Quantifying the Model


#1

Nbt price is replaced virtually by central reserves. In this way, Nu attempts to avoid direct nbt supply inflation and deflation as a response to changes in demand, and instead uses a central reserve.

If reserves are under target:
Nsr is sold for btc, which is added to reserve

If reserves are over target:
Nsr is bought for btc, which decreases reserve

Loss mechanisms:

  1. Btc price fluctuates, causing the virtual nbt demand to fluctuate and cause fluctuations in the perceived reserve-target ratio.
  2. Nsr price fluctuates, causing a direct spread loss when adjusting reserves closer to target.
  3. Blockchain costs (mint rate)
  4. Employee costs, etc.

Profit mechanisms:

  1. Nbt spread
  2. Blockchain fees

Let’s dismiss blockchain fees (P2) and costs (L3) as negligible.

Nbt spread is ~1% on txns, BTC daily volatility is ~5%, nsr daily volatility is >20%.

Nbt volume is ~$500/day. Interaction with reserves is ~$100/day.

Simplest quantitative model (neglect btc volatility):
Loss = $1000.2 = $20/day
Profit = $500
0.01 = $5/day

Conclusion: Btc volatility directly affects reserve value, so therefore requires a statement about the size of the reserve. Without even considering this loss mehanism, Nu operates at a loss of ~$15/day.


#2

Current model is certainly not sustainable. NBT demand needs to be stimulated, but therefore you need trust which mostly comes with expensive reserves. As posted in another thread, a solution could be to create a sustainable profit model for the reserves. I haven’t anyone seen trying that. Most likely due to regulatory issues and high risks.

Nu is one of the few coins set up for this type of experiment. Hope it will take its chances sometime. Possibility is when the crypto economy becomes more sophisticated. We are already seeing index funds, hedging and certain types of assets entering the blockchain. I believe it is a matter of time when e.g. loans will become possible and feasible creating a more viable model.


#3

Risks are a key problem for that.
Would Nu still have NBT or NSR listed, at least the Poloniex lending feature could have been tried for BTC. Cryptopia doesn’t have that feature.
Of course you face exchange default risk when lending at an exchange, but exchange default is already on the agenda by trading there with Nu funds.

My recommendation is to search for ways to lend money. I’ve made that recommendation before.
That’s what banks do to make money. Nu is a central bank.
If Nu can make real money from lending reserve, nobody needs to be afraid o 100% reserve.


Balance Sheet Attacks
#4

That is where we need a decentralised exchange.[quote=“ConfusedObserver, post:3, topic:5149”]
If Nu can make real money from lending reserve, nobody needs to be afraid o 100% reserve.
[/quote]
:bks:


#5

And @Phoenix knows that we know that. I am sure he is going to try to raise additional funds and dilute initial investors heavily very soon. All B&C funds disappeared like magic, and that is very sad because I was a strong believer in the project and put almost 20k into it. But I am done with it as much as I am not interested in investing money into Nu. Not because of the ideas, since they have potential I think. It is because of an absolute maniac with majority control. @Phoenix can decide to print shares at any time and destroy your investment. He dictates the rules at all times. Raise rewards for signers? No problem, here we go. Stake at 10x the rate of others, yeah. Now that wouldn’t be that much of a problem if he proved to be a skilled manager. But he isn’t. @Phoenix raised much more money for B&C than needed to create a working product. The money is gone, and there is much less than a working product. That’s his story, simple and short.


B&C custodians? What's up?