The NuBit peg can be thought of as having three dependencies that determine its strength:
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Tier 1 to 4 reserves. Right now these are BTC that we hold which we can use to support NuBits at a moment’s notice. The more we have the stronger the peg, even as it increases counterparty risk.
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NuShare sales. Our ability to use NSR sales to support the peg depends on the liquidity of NSR. Deep liquidity means deep peg support.
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Transfer capacity. The capacity to transfer funds from the lower tiers (2 to 6) to tier 1 where they are accessible to NuBit customers. This is the dependency that failed nearly a year ago, so its importance shouldn’t be overlooked.
So, let’s consider the long term trajectory of peg strength, in terms of these three factors.
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Tier 1 to 4 reserves. These reserves used to be regulated at 15% in 2015. We currently hold a 28% reserve in tier 1 to 4 alone. This is an 87% improvement in peg strength from this one factor.
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NuShare sales. NSR liquidity has experienced phenomenal improvement since 2015. Two measures are important: the percent of NuShares that are exchanged each day and the USD value of all trades. While I haven’t crunched raw data figures to derive exact historical values, I recall that in 2015 we typically had less than 0.1% of all NuShares being exchanged each day. It is now nearly 2% of the NSR circulating supply each day, for a 20 fold, or 2000% increase. That is a phenomenal improvement. Even though the NuShare price is much lower today than in 2015, the USD value of liquidity has also dramatically improved. It was under $2000 per day in 2015, and is now around $7500 per day. That is a 275% improvement. Imagine how much NSR liquidity would improve with an NSR price increase.
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Transfer capacity. In 2016, we experienced a major human failure in our transfer capacity. Some unprincipled multisig custodians failed to keep their contracts to provide liquidity. They were afraid of some market events, which seemed to cause them to hunker down and freeze in fear, as people with authoritarian tendencies are apt to do. They used their fear as a justification to claim that everything had changed, and that the rules that had been so meticulously developed and agreed to were irrelevant. They were lawless and impulsive, which is characteristic of authoritarians. Today, transfer capacity depends on three individuals: myself, @jooize and @woolly_sammoth. I don’t permit pseudonymous custodians in my department. I require everyone to provide multiple verifications of their birth identities. In the time I have been Chief of Liquidity Operations, I have created a culture where efficient and rule based movement of reserves is of paramount importance. @jooize was a custodian at the time of the 2016 transfer capacity failures. He consistently resisted the misconduct of our authoritarian custodians, consistently arguing for devoted and quick peg support. We know how he will react to a crisis, because he has proven himself in one. Similarly, @woolly_sammoth was cooperative in the crisis and demonstrated a fidelity to NuBit holders. We can have confidence he will do his part to reliably support the peg. Our transfer capacity is much more secure than before.
In summary, our reserve is 87% higher, liquidity is greater by 2000% or 275%, depending on how it is measured, while our transfer mechanisms have been improved a great deal as well.
The peg is far more secure today than it has ever been. Nu is gaining strength over the long term.