[Passed] Motion to end LPC operations of KTm, Jamie and NSR sales of Jordan

[tomjoad]

if NuNet goes zero reserve and KTm and Jamie end their operations how exactly are new NBT brought into circulation?

Remember there is a difference between Liquidity Provider Custodians and Sell Side Custodians as defined by the white paper.

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.

[masterOfDisaster]

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.

[tomjoad]

I think it’s very likely a common question, thank you for bringing it up! Feel better.

[jmiller]

Jordan,

This is a very good plan. Thank you for taking the time to put this together.

Jamie

[JordanLee]

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.

[cryptog]

I still have a couple of questions to be answered before voting for this motion:

Within 60 days after the protocol is altered to permit custodial grants of NuShares

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?

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Jordan Lee must burn all undistributed NuShares.

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?

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Within 30 days after this motion is passed Jordan Lee must burn all NuBits held on behalf of shareholders in excess of 250,000 NuBits.

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:

Finalized evolution of liquidity operations

Tier 4This liquidity can be provided by custodians not dedicated to liquidity operations. A present example are the proceeds of NuShare sales. They are intended for operational and development expenses, but can be used to support the critical function of liquidity provision as needed. When these funds are used for liquidity, they are exchanged from one type of asset to another, but are still available for their original purpose, such as development. These funds can be promoted to tier 3 in hours and the cost is exchange rate risk.

[crypto_coiner]

In order to move to the model described above, which is decentralized and eliminates counterparty risk to NuShare and NuBit holders, the LPC operations of KTm and Jamie must be wound down. Their service was of great value at the launch of NuBits, but it is time for Nu to mature into the decentralized, counterparty risk system it was originally envisioned as. Similarly, it is important that the undistributed NuShares I possess (currently nearly 300 million) either be distributed or burned. Once these actions are taken we can say that Nu is free of any single points of failure or catastrophe: decentralized, free of counterparty risk, robust and resilient.

Ending the LPC service of KTm and Jamie is also the key to unleashing share buybacks and dividends. Right now they are holding the proceeds of their NuBit sales as reserves. Transitioning to our zero reserve model is synonymous with ending the LPC operations of KTm and Jamie. When this transition is complete, proceeds of NuBit sales will not be held at all. Rather, NuShare holders will be immediately rewarded when those proceeds are used for NuShare buyback and burn or dividend distribution. In order to unlock the full benefits of share buyback and dividends, shareholders need to make a full commitment to paying a transparent and upfront cost for liquidity from LPCs providing their own funds. As I’ve said before, this feels kind of like paying health insurance premiums, but allows you to accurately predict the costs that will be incurred. While KTm and Jamie continue operations, we only know that our cost for their service will be between their modest 2% fee and 2 million NBT, if shareholders lost control of the funds somehow. Nu cannot afford a 2 million NBT cost at this point in its development. We can and ought to eliminate the possibility of this potential catastrophe quickly by purchasing insurance, so to speak.

Verified and voted

[crypto_coiner]

This motion amends or nullifies
previous agreements between shareholders and KTm and Jamie as required
to comply with this motion.

Do we have to suppose that (the execution of) (certain) motions can be amended/nullified/modified (at any time) once passed?

[crypto_coiner]

If this plan is implemented NuShares will be even more volatile than they are now. It makes sense that they would be, because we are basically diverting the volatility the market naturally wants to impose on NuBits to NuShares. NuShares will be a speculator’s delight. They should never approach zero so long as the network purpose of a pegged currency that is is used continues to be served.

Not really appealing for someone looking for a long-term growth stock

[crypto_coiner]

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”

[cryptog]

Do we have to suppose that (the execution of) (certain) motions can be amended/nullified/modified (at any time) once passed?

You can pass motions that cancel previous motions.

[cryptog]

@assistant motion vote ed7b9fc65dc4e9d9acad61e528420c2690f599d2

[assistant]

Hi @cryptog

Here are the details for the Motion Vote on ed7b9fc65dc4e9d9acad61e528420c2690f599d2:

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##[ed7b9fc65dc4e9d9acad61e528420c2690f599d2][1]
[1]: https://discuss.nubits.com/t/voting-motion-to-end-lpc-operations-of-ktm-jamie-and-nsr-sales-of-jordan
Blocks: 1910 (19.100000%)
Share Days: 582265211 (17.901982%)

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Motion hash to place in your Nu client:

ed7b9fc65dc4e9d9acad61e528420c2690f599d2

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

Read More

[JordanLee]

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?

The protocol switch date is unknown. I would be surprised if it happened in less than two months.

What is the purpose of this burning? To increase the unit price of NSR?

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.

How many NBTs are held currently by Jordan Lee?

536,000 + 5,000 currently at BTER

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:

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.

[JordanLee]

I moved 3 posts to an existing topic: Park Rate Voting

[cryptog]

@assistant motion vote ed7b9fc65dc4e9d9acad61e528420c2690f599d2

[assistant]

Hi @cryptog

Here are the details for the Motion Vote on ed7b9fc65dc4e9d9acad61e528420c2690f599d2:

---

##[ed7b9fc65dc4e9d9acad61e528420c2690f599d2][1]
[1]: https://discuss.nubits.com/t/voting-motion-to-end-lpc-operations-of-ktm-jamie-and-nsr-sales-of-jordan
Blocks: 4787 (47.870000%)
Share Days: 1430582899 (44.710345%)

---

Motion hash to place in your Nu client:

ed7b9fc65dc4e9d9acad61e528420c2690f599d2

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

Read More

[cryptog]

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.

[JordanLee]

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.

[cryptog]

it may make sense to have 5% in tier 1, 5% in tier 2 and 90%

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