[Passed] Motion to regulate rules of fund management in NuLagoon

[crypto_coiner]

1f7223971e026dd124dc1a31ebf548836b73af71 voted.

[JordanLee]

4. 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.

This is contrary to the interests of the network. Allowing NuLagoon to be unbalanced if needed to balance total liquidity is positive.

[Nagalim]

Dude what? Why did you not participate in the week long discussion of this a week ago?

In what situation would NuLagoon being unbalanced balance the network? Of course, only when the rest of the network is unbalanced the other way, which is exactly when an interpool balancing is useful. For example, LP1 has 25 nbt buy and 75 nbt sell. NuLagoon has 75 nbt buy and 25 nbt sell. It is perfectly consistent and good for the network if NuLagoon buys 25 nbt from LP1.

[masterOfDisaster]

NuLagoon is a liquidity provider like the multiple other ALPs and maybe soon one or another NuBot.
There’s no reason to expect or to want NuLagoon to buffer liquidity from other pools.
It’s in the best interest of the Nu network to have the liquidity balanced across pools.

In fact what NuLagoon starts does not go far enough.
This whole idea of balancing needs to spread across all liquidity tiers up to 6.

If NuLagoon balances funds with other pools the result might be that NuLagoon’s (as well as the other LPs) buy and sell side end up unbalanced, having either too much or to few NBT.
There must be a way to connect from tier 3 to tier 4 and from there to tier 6 to balance again.

How else should NuLagoon or all other LPs get NBT if they need them or get rid of NBT if they have too many of them?

The Nu network needs this inter pool balancing to know which side to seed in seeded auctions. Once again I’m speaking of seeded auctions, I know… But seeded auctions (or something even better that I can’t think of) are needed to absorb or distribute NBT by the Nu network.
And the balancing NuLagoon proposes can be used to determine when (threshold) and what side to seed in the seeded auctions that yet need to be developed.

[Nagalim]

This concept works just as well for park rates and buybacks/dilutions as it does for seeded auctions, this is something we need now as well as in the future. The statement is that the pools need to balance off of each other so that the shareholders can’t point to any on LP to blame but must instead point to themselves and balance the network globally with park rates/distributions or buybacks/dilutions.

[masterOfDisaster]

This concept works just as well for park rates

I have trouble with park rates.There seem to be better solutions that address the same problem.

and buybacks/dilutions

I don’t know how buybacks dilutions should be done if not by seeded auctions - at least if the goal is to do that in a transparent and verifiable way.

[Nagalim]

I’m just trying to bring it home that with the mechanisms already in place this is a vital motion. It is vastly better than shutting down NuLagoon in general, which the other motion regulating NuLagoon would effectively do. It directly solves the problem of NuLagoon being out of balance with the rest of the network and puts the responsibility for globally balancing the peg squarely on the shoulders of the shareholders, where it belongs.

[cryptog]

But I think @JordanLee has a good point. The problem with this formula is that this formula intends to make the proportion of buy side liquidity provided NuLagoon compared to all liquidity provided by NuLagoon similar to the proportion of buy side liquidity provided by all providers compared to all liquidity provided by all providers.
So if overall, the network’s liquidity is over-focused on the sell side, it would make NuLagoon’s liquidity over-focus on the sell side, which would be bad.
On the contrary, if it is over-focused on the buy side, it would make NuLagoon’s liquidity over-focus on the buy side
I think I missed that aspect.
If the purpose is to uniformize the topology of the liquidity provided by NuLagoon compared to the network’s liquidity’s topplogy, I think it is a useful motion but this motion will not help us in solving the issue of having too much sell side liquidity overall, which is in fact a crucial issue.

[masterOfDisaster]

The problem with this formula is that this formula intends to make the proportion of buy side liquidity provided NuLagoon compared to all liquidity provided by NuLagoon similar to the proportion of buy side liquidity provided by all providers compared to all liquidity provided by all providers.

I’d rather say: the solution provided by this formula saves NuLagoon from being an unbalanced liquidity provider in relation to the overall network liquidity. It aims at balancing NuLagoon’s liquidity situation with the network liquidity situation.
Network liquidity is what I’ve highlighted in @henry’s formula:

'4. 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.

This hits the nail on the head:

I think it is a useful motion but this motion will not help us in solving the issue of having too much sell side liquidity overall, which is in fact a crucial issue.

and you are absolutely right that this can’t be solved by moving a pile of sell side liquidity around.

Interestingly this motion:

[Withdrawn] Motion to lower compensation for NuLagoon sell side

Beginning November 1, 2015, shareholder funded sell side liquidity at NuLagoon will be capped at 0.08% per day.

doesn’t solve that problem either. It just tries to cut down costs by reducing compensation for the sell side, which makes NuLagoon doubt they can continue the operation with the cut down compensation.

And in case the [motion to lower compensation for NuLagoon sell side][1] passes, rational market participants will change their NBT for BTC (at ALPs) before they deposit BTC at NuLagoon to receive the bigger compensation.
And NuLagoon will keep as much funds in buy side to provide the customers with the promised compensation. If the motion to lower compensation for NuLagoon sell side passes it will create trouble for the balance of liquidity.

I was talking about a “problem”: unbalanced liquidity.
This isn’t really a problem. It’s a status, an assessment of the situation.
If there’s too much NBT on the sell side, NBT need to be removed from the market.
If there’s too little NBT on the sell side, NBT need to be brought to the market.

But this is nothing liquidity providers can do.
They act solely on tier levels 1 to 3.
If the don’t already own NBT to fill the sell side, they can’t get NBT except they buy them from Nu. Of course they can buy them from other LPs as well, which doesn’t change the sell side liquidity, though.

LPs can remove NBT from sell side provided there’s an incentive to do that.
And they can put BTC to the buy side of they have an incentive to do that.
Nu provides incentives for the first by park rates and for the latter by paying compensation for liquidity provisioning.

As long as there’s buffer in tier 2 and 3, Nu can provide incentives for promoting tier 2 and 3 to tier 1.

If the sell side stays higher than the buy side, although incentives are provided for LPs to fill the buy side, this is a signal for Nu to remove NBT from the market (or to raise the park rates; I’d prefer permanently removing them from the market…).

Inter pool balancing of the pools helps to understand that signal.

That’s why this is a valuable step into the right direction.

Nu might soon have information about the compensation rates that LPs demand for providing liquidity.
The fixed cost pools will provide Nu with that information.
Nu will be able to read the compensation rates per exchanges and trading pair looking at the total value of liquidity provided per exchange and pair.
Dividing the (fixed) compensation by the liquidity tells Nu the compensation rate.

I’d rather wait until that information is available before I’d consider cutting down costs of a business partner.
[1]: [Withdrawn] Motion to lower compensation for NuLagoon sell side

[Cybnate]

Not supporting this motion as it doesn’t fix the high liquidity cost imo and therefore awaiting the developments regarding fixed cost pools.

[cryptog]

@assistant motion vote 1f7223971e026dd124dc1a31ebf548836b73af71

[assistant]

Hi @cryptog

Here are the details for the Motion Vote on 1f7223971e026dd124dc1a31ebf548836b73af71:

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##1f7223971e026dd124dc1a31ebf548836b73af71
Blocks: 2170 (21.700000%)
Share Days: 582435652 (16.862411%)

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[zoro]

@assistant motion vote 1f7223971e026dd124dc1a31ebf548836b73af71

[henry]

it doesn’t fix the high liquidity cost

Yes. But, It doesn’t hurt to vote this motion if you agree the rules of fund management described in it. You can treat it as the precondition to control the cost.

[Cybnate]

Yes. But, It doesn’t hurt to vote this motion if you agree the rules of fund management described in it. You can treat it as the precondition to control the cost.

You have a valid point there which snowed under in the discussion about liquidity provision cost reduction of sell side only.
The five items are useful rules to have in place regardless. Therefore i will add this motion to my feed.

[CoinGame]

[zoro]

it passed.