Proposal: Buy-side liquidity support

NuShares Grants
#1

I was hoping that we’d have others who would be stepping up, too, to offer liquidity support after we learned that the previously pledged liquidity wasn’t going to arrive, but since I haven’t seen anything from anyone else, I’d like to submit a proposal.

To be quite honest, my hope is that this proposal is rejected in favor of someone who can offer a better interest rate for a comparable (or greater) sum of liquidity. However, if that doesn’t come to pass, I believe strongly enough in the long-term benefit of what Nu has to offer that I’m comfortable taking the risk to make sure we have a viable position on the exchange.

Proposal

Custodian: Ben
Submission Date: 22-Sept-2014
Requested Grant Amount: 0 NBT
LPC Custodial Fee: 9,120 NBT

NuBits Grant Address: BP82xMZTWxPDoMMSHdmQGSuJ7HCdyCCLow
Vote Amount: 9,120 NBT

Proposal Details:

In exchange for the NBT fee generated by the grant, I will personally place 6,000 PPC in buy support against Kiara’s sell wall on CCEDK. This presumes that she’ll be placing a portion of her grant funds on the PPC/NBT market there, at least until which time there is enough USD liquidity on the market to support the exchange of the pledged PPC into USD. If that point is reached, I plan on shifting this buy support over to the NBT/USD market, following her lead.

At the time that this proposal was published, today’s average market rate is $1.52/PPC. This means that the USD value of the funds I’m making available for liquidity is $9120.

Expecting that the market will react in a positive fashion towards Peercoin, once the full details of Nu are released, I anticipate that this holding will be worth significantly more in the next couple of days. I’m willing to miss out on any exceptional short-term gains to do what I can to support the stabilizing of the NuBits peg. However, to offset this, I’m going to ask the network to accept a fee of 9120 NBT for my risk.

If passed, this pledged liquidity will be available on CCEDK until at least two other liquidity providing custodians have been elected, or until the buy-side support has reached a 25x multiplier of this initial fund ($228,000).

Addendum: NuBot, running in "dual-side liquidity" mode will be used to handle these funds while they are in action.

Note: If the shareholders agree to this proposal, in public support here on the forums, I am comfortable placing these funds on the exchange immediately, rather than waiting for the full voting period to occur.

If the votes do not come in within 10 days for this proposal, I will withdraw the funds from the exchange and publicly post that the proposal has been withdrawn and that voting should be ended.

Pricing Reference:

1 Like
#4

Yes, this will use the NuBot running in dual-side mode. I’ll update the proposal to include a note about it.

#5

In my opinion, the risks outweigh the rewards here.

Here’s why we don’t need this in the short term:

  • There is no downside risk to the peg if no NBT exist in the hands of those who wish to sell.
  • The only people who currently own NBT are those on payroll (who will not endanger the peg?).
  • After launch, any NBT entering the market will have 90% buy support from KTm, which should be sufficient, since many purchasers will immediately park their NBT.
  • Therefore, sell pressure is not expected to be high during the first few days/weeks after launch.

Here’s why we’ll only have this in the short term:

  • This liquidity is only pledged until $228k is available in buy support.
  • This will happen once KTm sells $253k of NBT into the market (using the 90% rule).
  • Therefore, we will lose these funds after KTm sells just 14% of her original grant into the market.

Here’s the downside:

  • If KTm sells 14% of her grant in, for example, three weeks, and this retracts the funds, then the interest rate return requested by this proposal is 1733% annualized. The fee is very, very high.
  • This proposal will inject 9120 NBT into the supply.
  • The additional supply will eventually result in sell pressure and push against parking rates. Once created, NBT is not destroyed. We’ll have to deal with it forever.

Therefore, I’m not in favor of sponsoring additional LPC funds at launch, at these fee levels.

#8

Yes, yes it is. I would rather not have to make this support available, and would have preferred that the shareholder that had originally offered to handle LP would have been able to follow-through with that plan, but they weren’t, so we’re now in a different place.

I’m certainly open to suggestion, and if the shareholders don’t feel that this is needed, they won’t vote for it. In that case, I’m freely able to trade against my PPC on the open market and I might make an even better return.

#9

Yes, and when the bot goes back online, it checks if everything looks ok. If it doesn’t he will “reset” gracefully and create new orders.

#10

Good to know. That makes the bot sound stable to me.

Desrever, as I understand it, you played a major role in the building of the NuBot. What is your technical analysis on the need for a backup custodian, solely from a connection reliability perspective?

#11

Side note: There’s no reason why KTm shouldn’t be able to fill her role by splitting the funds up over multiple accounts and running NuBot on multiple cloud servers for redundency.

#12

This is my intent. Redundancy is a strong concern.

//KTm

#13

@Ben - I hope that this proposal is not needed. The dual-side liquidity provided by the grant that I am overseeing will give us the backing required for the peg…but I understand your concern. I too, was caught unaware that we would not have a dedicated LPC at launch, but realize that being adaptive is the need here.

//KTm

#14

[OT][quote=“Chronos, post:10, topic:200”]
What is your technical analysis on the need for a backup custodian, solely from a connection reliability perspective?
[/quote]

I wrote something very similar in the chat a few minutes ago. Its a very good idea and after a decent planning and reaching agreement I’ll submit here a proposal for a design change of the bot. Ideally each custodian will be required (on each exchange) to create two separate accounts and then they will have to run two different bots : main-bot and backup-bot . Ideally on two different machines .

[/OT]

#16

I’ll withdraw this proposal from consideration, and just keep an eye on things going forward. Hopefully the existing dual-side liquidity pools will be enough.

#17
#18

There was a period of a couple of weeks where we were planning on having to provide liquidity on a BTC/NBT or PPC/NBT pair (as opposed to NBT/USD), which involves significant potential for loss of principle. The degree of risk is quite difficult to gauge. This changed people’s plans from what I can see. Similarly, the difficulty of converting BTC to USD on CCEDK and BTER is changing the calculation. Finally, KTm is providing a large amount of liquidity at a low price, so that also made people feel like the need isn’t there.

I still think redundancy in this role is a critical issue for us.

What is the risk of being a custodian on NBT/PPC?