Peg lost?

[Dhume]

The difference is that most people bought Bitcoin for way cheaper then 1000 dollars, while no one bought Nubits for less than 1 dollar. Your comparison is not valid.

[Nagalim]

If someone makes BitUSD at a particular BTS price, and then destroys it at another BTS price, making BTS in the process, where does that BTS come from? If BTS has low value, that means more BTS must be given to the successful trader than if it had higher value. This is susceptible to the same black swan of BTS value, and if there was a lot of adoption all the traders would sell all their BitUSD during a btc bull run, same as Nu. The BTS price would crash as BTS flooded the market, triggering panic sells and stop-losses, and it would black swan. Again, only if there were actually people using BitUSD.

Maybe pegging isn’t possible, maybe it is. In my opinion Nu failed because it lacked a profit source to offset the dev costs. Because the tech requires dev work, all other crypto pegs will fail for that same reason unless they are built as an adage to an already successful system.

[Dhume]

Don’t forget we also wasted a ton of reserve funds on buybacks.

[Chronos]

If someone makes BitUSD at a particular BTS price, and then destroys it at another BTS price, making BTS in the process, where does that BTS come from?

BitUSD is collateralized by more than 100% of BTS. The person making BitUSD has to lock up 2.5 times the necessary amount, I think. No BTS is ever created by the BitUSD create/destroy process.

Today BitUSD kind of works, as it has a minimum floor due to something called “forced settlement” where you get the underlying BTS back, but the price does move around from the peg, because (surprise!) it operates in a free market.

The difference is that most people bought Bitcoin for way cheaper then 1000 dollars, while no one bought Nubits for less than 1 dollar. Your comparison is not valid.

Good point. It would only be valid if BTC were at an all-time low. Imagine BTC falls to 50 cents each. Then almost everyone could use that logic, because nearly everyone bought higher. Of course, the “NBT is a peg” changes things, too. So there are differences, you’re right.

[Nagalim]

BitUSD is collateralized by more than 100% of BTS

I realize this. I’m talking about a BTS black swan. When the statement is that the ‘peg’ survives it, the statement is simply that you can get back BTS at the rate denoted by the price feed. This assumes that the BTS price isn’t black swanning, which is spelled out in the white paper.

You’re right that BTS isn’t created or destroyed by the BitUSD process, but by locking and unlocking it, it effectively is. So what this would look like, is people holding BTS start locking it up in BitUSD, BTS increases in price due to this locking up process (This looks like a buyback). The network grows, prosperity (like Nu had), expenses grow, the network over extends with BTS dilutions to pay for new projects. A BTC bull run causes BitUSD holders to suddenly all sell at once. The protocol starts dumping the BTS price and people rush to get them to market. Buyers dry up as they start to realize that BitUSD has reached new lows of 90 cents, 80 cents, practically giving money away to anyone willing to deal with the conversion of BitUSD to BTS then selling them on the illiquid open market. And everything crashes. Oh so familiar.

You’re right that the BTS protocol would handle this situation way better than Nu, which at this point has broken contract with the Standard and Core motion by not selling any NSR this week.

[Chronos]

@Nagalim Yep, that could happen in BTS, where the collateral crashes so quickly that none of the BitUSD can be recovered for their nominal value. It is called a “black swan” and would required a sudden and large drop in BTS price. A slow but steady price drop wouldn’t cause it, because the “bad” BitUSD would be liquidated before it was under-collateralized. This kind of sudden crash hasn’t ever happened (yet).

@Dhume and @nmei I believe it’s the “sunk cost fallacy” to say: “I paid $x for what I own, and so did everyone else, so I won’t sell it for less than $x, even though it’s currently trading for less.” In a perfectly rational market, traders wouldn’t consider their purchase price, but instead only the current and future market price (except when gain/loss matters for tax purposes). EDIT: But again, a reliable peg changes things. So I do see what you mean.

[Nagalim]

This kind of sudden crash hasn’t ever happened (yet).

Because the situation I just described and called a black swan cannot happen with low BitUSD adoption…

[Chronos]

cannot happen

I would be careful with that phrase, when it comes to cryptocurrency.

[Nagalim]

The situation I described won’t happen with low adoption. A black swan can, that’s easy, just a bug in the software or whatever. But the sitation where people cash out BitUSD all at once will be one like Nu had, a bunch of people are actually using the tokens to hedge and they all want to sell their hedge at once because of some external event to the system, which causes a crash on the collateral. This can only happen if the BitUSD to produce such a crash actually exist, which implies adoption of some form or another.

[Chronos]

“Low adoption” is difficult to define. But the total supply of BitUSD right now is 108179 units, so I don’t know if that’s “low” or not. I’d say that anything can happen, just to be safe, haha.

Anyway, off-topic! Sorry.

[Nagalim]

It’s true, and that says something. BitCNY is actually being used a good bit too. I’m not sure of the history with that one, but I do know that BitUSD had >$100k before BTS 2.0, which says to me that the BitUSD supply isn’t really doing much. The BitCNY supply has increased, though, if I’m not mistaken. I’d love to see a chart of that.

Anyway, my point is that the system remains untested and BTC or ETH or whatever is a bucking horse for stable crypto. If the DAO is smart enough to not bite off more than they can chew, it may do alright.

Nu, on the other hand, is about to show some really interesting things about how DAOs work (or don’t) under pressure.

[rtGG]

It wasn’t a failure of the community, that’s what you don’t understand. It was a bad project f It wasn’t setup appropriately from the beginning. You needed to trust exchanges with your BTC which was really bad. I am just saying that it was bad that people were in this community wasting their time, believing in a pointless magical unicorn project.

I also said I feel bad for people losing money, as that damages crypto as a whole… Now after all this fluffy talk and your nice words I hope you are satisfied with yourself for being such a wonderful person and fell for JL’s magical unicorn.

Ciao

[leka]

Ok I officially lost faith in NBT. I’m out but I hope it can make it through and get back to $1 eventually.

[zoro]

BTC lovers insist that BTC will eventually destroy all stable currencies, fiat included!
Lets see…

[Sabreiib]

The real stable currency is Hayek money, not NBT/Tether, not FIAT.

[zoro]

Is there a crypto following Hayek’s principle?

[Sabreiib]

Till today, none, however, Peershare can implememt Hayak theory, B&C is the best candidate, B&C’s function is an(semi)decentralized exchange, but there is a coproduct: BKC, a potential Hayek money.

I see potential, that’s why I stay in this community, otherwise your Nu already pissed me off.