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

[masterOfDisaster]

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.

[cryptog]

By the way who is BCExchange in bitcointalk ? I am curious.

[Cybnate]

Keep it simple!Keep the exchange separated (technically and economically) from Nu but interacting with it in the proposed way.

I agree, however it would have been nice to be able to enforce a rule where B&C shareholders selling would be asked to offer it first to NuShareholders against market price before offering their B&C share to the open market. That way the NuShareholders are at least in control (of Proctor and Gamble and its daughters as TomJoad’s interesting comparison early in this thread). However unfortunately I don’t see a way to enforce that technically or contractually within this context.

[Joe]

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).

This is not guaranteed to be true forever unless the exchange is built into nushares. That is an important economic difference.

It’s technically easier to run it on a separate block chain.

I think it is silly to choose a worse outcome that it is easy rather than I better outcome that is hard.

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?

I understand how atomic trading can happen between two digital currencies. I also know that NuBits can be programmed to do these atomic trades. Therefore, I fail to see why we need a new blockchain when we have an existing unit that can facilitate these trades and we have existing shares to use for distribution of funds. If B&C can be built off a clone of nushares, it would follow that nushares could be adopted to be a decentralized exchange.

edit: I’d also like to add that any radical changes to Nu should happen earlier in it’s life rather than later

[creon]

OK, after sleeping over it I decided to post the last two points to this topic, since none of my suggestions seem to be backed by other shareholders. Here is what I personally believe will happen:

• NSR holders who don’t believe in the B&C projects will dump their BKS, BKS holders who don’t believe in Nu’s future will dump their NSR in order to buy more BKS. So if 50% of the shareholders lose trust in one project, then the remaining 50% who want to support both networks will have an opposing incentive to the other shareholders. In fact the model allows Nu to die while taking your own funds over to BKS without losing you investment, but it also means that we give up on the pegged unit idea.
• According to the design doc, the funding will be held in NBT and a monthly sell pressure of around 50k USD will arise. This means that we need 50k NBT fresh buy side liquidity every month. An interest rate of 0.25% is barely sufficient to get 10k, so I prepare for gigantic interest rates. Also note that the NuLagoon will not provide any of these 50k, since it keeps the ratio always balanced and will use other LPCs to get the BTC back.
• There is no official Nu development team developing on the Nu codebase in 2 months from now, regardless if this motion passes or not

Now the question shareholders have to answer is not if B&C is a good idea. The question is if it is this what Nu needs right now. Reducing liquidity cost is a good thing, but developing interfaces for merchants to approach the currency goal like suggested here certainly would also be a good use for this money. I also don’t see right now how we want to compensate Nu client development in future.

[MaVo]

When it comes to scalability, will we be able to endlessly build projects on top of the NU blockchain? What if the decentralized exchange isn’t the last idea, will it be possible to build more projects on the same blockchain again and again?

[CoinGame]

I think this is totally disregarding the fact that there are significant technical limitations on the blockchain already. Bitcoin is struggling with how to scale their own blockchain, and everyone has a different opinion on what exactly their blockchain should be optimized for. The “one blockchain to rule them all” is clearly unsuccessful. It’s the very reason so many altcoins and appcoins exist. Bitcoin cannot do everything. Expecting that the Nu blockchain can do everything is foolishly disregarding the current crypto environment in front of everyones eyes. Trying to run multiple services on one chain can also have disastrous effects for other services running within that chain. Bitshares learned the hard way how having all your mechanisms tied together can have those effects. Not to mention they have a client that tries to do everything, and has always been plagued by bugs. I really don’t want to see this happen to Nu.

The development decisions that are best for the exchange service may not be in the best interest for Nu, and vice versa. Many companies end up spinning off subunits into their own company due to this reason.

It’s good that there would be two asset of ownership because the decisions (development wise or other) would be in the best interest of that specific model. Nu is about creating assets to trade and B&C is about being able to trade those assets. Given that NuShares holders would have an immediate stake in the success of B&C they could pursue a synergy between the two projects, but it would be terrible if the success of one chain would negatively impact the other because of development limitations.

As Jordan has stated, if the NuShares holder proposal fails he will look into other means of funding the project. This will probably not involve a parity ownership for NuShares holders, and current investors of Nu could have significantly less impact of a close relationship between two very forward thinking projects.

There are many valid concerns and discussions regarding the B&C proposal. I personally feel having them as separate chains/units should not be one of them.

[MaVo]

Very well said. The scalability in the long run was my concern. The Nu network will benefit from a successful B&C exchange no matter what. Once we find more ways to monetize the NU model and launch other projects, I am sure there will be a decent demand for Nushares if that is the way to participate in new projects via a snapshot.
I am not that concerned that people buy Nushares and dump afterwards because that just won’t work out for everybody without making a loss, correct me if I am wrong. Because once people bought the Nushares for the snapshot, they would need sufficient liquidity for all those Nushares to be dumped afterwards. But why would the demand for Nushares be high enough right after a snapshot so that everybody who just bought can dump for a decent gain again.
I think that most people will turn into longterm holders if it turns out that the NU community delivers better projects than others. Once more, I think that the concern about buying and dumping just for the snapshot won’t work out as some people here might imagine. It all depends on the quality of the products delivered by the NU network.

[masterOfDisaster]

These are valid concerns, but I come to different conclusions.

NSR holders who don’t believe in the B&C projects will dump their BKS, BKS holders who don’t believe in Nu’s future will dump their NSR in order to buy more BKS. So if 50% of the shareholders lose trust in one project, then the remaining 50% who want to support both networks will have an opposing incentive to the other shareholders. In fact the model allows Nu to die while taking your own funds over to BKS without losing you investment, but it also means that we give up on the pegged unit idea.

Were NSR and BKS tied to each other because of being on the same block chain (in fact BKS not even existing, but only NSR), a shareholder who loses trust in one project needs to abaondon both projects at the same time because they are represented by the same token (NSR).

With BCE not being on a separate block chain you could have motions for the benefit of the stable currency part on the expense of the BCE part or vice versa. That can lead to situations as awkward as with two separate DACs.

With BKS being separate from NSR you can hold NSR while selling BKS and vice versa.

According to the design doc, the funding will be held in NBT and a monthly sell pressure of around 50k USD will arise. This means that we need 50k NBT fresh buy side liquidity every month. An interest rate of 0.25% is barely sufficient to get 10k, so I prepare for gigantic interest rates. Also note that the NuLagoon will not provide any of these 50k, since it keeps the ratio always balanced and will use other LPCs to get the BTC back.

The 50k buy side liquidity phase comes after the phase in which the funds (which have been received in exchange for the auctioned NSR (BTC, PPC, LTC)) have been traded for NBT.
Whoever or whatever is processing this trade has a pocket full of BTC, PPC or LTC.
The current (buy side) liquidity is low because of the aftermath of the exchange defaults earlier this year. Lots of BTC (or other) that have been traded for NBT on those exchanges are not accessible or lost forever, while lots of those traded NBT are in the wild. That’s why the buy side has little liquidity. Or is this view incomplete or naive?

There is no official Nu development team developing on the Nu codebase in 2 months from now, regardless if this motion passes or not

While this is worrying I think it’s not that drastic. The focus of the Nu development team shifts temporarily. The Nu code does what is expected from it. Major improvements or enhancements are not suffering from this shift of focus, because there are no major improvements planned, except for the NSR burning. In case of security related problems the development team is well-advised to fix them in the Nu code base, because they are likely to make trouble with the BCE code base
Continuing the development of Nu costs money. The revenue of Nu is not yet very well - to say the least.
With BCE the chances for being able to pay for continuous development rise - be BCE in the same chain or not.
NSR need to be sold by Nu to pay for development of Nu (direct development or indirect development). I welcome to have that dilution for the creation of BCE!

[cryptog]

The Nu code does what is expected from it. Major improvements or enhancements are not suffering from this shift of focus, because there are no major improvements planned, except for the NSR burning.

It is confirmed here by JL.

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.

[creon]

The 50k buy side liquidity phase comes after the phase in which the funds (which have been received in exchange for the auctioned NSR (BTC, PPC, LTC)) have been traded for NBT.Whoever or whatever is processing this trade has a pocket full of BTC, PPC or LTC.

Exactly, but you cannot assume that these BTC PPC and LTC will then support the buy side. Furthermore NBT bids will just be sold and there is no corresponding buy. Its the LPCs in the upcoming months who have to ensure that there are 50k on the buy side, no matter how, otherwise the Nu peg will break and also the funding model of B&C could fail. If the nu-pool wouldn’t be there, its only ktm right now who would provide liquidity for this, and her funds will be depleted within a single month. Its up to the shareholders if they want to take this risk and up to the pool operator if they want to provide a service under these conditions.

The Nu code does what is expected from it.

It doesn’t, there are numerous minor bugs which still have to be fixed, including many performance tweaks. Also various additional useful tools for data feed providers and users and other features might push Nu itself forward. Not to mention using the development effort to build tools to support Nu, like payment processor interfaces.

I’d also like to state that Nu’s success was in large parts because of the major personalities standing behind it. If in future everyone will associate these people with B&C instead of Nu then this will be very bad for Nu’s reputation. I also expect many from the “productive” community members to switch over to B&C because its just so much nicer to work in a productive environment. The same happened with PPC when Nu was launched.

We have no active development team in one month from now, I am not even sure who will be in charge of the main code repository. All these questions have to be answered in detail and are important when making the decision for or against this motion.

[cryptog]

Its the LPCs in the upcoming months who have to ensure that there are 50k

That is a very good point. What does @JordanLee have to say about that? If the buy side liquidity is not over 50k, how does he think he is going to be able to pay the contractors even for a month?

I also expect many from the “productive” community members to switch over to B&C because its just so much nicer to work in a productive environment. The same happened with PPC when Nu was launched.

There is indeed a timeline in which most important members jump off the ship to focus on B&C.
But what would be the point of doing so if most revenues of B&C would come from BTC/NBT trades?

[Nagalim]

Nu’s number 1 income source is adoption. Every nubit “out in the wild” is a $1 in the shareholders pockets to fund devs or buybacks or distributions or whatever. B&C will provide something of a sponge for nbt at first and will provide advertisement and ease of access to get more nbt directly to the end user. This is where the true possibility for Nu profit is; any profit B&C makes from trading fees or whatever is not in Nu’s business model and is not Nu’s profit.

[masterOfDisaster]

Its the LPCs in the upcoming months who have to ensure that there are 50k on the buy side, no matter how,

That’s the case with or without BCE. If I remember correctly the 50k NBT is the monthly ball park figure for the (current) monthly development costs of the development team.
If the focus of Nu would be directed towards payment providers, creating the interfaces, doing the marketing, the number would likely stay the same. At some point of time NSR need to be created and sold to pay for that - diluting the NSR supply.

With the low NSR liquidity auctioning them is a good way to sell quite large amounts; from a Nu perspective - it’s for the benefit of those who want to buy large amounts as buying large amounts would move the price far up while selling more than a few million NSR at the moment would crash the whole market.
The NSR market seems to be determined by holders.
Holding NSR is motivated by the expectation of Nu’s future development.
BCE might be as good an idea as working towards payment providers would be.
The advantage of favoring BCE is that this will be (initially and maybe for some time) a business which is controlled by Nu!
And BCE might generate revenue for BCE (fees; revenue for Nu indirectly) as well as it might increase the number of NBT transactions (revenue for Nu directly).

It doesn’t, there are numerous minor bugs which still have to be fixed, including many performance tweaks. Also various additional useful tools for data feed providers and users and other features might push Nu itself forward. Not to mention using the development effort to build tools to support Nu, like payment processor interfaces.
[…]
We have no active development team in one month from now

I was not aware that there are so much bugs left and performance tweaks to be done. This is for sure something that needs ongoing attention.
Tools to support Nu need to stay on the road map, agreed.

And you are right that some diligence needs to be done before this draft is ready to be voted on. But this is what we are currently doing. Responsibilities need to be determined as well as the future development of the Nu code base.
The development team won’t be gone. It’s focus will shift, new milestones will be introduced.

If I interpret your concerns correctly, you doubt that this kind of tool (decentralized exchange) should be preferred over other tools, e.g. those to support payment providers?
Or is this too much condensed?

[creon]

The development team won’t be gone. It’s focus will shift, new milestones will be introduced.

Sorry, but I read this sentence too often in crypto. I also don’t know how the 50k currently got paid (NBT/BTC/whatever), I just know from the design doc that it will be 100% NBT now.

If I interpret your concerns correctly, you doubt that this kind of tool (decentralized exchange) should be preferred over other tools, e.g. those to support payment providers?

Correct. Instead of splitting a part of the capital into a new revenue model which can and will live independent of Nu at some point we should use the money to improve the Nu infrastructure itself in order to make buying and dealing with NBT becomes attractive and people will just buy and hold NBT to have a crypto dollar.

I just see a great investment opportunity here, but no long term benefit for Nu. If Nu is successful, then B&C will only be one of many exchanges, and if B&C is successful, then NBT will only be one of many pairs. While all the great people are switching over to B&C we somehow assume that Nu suddenly prospers because it has a market on a decentralized exchange. I cannot follow this assumption and from a pure monetary perspective I think it will only be BKS which is worth investing in in near future.

[Nagalim]

Nu suffers from not having a good nbt/USD pair to support. Doesn’t B&C solve that problem? Isn’t that good for Nu long term?

[creon]

If its about that then I assume that we can encourage many exchanges to implement a NBT/USD pair if we pay them $200,000 out of our capital to do so. I am not arguing that there is no benefit for the cryptocurrencies traded on B&C, my only question is if there is nothing else we can do with $200,000 which could bring Nu into the state where it originally was intended to be.

[tomjoad]

I just see a great investment opportunity here, but no long term benefit for Nu.

I could see liquidity costs to NuShareholders dropping from 10% per month down to 2% or lower in the medium to long term. That is a significant long term benefit for the Nu network.

[Nagalim]

If we bribe an exchange and it goes down for whatever reason, we’re out of luck. What I’m saying is I feel we already went this route and it didn’t really work. If we make our own exchange, we can be much more confident that those kinds of things won’t happen, in theory.

[creon]

Well I really don’t want to become the most hated community member here because I am arguing against all this, but I neither think that the exchange default risk makes 80% of the current liquidity compensation, nor do I think that B&C in its current state is in any way more likely to succeed than any other decentralized exchange project. I furthermore assume that BKS holder will act in a responsible way for their DAC and remove any NBT pair which does not give enough volume, just as with any other coin.

OK I am really stopping here There are many others who probably want to say something and I am cluttering the topic with my personal concerns, which is not fair. I’ll keep observing how this develops and I am confident that shareholders will decide in the interest of Nu.