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The NuShareholders are becoming increasingly concerned about their limitless exposure in the scope of the liquidity service provisioning and monthly payments in time as result of the passing of motion b5e709a59226b979e4cb59e6d3a3e06b506e3761 for the liquidity provisions also knows as the NuLagoon.
Therefore the NuShareholders request the operator known as @henry to cap the costs of the operation to a maximum of 2,500 NBT per month and make an effort to inform the users of his pool of this new restriction and advertise his pool accordingly. Any excess fees above 2,500 NBT won’t be paid.
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To illustrate the concerns I and other Shareholders have, I have added a little story which hopefully shows the need to pass this motion in the short term:
Bob just helped Ann out by cleaning her house as there was no one to do it and she couldn’t do it herself. Bob and Ann agree that Bob can continue to clean the house. Next week Bob cleans the house and Ann is send an invoice which she pays.
The next week Bob brings a mate and cleans the house even better, he charges Ann double the amount though. His mate also needs to be paid and Ann agreed to clean the house and that is what they did and even better this time. Ann feels pressured by this and pays the bill as Bob is a good friend after all and helped her out.
The week after he brings two mates and they do a full clean inside and outside the house. The house looks almost perfectly clean and Bob is proud that he delivered this piece of work. However they charge Ann triple the amount. They cleaned the house and delivered the work so Ann needs to pay. Ann is not happy as she didn’t need such a thorough cleaning. And Ann cannot afford to pay for this any longer as she needs to pay bills to feed her family. Bob is now angry at Ann, can’t pay his mates and suffers reputational damage and threatens her to get her into court.
This story hopefully shows the loose-loose situation we are in. Both @henry and the shareholders can’t win in the long run. @henry’s reputation is at stake when the network fails to pay his liquidity providers and the network’s reputation is also at stake failing to pay and properly contract for a very important service based on needs. This wouldn’t look good in any case and potentially damages the Nu brand now and in the future.
On the passing of this motion, I will vote/support for paying this month’s and next month’s fees for NuLagoon without hesitation, as the new term has already started.
Your feedback on the content of this draft motion would be much appreciated before I submit it for voting.
We are open-minded to evaluate terms of the contract between Nu Lagoon and Nu shareholders, including capping the custodian fee.
The difficulty is that we are not sure what is the right number to set, as it is highly possible that the future of Nu could beyond everyone’s imagination. However, it is clear to us now that the fee cap(2.5k) in this motion is far from what is acceptable. Given the current fee split ratio between manager and pool participants, the manage fee will be caped at around 1k a month, resulting the time and effort we are putting on the Nu Lagoon now is meaningless. We will cease the operation of the Nu Lagoon immediately after this motion passed.
Edit: @Cybnate, would you add a item like this : The terms in the motion will begin effect in the next accounting day after the motion passed.
Here is my context for evaluating what the maximum should be:
We ought to have around 100,000 NBT total liquidity at this time, as the best balance between cost and securing the peg. At today’s market rates that will cost us ~8500 NBT per month. Once we reach 100,000 NBT in decentralized and counterparty risk free liquidity, then we can begin to reduce rates, so the quantity of liquidity will rise above 100,000 NBT.
With the assumption we will have three pools (NuPool, NuLagoon and LiquidBits), we should cap each so that it can’t constitute the majority of liquidity. For this reason, I propose a change to the draft motion to make the monthly cap 4,000 NBT. This is by no means intended to be a permanent figure, and I expect it will be revisited in a number of months.
The cost of liquidity is high right now, but I am certain we will see it drop as this market develops. While no one knows, my guess is we will eventually see liquidity costs drop below 1% per month.
That is absolute not my intention. See proposals below.
No problem, sure don’t want to disrupt an existing valuable service mid-flight.
Sounds fair, and I will round it to 5,000 NBT to enable NuLagoon to continue its services for an even longer period up to like 6 months and remove any suggestion that I’m trying to end this valuable service for the Shareholders. I do think it is good to review a contract after 6 months anyway and it is a long time in the crypto-world. So a motion to increase the cap by that time would be perfectly acceptable and no burden to the Shareholders assuming additional services are wanted.
I will update the motion according to the above later today and I hope that there is nothing controversial about this motion and neither Shareholders, pool operator nor those providing liquidity are negatively affected now or in the future. Instead all Parties concerned will have appropriate clarity about what can be expected going forward.
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NuShareholders are becoming increasingly concerned about their limitless exposure in the scope of the liquidity service provisioning and monthly payments in time as a result of the passing of motion b5e709a59226b979e4cb59e6d3a3e06b506e3761 for the liquidity provisions also known as the NuLagoon.
Therefore the NuShareholders request the operator known as henry to cap the costs of the operation to a maximum of 5,000 NBT per month and make an effort to inform the users of his pool of this new cap and advertise his pool accordingly. Any excess fees above 5,000 NBT won’t be paid.
This motion will become effective after the first NuLagoon accounting day on the day this motion passes.
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Verify. Use everything between and including the <motionhash></motionhash> tags.
I will add this motion and add [the custodial grant for the NuLagoon fee] to my data-feed.
Tks @Cybnate for writing this motion.
I think this motion is fair and gives @henry some sufficient margin.
5000 nbt is more or less 5 times the first reward.
It is unlikely that this would be reached in the next 2 payouts therefore giving us a few months to re-evaluate this motion in case it is necessary.
I think it is very important to cap the reward but on condition that it is relative to the circumstances.
In other words, it is a variable capping as JL has underlined.
The whole discussion is extremely important. The fees of the NuLagoon should always be considered as absolute lower bound for any trustless liquidity pool operation, since it is not tier 1 only and parts of the funds are off the exchange. Henry furthermore ensures that funds remain unconverted.
It is just the much safer deal for customers, but the NuLagoon alone can impossibly work since Henry needs other custodians keep the ratio strictly the same, since customers who deposited BTC want BTC as return and people who deposited NBT want their NBT back.
We will therefore never see lower interest rates by any LPC than offered in the NuLagoon and its fee structure should almost serve as reference for the required compensation of liquidity providers.
@Cybnate, Will you add following iterms into this motion?
Convert the monthly limit of custodian fee (5000 NBT) to daily limit (167NBT). Because the Nu Lagoon is using the number of days to calculate fees.
Nullify fee rate adjustment terms in the original motion. Because they are obsoleted and difficult to carry out.
When the total liquidity in buy side of Nu network is greater than 110% of the total liquidity in sell side for 7 consecutive days, the daily custodian fee rate will be decreased by 10% at next accounting period.
When the total liquidity in buy side of Nu network is not greater than 90% of the total liquidity in sell side for 7 consecutive days, the daily custodian fee rate will be increased by 10% until it reaches 0.34%, the maximum of daily custodian fee rate, at next accounting period.
Raise the number of exchanges the Nu Lagoon could serve up to 4. Because we already used the two slots by supporting Poloniex and Bitcoin.co.id.
run the Nubots to support NBT peg at $1 on up to 2 exchanges,
The Nu Lagoon will continue operation after new terms in this motion become effective.
The voting on the motion already started about 24h ago. Obviously you didn’t notice. Not sure about changing it now and starting over.
Item 1 can be calculated backwards easily. I have no problem with daily limits fluctuating as long as the monthly limit is not exceeded.
Item 2 is not an immediate issue, this can be updated later with another motion.
Regarding the exchanges that was not the scope or intention of my motion. I suggest another motion will be required for that.
That is good to know. Appreciate your collaboration.
I would like to vote for your new motion since it gathers all the elements but since I started to vote for @cybnate’s motion, I would like to ask him for a guideline beforehand.
I could vote for both at the same time since it would cancel it but it is awkward.
I just wanted to stress that the NuLagoon is the best deal a customer can get but worse for the shareholders than any other LPC operation, especially TLLP pools.
First, it is my honest opinion that Tier 1 liquidity should be compensated much higher than Tier 3. The reason is not only the difference in the hedging and exchange default risk of the liquidity provider, but also that Tier 1 is the only real liquidity in the sense that somebody is able to liquidate this amount of coins at any time. TLLP is 100% Tier 1, NuLagoon in large parts Tier 2 and Tier 3, which is why @muchogusto correctly says that especially after using multisig there is no incentive to provide the liquidity in Tier 1 if the compensation is the same.
Secondly, the NuLagoon depends on other LPCs since it promises to keep the ratio. So if the network liquidity gets out of balance, then its only other LPCs who suffer from it. Furthermore it means that if there is no other LPC than the NuLagoon, then it must cease the operation immediately because it cannot make this promise anymore. This is not even true for individual LPC operations, and especially not true for TLLPs.
So in order to achieve point 6 of the original motion:
The number of shares of participants will be: Amount of NBT deposit / NAV in effective day or Amount of BTC deposit * BTC price at 10:00am in effective day / NAV in effective day.
the ratio of BTC / NBT must strictly be held constant, and its done using other LPCs.
This is my opinion. This is not a critic at the NuLagoon, I just want to point out that a regular LPC proposal and a structure like this greatly differ in what they are offering and should not just be compared based on their compensation.
You get 0.01 % less on NuLagoon but sure, future TLLP proposals will need to ask for more and cybnates proposal shows this already. Of course, the user interest rate can change in TLLPs if the demand to provide liquidity is high, so in the end lower interest rates might be applied. I don’t think we can encourage anyone to provide 100% tier 1 liquidity without the guarantee to get the same asset back with an interest rate which is not about 1.5 x NuLagoon, so 0.33% per day as in Cybnates proposal sounds reasonable to me.
This is what I meant with reference, I would always use a factor of the NuLagoon compensation to justify a TLLP or any other LPC compensation.