I certainly understand the desire to have the decentralized exchange on the Nu blockchain. However, @JordanLee has made it clear that there would be a whole slate of technical challenges associated with doing so and I haven’t seen any solutions posed here as to how those would be solved. After seeing how well Nu works, I’m inclined to trust Jordan’s opinion on architecture. He had a good quote on a separate issue in the bitcointalk thread where he said “Simplicity is really compelling in a consensus protocol.” Splitting the blockchains accomplishes this.
A good real-world example of this simplicity principle is BitShares. Despite their good intentions, their client and products (BitAssets) are constantly undergoing revision due to flaws, bugs, and errors. I think it would be a mistake to emulate that approach.
I think that’s a good point Sentinel. But I think anyone making this argument has to take it to its logical conclusion: why would B&C Exchange shareholders do this? There would be no reason to remove NBT from the exchange if NBT is holding its peg as the only stable-value option. This is especially true considering the amount of liquidity that NuShareholders will be providing the exchange with its liquidity pools and custodians. Exchange owners realize that liquidity is king, and without it an exchange dies. There is a clever virtuous cycle present with the design of B&C Exchange operations that makes its shareholders unlikely to consider an alternative to NuBits as long as liquidity is being provided.
So, the only way I would see Nu being disassociated from B&C Exchange in the future is if the NuBits peg fails or if liquidity is no longer provided. In the case of peg failure, B&C Exchange’s market cap would be damaged if its equity was contained entirely within NuShares.
Maybe disassociate is the wrong word for me to have used. I don’t mean that B&C would stop supporting NuBits, NuShares and any other pegged currencies we provide. It’s clear from your argument here that they would have a strong desire to continue supporting our products, even if Nu shareholders lost majority control over B&C in the future.
What I mean is that B&C shareholders could get tired of Nu leaching off of their profits. If Nu shareholders also own the majority of B&C shares, then we will most likely distribute a small percentage of that profit to ourselves, but also pass motions to reinvest the majority of that profit into paying contractor expenses to build other Nu services. We could use B&C as a piggy bank for a long time, but eventually there could be a point in the future where Nu shareholders lose majority control over the exchange. Do you think that the new majority would continue to allow Nu to take its profits? Nu would lose that constant stream of revenue as the new majority would either distribute that profit to themselves or reinvest it in their own ways. The Nu network would no longer be able to draw from B&C’s revenue unless shareholders regained majority control of the shares. We will have effectively lost full ownership of the exchange and the constant revenue it provides.
You raise good points, and I’m realizing that the primary point of contention may come down to how the “reward” of BlockShares is intended to be felt. I personally view NuShareholders receiving BlockShares as a one-time individual reward for allowing an equity dilution. The logic is that my shares will be diluted 12.5%, and in return I get a new cryptoasset whose value I hope surpasses the dilution amount.
In contrast to this, I suspect others with your view see BlockShares being distributed as a collective reward for the entire network - as opposed to individual shareholders - that can be redeemed in perpetuity into the future. The cognitive dissonance occurs because of your belief the BlockShares reward should be guaranteed forever to the Nu network, which can’t be assured with a separate blockchain. That makes sense to me.
Nothing in the design document suggests that B&C Exchange should be a mere subsidiary that provides guaranteed perpetual revenue for Nu by funneling profits back to NuShareholders as a “piggy bank” though, and that’s why I subscribe to the individual outlook. BlockShares will be a stand-alone network. In particular, the design document suggests that 100% of revenues earned from the sale of BlockCredits will be returned to BlockShareholders as dividends, while ongoing development of B&C Exchange should be funded by BlockShares grants.
If the value of the BlockShares network exceeds the 12.5% share adjustment, then NuShareholders win, individually. I think that is likely if the decentralized exchange works as intended. Should this motion not pass, any other competitor could take Jordan’s design document, develop an implementation, and provide 0% to NuShareholders.
If B&C Exchange is implemented into the Nu blockchain then the value of Nushares go up in relation to the value and utility that the B&C Exchange provides. In the future if the Nubit peg fails, the value of nushares will drop until nushares are worth the value of the B&C Exchange. Splitting the value into two separate markets is completely unnecessary. Allowing for even a possibility of losing a valuable revenue stream would be greatly lacking in forethought on the part of Nu shareholders. How does Bitshares have an internal exchange? How does Counterparty? If they can manage having a decentralized exchange, why can’t Nu?.
Wouldn’t the future products and services developed by Nu benefit the BlockShare holders too? The new developments will increase the income of Nu thus strengthening the peg and allowing more liquidity to be provided to B&C. As Tom pointed out, the amount if liquidity is tied to the volume and hence overall profitability of an exchange.
I agree that the could be a point in the future where NuShare holders don’t hold a majority share in B&C, I just think it would be a hard sell to convince the majority of BlockShare holders that a split from Nu is a good idea, especially when it’s a profitable model for both.
As for using NuShares on B&C / using a shared blockchain, the technical difficulties involved are a big sway for me. The building of B&C has been given a cost, which in turn has inferred an estimated time scale to completion . In order to get close to getting this exchange to a state where it is releasable, the design needs to be kept as simple as possible. That is something that Jordan has done with this proposal.
I’m also cautious about the dilution of vote if NuShares are used as the token. We’ve had trouble to date with non voting shares causing motions to stall. I think we would see an increase of that if NuShare holders were expected to vote on two lots of ideas. Even more so if those shares are being used as a transactional unit on an exchange. Would they ever stay at one address long enough to mint?
Separating the Block chains will allow for an influx of new shareholders with new ideas and abilities. This may lead to a further separation of the two entities but, due to the role that NuBits in particular will play on the exchange, the profitability of both will be closely tied.
Tom, If Nu shareholders allow B&C to be its own thing and keep its own revenue, how will Nu survive in the future without a guaranteed revenue stream to pay contractor expenses? We can’t keep printing NuBits to pay for things forever. I assumed that we would eventually find a way to make revenue for Nu and then use that revenue to support the network, rather than printing NuBits for everything. I don’t think it can go on forever like this. Not taking advantage of this opportunity seems short sighted to me.
With an increase in the demand for NuBits, which is likely as we recover from the exchange catastrophes of February. Remember that Jordan’s vision for Nu (as detailed in his white paper) is that revenue from the sale of new NuBits can be used for paying contributors, distributing dividends, or anything else that shareholders decide is relevant. We are moving away from the counterparty risks of having shareholder-funded LPC operations with @KTm and @jmiller. If we can’t stimulate demand for new NuBits in the long-run, it is less convincing that we should compensate contributors.
A model like this can last as long as there is demand and we continue to sell new NuBits. I guess I just feel incredibly uneasy about being dependent on increasing demand in order for the revenue to be there to support Nu. I would much rather have this basic revenue from selling NuBits, PLUS revenue from the real world in which we provide services to people that pay us for them. If demand stops increasing for a certain length of time, we will have the revenue from these services to fall back on. I don’t like being dependent on increasing demand like this.
Edit: That revenue stream to fall back on in times of low demand would be printing NuShares and selling them, but I’d rather not be forced to have to do that. A real revenue stream from purchased services is much better and healthier in my opinion.
Yesterday the unit price was around 0.33; now it is around 0.25.
I must agree. It is difficult to set minimum purchase prices when the share is already traded publicly…
I also think that setting a price way higher than the current traded price will not help.
So 0.2 could be appropriate. After all it is higher than the “round 1” purchase price of 0.18.
@woolly_sammoth, I am ok with separating the shares if it’s technically dangerous to Nu or just not possible. My main concern as I said in my reply to Tom above is that I’m uncomfortable with being dependent on increasing demand and selling new Nubits in order to support the network and pay contractor fees. If that demand falls for any certain length of time, we need to have a revenue stream to fall back on. Printing NuShares has been provided as an answer for what to do in the opposite end of our economic cycle, but I feel we shouldn’t be doing this unless we absolutely have no other choice. It’s much healthier to fall back on revenue streams from services that we provide through the Nu blockchain. Using B&C as one of these revenue streams to fall back on is a possibility, but if it’s impossible or dangerous to build the exchange on top of Nu, then hopefully we can find other services that can be built on top of Nu that can bring in revenue.
Can you guys at least agree with me that using revenue streams from providing services is healthier than being forced to print NuShares when we’re in a demand slump?
Right now, there is almost no consumer adoption of NuBit because there is only a low liquidity (for the most part. We need of course to encourage services to adopt NuBit in parallel. )
This low liquidity in turns causes a low trade volume which worsens the low liquidity.
The low liquidity is caused by the fact that LPCs are reluctant to store money into exchanges.
The recent hacks of 4 main exchange for Nu illustrate well that risk.
Of course the recent very valuable work from @creon and @henry which created liquidity pools are important in that they lower the risk while at the same time enabling large liquidity potentially.
But still, the liquidity providers market is still very small. More than 6 months after Nu’s release, everybody would agree that this market has been very disappointing and yet this market is vital for Nu.
No liquidity = No Nu
As I understand it, decentralized exchanges would solve our problem.
Why? Because decentralized exchanges will be 10 times more secure that traditional exchanges.
Therefore we could see 100 times (just a figure to picture the impact) more LPCs willing to deposit money, which would mean 100 times more liquidity.
Right now we have only 10k of buy side liquidity…which is extremely small…tiny.
For NuBit to become one of the currencies of Internet, we would need at least 100m of buy side…(just a figure to picture the scale needed.)
Regarding the ownership of B&C, basically, Nu would own B&C exchange at 97% (30m NSRs would be owned by BTC depositors) and B&C exchange would own Nu at 97%.
This is just a very extreme example of cross ownership.
So it is highly highly unlikely that B&C shareholders would act against Nu and vice versa.
I have therefore no problem about separating the blockchains from a financial perspective (from a technical perspective, it makes things simple. So it makes sense technically as well.)
As for the revenues models of Nu, well the main business at that stage is selling NuBits.
But when you have no demand, you basically earn zero, which is the case now.
In the intended scenario, B&C would increase NuBits liquidity quite a lot, thus the demand for NuBits, thus making Nu very profitable.
As for the revenues models of B&C, it is very clear. Trade fees.
So in the end, it would a double win for Nu shareholders.
You’re absolutely right, my concern was more that by using NuShares as the credit unit on the exchange, we would diminish the number of Shares that are eligable to mint and vote. I do think though that by increasing th enumber of votes required by NuShrare holders, we will dilute the votes for each, but you are right, data feeds would mitigate that somewhat.
I totally agree with you on that.
I think that in this situation we benefit from the split. B&C should market itself as a Decentralised Exchange for All. I think the exchange would attract a lot more use from other crypto communities if it was only loosly coupled to Nu rather than an integral part of it.
Besides the fact that NuPool is brand new and still in the process of bug fixing, isn’t buy side liquidity so low because the interest provided by shareholders is only enough to provide 10,000k NBT on either wall, so a total of 20,000 NBT? If the Bittrex pool is already at 10,000 NBT buy side, then you’ve pretty much hit the limit correct? Wouldn’t shareholders need to provide more funding to the pool in order to increase the liquidity provided? I’m not an expert on how the pool functions, so maybe I’m wrong.
I agree though that a decentralized exchange will help greatly. Fears about hackings and losing funds will vanish and we should see more people offer their own liquidity because of it.
Could you elaborate on what you mean by “value of the BlockShares network”?
Well, we can still explore funding alternatives and quickly (hopefully) agree upon on them (as mentioned by JL on bitcointalk)
A motion has been introduced to the NuShares community to authorize this funding model that will take 7-10 days to vote on; if it is unsuccessful, B&C Exchange will not be created with this funding approach and alternatives will be explored.
I think NuShareholders need a compelling business/financial plan for this fund raising to construct a better idea of the foreseeable future.
I with you on that one. However in order to create the revenue stream within a reasonable time we need to do the technical split in order to deliver. I would also have preferred to have this on the same blockchain with the same Shares from a business continuity perspective. As others have already said there is a risk that B&C shareholders will have to make decisions which are beneficial to themselves which won’t always be the same as being beneficial to the Nu network e.g. paying the Nu bills not directly benefiting B&C shareholders at the expense of developing the B&C blockchain.
On the other hand I expect that the B&C shareholders will be relatively supportive that on the balance I think it is still a good investment for at least the short and medium term. The NuShareholders will still have to work hard on adoption and other revenue models and keep those in their direct control. It would be great to see motions or grants for decentralized developments which improve adoption and usage of NuBits and potentially a real revenue stream (besides selling NuBits and transaction costs) in the next months.
Increasing the interest rate would certainly increase the liquidity overall (more participants or more funds deposited) .
yes
Liquidity providers are not necessarily shareholders (though i suspect it is the case right now, for the most part) and that is the point: Nu needs to drastically attract providers outside the real of Nu.
This is the intended future of the TLLP. This first run was deliberately limited in both liquidity provided and the number of exchanges that the operation targetted. This was deliberate as it was expected that bugs would be found and a limitation on the impact of those was felt important. Now the pool has proved trustworthy, I fully intend to expand the operation to target more exchanges and with a higher liquidity target (thus meaning a larger grant to cover the higher total payout). There will also be a push to attract liquidity providers external to Nu.
I would encourage anyone else who feels that they could run a pool to do so. The competition that would create would naturally push the cost of liquidity down.
This discussion is already comprehensive and full of valuable ideas and assessments. Allow me to give a brief impression of what BCE looks to me and why I prefer having it separated from Nu.
Nu consists of NSR and NBT. NBT is the product with that Nu is designed to generate revenue. The current revenue model mainly deals with tx fees. That’s the reason why there’s no revenue; NBT are not transferred with large numbers of transactions.
While future revenue models might include lending and other ideas, the intermediate way of generating revenue is by the destroyed tx fees.
BCE helps Nu getting there.
BCE can not only help increasing the NBT liquidity, but the number of NBT transactions as well.
It is economically not important whether BCE is included in Nu or a separate DAC, because when forming it, BCE will basically be owned by NSR holders (at snapshot time).
All revenue generated by BCE can be in the hands of the Nu owners, if only they decide to hold their BCE shares.
So the value provided by BCE is in the hands of the Nu owners, even if it’s an independent DAC. The shareholders can for sure decide what to do with that value, but that’s in fact the beauty of the separation: one can buy/sell BCE shares independently form NSR.
It’s technically easier to run it on a separate block chain.
It’s more flexible.
It’s easier for people (users and possible future investors, shareholders-to-be) to get it; here’s the DAC with the stable crypto currency and there’s the DAC that is a decentralized exchange… have you tried to understand how Bitshares work or NXT?
Keep it simple!
Keep the exchange separated (technically and economically) from Nu but interacting with it in the proposed way.