NuBits and fractional reserve

cryptog 2014-12-17 01:21:01 UTC #1

If every holder wants to redeem their holdings for usd at the same time, would Nu be able to fulfill every redemption request?
In other words, how many NuBits have been printed out and how many usds (or btc/ppc in terms of usd) are backing them?
Sorry if this question displays my lack of knowledge.

History of the Nu Network (Feedback Please)

mhps 2014-12-17 03:07:06 UTC #2

Two points:

I think NuNet should have a balance sheet available to the shareholders, if not to the public.
A controlled fractional reserve perhaps strikes the best balance between efficiency and security. For example, if Nubits are used by day to day commerce so that it is beyond reasonable doubt that a fraction of nubits can never be brought to the exchange to claim USD in a short period of time, then I think NuNet can have that fraction unbacked by permanent reserve, for that period of time.

cryptog 2014-12-17 05:27:18 UTC #3

@mhps

that s a great idea.

I think so too.

By the way,m the buy liquidity is 256k nbts. The sell liquidity is 346k nbts.
If there are no buyers outside of that buy liquidity, does it mean that there are 90 nbtc unbacked?

Ben 2014-12-17 05:45:04 UTC #4

No, the walls start 100% sell-side. I’ll see if I can assemble the start of a public ledger early next week. It should be a lot easier with the help of a few of the tools I’ve built for the custodians’ reporting.

mhps 2014-12-17 06:00:56 UTC #5

I don’t think the buy/sell liquidity difference is a good indicator of unbacked nubits. Some nubits have entered or could enter circulation as parking interest and as award to custodians.

cryptog 2014-12-17 06:40:38 UTC #6

@ben looking forward to it.

cryptog 2014-12-17 06:44:09 UTC #7

@mhps. Sorry for being unclear. By “backed” NuBit, I imply the fact that Nu has some cash (USD) reserve to buy back this NuBit. So perhaps I could reformulate my original topic. How much cash reserve does Nu have and how does it compare to the total number of NuBits in circulation?
I guess this is a basic question related to fractional banking, but I am learning.

mhps 2014-12-17 06:53:07 UTC #8

You are sure you don’t count in nubits that can be backed by nushares as “backed”?

cryptog 2014-12-17 07:02:49 UTC #9

@mhps Right. I forgot about that one
So the notion of being “backed” is an important one and at the same time it is not a simple one.
You could diminish the supply by NSR burning or NBT parking in order to maintain the value of NBT so that holders can still redeem it for 1USD or you could use a reserve in which the Nu bank would increase the buy walls so that any holder willing to sell NBT can do so. At least this is my interpretation.

mhps 2014-12-17 07:11:54 UTC #10

It gets complicated when nushares is used to back nubits.

Anyways I think constructing a balance sheet will help to clear up the financial situation of Nu and bring consensus of direction to go.