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…
This is why Nu needs a feedback loop on protocol level and not only parking interest and motions based on what NSR holders think might be appropriate.
At the moment there’s no immediate and ongoing feedback between decisions (vote for 0% park rate; vote for x NSR to be sold to buy NBT and burn them).
An effect is that Nu faces parking rates that are higher than necessary and NSR sales that with bigger amounts than necessary to stabilize the peg.
Once the B&C Exchange funding is through Nu will see big changes in supply and demand for NBT.
When the non-NBT funds are collected and converted to NBT that will lead to a big pressure on the sell side (depending on the amount of NBT that is needed).
And when those NBT are put back to market to pay for the ongoing costs of the B&C Exchange development this will have an impact on the buy side.
Does Nu know how much parking rate is appropriate at which day, week or month after B&C Exchange development trades NBT back and forth?
I guess the answer is “no”.
Should Nu need to care about such events?
The answer for sure is “no”, because there are events out of sight for Nu which still might have an impact on Nu.
Adjusting parking rate interest is slow, maybe too slow.
Nu needs a continuous mechanism to deal with changes in supply and demand.
Especially is the supply is suddenly too big the parking rates are no effective means to protect the peg.
I know that this position is not in line with the current design. But I sincerely believe that the design needs to be improved in this area.
Sudden increase in demand can be mitigated by the strategic reserve of NuBits.
Sudden increase in supply can’t be mitigated by parking rates, because you don’t know whether or not NBT will be parked!
An ongoing conversion of NBT to NSR and NSR to NBT by a combined grant/burn process is required to help protecting the peg.
Once Tiers 1 to 4 of the tiered liquidity model are depleted and the parking rates (Tier 5)come into play, it’s already too late to defend against an intended attack on the peg.
This might not be very important now as Nu is still too young, its total value isn’t big enough and the gain from attacking it might not be worth the hassle of attacking it.
I believe an attack like George Soros performed on the British Pound is possible with the current liquidity model.
Nu needs to remove an oversupply of NBT continuously (and finally!) from the market.
Without that being automated an attack could look like this:
- lend a large stack of NSR from someone (say 10 million NSR valued 1 million USD for 20% interest per year)
- sell them for NBT
- buy all NBT that are available
- let Nu create more NBT
- buy them
- go to step 4 some more times
- dump all the NBT on the walls (and receive all the money that you put into NBT back; excluding the exchange fee)
- break the peg (because the buy side can’t compensate this and parking rates won’t work, because the attacker won’t park)
- buy cheap NSR form the market (say 10 million NSR for 100,000 USD)
- give the NSR you lent back
- be happy that you have 900,000 USD more than before (minus the interest you paid for the lending)
As you can see from the numbers, this belongs into the future of Nu. The NSR price in this scenario is way higher than it’s now.
A way to lend NSR is not yet known.
But both price and lending might evolve like I pictured out.
Only an ongoing adjustment of buy and sell side can protect the peg from this.
And it doesn’t hurt having this sooner than later although it’s not as badly needed now as it will be in the future.
It’s easier (and less costly if something isn’t right from the start) to implement this in Nu’s early phase (which Nu is still in).
Without that we’ll see oscillation in the park interest rates and Nu can be attacked with little risk (unless I messed something up in this scenario).
A continuous and on-protocol mechanism might be able to help a big deal!
Nu might not be able to remove the NBT from the market that are bought by the attacker.
But with the skyrocketing demand for NBT the NSR price can be expected to go up as well.
And that makes it easy (and cheap!) to fill the Tiers 1 to 4 again (buy side with BTC, PPC, USD, whatever) by granting and selling NSR.
This is how this type of attack runs dry.
Park rate voting doesn’t help here
Tier 6 needs to be reworked from a last line of defense to the ground the whole peg balancing is built on.
Kiara just burnt a lot of coins here: [Passed] Motion to end LPC operations of KTm, Jamie and NSR sales of Jordan which likely contributed significantly to the decrease on the sell side. The B&C auction will increase demand. The outlook for NBT is therefore likely relatively high demand in the short term. Will monitor the situation in the next 48 hours with the aim to nullify my park rates if nothing changes.
@masterOfDisaster thanks for wording what was floating in my mind lately too and illustrating it with an example. I think Benjamins’ proposal needs to be seriously considered for implementation. In the interim we can work with a weekly manual burn process although the need for it is likely to diminish quickly in the short term. Mid term (>1 month) this will surely be needed again (e.g. when first payouts for B&C will happen and also payouts Android grant).
Based on the balanced buy and sell rate in the last few days and the outlook for more NuBits demand due to the B&C exchange activities I think it is time to nullify my park rates in my data-feed.
With the frequency data feeds adjust park rates (~ once a week) I don’t see any point in setting rates above 0 for periods longer than a few weeks.
For example 1 NBT parked for 6 months is 1 NBT out of the control of further park rate adjustment for 6 months. Why do we want that?
I prefer the longer park rates as it would take longer before those coins return to the market. Having park rates up is not really a sign of demand and confidence. The longer periods we have without it the better from a marketing perspective.
That’s why I want it.
Buy side is 35k. Sell side is 45k. Time to raise back the parking rates once again.
I think we need to continue weekly burning as these NBT are clearly NBT released from parking. This problem will continue to come back until the demand for NuBits grows or till we burn coins.
Sell side liquidity is not a problem. The problem right now is low buy side liquidity. Burning does not actually help that much. Our Buy+Sell liquidity is so much less than it used to be when we were only using centralized operations.
I completely agree. That’s why I think burning needs to be put before parking in the tiered liquidity model
Buy side decreasing down to 32k.
Same sell side: 45k.
But park rates are still 0.
We need to increase the rates now and/or increasing the nsr auction size.
buy side is now 39k and sell side is now 36k.
buy under 30k, nsr still low. I’m going ~5%. If we offer park rates throughout the week and then vote 0% on friday, we will avoid triggering an auction.
I am increasing my park rates for the week too. It’s puzzling why the buy-side liquidity dropped so suddenly, but I hope to avoid another auction too.
probably because traders speculate that btc will go up and sell their nbts for btcs?
EDIT: We can speculate that some traders had plenty of NBTs waiting to be exchanged with BTC when BTC starts an uptrend
Why do you want to give someone 20% APR for holding NBT for 6 months? In 6 months the buy/sell ratio could go above 1 when NU needs NBT to circulate.
edit: we should realize that park interest (or any interest that has 0 risks) is a tax on people trying to use NBT for business. So far there isn’t any significant business (except for trading) for Nubits yet. But high interest has a netative effect of potential business.
I think the problem is that the parking system is badly designed.
If you were offering interest to everyone who holds nubits (not just those who park), interest would provide an incentive to both hold nubits AND to do business in nubits.
Obviously such a subsidy would still cost shareholders money. However, it is a strictly superior to the parking system because it serves an additional purpose beside motivating hoarding.