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We present this motion to NuShareholders. By voting in favor of this motion, you are letting NuLagoon know that the following rules of fund management serve the need of NuNetwork better.
The funds placed at Tier 1 will be 10% of the total fund or more.
The funds placed at Tier 1 and Tier 2 will be 20% of the total fund or more.
The balancing target for both funds on exchanges (Tier1 and Tier2) and off exchanges (Tier3) is the network-wide buy/sell liquidity ratio.
When funds is unbalanced by 10% or more (abs(NuLagoon buy / (NuLagoon buy + NuLagoon sell) – Network buy / (Network buy + Network sell)) > 10% ), funds will get moved in to/out from exchanges to achieve the balancing target, no less than twice a week.
Increase the maximum number of exchanges which NuLagoon supports to 4.
NuLagoon manage team
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Obviously @henry is talking about the linked motion and recommends not to vote for it.
It’s a little bit confusing that he linked one of his contributions, but nevertheless the thread only deals with one motion:
This motion aims at balancing the liquidity provided by NuLagoon and at uniforming it compared to the overall network liquidity. If it works as intended, it will solve the issue of “too much sell liquidity” on NuLagoon provided that ALPs have a balanced liquidity and produce more liquidity that NuLagoon, which is the normal state and matches the current conditions since we are in a normal state.
Therefore I am in favor of such a motion.
It’s a good first step towards a future in which the ratio of the sum of bid and ask sides will indicate whether Nu needs to print more money or needs to remove money from the market.
As soon as seeded auctions are established (an evolution of the unseeded auctions) there will be a burn gateway to either inflate or deflate the NBT supply gradually.
Separate share buybacks (like the one that might happen soon) will only be needed under rare circumstances - the seeded auctions will be an ongoing “share buyback” or “share distribution” - depending on the demand for NBT.
In seeded auctions “share buybacks” will create NBT, “share distributions” will burn NBT.
The demand for NBT can be read from the balance of the bid/ask sides, the side to be seeded (NBT or NSR) can be derived from it.
Everything comes full circle.
This motion is one of the first steps on Nu’s way to evolve liquidity even further.
The tiered liquidity model has despite of the name of the thread not been finalized November last year. The layers are important, but it still lacks the feedback loop between NBT in circulation and the market.
This is being changed for the better.
This motion here is not to be underestimated!
It appears that Nu is a never ending source of innovation thanks to the developers and the community.
Hats off to Nu!
…sorry if this sounds confusing. If it confuses you, I recommend thorough investigation of the matter (especially if you are a share holder!).
This post aims to draw a big picture of Nu’s liquidity future.
I’m very interested to see how NuLagoon’s method of balancing based on the current network liquidity compares to MoD’s proposal to always balance 50/50. I’m inclined to prefer NuLagoon’s method for tier 3 liquidity, but for tier 1 I think a 50/50 balance might be the best choice.
I don’t think this is a necessary condition for proper operation. Let’s pretend NuLagoon consists of 90% of the liquidity and is 75%/25% sell side. The rest of the network is ALP with 50%/50%. That means that the total network is 72.5% and NuLagoon does not have to rebalance. In fact, if NuLagoon constitutes 90% of the network, NuLagoon would have to be 100% sell and the rest of the network 100% buy in order for a rebalancing to occur. Basically, my argument is that if NuLagoon complies with the stated motion and is not able to rebalance effectively (from the shareholders’ perspective) it is because the network itself is unbalanced and it is not NuLagoon that has ‘too much sell liquidity’ but in fact the network as a whole.
I understand your point. Tks for the math.
But my point is to say that if NuLagoon represents the vast majority of the network liquidity, the rebalancing formula would not help much even if the rebalancing is triggered.
I see one problematic situation: NuLagoon represents the vast majority of the overall liquidity, and the overall liquidity is skewed towards the sell side. (as in your second case scenario)
In that case, the formula will not help in getting much more liquidity on the buy side which we would want, in my understanding, ideally.
This is only my perception. It might be off, so take it with a grain of salt.
The tiered liquidity model provides Nu with a sophisticated “waterfall model” with the several tiers being able to buffer liquidity.
Higher tiers buffer lower tiers in two different ways.
Higher tiers can absorb NBT or BTC of lower tiers if needed.
And they can provide lower tiers with NBT and BTC if needed.
The tiered liquidity ends at tier 6.
Tier 6 provides a connection between liquidity and the Nu network in the way that NSR or NBT grants can provide the market with additional NBT or absorb NBT in excess.
But how to handle tier 6 liquidity? How to connect it to the market? How to determine whether NBT need to be distributed or absorbed?
Remember how difficult it was (and still is) to find out when to pay park premium and how much?
There’s no metric available to assess the liquidity situation in a way that you know whether all is ok, or you need to do something and what.
This is why I perceive this motion here an evolutional step of the liquidity model.
Balancing the funds like proposed in this motion provides Nu with information about the liquidity situation:
Nu can read from the liquidity situation whether it’s necessary to distribute NBT or absorb NBT (or do nothing).
A very sophisticated way to distribute/absorb NBT would be the seeded auctions.