quick calculation from this thread. Count the parked NBT! (It will be unparked soon enough.) 664536 NBT + 154680 parked NBT = 799216, or about 800k NBT. With buy side funds of about $19k, rounded up to $20k, that means the peg is:

$20000 / 800000 NBT, times 2 (for 50% reserve) = 5 cents. Ouch.

Now here’s where my suggestion differs from the ideas so far:

  • Keep the peg there permanently, with buy and sell walls. NBT never returns to $1. After things stabilize, you might want to hard-fork the client so that NBT balances are reduced by 95%, and then $1 = 1 NBT again. It’s a permanent debt haircut. With the loss of NSR value, everyone involved has felt the pain of this default.

Now, for revenue:

  • Use double the exchange fee as a wall offset. This means that, for every NBT that’s bought and then sold again, Nu earns money on the spread. That’s the revenue. Keep the reserve in BTC with NuSafe:
    • When BTC is going up in value, the reserves go up in value, which counteracts traders’ desire to sell NBT.
    • When BTC is falling in value, traders prefer NBT for its stability, which counteracts the falling reserve ratio.
    • Each week, inflate or deflate NSR to keep the reserve at 50%. That could generate buybacks or dividends again, which gives value to NSR holders. Demand can be revived!
  • Also, though it’s not critical, I’d suggest to keep park rates at 5% for 3-month, 6-month, and 1-year terms. It’s a small annual cost in exchange for a good advertising draw, paid for indirectly by NSR dilution (via the weekly rebalancing).

Now, here’s something else to consider: if a plan like this were followed, and shareholders were open to it, I’d be willing to double the Tier 4 funds of 25.742961 BTC, letting this plan run on a well-capitalized 10-cent peg. In exchange, I would ask for the 100M NSR that was recently created. I would be willing to leave that NSR in control of FLOT for the next one-month period, before taking possession of it. That would give shareholders a chance to see that this system is working. If it fails, the NSR would be nearly worthless anyway.

EDIT: This offer has been retracted due to low shareholder support for the above plan.

Disclaimer: I do not currently own any NSR, NBT, or BKS. I have not owned any of these tokens in 2016.

6 Likes
#2

I would love to have a proof of this.

1 Like
#3

I would love to provide proof, if you can think of a way. I don’t think it’s provable, though.

1 Like
#4

True, but what is your incentive? 100M NSR? Really?
The only way your proposal could work is if BTC stays stable or goes down. Have to admit that this has a high chance of happening as it has now almost reached double the value anticipating the halving. So the miners are now satisfied for a while. Still not clear whether the Chinese are as they still using it to get money out of China.

#5

Actually, I think the peg would be strongest if BTC increases in value, because the reserves would grow in value, as well. I would guess that most NBT dumpers have already done their best damage.

Yes, that’s correct. Note that I edited the offer to be a one-month holding period with FLOT, to allow the shares to vote and mint sooner.

#6

That s interesting

but seriously i would not be able to vote for such a proposal.
Given that it seems that there are 200M NSR minting, you would basically take control of Nu.

1 Like
#7

@proposal

L-M-A-O

#8

according to latest calculation Nu has $28k in reserve. parked nbts were measured but was not taken out of outstanding nbt by the script. So the calculation results need not to be corrected for parking. there are about 640k nbt outstanding. that means a 100% reserved peg can be had now by Nu at $28k/640k = $0.04

Still thanks for the offer. Even it doesn’t get accepted, the idea or possible competition it might draw are all welcome.

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How much revenue does Nu need? Service contractors please fill in info
#9

I’m glad to hear it. Those were rough numbers, anyway. The math can be reworked with more accurate figures, and it would be great to start with a higher peg than outlined. It’s also possible to use some of the initial reserve to pay developers for any important protocol changes that come from these discussions.

If the 100M started minting, then total minting would be roughly 300M. I agree 33% minting stake is very high, but of course it is not “taking control” of Nu, because it’s far from a majority. Perhaps other shares would then be incentivized to mint in order to improve decentralization.

But on that point, I think some people may be focusing too much on my offer to contribute to Tier 4 funds. The main intention of the post is to outline a path forward, which can be taken with or without my offer to invest.

1 Like
#10

Thank you for this experiment.
I feel the outcome of it is that shareholders have learned the lesson not to trust single people with too much power.

Regarding the content:

I disagree.
The first order is to establish a sustainable peg. For that you need revenue. What really comes first is revenue.

Bad idea.
Nu will not be able to move the peg from there to $1 as soon as it starts to sell NBT at $0.05

The damage for the brand is bad enough. Forfeiting the peg to $1 will not make it better.

Based on what did you calculate that?
I miss some facts and can’t make a reliable calculation. From reading the forum I think that double the exchange fee is way too low to cover operational expenses and the risk.
10 times the exchange fee is closer to what’s a realistic minimum of a fee from trades that can cover the costs.

My understanding is that NuSafe keeps the funds in USD. BTC rate doesn’t affect the value in NuSafe. Do I understand NuSafe wrong?

Are you sure that the NSR market is liquid enough for that?

So you want to buy 100 million NSR for 25.74296 BTC or approximately $19k?

I’d rather buy tens of thousands of NBT at exchanges (over time and as long as the NBT rate stays low) or fund development, pay contributors with 25 BTC.
Whether the peg is at $0.05 or $0.10 doesn’t matter very much.

#11

Why? Is it necessary? You never know what will turn out if Nu is kept alive and allowed to evolve, right? If this statement is not necessary this proposal is similar to @Phoenix’ original $0.1 peg proposal wit different way to finance, correct?

i don’t undrstand. nusafe is for storing reserve in usd. if you want to keep btc, just let FLOT keep btc.

#12

Yes, sticking with a a single new peg is necessary because I think that Nu will never be able to afford to resume the old $ peg in a meaningful way, and it allows Nu to look to the future instead of the past. This is the primary way that my outline differs from other ideas.

One improvement that could be made on this would be to take the weekly reserve adjustments, and find a way to run them in a decentralized manner, via direct NBT/NSR swap, on-chain. That would take some clever engineering, and might be done separately.

#13

@ConfusedObserver Good observations. I’d like to comment on this one:

Then you must not own NBT either. :slight_smile: For someone who is invested in these tokens, getting double your value back could be a big deal. It seems like, with the more accurate assessments that @mhps provided, we might even be able to launch the plan with a well-capitalized 20 cent peg. Maybe even 25 cents, which would be a nice round number.

Also, you’re right about the liquidity of NSR being a challenge. We should revisit some of the “unseeded auction” ideas floating around to see if the reserve rebalancing could be done in a better way.

#14

Who in the future would buy a stable currency that has a precedent of reducing its value by 95% in time of troubles? I would not.

#15

if you have a better choice. note: nubit is a 1 decentralized 2 stable 3 crypto currency.

#16

OK lets analyse Nu, the balance sheet and the situation here:

Nu is a business so it needs a revenue stream to cover the expenses, to long this project behaved like a charity to give traders a easy way to hedge without asking for some reward.

Revenues:

Trading fees:

So one way to generate revenues for the future is to widen the peg a little. 0.975 for the buyside 1.01 for the sellside. Thats a 3,5% fee i think many trader who need to act fast or dont want to use exchanges because of AML/KYC registration would gladly pay that.
The last days i saw about 5000-8000$ daily volumne in NBT. 5000$ volumne are 175$ fees daily, 5.250$ a month. Thats all theoretical but we have to begin somewhere.
Remember that this is just for the future to get there will take a long time but i will explain later why i dont believe we can just change the peg to 0.05 , 0.1 or whatever without destroying nu completely.

Selling NuShares:

The Nu Blind Auction sold 2.760.000 NSR for 3.240,00 Nubits. Thats 3240$ gone from the liability side so i dont think it was a failure even if not everything was sold.
The Nu Blind Auction should be continued say every week.
Also now there should be 100 Mio NSR to sell. There is still quit a buyside on poloniex for NSR. Dont drop everything at ones just sell portion every day. 500k/ day are 200 days of selling.
500k today would bring 0,435 Bitcoins. Of course i know the price will shrink over time but what matters is the value each NSR represents. The intrinsic value of NSR can be higher even if its price goes down.

Every company at the stockmarket which diluted its sharecount and doesnt use the proceed to better itself will go bankrupt. A company which uses the proceed to pay down debt or invest in the start of a new product that will generate more profit will be rewared in the future. The sharecount doesnt matter the equity value in the company matters.

Balance Sheet:

Thats a little tricky. Can somebody give me exact number of all outstanding nubits?

If i use getinfo i get : moneysupply" : 1323920.0765,
On Coinmarketcap i see : 757,084 USNBT

Whats the real number?
Most user in the forum talked about 700k so i assume thats the correct one.

Assets: Future revenues , bitcoin holdings
Liabilities: 757.084$ Nominal debt - at 0.25$/NBT 189.271$ real debt
Equity: Assets - Liabilities for now negative value

So the equity should be worth nothing in this company but its still valued at $ 688,041 today?
Even higher then the real debt. Of course its not very liquid, but even if we cut it in half its larger then the debt. User still give it a value because they see potential future earnings and value.

Has somebody the actual number of bitcoins Nu has?

I ask because if bitcoin rises further, the value of NBT will also fall further. So it could happen that at just say 0.15, 0.10 , 0.05$/NBT there is enough value to buy the debt cheaply and erase it from the balance sheet.
The equity would gain intrinsic value, users would gain confidens in the future, NBT holders would see a reduce in debt which would make there own claims more valuable and attract speculators/investors.
Thats the reason why i think the goal has to be to reestablish the 1$ peg. If we reduce the debt via haircut the value for NBT will be gone.
The only reason it trades at 0.25/NBT is because of users that think someday in the future it will be worth 1$ again. Thats the only demand NBT has for now. Just investors. You dont hedge with high volatility its to unpredictable.

Nobody should deceive oneself this will take time. But i think that there is a real possibility to get NBT back on a 1$ peg.
So the peg is necessary for Nu to work in the longrun but now the first priority is to get the debt down.
Nu is distressed company with its bonds trading in distressed territory its absolutely legitimate to make use off it.

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#17

See this post and the buyback calc therein

see

Great analysis. See expense analysis

#18

It seems there is not broad shareholder support at this time for a permanently lowered re-peg, so I won’t be putting this idea into an official motion format. I am also retracting my offer to buy the undistributed NSR, since the investment was dependent on such a plan.

Thanks, everyone, for the good feedback and discussion.

2 Likes
#19

I appreciate your proposal and your constructive approach.

#20

I like the revenue plan though. Having our revenues come from the exchange of our product seems to be the best business plan.