This is becoming a very fundamental question and I have a hard time to make up my mind and form an opinion given the wide range of pros and cons which have been discussed. In a sense I like the motion as it creates NSR as collateral, basically manually achieving what Benjamin is advocating. I’m also aware that this is not how Nu was originally designed.
Best I can come up with is that Benjamin’s approach works better when the peg is under pressure and the confidence/utility in the NU network is relatively low. When usage, confidence and ownership increases I think there is more room to loosen the 1:1 collateral to some extent. Haven’t made my mind up whether that can be 50% or 80% eventually.
I’m still having difficulties with selling NBT and return that to the Shareholders as dividend. If anything it should be returned as shared collateral which can be used when the peg is under fire. That doesn’t mean that this is dead money, it can certainly be used for e.g. short term lending.
Dividends should only be paid when the network makes profits e.g. from services on the network. Unfortunately we haven’t seen much of that yet.
Therefore, we will have two complimentary mechanisms which are the exact inverse of one another:
When NuBit demand is low, NuShares will be created and sold while NuBits will be purchased with the proceeds and burned. NuShare supply increases as NuBit supply decreases. This depresses the NuShare price as it supports the NuBit price to the pegged level.
When NuBit demand is high, NuBits will be created and sold while NuShares will be purchased with the proceeds and burned. NuBit supply increases as NuShare supply decreases. This inflates the NuShare price as it suppresses the NuBit price to the pegged level.
So the above modified motion is just an implementation of it. NBT and NSR are the two sides of the same thing. Value flows between them to maintain the peg. I think @Benjamin’s suggestion differs from the modified motion by 1) implementing on protocol leve 2) using binary vote. I see the above modified motion a step to protocol level change.
True 1:1 collateral is only possible using the USD. BTC volatility will wipe out any attempt at keeping stable value in crypto (if you think of derivatives, you get counterparty risks.)
Dividends is widely used to valuate shares. It’s easier to understood by lay investors than share buy back. Besides being easier to understand, I think dividend has a greater effect to push up marketcap of NSR because people know the bought-back shares, if not burnt, could leak out when no one is watching. So I see dividend an effective value-transfer scheme from NBT to NSR.
I think with B&C exchange we can create derivatives to help maintaining the peg. In any case, lack of network revenue is still the culprit.
Even with full USD reserves there will still be a cost burden of counterparty risk. Dividends leak out of the network, and if they all come from sale proceeds of NBT, the long term NSR market cap can only be equal to the long term amount of NBT in circulation, which we know is unhealthy. NSR buyback may have similar problems, except it seems to make the value of holding NSR less transparent.
NSR/NBT burning helps, and should be implemented at protocol level at some point. Ongoing discussion on this is very meaningful. The priority now however should go towards building a revenue model.
I have to admit I didn’t follow the complete discussion, and maybe someone already proposed it.
But what if instead of burning NBT, we use those NBT to buy NSR and then burn NSR?
It will reduce NSR supply and revitalize the NSR market generating arbitrage opportunity between the NSR/NBT pair and NSR/BTC pairs for other traders.
For sure my proposal won’t help reducing NBT supply. Sorry for checking in without proper understanding. Let’s leave this out for the NSR Buyback discussion.
"If 50% or more of liquidity is on the buy walls and interest rates are zero for all durations, NSR auctions will cease immediately."
So park rates are currently zero, buy is about even with sell. I dunno, this motion has so many weird technicalities.
The time is 10:08 PM GMT, the buy is currently 39413.6947, the sell is 38302.60, and park rates are 0%.
NSR auctioned: 1 million Expected auction proceeds to be burned: 2000 NBT Highest price: 0.002 per NSR Lowest price: 0.002 per NSR Total NSR bid for: 3 million
If you bid 0.002 or more, you will be contacted to arrange settlement, which must be completed no later than Monday UTC.
Buy side liquidity is 39420 and sell side liquidity is 39688. Because the buy side is smaller than the sell side, an additional auction will be held next week. According to the rules specified in the motion to make the auction size adjustable, 667,000 NSR will be auctioned with bids due next Friday UTC.
