NuBits vs BitUSD (Bitshares)

It has been suggested that the NuBits community have a thread to compare and contrast it with the approach of BitUSD that operates with BitShares. Here are a few questions to seed the discussion:

  • Are NuBits and BitUSD competitors? According to the BitShares lead developer, they are not. This is stated in this audio stream at 16:33.

  • Is NuBits a ponzi scheme? The BitShares lead developer claims this at 11:30 of the above audio stream. NuBits operates with a fractional reserve. Are all fractional reserve systems essentially ponzi schemes?

  • BitUSD are collateralized Bitshares (BTS) that are created by mutual agreement of long and short market makers. Unlike NuBits, no real dollars are present in the system as every instrument is a derivative of BTS. This exposes BitUSD to a potential black swan event that could cause it to collapse. Is this realistic or likely?

  • The NuBits custodians maintain liquidity with pools on the exchanges. BitUSD require trading partners to bring them into existence. Does one system have an advantage for liquidity scaling?

  • Does delegated proof-of-stake used by BitShares offer any advantages compared to NuShares voting?

  • Is NuBits credibility harmed by having anonymous developers?

I’m sure there are other interesting questions that can be posed. If you wish to participate in this thread, please do so with constructive dialogue. Ad-hominem attacks and dismissive comments add nothing useful to the discussion. For reference, the NuBits-BitUSD thread on bitsharestalk is here.


Ok, I’m just going to pick two to start with:

A ponzi scheme has a very negative connotation. I agree that the current model is based on a fractional reserve, the very same system that is in use in many countries (including the US and many European countries). So calling all those countries a Ponzi schem would be inappropriate in my opinion. The big difference between NuBits and those countires that there are actually guarantees by the central bank to some extent in case of bank runs or banks going bust. This is a kind of insurance towards all fiat holders covered by the central bank.

So what could NuBits do to guarantee it’s holders that they can always get a dollar back for their NuBits. We might start with thinking how we can deliver that decentral assurance to NuBits holders. As discussed in other threads we could somehow tie NuShares with NuBits in such way that the Shareholders have to stump up their shares when there are inadequate buy walls. This would resemble the ways Bitshares are tied up to bitUSD.
On top of that one can also think about an insurance which can be bought to cover the value of a wallet. This would require a company to keep the premiums in a fund. It would be a challenge to safely manage this fund decentralised.
One can envisage models with mediators and multisig. I can recall that Dan Larimer already wrote down a concept for how this could work a while ago. The implementation is still a challenge a anonymous reputational identities are still not available. So NuBits have some ground to cover in this space.

On the other hand with choosing for a peg with USD which also operates on an operational reserve, it is not entirely illogical to run a token which matches the value on the same bases. Personally I would like to see some form of insurance or collateral given the risks of failure of the network or shareholders getting too greedy.

I’m interested in this one. What would be the incentive to bring liquidity into the bitUSD market? I think the way it is modelled with collateralized Bitshares doesn’t entertain liquidity by itself. Of course can this be incentivized, but it wouldn’t be a natural system property.
With NuBits the system is build on providing liquidity to keep the peg. So the NuNet system will have to provide liquidity as a side effect to keep the peg. I think the NuBits model has a clear advantage here.

What I’m hoping that this discussion educates us all when discussing pros and cons on other forums or even with the media and finding ways to improve the NuNet ecosystem. Hope others join me in this.

Thanks for opening this, it will be very useful.

Let me add a couple of thing right away : unlike NuBits, there is no such thing as a bitUSD wallet : you need to download the BitsharesX wallet, register to the blockchain and get some assets.

BTSX trading activity is mostly based in the client vs NuBits traded exclusively in the open markets.

NuBits is the first cryptocurrency that can be parked, enabling a various degree of innovation

NuShares is the first example of distributed voting pool.

The list can go on for long, so now that I think of it I think you started with the wrong foot mentioning “ponzi” accusations by their dev who repeatedly demonstrated shortcoming discussion skills. Jokes, accusation, promising to copy our source… So if we want to make another comparison, we can also put Jordan’s capabilities next to that guy’s .

Is this your own feeling or someone else expressed concerns?

PS: People doesn’t seem to be refrained by pseudonymous developers. Ever heard of Bitcoin?


No, not my sentiment but it has been expressed by others as a criticism of NuBits. The thinking is that a secret team of developers has incentive to run away with all the funds. Given what NuBits is trying to accomplish, I think developer anonymity is a wise move. If NuBits eventually reaches some critical mass, it can’t help but be perceived as a threat to established infrastructure. The opportunity for an authority to target individual developers would expose Nu to considerable risk.

And yes, no Bitcoin adopter seems to care that Satoshi remains anonymous.


I should mention that Preston Byrne (BitMarmot saga link above) was not the first observer to point out the danger of BitAssets being repackaged Bitshares. This was first flagged in a lengthy thread on bitcointalk over a year ago. That thread raised the concern about whether Bitshares is operating as an Impossible Trinity:

because it simultaneously offers a market peg (bitUSD, bitBTC, etc), 5% interest on those assets (monetary policy), and free market trading. (The NuBits/NuShares separation resolves this problem for Nu) I believe this is a separate issue from BitShares’ potential black swan failure mode.

Bitshares marketing suggested/implied risk-free return (“Better than a Swiss bank”), but this slogan appears to have been recently removed from their website.

The point here is that NuBits must be very up-front and careful stating the risks inherent in the system. An important one is that while NuBits are purchased with real dollars, not all those dollars are going to be available in the event everyone wants to sell their NuBits at the same time (ie. a bank run). It is a fractional reserve with no depositer insurance.


Burn NBT to get NSR is kind of “rob Peter to pay Paul”.

The ultimate solution is how can Nu earn profit. The majority income of selling NBT is not profit at all.

We can charge transaction fee by price spread on trade pairs or provide nubitmessage service.

Do I understand it correct that with BitShares the shareholders able to delegate their votes to Delegates? That will mean that they trust the delegates to be well informed and vote for the right things at all times. Is that similar as many democratic systems, a bit like a congress?

With NuShares the shareholders are up to this task themselves. The idea is that Shareholders are adequately informed by datafeeds from the network. Depending on the quality of the information this may or may not work. They have to trust the providers of the datafeeds as much as the BitShares shareholders have to trust the Delegates to act in their best interest. At least that’s how I understand it.

I think it is too early to compare both systems and how successful they are. I admit that I do have my reservations about the NuNet Shareholders participation to actively follow the datafeeds regularly, assess new proposals and motions and vote for them in the long term. The ‘do nothing’ option might become very popular as the default vote is 0 when actively minting. This issue may be solved by introducing a type of delegates model in NuBits, this can e.g. with multi-sig. Other solution maybe to built in negative incentives for not voting.


Unfortunately, I’ve never seen a business successfully eliminate their competition by merely wishing it out loud. We’re not competitors in some aspects, as NuBits is a true stand-alone stable digital currency while BitUSD is just a repackaged exposure to Bitshares X. However, we are competitors for users who want to eliminate volatility from their crypto holdings. Bitshares has a larger existing community, but we are growing quickly. Our daily trading volume has been very healthy since we launched and that will undoubtedly lead to a larger community for us in the future. The competition is only just beginning.

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The knowledge that we will eventually be open-source seems to have satisfied the market for the time being. I don’t see an overwhelming amount of criticism around our decision to maintain a limited competitive advantage in these early days. Nu is bolstered by the presence of well-known figures from Peercoin’s community who have built up their online reputations. I think having @sigmike working on Nu is especially reassuring since he is a core developer of Peercoin.

I think if anything our credibility may be enhanced by the anonymity provided to developers and shareholders. Malicious outside actors will have a more difficult time trying to threaten or influence individual shareholders if they are anonymous. BitShares is more vulnerable in that regard.


This is amusing to anyone who understands what a ponzi scheme actually is. As defined in a dictionary,

A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.

Our “Profit earned by the operator” in this case are sales of new NuBits that are required to satisfy conditions where aggregate demand has expanded beyond the available supply.

As far as I can tell, “ponzi” has served as an inaccurate categorization to criticize the fact that our NuBits supply won’t contract to match demand. This is a false statement. There are currently two mechanisms planned that can contract the supply of NuBits:

  1. Currency Burning. This is a way to shift some of the speculative risk back onto NuShareholders where it rightfully belongs.
  2. Variable Transaction Fees. @CoinGame had some excellent thoughts on this and I touched on it a bit in the currency burning proposal thread. In short, I’m not sure the outside community fully understands yet how powerful these transaction fees can be at ensuring price stability.

A basic assumption about NuBits usage is that nobody is purchasing them to speculate on their future value. Even in the short time the network has been operational, the price peg we have maintained has made it clear that purchasing NuBits for above $1.00 US is a losing trade, as is selling NuBits for under $1.00 US.

Because of this, we need to adjust our mental models away from the types of demand shocks that occur with volatile speculative cryptoassets like Bitcoin. It is unlikely that aggregate demand would ever decrease by 80% in one day in the absence of a major event like NuBits-usage being declared a felony. I use “aggregate demand” to mean macro-level demand over many weeks and months, not day-to-day volumes which can fluctuate significantly (and for which Liquidity Provider Custodians exist to stabilize).

In a scenario where aggregate demand begins to slowly decline, transaction fees can actually reduce the supply by the equivalent amount of lost demand if no new custodial funds are granted, and capture a good portion of the willingness-to-pay of the remaining users. Or in other words, transaction fees are a price discrimination mechanism to cleverly identify which users value the network the most and charge them accordingly. They can (and perhaps should) be used while aggregate demand is growing too, but that’s outside the scope of this post.

In my view the big takeaway is that most end-game scenarios will begin with slowly reducing aggregate demand, and that transaction fees will reduce the supply in an extremely efficient way to maintain the peg. In a scenario with rapidly reducing aggregate demand, it’s likely that a major event such as adverse regulation has occurred that has impacted all existing cryptocurrencies equally and thus is no longer a Nu-specific criticism. In both these scenarios no new custodial funds are being granted and there is zero expansionary pressure on the supply of NBT; transaction fees will be eating away at the NBT supply as quickly as NuShareholders vote to do so.

Furthermore, as Coingame correctly points out, the more services we can create that use NuBits as a “fuel”, the easier it will be to manage our supply.

I would be very interested to see someone with a formal economics background challenge my thinking, and perhaps create some quantifiable models that can be critiqued.

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Currently trading vol of NuBits is 120,000 usd [] whereas trading vol of BitUSD is 2,000 usd []…

So NuBits dwarfs BitUSD by several orders of magnitude.

By the way, how much of that volume is created by NuBot?

Not really.
Please not that they trade bitUSD on their internal exchange vs BTSX, they have an explorer somewhere, can’t find the link now.

how much is the real vol then, do you know?

the link could be that:

Yep. See the volume here :

Well, less than 1500 $ , so, not far from open market .

Details on :

24h volume for bitusd …24usd…
If that corresponds to actual trades (sell and buy) of bitusd the least we can say is that it is very low.
Compared to that nubits has more than 50,000 usd of trade volume…
That is not comparable actually.
Now, I am wondering about how much of those 50,000 usd corresponds to trades made by entities different from NuBot…

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None of them are made by NuBots today. I guess some arbitrage is taking place and people using NBT as a temporary mean

I see.

BitShares/Market Peg

Discussion in: BitShares/Market Peg

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I’ve moved this topic to Economics and Finance.

Wanted to jump in and say that a lower bound on average daily volume is total supply divided by 30, so numbers like $1500 are sort of cherry-picking. A better estimate would be $25k internal exchange volume based on this lower bound plus whatever is trading externally (about $16k today). Still not close to nubits volume.

I do wonder what the total bitAsset volume is (internally + externally), that might give a clearer picture of relative volumes because CNY, EUR, GOLD etc are just as good as USD for the purposes of short-term hedging.

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