A long standing criticism of Nu’s Liquidity Engine model is that it requires an input of funds to provide the liquidity used to maintain the peg. NuShare holders have shown concern that until the model is mature, those funds have to come from somewhere. Until now, Nu hasn’t has a source of income.
It has been mentioned in other posts but I wanted to outline here the intention for the current and future use of trading bots to create a profit model for Nu. The profit would be used to fund the liquidity engine and allow for a stronger peg when it is eventually regained.
Before the peg was lost, I developed a replacement for NuBot. NuBot was very well written and could handle every strategy required by Nu since the launch in 2014, but unfortunately, over time, a lot of those strategies no longer applied to Nu’s operation. NuBot was also quite resource hungry and users had some difficulty in keeping a NuBot instance running, even on dedicated hardware.
The replacement is known as LambdaBot. It took the basic strategy of NuBot but rewrote it specifically for the AWS Lambda service (known as a Serverless service). This means that for very little money, multiple peg buts could be run and they require little or no maintenance.
Since the loss of the peg I have been experimenting with using the same bot platform that maintained the peg, but switching the focus to spread trading to try and turn a profit. I’m happy to report that the experiments have gone well. To date, they have used relatively small amounts of funds but the system has proved itself capable of returning a profit on a high percentage of trades made.
As mentioned here, the intention for this trading bot system is to create funds for the buyback of circulating USNBT. This plan should be accelerated in light of the upcoming deal with BarterTrade for which 700 million NSR was recently granted. The trading activity should of the trading bot platform will be increased to target more pairs on more exchanges and increase the profits coming to Nu. These profits will be used to buyback USNBT and eventually maintain the peg at BarterTrade and elsewhere.
I will also look at expanding the abilities of the bots. If they target multiple exchanges then Arbitrage opportunities should be seized. The bot platform currently relies on a few centralised services for operation. I will look to increase the resiliency of this system and ensure that there is service redundancy so that funds aren’t placed at risk. The system also needs an auditing / reporting function so that trade and profit data can be made available to NuShare holders. I will work on these points over the coming weeks.
I would welcome any comments or questions about the system and the plans in place. I would also welcome suggestions for exchanges and pairs that would make good targets for the bots.
I wouldn’t try to hard to bring Nubit artificial back to 1 U$, I’m firmly convinced
that this mission will fail.
At the moment we should concentrate more on Nushares.
As soon Nushare price is at the point that its peak is collapsing, money will find its way
naturally back into Nubit and the result of that is that the Nubits peg will soon be restored.
Keep also U$ interests in the Nubit wallet not to high (I would recommend 7%) to avoid inflation
of the marked with to many new U$ Nubits.
What’s the point in bringing it back to $1 if there is no revenue plan to make sure that, this time, it’s actually going to be different?
I don’t fully understand the potential for revenue from this proposal, but any proposal to generate revenue and profits that can support the peg are very welcome in my view, and more effort should be put into this so that Nu can recover with some reason to believe any peg will last past the next bull market and survive future bear markets.
They have revenue.i just don’t understand why do u want to wait longer to restore the peg.To accumulate NBT?.It’s been more than a year since NBT lost it’s peg,and it’s supposed to be a stable coin.It’s purpose is to remain at $1 not more not less.
I think the two previous peg losses pretty much prove that the model as it is / was isn’t sustainable (though the first time was arguably down to FLOT’s management error).
To be sustainable in the long term, given what can happen with prolonged bear markets and potentially irrational confidence drops, I feel that Nu generating revenue is absolutely essential, so I welcome this news that an avenue is being worked on that could provide some revenue.
I also hope more revenue generating concepts will be considered and developed going forward to let Nu become truly sustainable.
Nice progress report on trading bots. It sounds like a favorable development.
I think supporting the peg needs not only revenue but also a larger reserve. IIRC Nu was operating on a 40% reserve, which is very optimistic, and places a tremendous strain on deeper sources of support for the peg such as the value of NuShares (and also revenue). Keeping the reserve significantly higher (IMO at least 80-90%) will reduce the strain and allow the latter sources some breathing room to thrive without constantly being called upon and drained to support the peg. Crawl first, then walk, then run.
I completely agree - revenue and larger reserves would make the model far more resilient in tough times.
Is there any plan to adjust the reserve ratio when new sales of USNBT take off once the peg is restored @Phoenix? Even 60% would be a huge step up from 40% in my opinion.
I’d be happy to see a significantly higher reserve, especially when growth is fast.
Though I don’t know how this would work in a decentralised way, it’d be great if some of the reserves could be lent out to generate revenue, possibly by using a platform like Celcius or Nexo to get some interest that can also be used to support the peg, or grow the reserve over time.
@woolly_sammoth this is being used while we don’t have a peg, but are you saying it can also be used to make a profit while we do have a peg?
I believe it was discussed before about earning from a slightly wider spread, but that idea was denounced by Jordan because we would effectively be weakening our product, which would hurt adoption because it would make NuBits less useful. Is this talk of spread trading different from simply widening it?