[Passed] NuSafe - An 30k hedge of Tier 4 funds in USD

[masterOfDisaster]

justifying 300 NBT a month just for BTC volatility

If BTC swings down by 1%, the 300 NBT is at break even with the saved losses (based on 30k USD value being shifted from BTC to USD)

[mhps]

If BTC swings down by 1%, the 300 NBT is at break even

If it swings up Nu has a double loss. Just to show the whole® picture.

I think BTC has more room on the down side. Maybe. I could be biased.

[ttutdxh]

To be fair it is not a double loss, it is a loss of the 1% as fee and a loss of opportunity that could as well have been another monetary loss.

[mhps]

it is a loss of the 1% as fee and a loss of opportunity

I mean by the previous post’s logic a swing upward of 1% will let Nu not only spend the fee but also miss the benefit of increased valuation as a result of btc/usd appreciation.

[Nagalim]

The risk of a peg break is greater than the reward of some buybacks. That discrepancy creates a need for stable reserves that have some small demurrage.

[Dhume]

The thought behind transferring part of Nu held funds to USD stable alternatives is that upswings in BTC price do not really affect us. An upswing in BTC price doesn’t effect Nubit price or USD price. However a significant downswing combined with a decline in demand cut put us in a awkward position. A strong decline in demand would require us to use T4 to support the peg but at the same time due to BTC decline the reserve would be strongly diminished as well. This is sort of a perfect storm scenario but definitely possible and in my opinion the greatest threat possible to breaking the peg.

Now effectively we’re 100% long on BTC at the moment including our “back-up” reserve. I would like to see a situation where the “back-up” reserves are shifted to value stable USD alternatives. So we can guarantee to always have XXXXX amount of USD available to support a decline in Nubit demand.

In practice we will still have a ton of funds (everything in surplus of our 15% reserve) in BTC so an BTC upswing will still be profitable however a BTC downswing will not affect our “back-up” reserve.

[quote=“Cybnate, post:4, topic:3215, full:true”]
This took a while to digest and I’m not sure whether I got this entirely clear. Do I understand that this takes 30k in BTC out of T4 and replaces it with 30K USD? So it won’t add any funds to T4 over the 15%, something I would like to prefer see?[/quote]

Yes it is meant as a replacement of volatile BTC currently regarded as our T4 15% reserve and replace them with value stable USD.

I’m ok with the collateral. Still having a hard time of justifying 300 NBT a month just for BTC volatility. Would be a lot easier and more valuable in my opinion if it was just adding an additional layer of security to the tier 4 funds instead of replacing.

Personally I would like an additional layer on top of the 15% we currently reserve in accordance with this motion: [Passed] T4 Circulating NBT Threshold

I think @ttutdxh’s proposal DR (Distributed Reserves) would be extremely well suited for this, I would love it if we could have the current 15% reserve and an additional 10% reserve in DR, totaling 25% reserve compared to outstanding Nubits.

[Cybnate]

Thanks for the clarification. Adding to my datafeed. Will need to look into the DR proposal this weekend amongst a few other discussions.

[Dhume]

Your welcome, thanks for your support.

@Nagalim could you add this motion to the hot list?

[masterOfDisaster]

Anybody can do that. It’s a wiki post.
I’d do it, but don’t want to mess up the post on my mobile phone…

[Dhume]

Oh I didn’t know that, I’ll try adding it myself

[cryptog]

Using only bks as collateral is not satisfactory to me.
It is an illiquid asset at this stage.
I would have wanted something like half of the whole collateral in bitcoins.
Besides, 30k is a bit too much.
I would have preferred something like 15 or 20k.
However the overall idea of NuSafe is good.
I am hesitating to vote right now.

[Dhume]

Liquidity of BKS on the open market is indeed very low, although @tomjoad’s post in the other thread seems to indicate a decent amount of volume is happening in private trades. A collateral in bitcoin would be interesting as well but of course bitcoin is very volatile (which is the reason for doing an hedge in the first place) I’d argue more so than BKS.
I would welcome a similar proposal to Nusafe from a shareholder proposing to put up BTC as collateral. Unfortunately I do not have large amounts of bitcoins for long term holding so this is not an option for me. I went with 30k based on my poll in the other thread and the suggestion from @nagalim.

[Dhume]

This is going to need more support if it is to pass, I urge shareholders who are in favor to not forget to vote for this proposal.

[cryptog]

I would vote for it if the amount was under or equal to 20k. The reason is that I would like to prioritize NSR buy backs.

[Nagalim]

This doesn’t affect buybacks, it replaces some of the btc covering 15% nbt we keep in T4 with a contract for USD.

[cryptog]

btc covering 15% nbt we keep in T4 with a contract for USD.

I see. If this motion passes, 30k among T4 will be kept in USD, the rest in BTC?

[Nagalim]

Yah. The arguments have mostly been about the BKS collateral used to secure the $30k USD contract with @Dhume, the magnitude of the hedge, and the fee. @Dhume conceded to a somewhat generous offer compared to the starting offer.

[cryptog]

In that case, I think this motion is reasonable. It would help Nu protect the peg in case of a black swan event in which bitcoin undergoes a huge decreased in price.

e3966c4205ebb2966110218435ad21d9c5c8f2c0 voted.

[Nagalim]

Congrats. Now we need to talk about who will hold your BKS. Does BKS multisig exist?

[zoro]

I am excited to see how this will proceed.
About the colateral, what coins can flot accepts?
Whatever has multisig addresses?
I am thinking to try something like this with much smaller amount