LPCs are compensated for allowing greater demand variability in NuBits. If aggregate demand for NuBits is 100 NBT per day, variability might mean some days have 97 NBT of demand, and others have 103 NBT. Shareholders compensate LPCs for providing that 3 NBT in demand variability insurance. In this simplified example, LPCs would ideally be providing 5-6 NBT of insurance in that case so that a spike in demand wouldn’t break the peg. Relevant:
The trading bot should automatically and immediately place these 1,000,000 NBT for sale at a price of 1.002 USD (one USD + a 0.2% transaction fee). If this order fills, then the bot should use the USD proceeds to immediately place a buy order for NBT at 0.998 USD. All funds should be continually on order and the LP custodian’s funds should not be depleted by transaction fees.
Sell side custodians sell new NuBits above LPC prices. Relevant:
Using our formula above, the trading bot would place a sell order for 10,000,000 NBT at a price of 1.0021. The reason it should be 1.0021 instead of 1.002 is that we want dual side sell orders to be executed first, so their funds can be returned to providing buy side liquidity.
The profits from the sale of those NuBits can be used for any purpose shareholders see fit - dividends, share buybacks, or development work.
Thank you for patiently explaining what I wasn’t able to understand.
I digged in the whitepaper, but stopped a chapter too early as it seems.
Although I made a fool of myself I won’t delete my post for it may serve people who are new to NuNet.
And now I’m really off to bed, trying to get rid of the fever.
With discussion about @KTm and @jmiller starting liquidity pools, I thought I should clarify that this motion only regards their use of shareholder funds received via custodial grant. It is not intended to prohibit operation of liquidity pools using private funds. I would like this motion to be passed and see @KTm and @jmiller run liquidity pools after its implementation using private funds.
I still have a couple of questions to be answered before voting for this motion:
Compared to the expected time of this motion’s passage, when the protocol is expected to be altered?
Before or after this motion’s passage?
That means that if the nsr’s auction is performed and successful, 200m nsr would remain and intended to be burnt. What is the purpose of this burning? To increase the unit price of NSR?
How many NBTs are held currently by Jordan Lee?
Overall, my understanding is that all the shareholders’ money held by KT and JM, whether it is NBT or BTC/PPC will be burnt.
However, after their operations cease, would some shareholder’s fund (non NBT) in custody of Jordan Lee remain (I suppose at Tier4) that could be used to help maintain the peg just in case or this motion’s passage would also imply the end of any use of Tier4 to maintain the peg as it is written below:
I am quoting here, but to me it constitutes the gist of one of the pictures here:
The more LPCs, the more decentralized
“Running NuBot isn’t harder than running a miner, and many people are able to do that. Targeting many people with low to moderate funds will provide a stable liquidity floor which won’t fluctuate as much as with a few very rich custodians.”
“Ideally each NSR holder should be willing and able to run a NuBot”
“Exchanges can be great LPCs even without asking of any reward. just
the fees would be enough”
When our network began, we had a way to increase the NuBit supply at the will of shareholders. We then decided to add a way to decrease the NuBit supply at the expense of increasing the NuShare supply (due in the 0.6.0 release). It should not be surprising then, that a mechanism for reducing the NuShare supply would also be introduced, to complete our flexible supply of both share
The protocol switch date is unknown. I would be surprised if it happened in less than two months.
To remove any question about what I will do with them. The increased certainty and the control that shareholders will have over the creation of NSR should increase the network’s value.
536,000 + 5,000 currently at BTER
Yes, non NBT funds would remain for tier 4 liquidity. Medium term, this should held jointly using multi-sig. If enough liquidity could be developed in the NSR market, tier 4 might only consist of NSR.
When our network began, we had a way to increase the NuBit supply at the will of shareholders. We then decided to add a way to decrease the NuBit supply at the expense of increasing the NuShare supply (due in the 0.6.0 release). It should not be surprising then, that a mechanism for reducing the NuShare supply would also be introduced, to complete our flexible supply of both share
I am late but I wanted to make sure that even with the passage of this motion, we would still have some time margin to increase the number of lpcs.
The end of operations of KTm and Jamie will be a gradual process.
So their buy liquidity support will fade away gradually.
In the worst case in which Nu has not increased the buy liquidity via private custodians, we would still have some liquidity present in some of the reserves held by JL at Tier4.
Voted.
This has passed. I will have more to say about steps that need to be taken for a smooth transition in liquidity operations over the next several months. In three months time we will be certain there will be no more exchange defaults on shareholder deposits, because there won’t be any.
For now I would encourage shareholders to quickly transition away from using Jamie and KTm’s services. We can do that even faster than the motion stipulates if there are enough LPC proposals and shareholders pass them. It could take as little as two weeks if people stepped up quickly to provide alternatives. Such an outcome is worth a lot. I would be especially pleased to see liquidity pools form and LPC proposals that make use of off exchange funds in tier 3, even though that means movements between tier 3 and tier 2 would be handled manually for now. It is worth the trouble to protect from exchange defaults, as we have learned. As I have said elsewhere, it may make sense to have 5% in tier 1, 5% in tier 2 and 90% in tier 3 to provide excellent protection from exchange default.
I think this is must.
Otherwise it is gonna be difficult to find new LPCs I believe.
The new LPCs new to protect themselves. Hedging by purchasing derivatives is probably too complicated for the average LPC.
Spreading the liquidity over Tiers1-2-3 is much simpler