We need our orderbook to look like the orderbooks of trusted markets. Image is everything, when people look at an NBT order book, it should look like this:
You have obscured that these are questions for desrever, not assertions, by removing âWould there beâ from the beginning of the first sentence. In any case, it applies to illiquid pairs, which are the only pairs for which parametric order books are well suited.
Ok, so here, Iâll give you it unobscured.
There is a useful role in automatically changing the curve values to encourage balancing the available liquidity. In essence, if the sell side has less liquidity, steepen it while while making the buy side more flat.
Illiquidity is a price feed issue, not a spread issue.
It seems like it would be useful to review the reason for parametric order books.
Imagine we decide to maintain liquidity on an NSR/NBT pair. With very low liquidity, there is a real risk that NuBot will attempt to peg NSR. This isnât possible to maintain, and will result in a loss for anyone attempting to peg NSR. The important question is whether the supported market is creating the price or reacting to it. If most volume in NSR is on a supported NBT pair, then we are making the NSR price, not following the market. That is the problem that parametric order books can address.
With liquid pairs, our own NBT/BTC pair at Poloniex isnât attempting to peg the BTC price, because trading on the pair is dwarfed by Bitcoin trading on other pairs, which determine the price NuBot offers trades at.
Essentially, parametric order books are needed if there is a risk that our supported pairs will have any where near the majority of trading volume for a particular asset. That isnât a risk for BTC, ETH and USD markets, so they should not employ parametric order books.
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Parametric orderbooks cannot address this price-feed issue. If you attempt to use parametric orderbooks as a solution for the price feed issue on illiquid pairs, your system will abused by people who are manipulating the illiquid price feed. Parametric order books are a solution for better bulk liquidity provision on liquid pairs like BTC. A solution for illiquid pairs will require a lot more thought and attention to the price feed rather than the spread.
The solution to this is a recursive price feed, not parametric order books.
This is what an order book for an asset that is variable in price looks like. A price pegged asset order book ought to be two vertical walls ideally.
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Good luck telling that to traders and bots that donât care what our product is. Theyâre just looking at the order books and see big red flags that say âthis is being manipulated, stay away!â
Of course it is. People who donât understand we regulate the value of NuBits shouldnât be trading them.
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Everyone should be trading in NBT. To say otherwise is suicidal.
You really want to turn away all the bots and traders who donât know the intimate details of Nu? Seriously? How does that make any sense?
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I wouldnât call knowing that we peg USNBT to the US dollar an intimate detail. And yes, every NuBit user needs to know this.
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The only way a trader can know whether the manipulation is from Nu or from some nefarious 3rd party is to know the intimate details. What if someone starts pegging NBT at $0.99 on HitBTC? The volume is so small there we wouldnât respond for maybe weeks. So then a trader goes and just assumes that the price is correct because they donât know our details, and they get manipulated. With the parametric order book, a takeover like that would require making a whole lot more waves that shareholders will respond to.
A trader doesnât need to know anything to buy an altcoin. How are you going to take their NBT away from them?
If you mean to say every NBT user should know this, well if âshouldsâ were bitcoins weâd all be rich.
You say you want traders to use bots to arbitrage exchanges. Bots are not aware of what is pegged and what isnât. If you want bots, we need to cater to bots. People arenât going to redesign their entire bot just to take advantage of our measly little market. We need to bring them to us, not force them to accommodate our completely new economics.
A lot of bots react based on the order book. If our order book reacts to the LP balance, we can get bots to react to our LP balance. This would be a huuuuuge step forward for us.
Bot operators do typically specify what pairs are to be traded, just like NuBot does. An arbitrageur would set up the BTC/NBT pair as though it were a BTC/USD pair. It is quite simple.
Right, and their bot would proceed to not trade at all because the order book looks screwy. Making a bot that understands the fact that our orderbook looks different from other pairs would require much more than a simple modification.
Arbitrage bots donât examine the order book. They only care about the top of the book, the best price on each side.
So you are 100% on not wanting any bots that look at the order book? Meaning you think a vast majority of the trading bots out there are undesirable for our network? In that case, itâs no wonder traders donât use NBT.
I have another view and submitted my draft motion here: [Withdrawn] 0.6% Maximum Spread for ALP/MLP, 1.2% for Nu Funded Liquidity Operations
Key differences are:
- Lower spread (0.6%) for ALPs/MLPs to improve liquidity quality (with exemption when high fees are incurred) and with that likely the volumes
- Medium spreads (0.7%-1.4%) for Nu-funded liquidity but limited to maximum of 30% of total liquidity when ALP and MLP fails e.g. in high periods of volatility as a first line of defence.
- High spread (1.4%-2.5%) for Nu funded liquidity but limited to a maximum of 10% of total liquidity as a last line of defence
- Adding a role for FLOT to respond when High Spread funds are being touched.
Here is the link to my motion:
https://daology.org/proposals/5f9ce9e6fabd149ce8c321cfd28491827602a955
Happy to have the discussion here though.
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minimum practical tolerance is 0.475%, or 0.95% spread.
https://daology.org/u/nagalim/proposals/a8bb5e317723403d8e84bdacb3279b3c2f877bb3
I must admit I agree, in principle in everything that @JordanLee has said in that motion, thus in the provisions of that motion. Great proposal.
However, practice has indeed showed us the role played by gateways, as last lines of defence.
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I donât understand. When fee is 0.2% on both bid and ask side as spread of 0.4% is technically possible.
Are you referring to the risk of different bots trading into each other? Or strong volatility on the pair?
For fiat pairs this is less likely, for highly volatile Bitcoin this can be a problem. Thatâs why I took a 0.2% margin in my proposal.
Allowing 1% spread on the order book means 1.25% tolerance, forcing 1% spread means 1% tolerance where LPs would sometimes only be compensated at 0.75% spread.
Asset liquidity should be defined by volume, where there is at least one easily accessible exchange with considerable volume. Litecoin doesnât cut that nowadays.