Agree on that same price feed is important. Can Alix provide a recommendation of order of BTC price feeds, so can easily bring all LPs to the same page.
Does that mean the minimum spread NuLagoon could set is 1.5%?
How about the situation of multiple LPs (including NuLagoon) supporting one exchange. Should the goal of NuLagoon be set to balance overall buy/sell sides on the exchange or to balance its own buy/sell sides?
We tend to treat the Tube as an exchange. Because the fund there could be immediately accessed by Nu users, donât you think itâs more reasonalbe to report the values as Tier 1 liquidity?
This is unneccessary. You will get paid sooner if you submit the report sooner. If you fail to submit a report you wonât get paid and shareholders have plenty of time to pass a motion to respond to perceived performance.
Overall. This would be a direct pivot of contract from previous NuLagoon iterations. Instead of being concerned with dozens of arbitrary parameters and functions, focus on making sure the actual buy/sell on exchange stays within ±1.5% of the price feed with reasonable liquidity.
Having some funds at larger spread is fine, but those should be considered T2. Basically, providing extra market pressure at higher spreads can cause the market to respond positively. So in the long term any action that aids in keeping the peg should be accessible and even reportable by NuLagoon.
This motion subtly changes the function of the Tube. It will now be used primarily as an access point for Nu FLOT funds (though itâs basic function of trades off-exchange will be unchanged). Therefore it should not be balanced like a network trading pair and should instead give FLOT indication of NuLagoonâs off-exchange funds. The tube is off-exchange (T3) because exchange default and operator default are one and the same in the tube.
For example, according to this motion if NuLagoon made a private manual trade with flot, that would still be considered a âtubeâ transaction. This is because the two instances are degenerate, the only difference is whether we are using automated software or not. In either case the price must be agreed upon, which is why if FLOT believes the tube prices are being manipulated they can stop paying NuLagoon - allowing an accessible access point for network liquidity to trickle down all the way from the top tier to the bottom tier is a vital part of how NuLagoon should function.
Still not sure about your exact meaning. The fund on the Tube comes from NuLagoon Pools. Are you talking about placing FLOTâs fund on Tubeâs buy/sell liquidity wall?
Can you explain more about the default risk of Tube?
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. Thatâs 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. Letâs 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 NuLagoonâs interaction at all.
Whatâs 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. Itâs because in the Tube if FLOT is obligated to refill NuLagoon is not the âhouseâ, Nu is, yet NuLagoon is still claiming the trade advantage by using a spread.
We are afraid that we are not big fans of this idea. If we understand correctly, it seems like that the Tube will be treated as a secondary liquidity support for traditional exchanges like Polo. In some situation, unbalance the Tube to balance Polo? Wonât this harm Tubeâs major role as a direct support to Nu 's peg.?
We still tend to think the Tube is an innovative exchange customized for the support of Nuâs peg. At this exchange, the peg never will broken. The point we are trying to make is that although the Tube could contribute to the T3/T4 management, sometimes make their life easier, however, the most valuable part of the Tube is to support Nu end-users directly.
We are also planning to imporve the Tube for new NuBits users as an easier way to acquire their first NBT.
Thank you.
All T1-3 strategies require a method by which they interact with T4. So please answer this question:
How does NuLagoon interact with FLOT?
Because recently the answer to that question has solely been the Tube. Avoiding T3/T4 management is the same thing as avoiding a change in circulating nubit supply. How can NuLagoon operate as our #1 biggest liquidity expense without interacting with the circulating nubit supply at all? It cannot. That is why FLOT has had to resort to balancing the tube. That is why it is an important part of this contract. If you are not comfortable with that, offer an alternative. However, a T3 strategy for FLOT interaction is important and, in my opinion, mandatory for a long term operation (a year of operation is already long term in this world).
As another perspective:
If you market NuLagoon as never breaking the peg and I buy all your nbt, what do you do to get more? Do you go break the peg somewhere else? No, instead, FLOT balances it for you. FLOT gets grants from shareholders. Nu is ultimately the reason why the Tube doesnât break peg.
##Liquidity Index
The magnitude of liquidity on an exchange is also very important. To avoid overloading shareholders with large numbers, the liquidity index for an NTP will be measured as follows:
LI = log ( A + B )
Where log () is the logarithm in base 10, A is the total volume of ask orders on the order book, and B is the total bid volume on the order book, measured within 1.5% offset of the price feed.
We are not saying that we gonna stop using the Tube in T3/T4 management. This feature is useful and necessary.
We just want to emphysis the Tube is much more than that, We need to atrract more Nubits users, especially new users. The Tube should do more work in this area. It would be better to avoid deterioate the feature of the Tube in supporting Nu end-users.
I dont think this deteriorates the tube. You can still keep 40k liquidity there, it will just be that if NuLagoon needs T4 balancing it will show up in the tube rather than on exchange. So the only potential degredation of Tube service proposed by this grant would be that flot takes on responsibility for balancing the tube. I think FLOT has shown that it is up to this task. Do you think that FLOT will not be responsive enough to keep the tube balanced? I think they will respond with similar speed as NuLagoon itself, which is to say a balancing might take a couple days to notice the discrepancy and sign a txn.
Im hoping NuLagoon will propose their own motion, using mine as an influence. Otherwise, maybe a little more feedback wouldnt go amiss. Is there support for hashing this?
In general, we think that what is outlined in this motion does make sense. We would like to try to do so in terms of reporting and balancing liquidity accroding to Alix panel before the motion is formally passed and effective. In this way, we will be more clear how the motion would impact the NuLagoonâs operation.
The way this motion is written, NuLagoon is responsible for ensuring liquidity on a supported pair, whether itâs their liquidity or not. Clearly, ALix is a great way to measure this. However, I feel like if ALix is mentioned specifically it will become the end goal rather than the actual exchanges.
As an extreme example, say ALix is down or compromised. What happens to the NuLagoon contract? Do I have to put in clauses about how to determine if ALix is compromised or not? Instead, we can just say what we want (liquidity on actual exchanges within 1.5% of the price feed) and let the usage of tools like ALix be implied.
Can I ask what should Alix do if NuLagoon report the Tube liquidity to T3, instead of T1? How will this affect the measures of balancing and the actions should be took? Thank you.
With the update, this motion is written with Tube as T1. This motion will not really affect NuLagoon operation directly other than requiring a monthly report and switching to FLOT for payments (and slightly reduced but fixed daily compensation).