Potential Revenue Model: Liquidity as a Service

Sentinelrv 2016-06-16 20:22:08 UTC #1

What if we were to just call it what it is, our first experiment in pegging which shareholders failed in maintaining. People are trying to create recovery plans to reinstate the peg, all of them costing significant NuShare dilution. @Phoenix (most likely Jordan) said the following…

The peg has already been lost, so since the effectiveness of sales are going to be dramatically reduced, shareholders are probably about to embark on a path of unlimited amounts of NuShare dilution in order to save our current peg. I really wonder how many shareholders are going to stick around, because with the amount we are in the debt, it will end up taking a whole lot of NuShare sales in order to get us out of this and that depends on if people keep buying them. NuBit holders aren’t even getting what they originally paid for them either, with plans to buy them for less than $1. What if we tried a different route.

Before all of this went down, we were talking about possibly introducing a new product series. It would have been a fixed supply proof-of-stake currency which mimicked Bitcoin’s inflation rate. Holders of this currency wouldn’t have to mint, as it would be taken care of by NuShareholders. Since the currency is fixed supply like Bitcoin, it would require no pegging or liquidity operations to maintain. It would require altering the client to include the new currency and shareholders would need to regularly provide FLOT with new currency to sell on the market in order to keep up with Bitcoin’s inflation rate. Here are the threads discussing the idea…

Why don’t we just take our existing US-NBT product and convert it into this new free floating fixed supply PoS currency. We would do the following…

Rename US-NBT. There are names discussed in the linked threads.
Increase Supply: Take the existing US-NBT supply and create a grant to increase it to Bitcoin’s current supply. Auction off these coins to whoever wants to buy them. This would give us some profit in order to pay back B&C Exchange.
Mimic Bitcoin’s Inflation Rate: Shareholders would provide FLOT new currency at regular intervals to sell on the market in order to keep up with Bitcoin’s inflation rate. Any proceeds made would go toward paying off B&C Exchange.
NuShare Sales to Repay B&C Exchange: The entire time weekly auctions get held for lots of NuShares. The proceeds again go toward paying off what Nu owes to B&C Exchange.
Tweak Pegging Model Through Motions: NuShareholders pass whatever motions are necessary to change the pegging model for NuBits, for example raising the reserve to 100% and anything else needed to increase confidence in Nu’s pegging abilities.
Reintroduce/Reboot US-NBT: Once B&C Exchange is complete and ready for launch, Nu would reintroduce US-NBT. This would be a complete reboot of the pegging system with a brand new supply. Whatever Bitcoin is received through NuBit sales from customers willing to give Nu a 2nd chance will be put in our reserve. The reserve cannot be touched for spending on development or marketing. NuShares must be sold in order to raise funds for those expenditures. It also can’t be distributed to shareholders in the form of dividends or share buybacks. The reason to wait for B&C to be released is to protect Nu’s reserve funds from theft through the decentralized nature of B&C Exchange. We don’t want a 2nd occurrence of the centralized exchange hacks, so we should wait.
B&C Exchange Pays Nu for Liquidity Service: BlockShareholders pass a motion pledging to help Nu sustain its pegging operations by paying for its liquidity service. Basically, if Nu is losing reserve funds through its pegging at a tight spread to the dollar, BlockShareholders would offer Nu a certain percentage of its income from BlockCredit sales in order to help pay for the liquidity operations that Nu is providing to B&C. This way Nu is being paid for its liquidity operations and not providing this valuable service for free. As Nu finds different ways to earn revenue over time, it can decrease its cost of liquidity to B&C.

So basically we will have two series of products, Stable Value and Stable Supply. Our existing product gets converted into a free floating fixed supply PoS currency. Any proceeds from these sales go toward paying B&C’s development funds. NuShareholders still suffer dilution, but it’s much less than trying to salvage our existing product. The proceeds go toward getting B&C finished and its website built. We reboot US-NBT with full reserves and B&C paying Nu for our regular liquidity service. What do you think?

[Draft] Buy 1000 NuBits each day

[Discussion] Long term Nu recovery plan and B&C debt settlement

Our options to save Nu - June 25th, 2016

[Draft] Buy 1000 NuBits each day

Chronos 2016-06-16 23:00:06 UTC #2

Well! My opinion is highly sought these days.

I think a token that tracks the supply of BTC isn’t very useful, so people generally won’t store, use, or trade it. For what purpose would someone want this token? Would you buy it? If so, why?

Dhume 2016-06-16 23:07:57 UTC #3

I see most merit in launching B&C using only crypto / crypto pairs like BTC/ETH, BTC/LTC , BTC/BKS etcetc and leaving Nu out. If BKS price goes up significantly we can propose to use profits and some dilution to buy a massive amount of Nushares getting Nu out of debt and reestablishing the peg.

Why would BKS holders pay Nu for liquidity service if we can just switch to a different stable crypto instead? Nu already owes Blockshareholders 120-150k USD. Essentially Nu used the funds raised for BKS development to buy back Nushares at a highly inflated rate, Can’t believe I didn’t realize at the time of the buybacks that we were effectively using the funds BKS buyers brought into the Nu system to conduct the buybacks…

Sentinelrv 2016-06-16 23:08:04 UTC #4

There are replies about it in the threads I linked. I thought converting it into a different product would be better than abandoning it completely, which would require us to skip steps 1-3 and go directly to 4-7.

Sentinelrv 2016-06-16 23:42:11 UTC #5

Well, my thinking was that BlockShareholders pledging through a passed motion to pay Nu a portion of income to cover the costs of their liquidity service would be the only way to motivate NuShareholders to hold NSR sales in order to pay back B&C Exchange the full 120-150k USD. If that isn’t done, then BlockShareholders may need to massively dilute as well in order to make up the remaining funds necessary to complete everything.

So basically either we dilute BKS in order to make up this money or we pledge to pay Nu for their liqudity service and NSR is diluted instead to pay for it instead. I guess it also depends on how many BlockShareholders are also NuShareholders and still want to see it succeed.

Dhume 2016-06-16 23:45:29 UTC #6

So essentially your suggesting to pledge to give more money for free, in order to hopefully get back money we’ve already given Nu and they have lost?

If Nu wants to receive profits from B&C we need to get something in return like NSR. I can see a scenario where BKS holder pledge to use 10% of the revenue stream to buy NSR from Nu at a cheap price. Thereby slowly helping to build up Nu reserves again.

Sentinelrv 2016-06-17 00:05:52 UTC #7

Not for free. Liquidity provision costs Nu money. Nu is providing a service to B&C, so they will charge for providing that service.

No, there is no hoping in this. B&C pledges through motion to pay Nu for their liquidity service. B&C doesn’t need to pay anything until much later after Nu is already providing liquidity to the pairs on the exchange. The only point of the pledge is to show NuShareholders that if they dilute their NuShares to pay B&C back all the money they owe now, that B&C will sign up and pay for Nu’s liquidity service later. B&C pays Nu nothing until Nu provides liquidity on the exchange. If B&C makes the pledge, but NuShareholders don’t dilute in order to pay B&C back, then B&C pays nothing and there is no contract between the two DAOs. If NuShareholders do dilute and pay back everything, then there is a contract between them.

Dhume 2016-06-17 00:11:24 UTC #8

We can’t use Nubit as long as it’s not pegged at 1 USD there is no point in adding it to B&C at that point.
If we get to the point where Nu is actually operating liquidity services again that are useful to B&C (aka with a 1$ peg) then they should already be “saved” and so should our BKS funds.
I only advocated temporary liquidity services when B&C went live to generate addition liquidity on the order books. I don’t see Nu recovering anytime soon so I don’t see a point in having a liquidity service at all anymore. NBT/BTC price should be similar to USD/BTC price and be driven by the market not by us. Nu should just provide NBT/USD on ramps so people can exchange their NBT for USD and vice versa. We should not have any business pegging a NBT/BTC pair, and from my understanding we only did that to generate additional demand it was never meant to be a permanently supported pair.

Sentinelrv 2016-06-17 00:25:58 UTC #9

I was suggesting above that we either convert or abandon the current product and reboot it later, so Nu would default on its debt and attempt to start over later. The only way I see NBT/BTC working without the required transaction fees necessary to cover liquidity expenses would be to create revenue by charging for the service. If nobody sees a liquidity providing service as useful enough to pay for, (B&C included) then Nu cannot function providing a NBT/BTC peg.

crypto_coiner 2016-06-17 00:33:25 UTC #10

It is my understanding too

Sabreiib 2016-06-17 00:44:46 UTC #11

@Eleven almost finish most feature of B&C now, no heavy dilution of BKS I/m afraid.

B&C may give out a small portion revenue to Nu after B&C’s success.

Sentinelrv 2016-06-17 01:11:17 UTC #12

@Sabreiib, non-core infrastructure can no longer be completed because the funds are gone.

https://bitcointalk.org/index.php?topic=1033773.msg13974062#msg13974062

cryptog 2016-06-17 03:29:43 UTC #13

I personally see no demand for it.

I agree. It does not make sense for B&C to integrate NuBits if the peg has not recovered.

I do not think it is correct. Jordan Lee converted the funds to NuBits in order to protect the fund from bitcoin volatility, which is understandable given than the funding for NuBits development was decreased by more than 50% back in 2014 and he did not want to make the same mistake.
I do believe though that he should have left a portion in bitcoin just to hedge.
But anyway, the buybacks were generated by the big NuBits sales back in Nov 2015 (100k NBT in 1 week) or so.

I do not think so. From I understand, the exchange functions are not implemented yet.

So basically, B&C Exchange still needs a lot of development.
We made good progress tks to @Eleven but still there is a lot of work that remains to be done, I feel.

But as you know, the funding of B&C Exchange has been harmed a lot because of the failure of the peg.
The fund is probably around 100 k USD / 3 (assuming that there is enough liquidity on NBT/BTC , which is uncertain), I guess.
So B&C Exchange shareholders have the following options:

wait that the peg is recovered with enough liquidity: it can take a while because Nu shareholders need to set a new strategy and sell NSRs while the unit price is very low
dilute by issuing new shares: I remember that we could have raised more back in July 2015 because there was more demand for BCS than what could be dealt with. Of course, now is a different situation so whether or not we can raise easily new funds is uncertain

As a shareholder of both Nu and BCE, I d be ok with the combination of both options.

Sabreiib 2016-06-17 03:43:11 UTC #14

So Nushare holders need to pay B&C’s debts, they may donate their BKS to B&C developers, otherwise NBT is never voted on B&C platform, at least I will against NBT appearing on B&C!