Recommended Custodial Terms

[Chronos]

This is a topic to discuss what shareholders feel is a reasonable set of parameters for LPCs. Two new proposals have come forward in the past 48 hours, which is a good thing. Both have received shareholder input that the fee is very high.

So, I would be interested in hearing opinions on the following:

• What is your desired amount of liquidity offered in a single LPC proposal for USD pairs? BTC or PPC pairs?
• What length of contract do you consider to be optimal? So far, we’ve seen 30-day contracts, but perhaps a different length would be preferred.
• What fee do you consider reasonable, for a low-to-moderate-risk exchange such as BTER?
• Do you have any other comments for prospective LPC proposals?

Thanks!

[JordanLee]

What is your desired amount of liquidity offered in a single LPC proposal for USD pairs? BTC or PPC pairs?

This varies by pair and exchange. There have been specific numbers discussed by LPCs and myself via Bitmessage. I don’t consider this info private if someone would like to dig it up and post it.

What length of contract do you consider to be optimal? So far, we’ve
seen 30-day contracts, but perhaps a different length would be
preferred.

For now, I think 30 days is perfect. I expect longer periods later, but the risks of being an LPC are rapidly declining. NuBot changes being discussed would lower that risk quite a bit more. The situation is changing too fast for long term contracts to be effectively priced right now.

What fee do you consider reasonable, for a low-to-moderate-risk exchange such as BTER?

10% to 15% for a 30 day period on crypto pairs.

[mhps]

Good questions.

What is your desired amount of liquidity offered in a single LPC proposal for USD pairs? BTC or PPC pairs?

If I have to vote, these days (when there are not many to vote for) the amount can be as little as several k USD on a small exchange.

What length of contract do you consider to be optimal? So far, we’ve seen 30-day contracts, but perhaps a different length would be preferred.

For now 30 day is very good.

What fee do you consider reasonable, for a low-to-moderate-risk exchange such as BTER?

Exchange risk depends on the exchange. There are many ways one can lose fund accidentally on an exchange, from hacking to exchange haircut (vircurex) or going under (mt-gox). I think all LPCs should stay on reputable exchanges. Of course it is nice to have LPCs posted on every exchange but it is not practical. It makes little sense to sponsor an LPC in a dark alley exchange to be mugged.

For the same exchange, exchange risk is roughly proportional to how long the fund stays on the exchange. For a dual-sided (buy and sell) LPC the fund presumably stays on the exchange for the entire contract length, because fund cycles between the two walls. As a first order approximation, the risk can be estimated by calculating what probability the exchange goes under in the contract period. If we use an exchange that has been around for two years (24 months), the probability for it to go under, causing a total loss of LPC’s fund, in one month is 1/24, about 4%. So if a contract of one month, this part of risk is about 4%.

Single side LPC is different. The operation is basically sell or buy NuBits. When Nubits are sold or bought, the proceeds can leave the exchange. When all are sold/bought, the LPC’s job is done. So the risk can vary between 0% to 4% in the above example.

On top of exchange risk to compensate LPC’s cost 5% can be added. There should be a cap I think. But I would like to hear from existing LPCs.

[xjabc]

I would like to hear from existing LPCs.

As an only existing self-funded LPC, I never do the calculation about how much compensation should be. Before Nu released, I even said to Jordan I can accept 0% return.

To be fully honest, this is because I have two incentives: (1) I want to be a Nushareholder. (2) want to build reputation to the community.

However, at the moment, I am hesitated about the meaning of all as everything changes really fast. Now the two incentives mentioned above disappeared: (1) there is a public place to buy NSR even cheaper. (2) reputation is not important or even needed in Jordan’s multiple tier mode and the service first pay next mode. Moreover, (3) the size of my money is insignificant compared with size of Kiaria’s. (4) the trading volume of the first half operation period is also insignificant.

I am sorry for the unclear thought, there is too much information about LPC in recent days, I am still thinking about it.

Any way, I will submit a proposal to continue 1 term of my operation according to Jordan’s fee suggestion, but I am considering reduce the size of the fund in this term.

10% to 15% for a 30 day period on crypto pairs.

[seki]

i think in a very new exchange, even a fee of 25% is logical. in all the others i go with Lee’s proposal for 30 days. for more days the fee can be higher of course.
we have to consider also what are the goals of a costodian, if he/she have priority to build
reputation, then a much lower fee can be required.later on, the fee can be higher

[mhps]

i think in a very new exchange, even a fee of 25% is logical.

There are so many medium/low risk exchanges I question why setting up LPC on an exchange where the overall risk is 25% per month in the first place.

Although I used age of an exchange as the criterion in the example, exchange selection has to take account into other factors such as transparency. Ronny from CCEDK is very communicative and has a track record in his previous real world business; while we basically don’t know any thing about BTC-E management. Although CCEDK is much younger than BTC-E I feel they are on similar level of default risk, which is rather low.