[Passed] Grant to provide liquidity using NuBot on hitBTC - the begin of modPuddle

[mhps]

I caution liquidity providing on new exchanges here

Southexchange liquidity support thoughts

For new exchanges such as hitBTC and Southexchange there is a significant exchange risk which can only be lowered usually by test of time. Recall how exco.in, a new exchange proud of and praised by peers for its technical innovation and enthusiasm, lost most of its coins because of rather low-tech operational mistakes. I'd put ~7% premium on exchange risk per month for these new exchanges. The OP has 1000NBT on each side which is good. I suggest eventually any new exchange doesn't have more…

[mhps]

Balancing bid/ask: each WednesdayBalancing goal: each side between 45% and 55% of volume

How do you balance? You don’t control the fund and the interest rates are fixed.

[masterOfDisaster]

consider to bring it one step further.

I think I’m doing that albeit in a different way.
For me running NuBot there and having an independent solution is what I’m striving for first.

I caution liquidity providing on new exchanges here

Your warning has been heard. It will be considered.

How do you balance? You don’t control the fund and the interest rates are fixed.

I do control the funds. This is not another ALP, but a NuBot being run at hitBTC.
The funds are in an exchange account I control.
In need of balancing funds (BTC or NBT) are withdrawn to other exchanges (with sufficient tier 1 bid walls) traded there and put back to bring NBT/BTC on an even level.
I don’t know how to treat situations in which BTC price plummets, because it will make it hard to balance and affects the liquidity volume as well, but this shouldn’t stop us here.

[mhps]

I do control the funds. This is not another ALP, but a NuBot being run at hitBTC.

Oh. It was not obvious until it was obvious

[masterOfDisaster]

That’s why I often struggle when choosing a proper forum name.
I’m torn between “masterOfDisaster” and “CaptainNotSoObvious”.
Most times I pick the first, but I think both suit me well

[mhps]

What concerns me with forced rebalancing is possible aggrevated losses in a bear market (which had probably caused the imbalance in the first place) as discussed here and a few posts that followed -

Draft: Proposal to continue LPC operation on Poloniex for 60 days

Then the problem with exposure to BTC price has to be addressed because when the LPC rebalances in a bear market he/she effectively is taking losses. The LPC might consider capping losses according to the fee being asked for, which should to be told to the shareholders in the grant proposal because it effectively takes fund off the walls.

[masterOfDisaster]

What concerns me with forced rebalancing is possible aggrevated losses in a bear market

On the contrary - in a bear market people will try to get rid of BTC (assuming they’ll drop even further).
So the LPs end up with lots of BTC and little NBT.
Rebalancing mitigates the effects of falling BTC prices, because after the rebalancing more NBT will be in the pockets of the LPs.
This is for sure only true if the LPs can trade the BTC for NSR (at an exchange) and the NSR for NBT (at Nu).
Without being able to sell NSR (the former BTC) to Nu and buy NBT there, it will leave another LP holding the baby…

[Nagalim]

There is for sure some arbitrage loss when rebalancing. However, it is assumed that Nu is paying plenty to LPs to cover such losses. As far as volatility is concerned, I would argue that instituting random buys and sells at random times should be statistically equivalent to making no buys or sells other than the txn fee, assuming liquidity, no potential gaming vectors, and a longterm stable bitcoin price. A long term bear trend is a risk for operation on the btc pool in general, it is not exacerbated by rebalancing.

[mhps]

@mhps
What concerns me with forced rebalancing is possible aggrevated losses in a bear market

On the contrary - in a bear market people will try to get rid of BTC (assuming they’ll drop even further). So the LPs end up with lots of BTC and little NBT.

Rebalancing in a bear market means selling the btc at current low prices. If the price action reverses there is no chance to ride on an appreciating btc price for those sold btcs.

[masterOfDisaster]

I decided to write my thoughts about your last post in another thread as I want to focus on the motion draft for hitBTC.

And I want to note that I thought about your warning about providing liquidity at new exchanges which lead to adjusting the compensation.
This makes the liquidity operation look expensive, but on the other hand I don’t ask for an operator fee and include a part about continuity of liquidity.

edit: I’ve made a rework of the draft in some important parts and recommend to inspect it closely. It’s very different from the last draft - I hope for the better.
Your feedback is highly appreciated.

[masterOfDisaster]

bump.
No interest in having a liquidity operation on hitBTC (independent from ALP operations)?
Or are there just no more questions to be answered and I can turn from [Draft] to [Voting]?

[zoro]

to be ohnest, i prefer the ALP so that i can participate my self

[masterOfDisaster]

Yet NSR holders might be interested in buying liquidity at a new exchange

[desrever]

I am in favour. Would you mind expanding the

Amount Requested: 225 NBT

How does it compare to other grants? How did you come up with such number?

I’m not saying that is either too much or insufficient, just would like to know what’s the reasoning being it.

[masterOfDisaster]

The amount is considering that hitBTC is a new exchange and I follow @mhps’ recommendation to put a premium for that on top.
The 225 NBT per month for a liquidity of 1,500 NBT are rather expensive (15%), but I charge no operator fee.
I expect future terms to be cheaper, because

• fixed cost models will allow no to determine the compensation rate required by the market
• good experience with hitBTC will lower the premium

[desrever]

I also suggest you to contact @HitBTC to get a premium txfee

[HitBTC]

We offer 0% trade commission for new currencies. Of course it works for NuBots

[mhps]

but I charge no operator fee.

I think you should charge an operator’s fee. The higher premium is the cost of Nushare holders’ determination to expand pegging operations to a relatively young exchange, if the grant motion passes. The total cost is not a big sum, which is a result of a modest target appropriate for a starter pool on a new exchange.

I would like to see a point to point comparison with the other MLP, Nulagoon.

[willy]

I would like to see a point to point comparison with the other MLP, Nulagoon.

Other MLP? Wait… MLP means “managed liquidity pool” right?

I thought what moD proposed here is a single custodian liquidity provision, like we did before tllp. Those single custodians had no “operator fees” if I remember correctly, why should that change now?
What would he be operating anyhow despite NuBot on a RPi?

[mhps]

I thought what moD proposed here is a single custodian liquidity provision, like we did before tllp. Those single custodians had no “operator fees” if I remember correctly, why should that change now?

I thought moD is taking funds from a few liquidity providers and manage a pool, as you said, like it was done before tllp. However I remember every LPC before tllp charged a fee both for the fund provided (opportunity cost or whatever it was called plus exchange risk and btc price risk) and for the work incurred to setup and tend the rig.