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
- Btc price fluctuates, causing the virtual nbt demand to fluctuate and cause fluctuations in the perceived reserve-target ratio.
- Nsr price fluctuates, causing a direct spread loss when adjusting reserves closer to target.
- Blockchain costs (mint rate)
- Employee costs, etc.
- Nbt spread
- 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 = $5000.01 = $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.