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.