I see it with a slightly different perspective. We only need to protect our buy side liquidity from hedging and volatility, our sell side is protected by the very nature of the peg. This is why we should channel buy side liquidity to fiat pairs and sell side to crypto pairs. Fiat pairs should have a smaller sell target and crypto pairs should have a smaller buy side target.
Setting strategic target as above is what you mean by “channeling”, right?
This is a use case for a shorter motion voting period.
The drop in buy side support is likely due to the payment of contractors yesterday. A transition is underway to decentralized compensation for work with twice monthly payments dropping to ~5,000 NBT in 60 days. In the meantime, there is 2.0 and parametric order books to finish. However, each twice monthly payment should be less than the one before (for the next three or four periods) as we move toward the decentralized development model @Cybnate has employed.
This is delicate. It’s more of a marketing strategy, then adjusting the targets to fit the participation level rather than trying to force the market one way or another.
Basically, we instill a philosophy: fiat buy order is low risk profitability in return for real liquidity provision. Crypto sell order is compensated high risk bets on individual coins in return for network volume and exposure. If you think about it, it not only makes sense, it is what we are already doing. We just don’t have the fiat pairs yet.
If you have fiat, why not profit off it in a liquidity pool while you hold it? If you have nbt, maybe aim for the higher compensation on your favorite coin that you think will go up long term. If you have crypto, try to sell at a great price for fiat so you can run the loop again.
The issue is that we are not only paying for btc volatility right now, we’re also paying people a lot to hold btc on buy walls. That is a huge gamble. Let them hold their non-nbt liquidity in fiat pools instead and pay them way less.
By the way, how do you foresee your role when Nu has adopted a fully decentralized development configuration?
I’m glad to find a proponent for what I propose at every single place where it may apply!
Brief version of how to reduce the risk posed by customers using NBT to hedge falling BTC prices.
if BTC get dumped into the NBT/BTC proxy them to a BTC/fiat pair.
One of the more detailed posts is this:
Not a great example. This didn’t happen overnight. It is a shareholders’ choice to act late and bet on increasing rates only.
You are right. Discourse doesn’t do nesting obviously, my apologies. Have changed the post above.
Don’t you think we have gone too far with this park rates? I mean it looks ridiculous now, with 18% for 3 months.
Just raising the interest rate is not going to make people automatically buy more NuBits and park them, not with nobody out there knowing what NuBits are and Bitcoin that seems to be preparing to jump.
Please think twice before going so far, our park rates should be 10% at most. This makes us look like clowns.
Maybe, but what would have been the alternatives?
If I understand the parking correct, the 18% is the annual rate for a minimum parking duration of 3 months, which still is high.
18% annually equals 4.2% for three months (compound interest included) or 1.38% per month.
That is still far below the interest that can be made in the liquidity pools. But paying for liquidity pools is the better choice. I’ll come back to that later in this post.
That’s true, but as other effective means for regulating the tilt between supply and demand were not available with short lead time in that situation. Raising the parking rate interest was the only way to treat the situation.
It may be that the blooming decentralized liquidity providing helps a big deal here.
I believe that the tiered model of liquidity operations needs to be reworked.
Currently parking rates are on tier 5 and NSR sale / NBT burning is on tier 6.
It’s my firm conviction that tier 6 is more effective than tier 5:
- it takes a lot of time for the parking rate interest to really climb by a substantial amount
- it creates only more liability that needs to be covered by tier 6
The only instrument that is missing is a way to quickly, reliably (and ideally on protocol level) determine a ratio for NSR/NBT conversion.
So far this can only be achieved by NSR grants that are used for buying and burning NBT, which is obviously not operating on protocol level.
In my eyes the ideal solution for keeping the peg deals with an appropriate compensation for liquidity providing and agile, reliable NSR/NBT burn mechanisms.
If something goes pear-shaped raising interest is too slow and people might not want to buy and park NBT depending on the kind of what goes wrong…
An idea how to address the lack of NSR/NBT burning (on protocol level!) is already available:
I’ve been saying that burns are more short term than park rates for a while now. This is also why we should not link burns to park rates in any way. Park rates should respond to burns (among other things), burns should not be designed to respond to park rates.
I am not so sure. Park interest has almost no risk (except for peg risk) and betting on BTC has a lot of risk. You could borrow from a bank and buy NBT to park (if you think peg risk is small enough) and make more profit than buying / selling a few bitcoins with impossiblly good timings… The fact that we haven’t seen millions of dollars piling into parking suggest that not many know about it and / or the peg risk is not ignored.
Providing liquidity in fiat pairs (especially NBT/USD) poses little risk compared to NBT/crypto pairs.
This is the way to go for liquidity providing, because it will be cheaper for Nu and better calculable for liquidity providers.
I think that’s a misunderstanding of the design of the network. The Nu network has three tools for responding to aggregate demand variance over time. Short-term durations are balanced through liquidity provision, mid-term durations are supported through parking rates (to spur demand in brief periods of modest demand decline), and long-term durations are supported through burning (to permanently correct oversupply).
It kind of destroys the crypto spirit of distrusting USD, but as a developmental strategy I agree we should definitely take a serious look at making good use of fiat pairs. It is much more difficult to reduce counter-party risk, and some of the USD or EUR liquidity can still flow to BTC and other stuff, so we still can’t rely on it heavily.
I think this is wrong. I realize this is your and Jordan’s opinion of how Nu works, but I do not believe it is long term sustainable. I believe you will eventually come to the realization, like @masterOfDisaster did, that burns are necessary as a short term way to balance the peg.
Liquidity is not a way to balance the peg, it is the peg. Burns (should be used to) balance the dual side liquidity on a daily basis. Park rates help the nsr price from diving in the midterm (the corralary of which is distributions which are use to further increase nsr value when it is already high). The only long term method of maintaining the peg is adoption.
To call burns our long term solution means we are as big of fools as @peerchemist says we are.
Cryptos distrust fiats and use decentralized uncorruptable ledgers for bookkeeping. It doesn’t matter what the token or a derivative thereof traces to, be it nothing (BTC), USD (nubits), gold (bitGold), oil, marmot …
The buy side liquidity is now 42k, the sell side liquidity is now 35k.
It is probably the first time that the buy side is significantly higher than the sell side .
Time to reduce drastically the rates or even nullify them.
The additional 1m NSR sale auction is not necessary any more but since the motion has passed…