Park Rate Voting

[masterOfDisaster]

You got a point.
I take that into consideration.
Maybe a slow but steady decline of park interest (not speaking of the resulting rate, but the configured values) might lead to better results.

[mhps]

Playing games could be counterproductive in the long run. We should come up a way to determine park rates and just follow it.

[masterOfDisaster]

We should come up a way to determine park rates and just follow it.

I fully agree.
More than once I encountered problems trying to think of algorithms to automate or at least assist decision making.

Deriving park rates from the market situation will be no easy task.

Factors like BTC volatility (amplitude, frequency), ratio of NBT buy and sell side, absolute values of NBT buy and sell side, the velocity of the change of ratio and absolute values and likely some more can play a role for determining the park rate.

This will become even more complicated once more than just US-NBT are on the market.
Better start now with creating the algorithm(s) - only I don’t know how…

[GLock]

I think that reducing park rates too promptly and having park rates without continuity is very counterproductive especially if Nu is looking for new users, and I am talking about the average person here…

Thinking logically, who already owns or frequently trade cryptocurrencies is the first one who will park his/her NBT defeating the purpose of having park rates in place (we want to bring in new users - see buy pressure)

If the average Joe decides to buy some NBT and park them to earn some interest, it will take a while from the time he manages to organize his finances to get some money in the crypto world and buy some NBT. After having a positive experience (reliability of the system/ease of use etc…) we can sure count on having a new “customer” that can take in another “customer” and so on…

So cutting interest rates before the user we target has a chance to make a move is pointless.

I believe semi permanent park rates that beat or equate inflation levels in the pegged currency (at the moment USNBT) are one of the best instruments we have to attract non-speculators to use NBT.

Nu, should look, especially because of its pegged currency system, to increase adoption among the average person not just investors/speculators/crypto savvy etc… and park rates could be an excellent instrument at it.

[Nagalim]

I believe semi permanent park rates that beat or equate inflation levels in the pegged currency

I’ve been arguing for 1 or 2% park rates for over a year now. The shareholders never seem to do parking in moderation, which I agree defeats the whole purpose.

[masterOfDisaster]

I lowered the park rate in my data feed

masterOfDisaster's Nu datafeed - BETA

Park rates
24% @ 11.5 days (before 32%)
12% @ 23 days (before 16%)
6% @ 1.5 mo (before 8%)
3% @ 3 mo (before 4%)
0% @ 6 mo (before 0%)

I’m inclined to keep lowering them as long as the liquidity situation seems stabilized, but seriously consider letting them end at non-zero values.

[Nagalim]

By picking 0%, we are turning away people that are willing to loan us money at a reasonable rate.

Basically, just a reiteration of what GLock said. For example, BCE holds a bunch of NBT. If we offer 20% rates, they will park at 20%. If we offer 1% rates, they will park at 1%. No matter what, BCE will park a bunch of NBT. Except if park rates are 0%. If rates are 0%, BCE will wait until the rates start climbing before parking. If rates are 0.1% and have been for a long time, BCE will be parking at that number when the rates start climbing and won’t be able to time it perfectly. That uncertainty is a win for Nu.

[masterOfDisaster]

What about

4.0% @ 11.5 days
2.0% @ 23 days
1.0% @ 1.5 mo
0.5% @ 3 mo
0.0% @ 6 mo

as permanent lower threshold for park rates?

Does it make sense to use an alternative distribution of parking interest over time for the “basal” park rate?
Maybe even the opposite of what we have now - be one that provides a stronger incentive to park longer?

0.0% @ 11.5 days
0.5% @ 23 days
1.0% @ 1.5 mo
2.0% @ 3 mo
4.0% @ 6 mo

[Nagalim]

I’d prefer something like this as a minimum:

0.0% @ 11.5 days
0.5% @ 23 days
1.0% @ 1.5 mo
1.0% @ 3 mo
0.5% @ 6 mo
0.0% @ 1 yr

[masterOfDisaster]

Tuning without knowing:

0.0% @ 11.5 days
0.5% @ 23 days
1.0% @ 1.5 mo
2.0% @ 3 mo
1.4% @ 6 mo
1.0% @ 12 mo

I bet not many NBT will be parked with those rates, but I’d really like to find out!

The average parking duration should be above 3 months, because the maximum APR is at 3 months, but one can park for between 3 and 6 months with less effort and only slightly less parking interest.

Would that be a start - offer park rates and find out how many NBT get parked for how long?
I mean, we are in the dark regarding park rates and their effect on customers.

[Cybnate]

I’ve been arguing for 1 or 2% park rates for over a year now. The shareholders never seem to do parking in moderation, which I agree defeats the whole purpose.

I don’t believe in parking in moderation. We either need parking rates to fix the buy side or we don’t. We are not a bank, who could give interest on received/parked funds and could lend them out for higher rates.
Parking rates are a cost to the network. The cost is only justified when it is used to fix the buy side / maintain the peg. Just giving away interest rates for the sake of it doesn’t make sense. I don’t think the advertising argument is a strong one.

BTW I’m all for it and supportive of proposals if someone can find a profitable model to combine park rates and lending.

[masterOfDisaster]

We either need parking rates to fix the buy side or we don’t.

Fixing temporary demand issues is one use case, but not necessarily a complete list of use cases.

We are not a bank, who could give interest on received/parked funds and could lend them out for higher
rates.

Lending is a business, which needs to be explored. Basically it’s possible. NuSafe is a good example for that.
NuSafe is being used differently from lending, but the same approach could be used for lending:

• agree on an interest rate
• request a collateral
• send NBT

Selling BTC for NBT is remarkably close to the lending concept (Nu lends NBT to people who deposit BTC as collateral)!

Parking supports liquidity provision at a cost just as we support liquidity provision by offering compensation.
Users who buy NBT to park them, fill the T4 reserves.
Users who already own NBT and park them, reduce the sell side pressure or increase the buy side pressure - depending on the angle from which you are looking at it. In the end it leads to a plus for the T4 reserves.
If we are able to benefit the liquidity scheme by offering a park rate, which is below the compensation for liquidity provision, it might be worth a second look.

Parking rates are a cost to the network. The cost is only justified when it is used to fix the buy side / maintain the peg.

There’s a lot of costs for the network and all of them should be justified.
Peg maintenance is as necessary as marketing and advertising Nu is.
What good is a peg if nobody is aware of it?

Just giving away interest rates for the sake of it doesn’t make sense. I don’t think the advertising argument is a strong one.

I’m a strong proponent of executing NSR sale instead of offering high park rates.
I see some use of moderate, continuous park rates, though.

The advertizing effect and the positive effect on the liquidity balance are worth a test to find out how many NBT you get parked depending on what interest you offer.
2% APR is peanuts compared to over 7% monthly (which equals 125% APR if you include compound interest!).
I wouldn’t hesitate to try bigger values for park rates.

[Nagalim]

It’s very straightforward. If we dont give moderate park rates, B&C (and other holders) will always park at the exhorbitant rates we offer. So we will be paying very high interest rates for little gain on buy side. This is a threshold phenomenon that only exists if we refuse to act like a normal financial institution and offer reasonable and continuous interest rates.

Park rates are much more effective when offered in moderation. From marketing to infrastructure to simply the way economics works, interest rates need to be stable. Spiking the rates during crises times and then dropping precipitously after is a very big telltale of an uncertain economy.

[Cybnate]

that only exists if we refuse to act like a normal financial institution and offer reasonable and continuous interest rates.

Agree, and act as a bank and lend the money to earn the interest back.[quote=“masterOfDisaster, post:483, topic:161”]
The advertizing effect and the positive effect on the liquidity balance are worth a test to find out how many NBT you get parked depending on what interest you offer.
[/quote]
I’m not convinced, we can also try to advertise by other means which are likely to be far more effective. Maybe in combination with an advertisign campaign to raise awareness for the coin. But just giving away interest doesn’t make sense to me from a business perspective. There need to be an income source or other good reason to do it.

[cryptog]

Buy side is strong, 54% of total liquidity according to ALix.
I have halved the rates that I am voting for.

[masterOfDisaster]

The advertising is just a secondary effect.
The main reason for having non-zero park rates (even if the liquidity is looking good) is to have a field test to gather data.
We don’t know how much parked NBT we can “buy” for what park rate - we ought to know that!

[Cybnate]

We don’t know how much parked NBT we can “buy” for what park rate - we ought to know that!

I don’t think we will ever know that other than for a very brief moment in time as that will be highly dependant on many environment variables like BTC price fluctuation, interest rate, parking terms, state of the Nu nation, external advertising, B&C reserves and not to forget some luck.

[masterOfDisaster]

I agree with you that it will be hard to exactly know.
I dare say we currently know close to nothing about it.
I’d like to reach a place in between knowing nothing and knowing exactly.

We need to start acting like a bank, if we want to survive in this market.
Financial theory is crucial, only I have almost no knowledge in this field.
I’m certain that gathering some information about the NBT that get parked depending on a park rate is helpful.

Even ignoring all other factors, we will be able to find a corridor.
Something like "4% APR for 3 months parking leads to between 0 NBT and 5,000 NBT that get parked."
We might even find Gaussian distributions or other patterns.
From those patterns we can try to make predictions and verify or falsify them.

To view it from the opposite side:
paying some NBT for park interest (to gather data) doesn’t hurt much, but can provide us with useful information.
It’s quite bad that we can’t limit the amount of NBT that can be parked. But even if all NBT in circulation were parked at an APR of 4% for 3 months (just as an example), that’d cost only a few hundred NBT in total to cover the interest.
…I don’t expect huge amounts of NBT being parked at 4% APR.
Wanna make a bet?

Anyway: I’m more and more convinced that this kind of field work is necessary.
It would be great to combine monetary policies and ideas about crypto currency markets to a unified theory.

Until further notice my data feed will only contain non-zero park rates (I suppose in the order of magnitude of single digit APR for up to a few months; until I know better ).

[Cybnate]

Wanna make a bet?

You know I’m not a day trader
But I wouldn’t be so sure to win that bet, B&C might just take up such offer for their reserves as something is better than just dead money. Do we as NuShareholders want to subsidize B&C?

If anything I would try some low rates (1%) for terms >6 months. I doubt whether many would pick that up. With money parked at those rates one might try to lend some of it during the parking time. Assuming it is substantial.

BTW I’m keeping my parking rates in my datafeed where they are for now. Just like to see whether Poloniex sell side gets stronger in the next week. Just trying to identify a trend. The saga around Satoshi might create some Bitcoin volatility.

[masterOfDisaster]

I’m keeping my parking rates in my datafeed where they are for now.

Me too.
If the liquidity stays stabilized, I’ll lower them in steps until I arrive at small single digit APR values later.