[Passed] 1% Maximum Spread for ALP/MLP, Above 1% Allowed for Nu Funded Liquidity Operations (e.g. Gateways)

Motion hash: bd4d153bb5c2d8cd6013b77ad8780eabc7bae79e

To provide an alternative for [Passed] 1% Maximum Spread in Shareholder Funded Liquidity Operations I created this motion. Please continue the discussion in the thread, @JordanLee started to have all arguments in one place.


Quoted for convenience:


I just wanted to say thank you to @masterOfDisaster for creating an alternative proposal. When motions are voted on, ideally there should be a number of variations competing.


Thank you very much for your appreciation.
I adore the design of Nu you created. Just because I sometimes might differ from your view doesn’t mean I don’t respect what you and Nu have achieved.
With regard to liquidity provision I allow myself having an opionion which I consider justified.
That’s the main reason why I created this alternative proposal.

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What has been in average the proportion of gateways powered liquidity compared to the total rewarded liquidity?

I tend to think that Nu should only reward very tight peg.

this is key for a healthy business :wink:
(the disease is to not have different views at all)
I like this proposal, it is simple enough.

Great proposal too.

How do you define exactly this?

Nu funded operations are the NuBots @zoro or me operate at Poloniex or the PyBots @Cybnate operates at Poloniex and Bittrex.
They use funds owned by Nu.

All ALP or the MLP NuLagoon receive a compensation from Nu, but the funds are from random people.

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If trusted T3 can go outside the spread then I think this is the only practical spread regulation shareholders have if they feel they need a maximum spread.

However, I’d prefer a strict definition of T1 and T2 and stuff.

Maybe this a good opportunity to introduce T1.1 and T1.2.
There have been discussions about it, but it was never officially agreed.

How does that look:

  • T1.1 liquidity are orders at a spread of <1%
  • T1.2 liquidity are orders at a spread of >=1%

I don’t see a place for T2 here, because this motion tries to regulate the spread of orders.
T2 is by definition on exchange, but off the order book.

For those who wonder whether this motion here is in conflict with

I can say that at hitBTC there’s no ALP.
The only LP there is NuLagoon (type: MLP).
Under normal circumstances the MLP were the only T1.1 operation and the NuBot gateway would operate on T1.2.
Yet my NuBot gateway at hitBTC will operate at T1.1 to gather data about the cost of a small spread.

I suppose that a smaller spread increases the cost, because a bigger spread allows to make some revenue when trading.
This revenue might be able to compensate parts of the losses from hedging, operator cost, calculatory cost from exchange default, theft, etc.

If there’s no revenue to be made at a spread of <1%, another test with an increased spread should be made.

Now that I think about it - ideally both spreads would be tested at the same time, because the time frame might play a role for the results.

What about letting NuLagoon operate as MLP on T1.1 at <1% spread while my NuBot gateway runs at T1.2 and >1%?
The amount of money would ideally be the same and both operations should start at a balance of 50/50.
Each week or fortnight the NAV of both operations can be compared.


I’ve included the T1.1 and T1.2 naming and promoted the motion to [Voting]

I have 1 question.
Sponsored liquidity means liquidity provision that gets paid by Nu. Basically the proposal says we should not pay liquidity whose spread is beyond 1% except for Gateways. But nothing would prevent someone from trying to provide liquidity at a much higher spread at his or her own expenses. Then the question would be: would that person be able to broadcast his or her liquidity info to the Nu client?

In other words, what is the condition on the spread if you want to be able to broadcast liquidity to Nu client regardless of whether or not you are getting paid by Nu?
Another equivalent question would be: what is the spread of the liquidity info displayed on the Nu client (Tier0 —> Tier4) and on AlixPanel ?
In other words, are gateways working at a high spread broadcasting their liquidity info right now to Nu?

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This is indeed a good question. In my motion, NuPaid operations will report anything over 1% as T2 while NuOwned operations will report anything over 5% as T2. The kicker is something I’m still playing with, that NuOwned operations must maintain some liquidity in T1.1 to act as a means of direct control over market supply.

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I think there are 2 important questions:
1- should Nu reward liquidity whose spread is >1% ?
2- should Nu regard liquidity whose spread is >1% as T1?

1- I think the answer is yes since for example gateways that have operated it seems at spread > 1% have proved to be very useful in protecting the peg in the past (by the way, how is gateways liquidity reported as? T1 or T2 right now?)
2- I think the answer should be no because we want T1 to be our main product, which should be a tight peg.
So we should report it as either T2 or T1.2 but in the latter case the tight peg should be reported as T1.1 and the Nu client should detail T1.1 and T1.2.

I am ok with that as long as T1.2 is minor compared to T1.1.
How can we make sure that T1.1 is our major liquidity product?
Because if T1.2 becomes major, our product would decrease in liquidity and we would lose customers.

I am worried about that.

The only operations at >1% spread (that broadcast liquidity) are NuOwned operations. Those receive no reward.They cost an operator fee and Nu needs to bear the risks, but a reward doesn’t get paid.

This is a philosophic question which can’t be answered in a scientific way.
The parametric order book is a great idea and I don’t see why it shouldn’t be applied to NBT/BTC.
The only trading pair at which I sincerely believe, T1.1 (at a tiny spread) should be the only rewarded liquidity is the NBT/USD pair.

All other trading pairs - including NBT/BTC! - have risks, which can be (at least partially) compensated by a parametric order book.

T1.1 as major liquidity product makes sense for NBT/USD.
I believe it’s dangerous to have a too tight spread at other pairs than NBT/USD.

Do we want to stay where we are, settle in being the means of hedging?
Do we want to focus on making hedging for traders convenient or do we rather want to advance Nu?

how can we achieve both?

We already offer pretty nice liquidity.
I consider one part achieved :wink:

…at least if BTC doesn’t go haywire.

Currently at 2% support

While Jordan’s proposal is at 26%.

If I couldn’t convince anybody in the last 5 months and the current events don’t open the eyes of shareholders, I can only concede my fight for the peg. I won’t waste my energy trying to fight for a peg at the NBT/BTC pair, if a spread above 1% isn’t allowed.
I don’t waste energy in fights that can’t be won.

I give up, if future NBT/BTC operations are forced at a spread <1%.
The peg can’t be guaranteed with these parameters.
This is madness.

I ll add this motion as soon as I can

you only need the data feeders, 4 people? :wink: