So for the Tube the only thing shareholders care about is when FLOT sends funds to the tube to make a trade. In this case, the risk that Tube operators take the money and run with it is the same risk that operators will break NuLagoon contract, i.e. they are the same operation with the same funding and perceived trust level. This is as opposed to trading on a third party exchange where shareholders are trusting both the operator and the exchange not to run away with the funds. That’s why I call it T3, there is less risk for the funds to be lost because there are less parties being trusted.
Correct. So if the walls on NuLagoonTube act as something of a barometer for network balance, FLOT can interact indirectly with the network by making trades through the Tube. For example, say poloniex has $6k buy side without NuLagoon. NuLagoon also happens to have mostly buy side liquidity (say $40k buy and $20k sell) because the network is out of balance. Now NuLagoon puts up $10k sell and $4k buy on poloniex to get the walls up to a healthy $10k each. NuLagoon knows that it is now very buy heavy but does not want to reflect that on poloniex because it would throw off the pool balance. So instead it reflects this asymmetry in the Tube. Let’s say NuLagoon keeps $5k buy and sell off the tube for insurance purposes or whatever. So the tube would reveal $31k buy and $5k sell. FLOT would now be able to see that and respond directly by signing a txn to balance the tube without NuLagoon’s interaction at all.
What’s more, by adjusting the money held off the tube and off exchange, NuLagoon can control the funds on the Tube entirely. So if NuLagoon wants to short BTC, they can request for it by emptying the BTC side of the tube. This is fine in my opinion, but it highlights why having a responsible Tube price feed with low spread and fees for FLOT is extremely important. It’s because in the Tube if FLOT is obligated to refill NuLagoon is not the ‘house’, Nu is, yet NuLagoon is still claiming the trade advantage by using a spread.
