January 4th 2017, the following markets will be delisted:
NBT nothing about NSR
time to get B&C exchange up and running
4 Likes
Fortunately, as the world’s first DAO we have quite a few options to incentivize Poloniex to keep US-NBT listed.
The Nu community is one the larger crypto communities (#4 when the question was examined carefully 6 months ago behind only Bitcoin, Litecoin and Ethereum). Where the community has not performed well in advancing NuBit adoption in the six months, this provides an opportunity for the community redeem itself.
We need shareholders, community members and users of US NuBits to contact Poloniex today and express your desire to use US NuBits on the Poloniex platform. Please tell us here in the forum if you have contacted them. It is also important we discover why they made this decision, so ask them why they made this decision and report the answer here on the forum if you get any indication from them. The posted comment from Thoth displayed in the OP says reasons for delisting in general may be “lack of community, support, development, and performance”. Remind them of all the good things we are doing in these areas. The community is still very active with 5 to 10 active threads on the forum each 24 hour period, typically. Both our software and liquidity are very well supported. We just released a new client with an important protocol change last month that is supporting our release of Chinese NuBits, European NuBits and SDR NuBits. Chinese NuBits now exist and we are about to introduce them to the public. As for the performance criteria, US NuBits are still exactly $1, as they should be. Despite a service interruption, US NuBits have been consistently pegged since September 13th. That is more than three months of perfect performance. Remind them that, as the first DAO, we continue to pioneer blockchain governance, and have made important positive changes, particularly in the way liquidity operations are governed. Remind them that I can be reached at phoenix1@sigaint.org or on this forum, and that I have the authority to represent shareholders and our DAO with respect to liquidity operations (i.e.: NuBit trading) and I am eager to negotiate a solution that appeals to their interests and keeps US NuBits listed on Poloniex.
I am honestly perplexed by the decision to delist given our active community, our excellent support of our offering, and our active and recent development. As for volume, that doesn’t seem to be an explanation either. Our average daily volume over the last month at Poloniex is around $2,000 per day, more than 25 or 30 coins on Poloniex that are not being delisted. Additionally, we have a history of much higher volumes on Poloniex, and there is good reason to think we can increase the volume again now that our governance problems are solved. We plan to increase the trade volume on Poloniex by offering $50,000 of liquidity at 0.6% spread and offering very attractive interest for holding and parking US NuBits: currently more than 18% for a six month period. It is an ambitious plan that has an excellent chance of succeeding, particularly if we remain listed at Poloniex.
Finally, I will remind shareholders and community members that about a year ago we were actually in very advanced negotiations to replace USD Tether in the prominently placed panel on the Poloniex web site, with listings for BTC/US-NBT, ETH/US-NBT and several other pairs. It isn’t clear to me why this didn’t actually happen. It seemed like the decision to do so had been made by Poloniex but that our technical support of the transition was lacking due to our decentralized nature and lack of action from @desrever. We have realized we were too decentralized, hence we now have hierarchically organized liquidity operations. The same will likely occur with development. Nonetheless, we currently have good support of NuBot from @woolly_sammoth and our core client from @sigmike.
As Chief of Liquidity Operations, I am having the department reduce the spread of our buy and sell walls on Poloniex to 0.6%, effective immediately @jooize. Go and trade NuBits immediately to take advantage of this very tight spread to demonstrate demand for US NuBits on Poloniex. Prior to this change, we already had more liquidity at 1% spread or less than any other stable coin on the market, including USD Tether and BitCNY.
Today is the right day for shareholders and community members to contact Poloniex to express their desire to continue trading US NuBits on Poloniex. We also need shareholders and community members to make a convincing display of their desire to trade NuBits on Poloniex by creating high volume there today and in the days to come. After all, the Poloniex business model is to get 0.4% of every trade made in fees, so giving them that revenue immediately will be the most convincing statement we could make.
5 Likes
@jooize has already reduced the spread on Poloniex to 0.6%. Thank you for your prompt response.
1 Like
Another point that can be made to Poloniex in correspondence is that where NSR is still being supported, they are already expending the server resources needed to support the NuBit client. They can support US-NBT without further expenses or overhead of this kind. It is very easy to do from their point of view.
1 Like
I have sent a message to MobyDick at Poloniex concerning the matter, although I am still trying to verify I have his correct email address.
1 Like
Time to speed up B&C development!
I guess I don’t have to wait to several years later when I learn C++ and understand the source code.
2 Likes
Am I the only one noticed that so will bitcny be delisted?
1 Like
I noticed it too.
Neither central bank lovers nor haters like FIAT pegging cryptos.
Hayek good money is the only way out.
Hopefully, Poloniex will change their mind and decide not to delist NBT. It still has good trading volume, I think, and it’s critical to the operation of NuBits and NuShares.
Poloniex supports nearly all the NBT trading volume in the universe. See http://coinmarketcap.com/currencies/nubits/#markets.
I sent a message to Poloniex Support yesterday informing them of Nu’s situation, what we’ve done, our development, and expressed optimism for continued business together. For follow-up I referred to @Phoenix while offering myself in case they prefer someone of public identity.
Even if they go through with delisting, we seem to have reached the floor of exiting NuBits. That makes me feel more confident in Nu’s future, but losing Poloniex would be disruptive. Please take a moment to send them a friendly message to indicate we’re serious about NuBits and give them a glimpse of the unusually professional community I know we are. I think it’s more powerful they get a burst of messages today instead of scattered over the next two weeks. It doesn’t need to be elaborate.
1 Like
Now you find it’s important to get forum members support. We all know that there is a serious split in our forum. In fact, no one is happy.
As a long time forum member, I am very disappointed, I suggested we should have revenue in 2014, I reminded to all of you that @Benjamin’s Zero reserve model is bad in 2015. Selling NSR when NBT in danger is something like borrowing money from banks when you are bankrupt.
In the end, all the thing I did on they forum is not very meaningful. I will not send messages to Poloniex at all, let them delist NBT, if Nu fails, let it fails. If B&C fails, let it fail!
All the stupid things should be answered for. I am learning C++, if B&C survives the next few years, you will get a free/cheap programmer, that’s all I can do.
I am fed up talking here, I am doing.
2 Likes
NuBits is attempting to solve a hard problem. Its backing mechanism is either subject to reserve assets’ value shifts and risk of losing reserves, or relying on rich people’s belief in the future of it. What alternative models have been suggested, and what am I missing? Is there a summary of Hayek’s model for application in a cryptocoin? There’s @Sabreiib’s suggestion (is that the best link?) and @ConfusedObserver’s suggestion. I still haven’t taken time to learn about either.
Crisis
The system must have taken damage by the failure to execute the model (causing downward pressure on NSR from the extraordinary sales), but it may still be viable. That we’ll simply have to see. I don’t particularly blame FLOT NSR for it. The group was incompetent (change from previous statement of mine). I would have been incompetent in that group. Shareholders should have made sure the group knew what to do, and how to do it. Who’s fault it was seems largely unimportant now, but as an organisation we may better blame the group for public clarity of what happened.
Augeas
I’ll make a note regarding “Augeas default”. I feel it was unfair to discredit the initiative like that, and obviously Augeas didn’t emerge until months later. I don’t think there was malice by an already formed rogue group, but simply incompetence. Using the name to refer to shareholders who didn’t support Nu’s established model and the peg in the crisis seems accurate, but I would have spoken differently if only for goodwill.
Revenue
Revenue is a genius idea. I mean, come on. Of course we all want revenue to the degree of turning a profit. If it were that easy wouldn’t we have it already? I’ve addressed this before. We’re an ambitious experiment building currencies that at scale have potential to be profitable. As of right now, we’re basically a startup. Why we primarily need development is to create the potentially sustainable system that can bring further revenue. Our current revenue sources, which we do in fact have, indeed rake low or even insignificant amounts.
Business model
Our current business model is to sell currency units and aim to keep the units in circulation immediately backed to 50% down to 25% (linearly by 0–2 M in circulation) with reserves. We sell units for $1.005 or lower, and buy them back at $0.995 or higher. Current reserve target is ~48% and our reserves are at ~32%. Nu began with 15% reserves and came quite far until confidence was eroded. We spend the other 50–75% on raising the NuShare value as a way to mitigate the risks of reserves and incentivise purchase of shares when NuBit demand is in decline.
A healthy peg is critical for the value of the shares, as confidence in the backing is paramount for NuBit sales which is the source of pay-off to investors. NuShares have to be sold and the owners rewarded (with buybacks or dividends) in order to keep that dynamic going until we find other ways of backing stable cryptocurrencies. At least that’s my understanding.
If you have any interest in seeing whether Nu can succeed, work for it, now.
1 Like
NuBits is attempting to solve a hard problem. Its backing mechanism is either subject to reserve assets’ value shifts and risk of losing reserves, or relying on rich people’s belief in the future of it. What alternative models have been suggested, and what am I missing? Is there a summary of Hayek’s model for application in a cryptocoin? There’s @Sabreiib’s suggestion (is that the best link?) and @ConfusedObserver’s suggestion. I still haven’t taken time to learn about either.
I wish poloniex delist NBT and you have time to valuate other’s suggestion, my opinion is just one of them and may not be the correct one. The most important is the attitude to the community. Good leaders always like listening.
Crisis
The system must have taken damage by the failure to execute the model (causing downward pressure on NSR from the extraordinary sales), but it may still be viable. That we’ll simply have to see. I don’t particularly blame FLOT NSR for it. The group was incompetent (change from previous statement of mine). I would have been incompetent in that group. Shareholders should have made sure the group knew what to do, and how to do it. Who’s fault it was seems largely unimportant now, but as an organisation we may better blame the group for public clarity of what happened.
Don’t blame FLOT. Just like you having no time to study other’s opinions, the spare time of FLOT is also limited because we are all busy in real world. If they are incompetent, it is because they served an incompetent architecture!
Now let’s review the dangerous game from 2014. At first, there was only NBT/USD pair in Nu’s white paper. Then Jordan added NBT/BTC pair just before the launch of this projects(perhaps exchanges suggested it). This was a very big change, and after the initial operation of LP at NBT/BTC pair from henry? & Angela, they both disliked continue to act as LP: no compensation at the risky reserve BTC price speculation at strict pegging. Then Jordan provided high LP compensation to LPs, as high as 10% per month! This game became even dangerous because Nu acted like a ponzi. In fact, BM from bitshare community already pointed out Nu is a ponzi in Sep-Oct 2014. Because Jordan has nothing interest in starting a profitable business at all, he ignored the revenue-expenditure problem and leaded Nu further into a dangerous water.
If we keep high reserve, this dangerous game may continue for relative long time, then a nerd called Benjemin appeared on this forum and argued for the stupid Zero reserve, “ sell NSR when reserve is consumed” “ Let the peg fail”. Quite a few were interested in his nonsense, including former marketing Tomjoad.
Then in 2015, Nu stupidly buyback NSR with 500+ BTC. Now we know how stupid the NBT<->NSR is. It makes NSR lose 90% cap, ironically, tomjoad objected the NSR sale when crisis took place. It’s amusing, he/she hadn’t found the problem of benjemin’s opinion but regret at the last minute, too late.
So in June 2016, no one could help Nu even FLOT used the last dozens of BTC to maintain NBT peg, and started NSR at once. It’s totally no use because Nu had done tons of stupid things.
In 2015, we spend 500 BTC to buy how many NSR? 20 million NSR? Then how many BTC collected by selling these NSR? Cannot you notice this stupid mechanism?
Don’t blame any one, blame our stupid mechanism. And every investor should blame ourselves for investing money into this LOW IQ project. Without decent common sense in business, Nu/B&C is deserved to fail. The god will punish those stupid/stubborn people.
Augeas
I’ll make a note regarding “Augeas default”. I feel it was unfair to discredit the initiative like that, and obviously Augeas didn’t emerge until months later. I don’t think there was malice by an already formed rogue group, but simply incompetence. Using the name to refer to shareholders who didn’t support Nu’s established model and the peg in the crisis seems accurate, but I would have spoken differently if only for goodwill.
Support Nu’s stupid model? LOL. Obviously most shareholders wake up in the end.
Revenue
Revenue is a genius idea. I mean, come on. Of course we all want revenue to the degree of turning a profit. If it were that easy wouldn’t we have it already? I’ve addressed this before. We’re an ambitious experiment building currencies that at scale have potential to be profitable. As of right now, we’re basically a startup. Why we primarily need development is to create the potentially sustainable system that can bring further revenue. Our current revenue sources, which we do in fact have, indeed rake low or even insignificant amounts.
Spending NBT’s proceed(BTC) without using it for investment is rogue behavior, and spread trading can be the easy revenue. Nu has not found the so called revenue because Nu’s architect refuse to collect that revenue.
The most difficult thing is to improve the IQ of Nu’s architect. Hope you understand it. Today’s situation is mainly because our archtect has Low IQ in business or High IQ in scam.
2 Likes
In point of fact, at the time the peg was abandoned on May 27th, there were over $40,000 in tier 1 to tier 4 reserves, and absolutely zero NSR had been sold. Rather than use these very ample reserves (which included NSR that could be sold at 500 satoshi), FLOT destroyed liquidity in NSR by stating their commitment to abandoning the peg.
If FLOT and @masterOfDisaster had not made these mistakes, I suspect the NSR supply would still be below 1 billion and the NSR market cap probably would have risen like other cryptoassets, well above 1000 satoshis, though I admit we can’t know. So, NuShare holders paid a 98% penalty for their representatives abandoning the peg and the model that was agreed to by shareholder passed motion. This should not be a surprise since Jordan Lee stated in the white paper that NuShares would go to zero if the peg were lost. He apparantly made the presumption that the peg would be vigorously defended, due to the fact that NuShares would be decimated if the peg were lost or abandoned. This basic premise and dynamic of the system seemed not to be understood by @masterOfDisaster or FLOT, indeed rendering them incompetent on this one fact alone.
We have discovered the model works wonderfully well. Our troubles are the result of its abandonment. The best way forward is to cling to the model that has proven to work so effectively over the past two years.
In any case, your account is factually inaccurate.
In front of the vast NBT dumping in May-June, the remaining $40,000 or a dozen of BTC is meaningless at all.
Even if you can sell NSR at 500 satoshi from June to Dec, you still lose tons of money which was spent in buyback 2015.
If the model is so fragile that even a group of elite(FLOT) from nushareholders cannot handle it and break it, the model itself is rubbish.
You can prove your model in 2017, this is the last chance.
4 Likes
Everything is relative, compared to Nu’s model, FLOT is impotent, but compared with FLOT, most ordinary crypto holders are impotent, many of them even cannot read English!
What kind of model on earth would you design for those stupid, selfish, English illiteracy crypto coin holders? They are reality, if your model wanna survive in this real world, you should design a model which is damned simple and robust, just like Satoshi did for us.
Any advanced, subtle, complicated model is hopeless.
1 Like
The important point to make is that our money supply in circulation shrinked from over 700,000 at the end of May to around 150,000 precisely because of the unnecessary default illegally imposed by @masterOfDisaster and FLOT. Chances are low it would have ever dropped below 600,000 if the model had been followed. In fact, the drop in May from over 800,000 to just over 700,000 was the result of a minor failiure to follow the model in March, when liquidity at Poloniex was dropped. Our model is to maintain high liquidity at all times. My guess is proper application of the model would have prevented the money supply from dropping more than 15%, as opposed to the 82% drop we have actually experienced. But we kept the peg during that huge drop, after taking control away from FLOT and @masterOfDisaster. That is an incredible testament to the strength of the model in supporting the peg. After decimating 85% of our market cap which we rely upon to support the peg, we were still able to support it. We did more than maintain it. We lifted the value of NuBits 400% in just over 2 months (from $0.20 to $1.00), after we had our market cap reduced by 85% due to gross incompetence and insubordination to shareholders. Think about that for a minute. What other currency can do that? Could the US dollar increase its value 400% and hold it there for the long term? No way. Not a chance. Only our model can do that. And it can do it after an extremely serious crisis. Perhaps Jordan Lee should be considered for a Nobel Prize in economics. Maybe. This is an amazing discovery and an amazing model, all implemented on a decentralized blockchain.
I understand shareholders are mad because they lost money. They have to take responsibility for not ensuring the model was followed. Requesting the model be followed in motions isn’t good enough, we have found. That is sad and unfortunate. As a NuShare holder, I have had many angry moments over what has been done by @masterOfDisaster and FLOT. Regardless, I come here every day to build our solution and fix things with a positive attitude.
If we can ensure the model is followed, we have good reason to expect NuBits to succeed going forward.
I have as well.
@masterOfDisaster and members of the FLOT are human, and therefore subject to mistakes, misunderstandings, having moments of irrationality, and being in a state of confusion – or if not confusion, then perhaps not totally aligned or ready to act within the vision of a cryptocurrency that was and is in its infancy.
For your own sake, have you or will you ever be able to forgive them, and move on? Or will you be stuck at that moment for the rest of your life?
If I could go back several years, would I have still invested in Nu? I’m not quite sure.
My life has taken a different path: thru what has happened here, I have had a lot of experience, and have grown as an individual.
These are still the early days of cryptoassets. The future is ours to make, hopefully together. But if you haven’t noticed, fewer and fewer people are posting here. The community is dwindling.
3 Likes
I attribute this to downward movement in the NuShare price. The only effective way to grow the community is to create improvement in the NuShare price. The only way to create improvement in the NuShare price is to stop the decline of the size of the NuBit money supply. Fortunately, the NuBit money supply can’t go below zero, and the closer it gets to zero, the easier it is to turn around. Having reduced 82% to around 150,000, it is pretty close to zero. We have to be close to a turnaround.
@woodstockmerkle, if you want to help, you should finish the 2.1 release that focuses on stability and reducing memory utilization. That would help us get more exchanges on board. I realize that is a difficult and very technical task.
@Phoenix, you keep saying that following the liquidity engine model is the only way that Nu can succeed. Before I turned against you and Jordan for all the odd behavior with multiple identities and important unanswered questions, I hope you will remember that I attempted to give you the benefit of the doubt.
After the collapse of the peg I spent a long time trying to analyze and understand your liquidity engine model. As the peg was collapsing you said that people needed to understand how the model was supposed to work and you’re still saying the same thing today, that the model must be obeyed.
After all the time I spent trying to figure it out, I went ahead and wrote out my interpretation of how I believed the liquidity engine was supposed to work in practice. You had placed such a high value on people understanding this model that I spent my valuable time writing it all out hoping that you would pick apart my analysis and provide clarification where needed.
However instead you completely ignored it and provided no feedback other than to say that my reasoning for why it failed was wrong. For someone who places so much value on others understanding the model and obeying it, you never provided any feedback on my attempted explanation on how the liquidity engine was supposed to function. Without that feedback, how else were we supposed to understand?
So I will give you another chance right here, right now. Please read my attempted explanation of how I thought the liquidity engine was supposed to function and provide clarification on where you believe I am right or wrong. The reason I have kept my NuShares even after all this is because I’ve always had this nagging voice in the back of my mind that says “What if the model actually did work if it was followed correctly?”
The reason this nagging voice exists is because there was once a time that the model did appear to be working as designed and it was right before the exchange hacks when we were providing high amounts of liquidity and having record trading volumes every day. There was an appearance that following the model was becoming increasingly successful, however because of the exchange hacks there is no way to know what would have happened and where we’d be at today.
I guess I still want to believe it does work, but you give us no feedback on the important details. If Poloniex doesn’t delist NBT, you may have another chance to prove your liquidity engine theory, but I would like to hear your feedback on my previous writing before that. Here it is again. If you believe it is so important for us to understand then you will respond back.
Intro
I’m going to attempt to describe my interpretation of @JordanLee’s liquidity engine model as best as I understand it, however I am not Jordan, so I may be leaving out important things or getting something completely wrong.
Most of what follows depends on the basic assumption that providing high amounts of liquidity at a tight spread will attract even more liquidity through increased NuBit sales. If Jordan is incorrect about this basic assumption, then the entire article that follows is based on a false assumption. I lack the knowledge necessary to determine whether his assumption is true or false. This is only my attempt at understanding his model based on what he has said in the past.
At different times over the course of this experiment, Jordan has brought up major points with shareholders that give us a glimpse into his vision of the future of Nu. For example, early on he revealed his goal to replace Bitcoin as the intermediary currency for crypto, through providing lots of liquidity. Later on he revealed that Nu is not designed to keep reserves forever, because with a reserve comes counterparty risk that could destroy the system if it ever fell out of our control. Recently though he began speaking of Nu as a “liquidity engine.” I had not heard him use this term until recently, but I believe it ties back into his first point about becoming the intermediary currency for crypto through the provision of deep liquidity.
Jordan’s Quotes on Nu as a Liquidity Engine
Here are all the quotes I could find where Jordan referred to Nu as a liquidity engine…
A Degraded Peg is Not a Peg, but a Tight Peg is Costly
The most important thing to understand is that a degraded peg with a lower buy side is not a peg at all and will cause customers of Nu to lose money when they cash out. This isn’t desirable, so customers would rather avoid NuBits, causing demand to drop like a rock. In Jordan’s words, a degraded peg means we have no peg at all and our liquidity engine is shut off until we return the spread to within normal parameters. A peg is only desirable when it has a tight spread, which offers something useful to the customer without causing loss of money. The counter-argument though is that when the spread is too tight, Nu loses money from our BTC reserve, which is slowly eroded away over time by users who trade NuBits using our buy and sell walls.
So our product is most valuable when it’s provided with lots of liquidity at a tight spread, but it’s also more costly to maintain. If there weren’t enough NuBits burned through transaction fees to cancel out the costs of liquidity provision at a tight spread and Nu couldn’t gain anymore NuBit sales to replenish the reserve with more BTC, the BTC in our reserve would be slowly eaten away until it was gone and the peg would collapse from lack of buy side funds.
How Nu Functions as a Liquidity Engine
This is where the term liquidity engine comes in. Nu starts off by selling NuBits. The BTC proceeds from those sales are placed on the buy wall at a tight spread. The large amount of liquidity provided by this BTC buy wall encourages trading, which over time increases demand for more NuBits, which are then sold on the market. The process repeats with more BTC proceeds being added to the buy wall from NuBit sales. So as NuBits are sold, liquidity increases, which encourages even more demand. This does not go on increasing forever, as Bitcoin’s ups and downs will effect NuBits demand as well. However, after low demand cycles are over, as long as we continue to provide lots of liquidity at a tight spread, NuBits demand will return and it may return stronger than ever before, adding more sales, more BTC and more liquidity to the system. This high liquidity is more powerful than any advertisement we could possibly make for Nu.
This system acts similar to a vehicle engine. @mhps described it well in the quote below…
In other terms, BTC is used to provide liquidity, which acts similar to transmission fluid. Transmission fluid is a slippery liquid that acts as a lubricant for all of the moving parts inside your transmission. In the same way, a high amount of liquidity acts like a lubricant for traders, making it easier for them to trade in and out of NuBits or BTC.
At the same time, the BTC used to lubricate the markets is also used as if it were fuel. It costs money to keep large amounts of liquidity up at tight spreads. BTC is slowly burned up as if it were fuel in order to keep this liquidity engine running at full speed. This can cause the BTC reserve to erode or shrink over time, but the little bit of BTC that is burned in order to provide these tight spreads is more than made up for in the form of increased NuBit demand and sales, which will increase the BTC reserve and liquidity even further. The BTC expenses for maintaining lots of liquidity at a tight spread is a small price to pay for keeping the liquidity engine running, if the end result is the engine picking up even more speed through increased NuBit demand and sales.
At times the engine will slow down due to lower demand because of BTC price swings. We protect ourselves from this by keeping a high tier 4 reserve and through using tier 5 park rates if necessary. If the reserve is high enough, then we won’t need to use parking that much. Tier 6 NSR sales should rarely be used if ever as long as the network is in a healthy condition and has lots of reserves. These upper tiers will continue to be in effect until Bitcoin reverses and NuBit demand picks back up, which causes the liquidity engine to roar back to life.
So in theory, as long as we continue to provide high amounts of liquidity at a tight spread, NuBit demand will continue to increase. It will hit periods of low demand, but when it returns NuBits will become useful to more and more people. Once again, high liquidity and tight spreads cause increased demand and NuBit sales, which adds more BTC to our reserve. A higher reserve means we have more BTC to add as liquidity on our trading pairs. This higher liquidity encourages increased demand and more NuBit sales. The whole thing is cyclical. It’s an engine designed to attract greater and greater amounts of liquidity through the burning of BTC. As liquidity rises, more BTC is gained through increased NuBit sales and is used to continue refueling the engine, which allows it to pick up speed and gain momentum.
Using Liquidity to Scale up the NuBit Money Supply
I believe @JordanLee was describing this process in his post here…
In the quote above, Jordan talks about using liquidity as a tool in order to scale up our network’s money supply through increased NuBit sales. He also says that as the NuBit supply scales upward, Nu’s liquidity costs as a percentage of the total money supply should drop dramatically. In other words, as we use liquidity as a tool to increase demand and sell more NuBits, the amount of liquidity Nu will need to provide as a percentage of the entire NuBit supply will decrease.
In the same quote, he also mentions that the US government and the Federal Reserve don’t pay for liquidity at all, because they have achieved such a large scale in their money supply. It seems as if he is implying here that if the NuBit money supply were to achieve a similar scale, that Nu would no longer need to pay for liquidity as well. I am not quite sure though without a confirmation from Jordan, so I will continue as if Nu will always need to provide at least some liquidity in order to keep the peg.
NuBits as the Intermediary Currency Used in Cryptoasset Trading
At this point, it’s very important to remind you of Jordan’s vision for using the liquidity engine as described above in order to exceed the liquidity offered by Bitcoin and ultimately replace it as the intermediary currency used in the cryptoasset trading market. Here are a bunch of quotes detailing his plan to do this…
As Nu provides liquidity at a tight spread, it will attract more NuBit sales, more BTC and even higher levels of liquidity. This will have the intended result of scaling the NuBit money supply upward. As this process continues and more and more people use NuBits as a trading instrument, the trading volumes for NuBits in terms of dollars will exceed that of Bitcoin’s trading volume. When this happens, NuBits will have surpassed Bitcoin as the intermediary currency used in the cryptoasset trading market.
Scaling up to Payment Processing as a Revenue Stream
While replacing Bitcoin as the intermediary currency used in the cryptoasset trading market would be a significant achievement for Nu, it wouldn’t solve the problem that the liquidity engine model which led to Nu’s rise is ultimately unsustainable in the long-term without some way for Nu to generate actual revenue.
Remember, in order to attract larger amounts of liquidity to Nu through increased NuBit sales, Nu needs to use the BTC it obtains as liquidity at a tight spread. This whole process of generating larger and larger amounts of liquidity in order to scale up Nu’s money supply can be very expensive to maintain in terms of Nu’s BTC reserve. The larger and larger amounts of BTC being brought in through sales is all being slowly burned in order to keep this process of scaling up the money supply going. It’s ultimately unsustainable in the long-term to maintain high amounts of liquidity at a tight spread without finding a way to generate enough revenue to cancel out the cost of liquidity provision. If no model for creating revenue existed, the BTC reserve would eventually burn away until there was none left to support the buy walls. There is also the fact that Nu’s reserve is being kept in a volatile asset, which can do damage to the value of that reserve over time. Now read this quote from Jordan again…
In the quote above, Jordan says that his liquidity engine model is made possible by crypto. I believe he is referring to transaction fees here. As NuBits are voluntarily transacted with on the blockchain by users of the network, transaction fees are required. The fees themselves are burned, which means the supply of NuBits is naturally eroded over time through use of the blockchain. Burning NuBits through transaction fees, thereby lowering the total supply makes final revenue for the network because Nu’s liabilities are reduced as a result.
If there were enough people using the network that the NuBits burned through fees canceled out the cost of liquidity provision at a tight spread, the network would be self-sustainable. However, the major problem is that in the beginning when the network is immature, there are not enough transaction fees to cover the costs of liquidity provision. In fact, most of the trading volume is done off-chain on centralized exchanges, which means fees aren’t charged at all, except for depositing and withdrawing NuBits, which requires actual use of the blockchain.
As far as I understand the model and the problems of low transaction fees in the beginning, there is only one path forward that has a chance of succeeding, and that is to get the liquidity engine running by providing high amounts of liquidity at a tight spread. It needs to be allowed to run at full speed, so that it continues attracting more sales and greater amounts of liquidity. If the engine is purposefully shut off or if shareholders try slowing it down by decreasing liquidity, NuBit sales will stagnate and the entire system will be in danger of collapse. You never want to intentionally stifle the engine and prevent it from doing its job.
As long as we allow it to run at full speed, it will continue to attract greater amounts of liquidity until it reaches a point where NuBits surpasses the volume of Bitcoin. On a scale from an immature network with little transaction fees to reaching the scale of surpassing Bitcoin, transaction fee levels will continue to rise as more people start to use NuBits. Even at the level of surpassing Bitcoin, Nu transaction fees will not be enough to cover the costs of liquidity provision. The primary reason is because at this point, most NuBit transactions will be done on exchanges where no fees can be charged.
If Nu were to reach the scale of becoming the intermediary currency used for cryptoasset trading, then as Jordan says in his quotes above, we will have gained the necessary amount of trust, credibility, liquidity and infrastructure needed to push beyond exchange trading and into the arena of payment processing.
Payment processing would be a gold mine for Nu precisely because on-chain transaction fees will be required for the majority of transactions, as opposed to making no fees by acting as a hedging tool for exchange users. No costly liquidity provision is needed and revenue is generated by people all over the world who use the network for payments. Nu as a payment processor would be even more successful for the mass adoption of cryptocurrency than Bitcoin was because of the price stable nature of NuBits.
Reaching this point may allow the network enough transaction fees to completely cover the costs of liquidity provision at a tight spread on exchanges. Even if it wasn’t enough though, Nu is a business and can create other profit models that don’t rely solely on transaction fees, such as loaning. New and talented people with big ideas to create profit will be attracted to Nu and become shareholders as we start to increase in scale and find more success. Any revenue brought in that exceeds the costs of liquidity provision can be distributed to shareholders as dividends, which will draw even more people to the organization.
While all of this sounds great, the only way to reach this point is if we first prove ourselves in the arena of cryptoasset trading as an intermediary currency. There is no path that allows Nu to skip straight to payment processing. Without proving ourselves first by supplanting Bitcoin as the intermediary currency, we won’t have the levels of trust, credibility, liquidity and infrastructure necessary to push beyond being used as a hedging instrument for traders.
Transitioning Nu to a Zero Reserve Model
Another long-term danger to Nu is keeping a reserve. I will once again refer you to Jordan’s quote, except this time with a different part bolded…
There are numerous problems that come with keeping a reserve. Here are some of them…
- Bitcoin’s price volatility can eat away at the value of Nu’s reserve.
- The reserve needs to be properly guarded by trusted shareholders using multisignature.
- Counterparty Risk - Providing liquidity using Nu’s reserve funds could place the entire system at risk if those funds were stolen through an exchange hack or corruption of the multisig group.
Like Jordan says in his quote above, Nu should only use BTC reserves while the network is immature. A reserve system doesn’t scale well because of the above 3 reasons. That’s why Jordan has advocated for the use of a zero reserve model in order to protect Nu from the drawbacks of keeping a reserve.
A zero reserve model however cannot be sustained without high amounts of transaction fees on the network, which means Nu needs to be mature enough before attempting the transition. In the immature reserve model, NuShareholders use the BTC reserve itself to provide liquidity on exchanges, but in the mature zero reserve model, NuShareholders print NuBits in order to incentivize people around the world to provide liquidity on exchanges using their own funds. The zero reserve model will protect Nu from the drawbacks of holding a reserve, however it can cost more due to the fact that liquidity providers need to be paid enough by Nu in order to make a profit in the face of Bitcoin’s price volatility.
The only way a zero reserve system can be sustainable in the long-term is if the number of NuBits printed to incentivize liquidity operations is equal to the number of NuBits burned through transaction fees from regular users of the network. This zero reserve model can’t be used in an immature state, because there wouldn’t be enough fees destroyed to sustain paying out that many NuBits to liquidity providers. The peg would eventually collapse due to too many liabilities. The amount of NuBits printed for liquidity operations needs to be balanced out by NuBits burned through fees in order for the zero reserve model to function properly, so it would be best to start making the transition after the level of fees generated reaches a high enough point. Once fees are enough to support a successful transition, Nu will not only be self-sustainable, it will be free from counterparty risk.
1 Like