[Outdated Version] My Interpretation of Jordan Lee's Liquidity Engine Model

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Man, now I only have 4 hours to sleep before I have to go to work. :frowning:

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Well summarised. Good luck at work! :slight_smile:

This is a very insightful summary. Very instructive. Very much needed. What is the vision of jordan lee for NuBits is a crucial question since it is needed to put every shareholder on the same page. Bravo!

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[quote=“Sentinelrv, post:1, topic:4072”]
It’s ok that liquidity provision at a tight spread is costly, as long as the BTC is working to bring us even more demand and NuBit sales. [/quote]

Not OK at all, because this is a typical ponzi style, as bitshare’s founder BM described in 2014, and I also think so because Nu has insufficient profit. Sooner or later, you will run out of money , this is the only result of each ponzi scheme. @mhps told us that Nu will run out of BTC in July even without share buyback!

Have you ever calculated it? I guess the liquidity cost will still be much higher than transaction fees on blockchain even if Nu grows up to BTC’s cap.

Nu’s Achilles heel is the lack of quantitative analysis.

Traditional accounting technology can easily calculate/predict Nu’s status, and the only thing accounting cannot calculate is the psychology of human being, which is heavily involved in share/stock market.

Well, the word of “stock” original meaning is “inventory”, “government bond”, why people link it to “share”? Because of the famous “south sea company bubble” in 1720 when UK government played equity-debts swap game just like NSR-NBT burning.


And in the south sea company event, the famous scientist Newton lost a huge amount of money, followed by his famous words “I can compute the orbit of heavenly body movement, but can’t compute humanistic madness.”

Share is never a stable value storage, you cannot be more wrong using it as Tier 6.


It certainly sounds like one as more and more Bitcoin is needed in order to sustain the rising amounts of liquidity and increased trades, however it would only be a ponzi if there was no plan to take care of these costs in the future. That plan is transaction fees.

It’s true that there is not enough transaction fees on the blockchain to give us sufficient revenue right now. That is why the liquidity engine being able to function is so important to this process. It is designed to build momentum and liquidity over time to the point there is enough use of the Nu blockchain by regular people that fees do cover our on-exchange trading wall expenses.

The only reason why @mhps says we could run out of BTC in July is because the lowered amounts of liquidity through exchange hackings/NuShare buybacks (loss of reserve) and zero reserve/pools (expensive & low liquidity) has prevented us from being able to run our engine at full speed, which has had the negative effect of low demand and decreased sales. Our engine has been stifled and prevented from running at full capacity because of the loss of reserves due to the fact that normal liquidity providing on centralized exchanges is too dangerous.

If we had B&C Exchange from the start, our engine could have run at full strength using much of our reserve for liquidity due to the fact that counterparty risk is very low. We wouldn’t have had to lower the amount of liquidity we provided because we wouldn’t have lost our reserves from theft. Liquidity at a tight spread as I believe Jordan sees it should attract more liquidity. Allowing the engine to run unfettered would have attracted more liquidity and sales over time. But our engine has been stifled, which is why we are in the current dangerous situation that we’re in.

No, I have only tried interpreted Jordan’s model here. Somebody else would need to do calculations. I believe you may be right that liquidity costs would still be higher than transaction fees if we grew to BTC’s size.

However, the true profit is the next step after Nu surpasses Bitcoin, which is payment processing. NuBits will most likely not be used for payment processing until the system can prove itself. It can only prove itself by surpassing Bitcoin as the intermediary currency.

The only way to get there is to offer lots of liquidity at a tight spread in order to build up the speed and momentum of our liquidity engine. Until Nu can reach this stage, it will mainly rely on the liquidity engine strengthening and increased sales in order to pay for increased amounts of liquidity. But as it does start to reach this stage, more and more people will start to use the blockchain for transacting value, meaning our BTC burn rate from exchange walls will slow down.

The only way the Bitcoin burn rate can completely be balanced out by transaction fees is if we surpass Bitcoin as an intermediary currency and move on to payment processing, which is a gold mine for transaction fees. Jordan said in his quote that as the NuBit supply grows, a smaller and smaller percentage of the total funds will need to be used to support on-exchange liquidity operations, meaning the majority of our supply will be used not for trading, but for payment processing, gaining us enough fees to pay for liquidity provision on-exchange and make a profit at the same time.

The only possible way of getting to this state is to let our liquidity engine run at full speed as it was meant to. That’s the only way we can build momentum enough where taking on Bitcoin and payment processing even becomes a possibility. I see no other strategy to get us there. Jordan’s model should work, but it needs to be allowed to run unfettered without shareholders getting in its way by purposefully trying to reduce liquidity. That is a recipe for NuBits demand to stagnate and reverse. We need the engine to run at full speed, allowing it to build momentum through increased sales and increased liquidity. It will continue to scale up to the point where fees burned will take care of costs. We can get there, but it will take time.

I agree and I mentioned that this is the one thing Jordan messed up with. NuShare buybacks were a mistake and caused our reserve to be even lower than it was because of the exchange hacks. This led to decreased liquidity and decreased demand of NuBits.

Again, if we had never lost our reserve through various mistakes, tier 4 would have probably been enough to handle any dips in NuBit demand. Tier 5 parking rates would have been rarely used. I believe tier 6 NSR sales wouldn’t have had to be used at all in our past 2 years. We needed to use it though because our mistakes allowed the reserve buffer to run too low. If that had not happened, tier 6 would probably still be unused to this day.

He has been offline since I posted this, so I hope he comments on it later. I feel as if he may be letting us suffer for not heeding his warnings. I agree we need to fully understand his plan here. This is my best attempt at doing so.

Satoshi has buried gold on the road ahead to 2040, that’s the incentive of minting hash.

If bitcoin only rely on transaction fee, hashrate may become 1/20-1/50, or even die, who know? Transaction fee is not sufficient for a costly system, bitcoin minting power consumption equals to whole Irland power comsumption!

The transaction fee is also only basic revenue. If Nu was to ever get that strong after that many years, I’m sure we will have found other methods of making revenue that eclipse the fees. Loaning operations come to mind, but possibly other things as well. The fee would not be our only way of making revenue. Only time could tell what those things would be though.

Bitcoin has the preburied gold, thanks for satoshi’s vision.

Nu has no chance to surpass bitcoin if nu cannot find more profit than the buried gold of bitcoin. So it is meanless to discuss what if Nu surpasses BTC at all.

This is the exellent explaination of how a ponzi system fails. The more BTC nu absorbs from outsides, the more debts of Nu, the bigger crisis in future, don’t you understand? Nu is lucky that the crisis comes early, otherwise Nu will left dozens of millions debts and attrack the whole cryptoworld’s criticism. Now, the 700,000USD debts is just one apartment price in big cities.

Just a thought I had –
When fixing synthetically the price of 1NBT vs the USD on markets such as a poloniex,
among all the markets and all the pairs that could include the NBT, which one will determine the nubit price and influence the others in a ripple effect?
Intuitively, the heaviest pair – which is the one with most liquidity within the market with the most volume.

Now, if that pair is NBT/BTC within poloniex, we are always going to have to react to the market forces and to the insane unpredictible volatility.
Wouldn’t it make more sense to have a pair with the most influence, predictible (a pair whose exchange rate we control) and that makes other markets?
Could it be just NBT/NSR (on a exchange that we control)?

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@mhps, your post about Nu using money as transmission fluid and fuel in order to make more money inspired my writing here. Do you have any comments on it? Do you agree?

Sorry for the late reply. i though i had the time to read it carefully but so far i haven’t. I will get you back after i finished reading the thread.

I’m actually still working on expanding it, you should wait. I’ll post again when I’m finished.

Perhaps the biggest surprise for me was that JL remembers to point at this “spread issue” very recently.
I mean, @masterOfDisaster introduced gateways more than 6 months ago
with a wider spread as the last line of peg defense.
Even JL had deposited funds in that gateway at those days!
Please tell me i am wrong, or JL’s behavior is very suspicious!