The notion that the liquidity engine is not efficient compared to holding reserves is plainly false. Reserves are incredibly costly. One excellent way of explaining the new low NuShare price is that it is an adjustment taking into account the tremendous expenses Nu now faces in the form of building and maintaining a reserve. A liquidity engine, when used, functions at a small fraction of the cost of maintaining reserves. Cost savings is the most compelling reason to use a liquidity engine. It is very efficient. However, it is worth noting that there are decentralized liquidity engines and more centralized ones. Decentralized liquidity engines are not only much more expensive than somewhat centralized ones, but also lack the ability to make competent decisions at this scale (less than 1 million NuBits). It appeared to some observers that our underpaid and highly distracted decentralized liquidity providers (distracted by things like real jobs) could understand and manage the basic operational principles of the liquidity. Chief among these principles are that the peg must be maintained and that NuShares must be sold if the buy wall gets thin at all. Apparently notions like these were too much for our amateur liquidity providers. So, we need expert management of liquidity operations. This is all very awkward because most active forum participants are these amateur liquidity providers. So the community doesn’t like to hear that our decentralized liquidity operations demonstrated profound incompetence, but yet those are facts and we must face them in order to provide an appropriate remedy. If don’t define the problem accurately, the solution prescribed will be inappropriate.
I don’t see a consensus emerging that the liquidity engine is inefficient. This seems improbable considering the clear facts that it is much more efficient than holding reserves.
To raise a100% reserved peg, the reserve has to increase at the same rate.
Ideal Liquidity Operations practices and policies
Plainly false? Not with this evidence. The low NSR price is because it’s difficult to build a reserve, because that means earning Actual Money™. Maintaining a reserve is a completely different task.
You’re saying this is the same:
- Trying to earn $100 when you only have $5
- Trying to keep $100 in your pocket after it has arrived there
Not quite the same.
Thank you @Sabreiib for sharing this perspective. I think it represents how a typical NuBit holder feels.
The NuShare price is low because we have shown a very poor commitment to the value of NuBits. Finding fancy ways to defraud NuBits holders in a way that appeals to the nerd in you is no way to build a customer base.
We have to promote the narrative that we discovered we do not have the expertise sufficiently distributed to operate a decentralized liquidity engine at this scale. There is good reason to think we could do that with 100 million NBT in circulation, but not with less than million NBT, as is our current situation. What we can do at this scale is have Tube and gateways operate under the guidance of a liquidity operations expert. I am confident this is the proper direction for us to move in our current situation.
It is difficult to build a reserve when NSR FLOT refuses to sell any NSR, which was the case as the crisis emerged. That doesn’t mean it can’t be done, it just means the lack of action was incompetent, as well as a clear violation of multiple passed motions that regulate NSR sales.
Supposing it is true.
Constructive and interesting to know is this in a kaizen approach:
- why incompetent lpc were chosen
- how to select competent lpc
- why was this nsr sale motion violated?
If one does not ask the good questions there s no way good answers will come out.
Because jordanlee, our lead developer, verbally attacked our lp’s and flot. He pretty effectively used his position to make the system fall apart in an attempt to satisfy a hugely risky short made during the buybacks.
The system was designed to function on a larger scale. The money supply is only around 800,000 and the NuShare market cap was only around 2.5 million USD before the drop this past month. We likely had around 20 people providing liquidity. The entire enterprise ran on about $15,000 per month, with only a fraction of that going to liquidity operations. There isn’t a lot of money being paid to liquidity providers. Much of the compensation goes to silent users of pools and NuLagoon. The pay for decision makers like NSR FLOT members is very low, a little more than $400 every 3 months, as I recall. We need these people to watch the forum regularly, understand passed motions that now total dozens of pages, and consider the effect of new motions on their roles. These are capable people with full time professional jobs and families. But our network isn’t the major focus in their life. We are asking too much for what we can afford, although it would work if we had considerably more scale.
I know these people are capable and well meaning. It is a position that requires expert knowledge. I am personally incompetent at most jobs. There are only a few I’m actually well qualified to perform. Our liquidity providers are no different.
You have to pay more. We can’t afford to pay 20 people a lot more, but we can pay one person (the Chief of Liquidity Operations) a lot more, affordably. Give this person the authority to decide what is done with reserves and NSR sales. Other liquidity providers, of which there will only be a few in the immediate future, will comply with the expert recommendations from the Chief of Liquidity Operations. In this way liquidity operations can have coherence and well informed decisions. The costs will be much less than in the recent past. It will still have a degree of decentralization as there will be several people involved.
I have thought a lot about that. I am not sure. I would like to hear the opinions of others. I would guess ignorance, inattention and a short sighted desire to not dilute NSR ownership were all factors in various cases. In 2015 when we had weekly NSR sales, it did put pressure on the price, but it was modest. Shortly thereafter, gains of over 100% were seen. It didn’t damage us. Allowing the peg to break causes extreme pressure on the NSR price, as we have seen. Even modestly heightened risk of a peg break will lower the value of NuShares. That is why need to be careful to quickly refill reserves when they have crossed certain defined thresholds. The more out of balance the system gets, the more expensive it is to rebalance it. We need small, assertive and early actions to rebalance things. We didn’t get that. Now our actions are quite late, and the price for corrective action has risen a great deal. Not selling NSR was a poor calculation as well as being a clear violation of multiple motions, as has been discussed elsewhere.
You are saying someone’s criticism of particular actions and suggestions for alternative actions made NSR FLOT members unable to sell NSR?
Really? How does that work?
B&C welcomes high value trade, dislikes micro trade.
If I wanna sell 20BTC for 2000LTC, B&C is my first choice because after so many bad things happened on centralized exchange, I don’t trust them any more, especially with my big money.
And I don’t care paying 12BKC(USD) in this 20BTC value transaction at all, because the trade fee is as low as 0.1%. And I keep my private well on B&C platform.
B&C just need performe less than 100 such high value transactions per day to achieve one million volume. Of course initial stage, our fee (BKS/tx) is low but if B&C becomes popular enough, we can ban those micro trade by raised fee, WE DON’T CARE TRADE QUANTITY, WE CARE VOLUME IN USD.
BTW, I can buy BKC directly on B&C with BTC.
@Phoenix, you have mentioned multiple times that Nu cannot afford liquidity engine experts given its current small scale, so we should instead elect one expert to lead operations.
Can you please explain what qualifies somebody as an expert on liquidity engines? Since this model is brand new and has never been tried before, how is it even possible that there are experts available to run it? The only person who can claim to be an expert is the person who designed the system, @JordanLee.
And even then, since this is a brand new concept, the designer of the liquidity engine model can only use theory to explain how he believes it’s supposed to function. The designer cannot have absolute certainty that his theory is based in reality until he can actually prove in the real world that he can run the liquidity engine successfully in a sustainable manner without danger of collapse.
How can you be so confident you are an expert when this has never been tried before? What qualifies you as an expert on liquidity engines?
[Passed] Create Chief of Liquidity Operations Position
I know the compound negtive interest well, whether the remaining is 28.24 or 14.12 is not important, the key is you can change customers balance as you wish, this is the red line, customers will prefer FIAT/goverment than NBT/Nu, at least they can parade in real world, but in cryptoworld, they can do nothing if Nu decide to cut 60% of their balance.
Welcome our customers competition, if they provide lower spread, we have better pegging quality and the service is free, this is exact the situation I want to achieve. Nu can only provide official guide spread, within it, is the room for a spontaneous order，ie the result of human’s activity while official spread is the result of human’s design.
Borrowing NBT by pledging NSR is on blockchain, it can be implement: you park NSR to granted some NBT on a ratio voted by nushareholders, automatically.
I agree. It is irrational, especially considering the Standard and Core only asks to dilute less than 1% per week.
It seems like you are realizing that LPC has to be a full time (professional) job that is well paid and even affiliated to the expert title.
- full time
That is only possible with the right incentive.
LPC does not pay well
Maybe if it pays well, gets recognized and lpc gets public like bitcoin miners
- expert title
That needs much education, advertisement, evangelism, and centralization with foundations
I don’t oppose centralized operation in initial stage, but if Jordan want Nu becomes success in long run, the “spontaneous order” is a must, just like Satoshi designed a bitcoin system that automatically drives people to mint to hoard.
This is very important architeture design, the duty of software architect.
What’s that and what does it have to do with Satoshi and Bitcoin?
by not knowing human nature, playing with fire, getting the house burned, and having to come back as a phoenix.
It was your choice to get into a risky business. You gave the power.
The way I see @Cybnate’s plan is that it sets it up so that Nu can profit from arbitrage between short-term interest rate and long-term ones. We all know most traders are after short-term gains and would borrow money at a high interest rate for certain trading opportunties. @creon’s plan just makes nubit a such kind of debt which Nu charges interest (coin-age fee) if borrowed. If you don’t want to pay you lend it back to Nu by parking them. This scheme makes nubit less a currency business than a lending business.