While I understand your critique of converting crypto currency funds to NSR (I was marking out that problem in the “identified risks” section of my post), I don’t like the dependency on a party outside of Nu that is being created by involving Okcoin.
Short-term this seems to be the better, the feasible way.
But I think a discussion about the “convert to NSR approach” could be worthwhile when looking for a long-term solution in a world with high NSR trading volume.
I just realized that custodial grants of NSR are being discussed (although my approach differs in some aspects):
If I screw up this thread by continuing the discussion here, I create a new one or ask for my post(s) to be shifted to a new one. My proposal might be a possible “solution to custodian loss of value due to BTC exposure”, but of a different kind.
The longer I think about that “convert to NSR and burn the NSR” approach, the better I like it - did I oversee obvious problems (beyond the dependancy on the trading volume?
Burning incorporates the value of the alternate currencies (even converting parts of USD to reduce the counterparty risk could be considered depending on the market situation) into the Nu network.
It would be required that burning the NSR automatically creates an address.
To this address the formerly burned NSR are spawned by the passing of a special custodian grant.
That grant would need a significantly lower threshold to be passed to allow quick reaction to a need for the NSR.
The grant for that needs to be created immediately after the burning to be prepared for the need of the NSR.
This grant can be put in feeds and distributed to clients which subscribed to them without share holder attention and hence very quickly.
Although it might appear not very secure to have a grant with a low pass threshold, I think even a very low threshold to pass this grant is more secure than keeping the currencies at an exchange or in the wallet of a custodian.
Even allowing such a grant to pass after 2 blocks in a rolling window of 30 blocks is better than not burning the NSR.
And a low threshold allows quick emission of the NSR. Remember that this is for tier 3 of my proposed solution, there are funds in tier 1 and tier 2 as well!
In case such a grant passes “accidently” because a feed includes the hash without need, there’s nothing more to do than to burn the NSR once more.
In case a custodian disappears for whatever reason, the value that is otherwise kept to the exchange account and maybe wallets (and maybe lost forever!), is still in the Nu network.
In that case the automatically created grant needs to be withdrawn and a standard grant to create the NSR at a different address with the standard passing threshold needs to be created.
Problems I’m aware of:
- the very low passing threshold seems could be usable for exploits. It’s required to tie such an address to the NSR burn transaction (sounds like a protocol change), as only this poses no additional risk; the automatically generated address is in control of the custodian where the funds were without burning anyway. In case the custodian disappears, a standard custodian grant with standard thresholds would be used to create the NSR.
- to recreate the burned NSR quickly (faster than 50% of 10,000 blocks; minimum ~3.5 days) the protocol needs to be changed
- feeds are not yet implemented, but as this solution (if it turns out to be a solution) is for the future, that doesn’t hurt
- abuse of the automatically created address is possible; scenario: custodian disappears, new custodian grant is created to issue NSR, evil actor creates a custodian grant with the “old” address and the “special grant low threshold”. NSR are created and lost to the old address (if the address is in control of the attacker it’s even worse; this would incentivize “playing” the role of custodian to abuse that at a later point of time).
Only if it’s possible to deactivate the “old” adress by tying a “new” address to the burn transaction (effectively replacing the “old” address) this attack vector is mitigated
This is a lot of talk. Forgive me wasting your time if it’s complete nonsense.
