[Passed] Motion to create the first liquidity pool: The Nu Lagoon

NuShares Motions
#21

Not sure about this. There is no end date and no cap to the custodial grants. So the commitment Shareholders are being asked for is basically a blank cheque for monthly ongoing custodial grants, but maybe I don’t understand it properly.

I suggest to run this for e.g. 3 or 6 months and re-assess and give yourself and the Shareholders the opportunity to evaluate and define the next step going forward and vote for a follow-up motion. Fees might need to be readjusted, terms changed, you might have enough of it. I like contracts with an exit either in time or on delivery anyway. So I’m holding my vote until it is clear how this will be dealt with.

3 Likes
#22

The Nu Lagoon is designed to operate continually with no preset end date. Participants can enter and exit the pool everyday. (temporary every week now). So I need to establish a contract with shareholders with no preset end date too. There always are opportunities to evaluate and optimize the terms in this motion later, because terms in this motion can be overwrite by another passed motion, which could be submitted by anyone. It shouldn’t be shareholders’ concern.

After think more about this situation, I think the best way is:
They will be treated as a deposit from the address in the first input. The address in the first input will be the address to receive fund withdraw.

#23

How was the lower limit for investing in the pool determined? I realise for simplicity having a higher number is better but for people like me who are willing to invest but don’t have a 4btc cannot do so.

#24

Ok, so you are comfortable with Shareholders stopping you doing business in say 3 months time because they don’t like to pay for the custodial grant any longer (the grants have no maximum BTW). So I suppose you will have a contract with the users in your pool that they can be stopped in a 10 days period (time to pass a motion)?

The risk is that you are expecting something from Shareholders (the custodial grant passing) which they may not be able to follow-up on as @creon already mentioned. This opens up an easy way for you (and a precedent for others) that you won’t trust ‘The Shareholders’ anymore and will be very unhappy as Shareholders will be about the situation they never wanted.

Please let me make myself clear, I like the concept of the pool and you thought that out reasonably well. I’m not convinced about you ability to run it properly. I would suggest you get support in running this pool and get some good processes in place OR limit your mandate and the funds in the pool and call it an experiment.
I’m holding my vote at this stage.

2 Likes
#25

Echoing @Cybnate’s comments, I think it would be wise to operate the pool as an experiment with limited participants over a defined time period, say 30 or 60 days. Our existing custodians encountered many challenges that weren’t immediately apparent at the beginning of their operations. I don’t think jumping into a perpetual pool with complicated accounting is the right way to approach this, although I’m encouraged that you’re willing to lead the way in testing the concept.

2 Likes
#26

Agreed. No reason to dive into a full operation. As we have seen with the original custodian motions there will need to be many tweaks in the learning process, and it’s better if fewer individuals and their investments are involved through it.

2 Likes
#27

To say that The Nu Lagoon is an experiment is probably a redundant statement, because the Nu itself is an experiment. In crypto currency world even Bitcoin still claim itself as an experiment. The key point is what kind of experiment it is.

Let me clarify this. The Nu Lagoon is an experiment about how to attract as much private fund as possible to support Nubits pegging at 1 dollar (So the only limit to participate the Nu Lagoon is the fund size no less than 1000NBT, and even that limit will be loosened in mid-term future. (also the reply to @Joe)), and an experiment to prove the cost which the Nu network spent for Nubits pegging will be going down while keeping the size of liquidity pool meet the need of the network.

They are the final two pieces in the Nu puzzle. I gather not every shareholder realized what will be if the experiment of The Nu Lagoon success. It will bring huge success to Nubits and drive the price of Nushares up to the sky. If I didn’t hold high stakes in Nu, I wouldn’t have motivation to design and manage the pool. The breakeven point of the size of the pool is estimated at around 250k NBT. I guess it won’t be reached in short time, and that estimation doesn’t include the money I am going to spend in hiring someone to build the automatic tools for me.

2 Likes
#28

@henry This is convincing - Thanks for your elaboration

#29

One of @Cybnate’s concerns is the unbounded liability for shareholders. @henry, what do you think of adding an upper bound to total fee income for the fund? Example: if fund size reaches x dollars, the fee charged to shareholders will not grow beyond its associated total. Instead, it becomes diluted between the existing depositors.

1 Like
#30

I could make the argument that such an experimental project would be better served by spreading the risk to more people for lower amounts at the expense of more time spent managing funds. I suspect the opportunity for Numembers to contribute directly to supporting the network would be welcomed by many.

2 Likes
#31

Totally agree. Whats the objective of the high buy in?

#32

i also think you don’t need a motion about this. you just organize the pool and participants just subscribe in it. simple as that. fyi, i am willing to risk up to 500nbt and 2 btc at first attempt

#33

the fee rate will decrease when there is enough liquidity in the pool. Your suggestion is feasible, only the calculation of the pool will be more complicated and we can’t predict how much liquidity the network will need.

Exactly, in this way, we can attract enough fund to let shareholder funded LPC operation exit.
The best practice is to only invest what you can afford to lose, especially at the first attempt.

I am afraid you have to convert them to one currency and deposit fund in one transaction to meet the minimum limit of fund size. There is no difference in risk and return in terms of which currency you deposit.

#34

Tks @henry for pioneering liquidity pooling.

I would like to vote in favor but I have a couple of questions if you do not mind.

Can you make a concrete example of custodian fee grant calculation?
Say you get 50,000 nbt at the beginning of the operations.
Then you make the custodian fee vote and hopefully you get it passed within 10 days (what happens if it takes 11 days to pass btw?).
How much is that custodian fee? Roughly 5,000 nbt? But in that case, it means that you are considering a 1 month period right from the beginning. What happens if the pool vanishes within 10 days for some reason? You give back a portion of the custodian fees to Nu shareholders?

5000 NBT as a monthly fee would be too high if there is only 5000 NBT in Tier1. It would amount to 100% fee somewhat.
The base amount to which the fee rate should be applied should not be the total amount of funds but only Tier1 fund amount imho. Does it make sense?

#35

The requested rate of a maximum of 0.34% per day may need to be amended at some point in the future to adjust for changes in liquidity market pricing. I would envision that taking the form of a motion setting a new rate to take effect either immediately or after some period of delay (perhaps a week or a month). Once such a motion is passed, the participants can evaluate whether they are still interested in using the pool.

Does everyone agree that is fair? Is that consistent with your expectations @henry?

#36

Assume the Nu Lagoon begin operation with 50k next Friday, the btc price at $250 all the time,no new deposit and no withdraw, and the buy side and sell side always perfectly balance. I will submit the custodian fee grant requesting 2380NBT after the accounting report is published at 27-Mar, the last accounting day in month. If that grant passed at 6-Apr, 2380NBT will be added to the operation and it will show in the report at next accounting day,10-Apr.

Just like most previous LPC proposals which get paid after the LPC operation, the Nu Lagoon need shareholders keep to their promise. In your example, I think most pool participants will understand and tolerate the deviation(11 days). But if there is a strong sign that shareholders wouldn’t pass fee grant in future, the Nu Lagoon will cease operation, and fund will be returned back to participants. Participants will reserve the right to ask shareholder to pay those custodian fee in future.

Those custodian fee is belong to the Nu Lagoon participants, it should be distributed to them.

How much will be placed on exchanges won’t be fixed at 10%, instead it will be set according to how much is needed based on several factors, for example the total size of the fund, the trading volume on the exchange, how often the walls will be unbalanced. The base amount to which the fee rate should be applied is the total amount of funds.

[Nu Lagoon] The Nu Lagoon is supportting Bitcoin.co.id now | NAV: 1.062 @ 14 May
#37

Yes. A new rate can be set by a motion. A new rate can only begin effect at an accounting day in future. It is better to have some period of delay to let all the pool participants be noticed and prepared.

#38

I think it is reasonable.

Tks @henry for your clarifications.

#39

Another question.

Let us say that I deposit say 1000nbt in pool A) for only 24h. After 24h I decide to withdraw.
At the beginning you are saying that you would manually keep track of how much time the money of each participant would have been deposited and compute accordingly the fee. Is that right?

1 Like
#40

I think if things get out of control (say NuNet needs to reduce drastically the quantity of NuBits in circulation urgently or the pool needs to be dismantled immediately implying that the pool reward payment is not possible any more), shareholders will make a motion that states that the previously custodian fee grant request is voided.

The sole liability represented by the pool against Nu’s shareholders is the fee grant.
Since the grant is requested on a monthly basis, one can argue that NuNet has enough time to control that liability if needed.