On the cruciality of setting high parking rates in a period of bitcoin price downtrend

[Hyena]

with such rates it becomes profitable to buy and park nubits. If only I had some money left I would do that but that bter just screwed me with their hack. I wonder if they ever compensate their users’ bitcoins.

[mhps]

You do realize park rates are annualized rates, don’'t you?

[Nagalim]

I’m voting for 10%-20% (higher for longer park times, because I think there’s more risk involved), so I agree with your number. However, I’d like to point out the only reason to correlate park rates with BTC price is that we are doing liquidity operations on BTC and our liquidity providers are losing money.
The real indicator of what park rates should be is NSR, our true market indicator whether we like it or not. If NSR price is low, raise park rates. When NSR price is high, lower park rates and perform dividend distributions. The burn motions, not to mention our individual pocket books, greatly support this behavior.

[cryptog]

If NSR price is low, raise park rates. When NSR price is high, lower park rates and perform dividend distributions.

I suppose you assume you would be using nsr burn mechanism.

[Nagalim]

For distributions? You use NSR to buy the PPC (remember, NSR is highly valued in this example) and you don’t want to mess with the NBT peg, you just want to liquidate some of the NSR marketcap for shareholders, so the best option is to just create the NSR without any burning.
For park rates we are attempting to stop people from selling their NBT for some other crypto, allowing us to have a competitive buy side market and freeing up shareholder liquidity to buy more shares. This is why you increase park rates if you want NSR to go up.
If NSR is already high, park rates are dangerous and inneffective, but a direct distribution to shareholders by creating more shares creates a way to make money off of NSR without trying to increase its price artificially. In fact, distributions reduce the price of NSR in the short term, though arguably increase their value in the long term.
We have a unique opportunity to speculate on our own shares for the profit of the company with complete decentralization. We never have to touch the market, all we have to do is vary our provision of incentives for holding NBT.
Burning allows custodians to speculate on the NSR/NBT market to keep it relevant to the NBT/USD price, but that’s a different speculation pathway than park rates though it is also important. I probably shouldn’t have brought burning up, though it does coincide nicely with this (burn NSR to create NBT, pay to park NBT, increase price of NSR at cost of inflation).

High NSR Price = Buy Side Pressure on NBT
Low NSR Price = Sell Side Pressure on NBT

[cryptog]

High NSR Price = Buy Side Pressure on NBTLow NSR Price = Sell Side Pressure on NBT

The way I see right now is the following:

• NSR is high: We create new NSRs, we sell them on the markets. We distribute the NBTs proceeds to shareholders or burn the NBTs proceeds in order to increase the buy side liquidity.
• NSR is low: We do not have any particular economic incentive to do any thing.

But in case the parking rates are kept high for a while, that means that we need to permanently remove some NBTs out of circulation. In that case, we need to create new NSRs whether the unit price is low or high.

[Nagalim]

Burning is for day to day operations of balancing the peg, in my opinion. It is parking rates and distributions that we should be using to respond to NSR price being high or low.

If NSR is low, we have economic incentive to raise parking rates. This is true from all angles, with or without burning.

Day to Day: Peg is in danger of breaking; burn NBT for NSR, sell NSR for NBT, burn NBT for NSR, sell NSR for NBT, rinse and repeat. This lowers NSR price to recover the peg.

Month to Month: NSR price is low, raise park rates. Gain NSR price at the cost of inflation.

Year to Year: Adoption is the only true path to dealing with inflation.

[cryptog]

Year to Year: Adoption is the only true path to dealing with inflation

I could not agree more on that though true adoption will inflate the money supply in a positive way

[Nagalim]

Adoption will absorb inflation. If we have much more adoption it will certainly allow us to inflate more (I.e. hire new developers, distribute ppc, etc) without endangering the NSR price (and thereby the peg).

[GreatScott]

Day to Day: Peg is in danger of breaking; burn NBT for NSR, sell NSR for NBT, burn NBT for NSR, sell NSR for NBT, rinse and repeat. This lowers NSR price to recover the peg.

This will definitely lower the NuShare price, which also makes it harder to “rinse and repeat”. The NuShare market does not have enough liquidity to support this strategy. We would need to print 12 million NuShares right now to raise only $7,000 NBT worth of buy support based on the complete NuShare order books on the 2 bigger exchanges at this time. This comes out to an average NSR price of 0.0005 NBT. How would we handle tomorrow in event we dumped all of these NuShares today? One must assume the price will not bounce back to previous levels as there really is not any reason for it to do so. Furthermore, I fear that we are left in the same situation whether NBT to NSR burning is done on a regular basis, or only under exigent circumstances.

[Nagalim]

Month to Month: NSR price is low, raise park rates. Gain NSR price at the cost of inflation.

We are in this situation because we lowered park rates as NSR price fell. This is why we should be burning on the daily, so we can see what the NSR price really is so we can vote on park rates accordingly. I believe now is one of the biggest stress points in Nu history because we let the nsr price get so bad, yet we are still voting for sub 10% parking rates.

[GreatScott]

We are in this situation because we lowered park rates as NSR price fell.

I’d argue the NSR price is so low because we printed ~100 million more NuShares and sold them, though many focus on the exchange hacks. It is probably a combination of both. Your strategy seems to do this much more often. This is not what many want to hear, but the NuShare price is exactly where it belongs right now. An action such as the NSR auction or CCEDK/BTER failures should negatively impact the share price as it did.

I also do not see how increasing parking rates will have any positive effect on the share price. Inflating NuBits is bad for Nu and by extension the NSR price, as far as I can tell. I feel we should be ignoring the NuShare price and focus on the NuBits peg as this is how we will achieve success.

[Nagalim]

There are many connections between low NSR price and low buy support on the peg. You can certainly see how parking benefits the buy side of the peg, yes?

Connection 1) Custodial support is connected to shareholder wealth. If shareholders are strapped for cash because they are buying NSR at low prices, they will not have funds to contribute to custodial support. If we need more buy side liquidity, custodians will not have funds to buy NSR at low prices.

Connection 2) Reputation and public perspective. If the peg breaks down, NSR plummets, this much should be clear. Inversely, if NSR is high people will buy NBT because they perceive Nu to be successful.

Connection 3) Burning. This is a direct connection.

Regardless of if we use connection 3 or not, we cannot ignore NSR price because of connections 1 and 2.

[GreatScott]

You can certainly see how parking benefits the buy side of the peg, yes?

Sure, but do you see how it also is detrimental? I do not think parking rates should at all be motivated by the NuShare price. That would just be selfish of shareholders.

[Nagalim]

It is only detrimental in the long term, where adoption will save us. During the first year, where we have a lot of work to do and not much reputation, park rates should be high at the cost of future shareholders.

If acting in the interest of shareholders is selfish, then every business in existance is selfish.

[GreatScott]

If acting in the interest of shareholders is selfish, then every business in existance is selfish

I find this comment very ironic, because I only supported the NBT to NSR burning motion after I realized it would be selfish to be stubborn about my personal NSR market share whisking away while the NBT peg is in trouble.

[Nagalim]

It is my opinion that this concept of “selflessness” is why Nu is getting taken advantage of by btc traders and miners.

If we want Nu to be taken seriously, we need to be concerned with our market indicator. High park rates will pull us out of this economic downturn as high interest rates help depressions in the fiat world.

[GreatScott]

Nu is getting taken advantage of by btc traders

It is the large buy and sell walls on NBT/BTC that enable this and nothing will stop it besides switching over to a NBT/USD pair as our main offering or hedging abilities built into NuBot for NBT/crypto pairs to mitigate losses by custodians. This is what is preventing me from running an instance of NuBot. I feel like operating as a custodian with the tools we have today is like showing up to a gun fight with a soggy french fry. This is not to deride any of the work done on NuBot by the team in the least bit. I am sure it is way more complicated than the paragraph it takes to explain it.

[Nagalim]

I agree with you on that point, I just vary with you about why we still use BTC pegging as our business model.

The business of Nu is NBT adoption. This is our product and our end goal. Every % of inflation needs to meet a similar % adoption. There are 3 types of users for NBT:

1. Custodians. They should be given their NBT and should hold them on a wall, so while they constitute a large portion of NBT use, they are not adoption. This use has a large inflation rate.

2. Parkers. They are both adoption and inflation. They provide shareholder enforced adoption at the cost of future inflation.

3. End users. This is true adoption at no inflation cost.

The business of the peg is to keep the following constant:
(End User NBT adoption + # of Parked NBT) / (NBT given for parking + NBT given for providing liquidity + NBT given for development and miscellaneous services + [NSR price * minting rate])

If NBT given for parking is trivial compared to NBT given for liquidity and end user adoption is low, as is the case now, we should increase park rates.

I see the NBT/btc operations as an attempt to increase end user adoption at the cost of NBT given for liquidity. If park rates provide better leverage, then we should be using them.

[GreatScott]

I just vary with you about why we still use BTC pegging as our business model.

I do not think we are far apart about this at all, actually. Though, I think as adoption grows it will make sense to halt the NBT/BTC shareholder funded market maker operation as the pair will develop a market of it’s own. But until that point, we will let ourselves be taken advantage of by traders is all I am saying. It is by definition selfless.