Protocol Level Burning of NBT in Exchange for NSR at Dynamic Rate Similar to Park Rates / Voting

[nmei]

I’d like to do this right now and see how it works as an end-user. Where is the auctioneer right now?

Nagalim is saying that you could be an auctioneer right now. Just fire up his software and your wallet and go. Post addresses to this forum and we have an auction.

Nu can push NSR to the auction and burn received NBT.

I can’t do it now b/c I’m at work and have no access to my wallets.

[teek]

yeah i realize all that…

manual processes (friction) every step of the way…

[Nagalim]

We can do it the way you like, it would certainly put in most of the code necessary to do seeded auctions in the future. I would suggest some kind of a cap on how many nsr can be minted, as this could easily be used to generate significant stake and overpower the network, allowing you to lower the price and generate even more stake and basically take over, then spike the price back up before other big players can react significantly. (Especially at the current mint difficulty)

[nmei]

Yes, there are a lot of manual processes. They are what we have right now.

[teek]

I would suggest some kind of a cap on how many nsr can be minted, as this could easily be used to generate significant stake and overpower the network, allowing you to lower the price and generate even more stake and basically take over,

If someone wants to provide that much liquidity to the NBT market as to try and take over, it did it’s job

If there is that much liquidity shareholders would vote the swap ratio lower as it is happening. We don’t want a high ratio if our liquidity needs are met.

I don’t see this being an issue.

[teek]

That is why i am proposing something new…

[nmei]

Agreed. There’s a lot on the TODO list for when we have funds.

[teek]

This is not so much of a “todo” list item, this is a “try to save nu” item. Or at least give it another tool to try to save itself.

I am not really up to date on all that is pending. What other protocol saving ideas are waiting for funding?

[Nagalim]

Im worried about the nbt on the market now. We open the flood gates, people trade nbt for nsr at a higher than market rate, driving the share price down further.

What you’re seeing here is an additional nbt use case of burning them directly to participate in liquidity balancing. I support the hell out of that. I’m just worried about the economic implications on the PoS security of allowing free transfer of nbt to nsr. There’s theoretically a particular nsr price att which if the nbt currently on market went through the auction and started minting it could take control of the network overnight.

[teek]

shareholders set the swap rate via voting.

if all the sudden there is demand for 100’s of k of NBT on the market… well… we should be selling it…

If we are selling it, share prices are going up, If i am a shareholder and the swap rates are favorable to me, i may offer nbt liquidity too.

Bottom line is, if there is NBT liquidity, NSR prices go up, swap rates go down, it’s all very self-regulating.

Yes there is a “theoretical” limit here in regards to pos danger, I just don’t see it happening. Maybe someone could model it out. I think that it’s self correcting as is though.

[Nagalim]

If there are about 250 mil nsr minting, you only need about 75 mil to mess with the network. At a rate of $0.001/nsr, this is 75k nbt. So anyone with 75k nbt can take over the network. There are about 700k nbt in circulation.

I was wrong about the overnight thing though. You’d have to wait a week for the shares to start minting. At least the attacker increases the difficulty somewhat during the attack.

[Nagalim]

Youre probably right, that these arguments are far fetched because they depend on a big single actor. And they go away when Nu is healthy with high difficulty. Just pointing out the thought process that led to seeded auctions as a means of throttling nsr creation and responding to network forces more intrinsically than by blockchain vote.

[teek]

Yep, but you do have a very good point and i was just trying to think of a possible solution. This would work a lot better if we were starting from scratch, or we did some kind of rebalance with NSR in some way. (i don’t count a rebalance of NBT as a possible solution)

One thing i just came up with is, double the NSR dilution, give the original to the buyer of the debt equity swap, take the other “half” and divide it equally among the solvers of the last 100 blocks.

You would definitely see mint rates rise!

[teek]

Would like to hear @JordanLee opinion on this… as well as anyone elses!

[nmei]

I want someone to set this up. I’m more than willing to burn some of my NBT for NSR. But I don’t have the time over the next few days to do it.

[cryptog]

I d definitively favor such a mechanism, too.

[Dhume]

You could also use the pledge for this if no one sets up the burn method, aka trade Nubit for NSR.

[nmei]

OK! Will do!

[woodstockmerkle]

I had some sort of similar idea a while back, but was not articulate enough about it.

The TL;DR-- what if you combined in-chain transactions NBT-for-NSR, combined with time-locking.

i.e.: if market is 1000 NSR per NBT, and in-chain we offered it as 1200 NSR per NBT but time-locked them for say 3-6 months.

If this is done in-chain, we can enforce the locking. This can’t be done on other exchanges (though I presume this could be brought in to B&C – perhaps as a “value-add” service to other cryptos)

A few things
1- the risk is offloaded to whomever wants to speculate on Nu over a period of time … i.e.: the premium of in-chain NSR-for-NBT should be related to the time risk
2- it is a “buy” of NSR instead of a “sell” meaning at the time we need to offer NSR, we are not adding downward pressure
3- they are “locked up”, meaning they won’t all hit the market at the same time, and especially at the time of duress

Three roles that need to be filled by shareholders

Hypothetical mechanics: Presumably the public/private keys used for custodians' NBT addresses can also be used to identify an associated BTC (or PPC, etc.) address. With the cooperation of a liquidity provider, the Tier-4 team would deposit BTC into the BTC version of the address associated with an LP's NBT grant address. In exchange, the liquidity provider would then transfer a like amount of NBT to a limited-use address used by the Tier-4 team. The Tier-4 team then disposes of the …

[teek]

The TL;DR-- what if you combined in-chain transactions NBT-for-NSR, combined with time-locking.

i.e.: if market is 1000 NSR per NBT, and in-chain we offered it as 1200 NSR per NBT but time-locked them for say 3-6 months.

I like it. I think it makes a ton of sense. Different swap rates for different time periods similar to parking as well.

Gives us a very good tool with some actual incentive and forces accountability. If the shareholders don’t want to get diluted to all hell they better keep shit in check.