Motion RIPEMD160 hash: 876e10611809f3a90f2216fb61f107d3b7c9c469
There has been a modest amount of controversy regarding the planned auction. The passing of this motion will give it the legitimacy it needs and make clear that the majority of shareholders support the auction. I proceeded to announce the auction with the understanding that the time needed to have extensive community discussions and a full voting period was too great for our scenario. Still, there is no reason to not advance a motion such as this after the auction countdown is in motion. I expect it to pass and prevent a minority of shareholders from feeling that something unfair was done.
While the context that makes the auction a desirable course of action is clear to me, I may have made the mistake of not fully presenting that context in connection with my auction proposal. Here is that context:
The original plan was to distribute 1 billion NSR at ever increasing prices. At the time that commitment was made, Nu was designed as a network without systemic or counterparty risk (from the perspective of shareholders and NuBit holders) in its liquidity operations. The use of shareholder funds by LPCs like KTm and Jamie had not even been contemplated, so far as I am aware. The idea to do that first emerged in early September. Prior to that, it was anticipated that LPCs would only operate on NBT/USD pairs, and that is all NuBot was originally built to support. As our release date of September 23rd approached, there was no exchange supporting NBT/USD, but we did have NBT/BTC support worked out. So, we pivoted quickly to providing liquidity on BTC pairs as a matter of necessity. This meant NuBot was hastily modified to support that. Using a new piece of software with major last minute modifications that also exposed LPCs to complex scenarios regarding arbitrage and BTC volatility made the risks of operating NuBot very difficult to assess. So we turned to shareholder funded operations with the expectation that in a matter of weeks the level of risk would become known via the experience of KTm and we could switch entirely to self funded LPCs quickly. That did not occur for variety of reasons, chief among them being shareholder rejection of LPC proposals. I have consistently and earnestly pointed out the importance of self funding LPCs, beginning with the internal release of the whitepaper last April. Two days before release, I was focusing on recruiting self funded LPCs by offering bonuses to start the role. A month ago a summary of the risks became the only globally pinned topic on this forum, giving it the primary attention I understood it needed. Then came our wave of exchange defaults. This was combined with outstanding NuBits declining by about 60% over the last two months to create significant stress on the network. It is possible to overcome this by offering very high interest rates on NuBits. However, consistent with a shareholder motion to burn currency with the proceeds of NSR sold, shareholders have indicated they view the NSR market cap as a more credible way to ensure NBT value – one that demonstrates willingness to sacrifice NSR value to maintain NBT if necessary. It is good signal to send to the market as well as a prudent way to manage the peg. That is what this auction does.
So to summarize, I said long ago that NSR would be sold for increasing price over time and that liquidity would be provided without counterparty risk or systemic risk to holders of NuBits and NuShares. The latter has not yet occurred, against my own will and wishes. Current liquidity operations in the form chosen by shareholders have resulted in substantial defaults and systemic losses. This important change made by shareholders made it impractical to only sell NSR at increasing price. Combined with shareholders’ decision to sell NSR on an as needed basis perpetually (not necessarily at ever increasing price), this auction is a very reasonable action attuned to the evolving will of shareholders.
Finally, while what I have said may paint a picture of the network as strained, in recent days I have been elated about how recent stresses prove the resilience and robustness of the network. We had about 60% of all NuBits in circulation two months ago exit circulation and sustained exchange defaults that are likely to equal 30% to 50% of all NuBits outstanding at the peak of demand a couple months ago. This is the equivalent of having all NuBits sold back to LPCs and we kept the peg perfectly! It is clear we can repair our financial standing with additional NSR sales. If we also eliminate systemic risk in liquidity operations as shareholder are currently voting to do with 81% consensus (in the last 100 blocks), it becomes difficult to imagine what could break the peg in the future. Our design has been successfully stress tested to the extreme.
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Following are the details of the upcoming NuShare auction that has been discussed. The consistently stated plan has been that 1 billion NuShares would be distributed, until this was recently modified by shareholder motion such that shareholders could decide on an ongoing basis using NSR custodial grants. This auction readily fits within the original limit for initial distribution, as the present number of distributed NuShares is a little over 700 million.
If the motion is passed before the end of 6 March UTC, the auction bid deadline will remain end of 6 March UTC. If it passes after 6 March UTC, the bid deadline will be the moment it passes. If it does not pass, there will be no NuShares sold in connection with the auction.
- 100 million NSR total will be auctioned.
- Bid deadline is the end of 6 March UTC.
- Maximum bid size is 30 million NSR. Minimum bid amount is 2000 NuBits.
- Multiple bids not accepted.
- Bidders will not see other bids.
- Best to bid early because if NSR sales are needed to support liquidity, sufficient NSR will be sold to the highest bidders at that time.
- Bidders must be business partners, which means you are or will be active in creating value for the network outside the scope of being a shareholder.
- A valid bid will contain three elements: a quantity of NuShares, a price you pledge to pay per NuShare in NuBits, and the asset type you will pay with (PPC, BTC or NBT).
- The price of BTC will be set at the auction bid deadline using the Bitfinex BTC/USD market price. PPC, being less liquid and subject to price manipulation, will be priced as the average of the BTC-e PPC/USD price 48 hours before the auction bid deadline, 24 hours before the deadline and at the deadline. Payments in BTC or PPC will incur an additional 2% fee above the bid amount.
- You may place a bid by sending a Bitmessage to BM-2cTihATJ5FwJ7vWBwZmJjr55eFPFWBCmCQ or an email to firstname.lastname@example.org.
- Settlement will occur in the days following the bid deadline of the end of 6 March UTC.
- The highest bid, the lowest accepted bid and the total funds received will be publicly released when settlement is complete.
- The first priority for funds raised will be to ensure the buy side liquidity is equal to the sell side liquidity as displayed in the Nu client. PPC and BTC will be used to purchase NuBits to accomplish this if necessary.
- The second priority for funds raised will be to provide tier 4 liquidity. Suitable persons to hold these funds using multi sig addresses will be sought out. Hedging will not be employed due to counterparty risk. Tier 4 liquidity must be highly liquid, and BTC is the only instrument that meets this need at this time, although I hope that liquid NSR markets will permit NSR to be used as tier 4 liquidity eventually. The quantity of NSR for sale is as low as it is to limit the effect of BTC volatility.
- The third priority for funds raised will be the payment of contractors engaged in development. NuBits are generally used for this purpose, and in that case all that is needed is to ensure there is good buy side liquidity on the open market.
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