[Passed] Motion to begin NSR buyback immediately

While it is our long term goal to eliminate holding reserves at all, until we can guarantee a large amount of decentralised liquidity for a long period of time, some reserves are necessary. As I have mentioned recently, I hope others will step up and hold that reserve using multisig addresses. Notwithstanding our plans for improvement in the coming months, a temporary framework for managing tier 4 buy side liquidity is needed at the present time.

If the tier 4 buy side is too big, it increases shareholder costs if the exchange rate moves against us (these are mostly Bitcoins) or if there is some other kind of loss of the funds. If the reserve is too small, it endangers the peg. So we are aiming to balance those two classes of risks. I don’t know of a formal or mathematical expression that can tell us what the size of the reserve should be, but here are some facts I’m using to arrive at the recommended tier 4 buy side size of $80,000:

  1. We have about 560,000 NBT on the blockchain.

  2. Over 300,000 NBT sits in B&C and Nu wallets, and will be slowly spent on development and other expenses. By itself, this will put sell pressure on the peg. We don’t know if other factors will provide enough buy pressure to counteract this, but there is certainly a good chance it will go this way. If it doesn’t, NSR sales can be used to reverse any earlier NSR purchases. This is the best approach because it reduces the size of the reserve in the interim, which reduces exchange rate and other loss risks.

  3. This leaves less than 250,000 NBT that is truly out is the wild. There is usually over 50,000 in buy side liquidity offered through NuLagoon and the TLLP pools. Most of this could evaporate without notice if liquidity providers saw heightened risks.

  4. About $80,000 in tier 4 buy side liquidity should be maintained. In normal circumstances, this gives us 130,000 in assets to contend with ~250,000 NBT whose owners may decide to sell at any time. In a worst case scenario that most TLLP liquidity disappeared, we would still have more than 80,000 buy side liquidity. We would also have demand from interest rates and funds from NSR sales combined with NBT burns as other ways the buy side could be rapidly (but not instantly) supported. While the $80,000 figure is somewhat arbitrary, it probably balances the risks of too much and too little tier 4 liquidity about right.

  5. Currently there is about 101,000 in tier 4 buy side liquidity. I propose we spend funds in excess of $80,000 to conduct NSR buy backs and burns. To prevent instability in the NSR price, only 10% of the excess should be used for share buy back per week. So, in a week where the starting value of tier 4 buy side liquidity is 101,000, $2100 would be used to purchase NSR and reduce total NSR supply by burning it. Over the course of the week the tier 4 buy liquidity would fluctuate according to the BTC exchange rate and in response to changes in the level of NBT demand. If tier 4 buy side liquidity increased to 110,000 over the course of the week, then $3000 (30,000 * 0.1) would be used to purchase NSR and burn it. Burn transactions would be published. Share buybacks would cease if tier 4 liquidity dropped below 80,000.

Motion RIPEMD160 hash: 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3

=##=##=##=##=##=## Motion hash starts with this line ##=##=##=##=##=##=

Tier 4 buy side liquidity in excess of $80,000 shall be used to conduct NSR buy backs and burns. To prevent instability in the NSR price, only 10% of the excess should be used for NSR buy back per week. The end of Friday UTC each week will the time for which the value of tier 4 buy side liquidity will be determined. Publication and calculation of this value will not occur in real time and should be expected in the following hours or days. The purchase will occur sometime during the week and the burn shall be published prior to the following end of Friday UTC. So, in a week where the starting value of tier 4 buy side liquidity is 101,000, $2100 would be used to purchase NSR and reduce total NSR supply by burning it. Over the course of the week the tier 4 buy liquidity would fluctuate according to the BTC exchange rate and in response to changes in the level of NBT demand. If tier 4 buy side liquidity increased to 110,000 over the course of the week, then $3000 (30,000 * 0.1) would be used to purchase NSR and burn it. Share buybacks would cease if tier 4 liquidity dropped below 80,000. These criteria apply equally to Jordan Lee and any other person or group of persons that provide tier 4 buy side liquidity.

TomJoad or a motion-elected representative will conduct NSR buybacks
with any excess Tier 4 funds provided to him or her by Jordan Lee each
week. The purchases will take place over the period of Monday through
Friday, with a single-price purchase order updated once per day on
Poloniex or the generally accepted highest volume NSR exchange. The
purchase order will be discounted from the last completed market trade
by 30%, 20%, 10%, and 0% for Monday through Thursday respectively. If
any excess funds remain on Friday they will be used to purchase NSR from
the sell wall on Poloniex, up to a maximum of Thursday’s market price
plus 50%.

If any funds remain after this they will be recycled to the following
week. If the entire purchase order is filled on a Monday, a 5% discount
will be added to each day the following week. If the entire purchase is
not filled on a Monday, the following week will be the standard
discount above. TomJoad or the elected representative reserves the right
to attempt private off-exchange sales through the BitMessage address
BM-2cVFzzfWwKkdxLmgZwhSFfGmKwqDrddDfv if the NSR purchase price is
discounted greater than 30% from the market and finalized within 24
hours.

TomJoad or the elected representative will provide details of the
previous week’s NSR burn before the following Monday period begins. In
the event TomJoad or the elected representative is unavailable for a
week the Tier 4 funds will be added to the next buyback period, unless
shareholders vote by motion to elect an alternate facilitator.

TomJoad or the elected representative will abstain from purchasing or selling personal NSR during periods of share buybacks.

=##=##=##=##=##=## Motion hash ends with this line ##=##=##=##=##=##=

Verify. Use everything between and including the <motionhash></motionhash> tags.

These criteria for share buy back are expected to be temporary in nature. In the coming months, the critieria and methodology are likely to undergo significant evolution as a result of changes in the total NBT in circulation, capabilities of liquidity pools to ensure liquidity, capability of B&C Exchange to ensure liquidity, preferences of a new team managing tier 4 funds using multisig addresses, etc.

5 Likes
How many dividend distributions has Nushares had? Will there be any more?
NSR Buyback #11 - Week of December 7, 2015
NSR Buyback #2 - Week of October 5, 2015
NSR Buyback #13 - Week of December 21, 2015
NSR Buyback #20 - Week of February 8, 2016
NSR Buyback #5 - Week of October 26, 2015
NSR Buyback #6 - Week of November 2, 2015
Where is sell wall on Poloniex?
NSR Buyback #7 - Week of November 9, 2015
NSR Buyback #8 - Week of November 16, 2015
NSR Buyback #9 - Week of November 23, 2015
NSR Buyback #10 - Week of November 30, 2015
Liquidity Operations Reference Thread
NSR Buyback #12 - Week of December 14, 2015
Automating Buybacks
NSR Buyback #14 - Week of December 28, 2015
NSR Buyback #15 - Week of January 4, 2016
NuNet chain revenues and exploring opportunities like NuBase
NSR Buyback #16 - Week of January 11, 2016
NSR Buyback #17 - Week of January 18, 2016
NSR Buyback #17 - Week of January 18, 2016
NSR Buyback #18 - Week of January 25, 2016
NSR Buyback #19 - Week of February 1, 2016
NSR Buyback #21 - Week of February 15, 2016
NSR Buyback #22 - Week of March 7, 2016
Newcomer: Please explain the dividend process from scratch
100% NBT reserve and elastic NSR supply
[Poll] 100% Reserve Required for NuBits?
About who is controlling the network right now
[Passed] B&C Exchange should trade all US-NBT for NSR
Liquidity operations policy changes
[Withdrawn] Make Firing and Replacing Incompetent Liquidity Providers Our Top Priority
[Idea] NuLaw - 60 NBT bounty!
[Idea] NuLaw - 60 NBT bounty!
Supply, Reserves, and Equilibrium (superseded by automation)
[Idea] NuLaw - 60 NBT bounty!
Supply, Reserves, and Equilibrium (superseded by automation)
Three roles that need to be filled by shareholders
[Withdrawn] T4 Dividends
NSR Buyback #4 - Week of October 19, 2015
NSR Buyback #3 - Week of October 12, 2015
[Passed] Motion to regulate rules of fund management in NuLagoon
[Discontinued] Cybnate's Nu datafeed - BETA
[Passed] 150k for tier 4 sell side liquidity (extremely urgent)
[suspended] Cryptog's Nu data feeds - BETA
Wall Observer - NuShares price movement tracking & discussion
NuRiver Pool on Cryptsy for NBT/USD & NBT/BTC
[suspended] Cryptog's Nu data feeds - BETA
NSR Buyback #1 – Week of September 28, 2015

I support this motion.

I think we should expand more on the dynamics of the buyback. For instance :

How will be the exchange(s) be selected? Will you enter a single order once a week? Limit or market? Will time be announced?

I think it should all be random, or all pre-defined.

I happen to have a script where the user delegate to a “bot” operations such as “Buy x NSR in 7 days on exchangex and exchangey” . The bot will split the amounts in small chunks and enter semi-random orders (both “market” and “limit” ) during the timeframe specified .

Will this be useful? it’s very easy to use

1 Like

I agree with @desrever that the mechanics of the share buyback should be clarified a bit. Rather than randomized purchasing though, I think we should strive to maximize our price discrimination in our purchases - meaning that we should attempt to purchase as many NSR as possible with a set amount of funds.

The most effective way to do that would be to create NSR buy orders that escalate over time. This will allow us to purchase NSR from sellers who value them least. For example:

T0 = Place buy order for market price minus 50%
T1 = Place buy order for market price minus 40%
T2 = Place buy order for market price minus 30%
T3 = Place buy order for market price minus 20%
T4 = Place buy order for market price minus 10%
T5 = Place buy order for market price
T6+ = Use all remaining funds to simply purchase into the NSR sell wall. Or, if all of these purchases are handled off-exchange, allow users to submit their own sell bids, with the lowest prices being accepted.

There would be small trade-offs with this approach. The more “T” increments we execute, the better we can price discriminate (and the more NSR that will be bought up); however, it will take more of @JordanLee’s time to do this. The approach above would fit in well with a one week period, with one action required on his part for each of six days, with the seventh day available to consolidate the results. I suspect in most cases the purchase would be complete before T6+.

1 Like

I agree this sort of approach would result in purchasing the most NSR.

I’m happy to specify details of the repurchase, but I am quite sensitive to additional demands on my time. Perhaps the best approach would be to hand off the purchase funds to @tomjoad for purchase each week. I would suggest to start bidding at 10% or 20% below the current market price and move up from there. If someone can compose a paragraph or two detailing how repurchase will take place I will put it in the motion (after some negotiation and perhaps edits).

1 Like

I’m willing to conduct the buybacks if shareholders don’t oppose it. Here’s a sample draft motion text for the buyback process. I’m sure it can be improved with input from everyone.

BEGIN DRAFT

TomJoad or a motion-elected representative will conduct NSR buybacks with any excess Tier 4 funds provided to him or her by Jordan Lee each week. The purchases will take place over the period of Monday through Friday, with a single-price purchase order updated once per day on Poloniex or the generally accepted highest volume NSR exchange. The purchase order will be discounted from the last completed market trade by 30%, 20%, 10%, and 0% for Monday through Thursday respectively. If any excess funds remain on Friday they will be used to purchase NSR from the sell wall on Poloniex, up to a maximum of Thursday’s market price plus 50%.

If any funds remain after this they will be recycled to the following week. If the entire purchase order is filled on a Monday, a 5% discount will be added to each day the following week. If the entire purchase is not filled on a Monday, the following week will be the standard discount above. TomJoad or the elected representative reserves the right to attempt private off-exchange sales through the BitMessage address BM-2cVFzzfWwKkdxLmgZwhSFfGmKwqDrddDfv if the NSR purchase price is discounted greater than 30% from the market and finalized within 24 hours.

TomJoad or the elected representative will provide details of the previous week’s NSR burn before the following Monday period begins. In the event TomJoad or the elected representative is unavailable for a week the Tier 4 funds will be added to the next buyback period, unless shareholders vote by motion to elect an alternate facilitator. TomJoad or the elected representative will abstain from purchasing or selling personal NSR during periods of share buybacks.

END DRAFT

This text should give us the ability to price discriminate to a high degree without burdening me with hour-by-hour price monitoring.

1 Like

Thanks Tom. I have added your proposed text to the body of the draft motion in the original post.

I will wait a little longer for additional suggested changes, then hash it.

One additional line I would add is that “TomJoad or the elected representative will abstain from purchasing or selling personal NSR during periods of share buybacks”. It occurs to me that I would be in a privileged position to purchase NSR if heavily discounted offers arrive through BitMessage, and a privileged position to sell NSR into a shareholder-funded buy wall prior to posting a purchase order on the exchange. As long as I’m not engaged in any transactions the process remains fair.

It’s interesting that share buybacks happen on exchange and share sales happen in auction. I would rather they happen this way when compared with auction, so I like to favor this motion. I’m worried, however, about the situation where the peg undergoes a good deal of sell pressure and we do not have tier 4 funds to support. In this case, we will implement park rates and an automatic share sale will be triggered. Could this motion lead to a situation where we are selling and buying nsr at the same time?

I guess my question comes down to what the threshold is for using tier 4 funds to support the peg.

I can basically follow the reasoning to have 80,000 NBT value in tier 4 buy side liquidity.
I just don’t understand how 250,000 NBT in the wild minus 50,000 buy side volume (tier 1?) from pools leads to NBT 80,000 buy side liquidity required in tier 4. Is it because the 50,000 NBT are tier 1 buy side and there are 120,000 NBT more in tier 2 -3?

It would be helpful to have a kind of formula that includes tier 1 - 3 buy (and sell?) sides.
The currently 300,000 NBT in wallets that are more or less in control of Nu are a special circumstance that needs to be taken into consideration - and you did that.
Maybe be after BCE there will be other projects causing big amounts of NBT under control of Nu? Nu development funded with NBT grants in my opinion fit that category.
So this should be included in the formula as well.

If I try to put your reasoning into a formula it looks like this:
NBT value in tier 4 = (total NBT) - (NBT controlled by Nu) - (buy side liquidity tier 1, 2, 3)

I’d like to differentiate between buy side liquidity of ALP and NuLagoon, because the buy side liquidity from ALP pools can evaporate in seconds, whereas the buy side liquidity of NuLagoon can only be removed twice a week.
That should be considered with a factor between 0 and 1 (that needs to be determined (based on historic tier 1 fluctuation?)) for each type of liquidity operation.

What about this:
NBT value in tier 4 = (total NBT in the wild) - (NBT controlled by Nu) - n * (buy side liquidity tier 1)ALP - m * (buy side liquidity tier 1, 2, 3)NuLagoon

I have no tier 2 and 3 liquidity of ALPs included because we don’t know about them.

These formulas are just an attempt to give the calculation of the tier 4 liquidity a start.
In reality it will be much more complex.
The value in tier 4 won’t be adjusted daily.
But the calculation of the recommended value in tier 4 should be calculated frequently to be able to follow a trend the next time the value of tier 4 liquidity gets adjusted.
A snapshot of the liquidity in tier 1 to 3 at the point of time when tier 4 gets calculated won’t do.

It would be nice to have the (un)seeded auction back and finally have it converted to a seeded auction to balance tier 4 liquidity!

1 Like

Done.

Nu could encourage liquidity provision when liquidity is low by setting the interest rate higher when liquidity is low. For example it seems easy to implement for ALP – just fix the total payout every minute so that less total liquidity gets to earn more interest for the remaining liquidity providers. This fixed perminut pay out also allows removal of fixed target, simplifying operation, and feels fairer to the liquidity exceeding the target (they can earn interest as everyone else)

1 Like

This is a very cool idea. Can you or I make a post about it? Possibly turn it into a motion eventually? There’s a lot to talk about there, as it changes the dynamics such that shareholders directly control things a lot more. Removal of fixed targets would be immense but it also necessarily increases amount of money paid out per month (no more rollover dollars) assuming fixed pool rates (i.e. rates would need to go down). Though you’re very right about it simplifying a lot of the economics.

1 Like

I think it would be a nice way to further reduce the counter-party risk of Tier 4 while at the same time increasing the wealth of shareholders.
By the way, who would manage the remaining 80k in Tier 4? It also needs to get decentralized and counter-party-risk-free.

Does it suggest that this buy back draft intend to elevate the NSR price in preparation of shares sales if case we need to put some pressure on the buy side of the peg?

I will be for right now. An effort has been underway for me to transition out of that, as detailed here and here.

1 Like

I hope it will elevate the NSR price in preparation for larger, additional share buybacks resulting from continued increases in demand for NuBits. But no one knows what will happen with NuBit demand. We will let ongoing liquidity and park rate data guide us in choosing between NSR buybacks and NSR sales.

1 Like

This has been hashed for voting:

7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3

The Verify link doesn’t work because @assistant is unavailable right now.

1 Like

Supporting this interim solution awaiting further tier 4 management improvements as result of management changes. Added to my datafeed.

1 Like

Voted.