[Passed] Motion to provide seed funding for B&C Exchange - a decentralized exchange built on the Peershares platform

[Joe]

I read most of the 20 page paper and all of the bitcointalk thread. Couple questions/issues…

1. Unsurprisingly, I’m not a fan of the 1k minimum bid for the auction. I expressed my opinions on this during the Teehe discussion.
2. Edit: I’m silly!
3. The 0.002 usd/nsr price point seems low. I’d like a little more explanation how this figure was reached.
4. How will the matching algorithm work? For instance, if someone places a sell order of 1 btc for 250 and then someone places a buy order for at 260 what is the outcome? Edit: I ask because in this example the exchange could pocket the 10 nbt as profit but some may see this as unethical.

[tomjoad]

The 30 million max seems high as well. If 3 people purchase 30 million then 3 people will own 90% of all bkc. Not very decentralized imo.

This is an auction for 100 million NSR, to bring us to about 900 million NSR in circulation. When B&C Exchange is ready to launch, the Nu blockchain will be forked to create a duplicate network with proportional ownership. So, there will be 900 million NuShares, and 900 million BlockShares. If you own 1.5 million NSR at that time, you will be given 1.5 million BKS for free.

The 0.002 usd/nsr price point seems low. I’d like a little more explanation how this figure was reached.

NSR was trading for about 0.0025 USD the past week. I think the reserve price was set below the market price to encourage active bidding, but high enough to protect existing shareholders’ financial interests. It is a bare minimum (reserve) price, not necessarily the price that all winning bids will be set at.

[Ben]

If you own 1.5 million NSR at that time, you will be given 1.5 million BKS for free.

It’s not free, you just didn’t pay for them directly. Your cost is equal to the amount your current NSR holdings are diluted.

[tomjoad]

It’s not free, you just didn’t pay for them directly. Your cost is equal to the amount your current NSR holdings are diluted.

Poor choice of words on my part, sorry. “Free” meaning without additional effort. @Ben is absolutely right.

[Joe]

Doh! Forgot existing NuShares are counted as well. I’m really excited for this project but still want to see more discussion to make sure that we maximize the upsides.

[woodstockmerkle]

In the other thread A question about the future of Nu development from the end of next month there was a discussion about how the Nu contractors with a run rate of $50k/month will remain compensated.

Is the plan then that that the same contractors would be working 100% on B&C? At that same run rate, would we then expect a finished, launched & debugged product in ~4 months?

[mhps]

This makes me feeling dizzy.

Some Nu related questions.

A subsequent motion passed by shareholders requires me to burn all remaining undistributed NuShares (of which there are currently approximately​ 187,000,000) within 60 days of the protocol allowing NSR custodial grants, a function which has not yet been implemented. So, this proposal to auction 100,000,000 of those 187,000,000 undistributed NuShares to fund development of B&C Exchange is still well within the authorization provided by shareholders.

Does this mean the nushares auctioned for BCDE some how still will be burned?

Any particular reason why BTC was chosen as dividend currency?

Since most trading volume is likely to be with BTC, it makes sense to use BTC if only one is to be chosen. But I think the currency of the fee should be chosen depending on the pair.

Shareholders should not be looking at the reserve price as a heuristic for the value of the project. Rather, they should be asking themselves if the required NSR supply adjustment (roughly 12.5% for adding 100,000,000 NSR into circulation) will be worth more or less than the future value of the BlockShares network. As long as a belief exists that the BlockShares network will be worth more than that, it makes business sense to vote for this proposal.

@Sentinelrv made a post the other day suggesting that the Nu network needs to eventually determine ways of monetizing its design, and in my opinion the design of B&C Exchange is a clever re-purposing of the variable-supply design of Nu.

The problem I see is that the 12.5% dlilution is the obvious part. The unobvious but probably much bigger part seems to be that BCDE takes the entire Nu dev team away. No matter how similar BCDE is to Nu, the difference part will likely take months to develope, test, and intensively maintain during initial run.

Both Nu and BCDE, as it seems, are very complex projects. As Nu has just barely been able to stand on its feet, can Jordan describe how Nu will not suffer from something like a 200% dilusion of attention from the dev team ? Or as could be implied by @woodstockmerkle’s post above, Nu can’t afford the team very long anyway?

BCDE is exciting. But I would like to see these questions answered.

[tomjoad]

The unobvious but probably much bigger part seems to be that BCDE takes the entire Nu dev team away. No matter how similar BCDE is to Nu, the difference part will likely take months to develope, test, and intensively maintain during initial run.

I think your last paragraph may have been answered when Jordan addressed it in the Bitcointalk thread, in a response to a similar concern from @Cryptog:

It is my expectation that Nu client 2.0 development of our shareholder approved protocol changes will be completed prior to the conclusion of the auction.

I’m confident the development of B&C Exchange will benefit Nu and NuShare holders more than any other additional development that has been discussed. Therefore, it is the proper priority for Nu development. The chance of B&C Exchange succeeding is tremendously enhanced by employing a proven team that is already working together successfully.

NuBot will be critical to the success of B&C Exchange, as it will be the method for establishing liquidity on it. The parametric order book feature that is the most important NuBot road map item is extremely important for providing liquidity on B&C Exchange to pairs other than BTC/NBT, such as LTC/NBT, Dogecoin/NBT, NSR/NBT, etc. Also, NuBot will need to be modified to work with B&C Exchange.

So, in summary, after the Nu 2.0 release, I believe the priorities of the core development team and the NuBot team should be B&C Exchange related development.

[crypto_coiner]

Does this mean the nushares auctioned for BCDE some how still will be burned?

Good point.

[crypto_coiner]

I remain confused - The motion drafts the seed funding of an Exchange (see title), but in its contents is actually yet another sell round of NuShares. Which one is it?

• What kind of an object is NSR?
  It seems that the motion is trying to use NSR just as money, with which external project to Nu is funded.
  However, NSR was originally intended as share within Nu, to which was attached a voting power.
  Then was proposed and passed back in Jan’ 15 the motion to permit NuShare custodians and burning transactions
  I don’t remember NuShareholders having passed any motion to enable funding external projects to Nu with Nushares.

• Conversely,
  If one considers that’s another sell round of NuShares - talking about risk reward.
  To which extent does this motion adequately reward early investors in Nu back in Sep’14
  more than those late stage investors thru this round?

[Sentinelrv]

Would B&C be able to work with the trustless liquidity pool designed by Creon? I believe these pools are extremely important for getting the maximum number of people to provide liquidity. The pool helps bypass all the headaches of becoming a full LPC and allows you to just go straight to providing liquidity and getting paid for it.

[crypto_coiner]

While future performance is always uncertain and no promises can be made, my personal opinion is that it is quite possible that the future value of B&C Exchange operations - and by extension BlockShares - would exceed the $200,000 dilution required from NuShareholders to fund development

Investors deserve a decent financial plan and risk assessment -
Could you elaborate quantitatively on this future value?

[crypto_coiner]

NSR was trading for about 0.0025 USD the past week. I think the reserve price was set below the market price to encourage active bidding, but high enough to protect existing shareholders’ financial interests. It is a bare minimum (reserve) price, not necessarily the price that all winning bids will be set at.

As of the date this pre-announcement
occurred, NuShares were trading at approximately 0.0033 USD on coinmarketcap.com.

The reserve price is well below the pre-announcement and current market price (40% below)
Random people can find an opportunity to buy and dump for a quick profit.

I would like to see the reserve price raised to at least 0.0025 USD

[Joe]

My initial thought was set the price above market so any buyers would have to hold. But this might limit substantially the pool of people willing to bid.

[mhps]

a 20 page design document

Please put page number on every page. An index page will be good to have, too.

[crypto_coiner]

I am not actually sure it would limit the number of bidders, at all.
It depends on the volume exchanged on the free markets.

[crypto_coiner]

The BitShares community has found the announcement, and while I hope they are constructive in their comments, history tells us that we may be a target for them.

Thanks for posting this.
I think these quotes from the bitshares community are interesting, and deserve some reflections from the Nu community back to this motion.

if the starting with B&C the NuShares capital has to increase of
12.5% to fund the project. In BitShare terms it would be called dilution
and inflation they call it auction.

Yes. Hard to tell the difference between

1. Increasing the supply gradually by releasing/selling/auctioning pre-printed uncirculated tokens or
2. Printing them up just in time with each block the way Bitcoin and BitShares do, or
3. Issuing 10% to developers at genesis who gradually sell them into circulation to fund development.

All are functionally identical, but as an industry we are learning the hard way what is easiest for the casual observer to accept.

[cryptog]

Overall, I am convinced that B&C is the technical next step in Nu development.

However, I am not comfortable at all with the reserve price: 0.2 cents per nsr.
Why?
For the same reason alluded to by @crypto_coiner below:

To which extent does this motion adequately reward early investors in Nu back in Sep’14
more than those late stage investors thru this round?

Even if this is a reserve price, there is no guarantee that the avg purchase price would be much higher than 0.2 cents per share overall.
That would mean that new shareholders would be able to buy nushares almost at the same price as early shareholders that bought back in Sep-Oct-Nov 2014 at the first round (0.18 cents). I am not even talking about other additional early shareholders that bought shares at higher levels like 0.3~0.6 over Nov-Dec-Jan.

Moreover, I do not feel that the background check that would be performed by Jordan Lee. (see https://bitcointalk.org/index.php?topic=1033773.msg11161479#msg11161479 ) would be as strict as what early shareholders underwent last year.

Therefore, there are some good chances that a non negligible number of new shareholders would be able to acquire plenty of NuShares under the same price conditions as early shareholders (such as me) with less background check although Nu has accomplished a lot of work in between with a lot of risks taken already by early shareholders.

It is much easier (less riskier) to invest in Nu now than 6 months ago. Nevertheless it is not reflected clearly in the reserve price.

Therefore, I would like to request a significant increase of the reserve price (such as 100%) before considering voting for the potential subsequent motion.

I am fine with the other elements.

Thank you for reading!

[Cybnate]

It is much easier (less riskier) to invest in Nu now than 6 months ago. Nevertheless it is not reflected clearly in the reserve price.

I’m not convinced about that given that the development by the core team on NuNet will basically stop soon and will be dependant on the open source community or from custodial grants. I think the prospects for an increase in Nushares value are not much better than 6 months ago. There are many opportunities, but also many risks with ‘loosing’ the paid core team.

By doubling the amount you will significantly increase the risk of this proposal failing. I’m not sure if it is worth taking that risk as the core team won’t be able to continue on NuNet anyway. The only alternative I then see is to run another auction to raise funds which are also likely to fail when you go above market price. Would that provide any value?

On a different note I would also like to have some clarity what the ‘skin in the game’ is for the core team. Jordan doesn’t promise anything on delivery date or costs. As raised in the Bitcointalk thread there is a risk that the raised funds are not adequate and additional funds needs to be requested or that a lot of time will be taken to deliver and being overtaken by other competitive initiatives already underway or in conception.

I fully appreciate that with innovative software development there is always a risk of overspend, overtime or even failure to deliver. Still, what I like to see is either an open process of software development (which has the risk that someone else copies it) or probably better an estimate of the amount of work required for each module and the number of hours/US$ which went against that piece of work to date.

Basically asking for some form of accountability to the Shareholders and/or a level of transparency during development.
It is a very luxury position to get paid anyway, it is healthy to ensure some skin in the game for the developers. Happy to discuss common models which could work without ‘false’ incentives.

[crypto_coiner]

OK - I just completed the reading of the design document.
First of all, congratulations to @JordanLee, @tomjoad and @sigmike
This is quite a phenomenal piece. Thanks for your contributions.

The quote that embodies the most of it all:

If an exchange website disappears suddenly, a user can simply go to another site that uses the same open source
exchange software, or use another application that supports B&C Exchange and continue using the same account without interruption. This is because all account information is stored on the blockchain

I have no problem with the product, at all. I think it is really great, sometimes breathtaking per its depth of inspiration.
I have some problem with the funding protocol.

In particular, this:

All NuShareholders will receive BlockShares in proportion to their NuShare holdings. By
doing this it is hoped that NuShare holders will have incentive to provide initial funding for B&C Exchange
development via the NuShare auction custodial grant mechanism, due to the expectation
that BlockShares will have value and B&C Exchange will lower the cost of NuBit liquidity operations.
Specifically, we will ask that NuShare holders pass a motion to authorize auctioning 100 million
NuShares.

What is NuShare auction custodial grant and its mechanism? that’s a first time for me.