Several Peg mechanism discussion

[Nagalim]

I can buy a bread with 1USD/NBT but I cannot buy same in 2020. Unfair.

Bread today is mold tomorrow, but I do not claim it to be unfair. We are not a business that decides the worth of $1, we are a business that uses the external valuation of $1 to provide market stability.

The B&C exchange charges transaction fee with & per KB, if we maitain same $ price per KB, we are discount our fee gradually. If we dislike discount the fee, I should maintain same buying power value per KB. If we prefer discount our fee, just lift BKC price and lower the BKC price per KB on blockchain.

Are you saying that lifting the price is equivalent to reducing the fee? Let’s pretend the fee is 1% and I’m buying $100 of BTC, so I buy BKC from B&C and pay $101 for the BTC. If the price was lifted to $1.02 and the fee was dropped all the way to zero, it still would cost me $102 for that BTC. The price is a poor lever point, the fee is much stronger. When you change the sell price of BKC you have to pay everyone that currently holds BKC. It would be great if people want to hold BKC, but we shouldn’t be paying them for it; that’s basically the mechanism of parking for NBT.

[Sabreiib]

Are you saying that lifting the price is equivalent to reducing the fee? Let’s pretend the fee is 1% and I’m buying $100 of BTC, so I buy BKC from B&C and pay $101 for the BTC. If the price was lifted to $1.02 and the fee was dropped all the way to zero, it still would cost me $102 for that BTC. The price is a poor lever point, the fee is much stronger. When you change the sell price of BKC you have to pay everyone that currently holds BKC. It would be great if people want to hold BKC, but we shouldn’t be paying them for it; that’s basically the mechanism of parking for NBT.

Do we need charge fee when sell BKC? The BKC is just the fee for BTC/LTC/Doge trade any way.

For example, you wanna buy 100$/BKC(1BKC=1$) for trading on BTC/LTC pair at B&C exchange for some time, your today’s BTC/LTC transaction information ocupies 4KB datasize on B&C blockchain, so you pay 0.4BKC for it. That is 0.1BKC per KB.

One year later, the B&C holders vote for 1.1 $ per BKC, and they lower the fee to 0.091 BKC per KB, so the transaction fee is still 1$ just because B&C holders wanna keep 1$ per KB, of course they may change fee rate to any level if they like.

But your BKC value protected by B&C company against inflation. This DAC provide anti-infaltion money: BKC, better than USD and better than bonds/parking NBT because you can use it at an time.

Except bread, there are quite some product/service do not rot during our life span.

[cryptog]

I like the simplicity of NuBits.
There is zero reserve so that way there is no counter-party risk, therefore increases decentralizedness.
Nu cannot guarantee that liquidity providers will keep a strong support of the peg in case the network is in trouble but Nu can guarantee that shareholders will take measures (such as burning nbts in exchange of nsrs issuance) when the peg is in danger. In fact we have seen that over the past months.
Overall, Nu has shown the strongest peg among competitors with the most decentralizedness.

[Sabreiib]

no counter-party risk

We just shift the counter-party risk from Nu granted LPC to self-funded LPC, the counter-party risk is there, and those LPC will demand high reward for dangerous BTC/NBT pair liquidity.

[masterOfDisaster]

You are right.
The counterparty risk is there, but outside the Nu network.
Nu pays a compensation for those who bear that risk.
And you are right that providing NBT/BTC liquidity is more risky than providing NBT/USD liquidity due to the BTC volatility.

I expect 3 main categories of compensation to form:

• NBT/BTC with highest compensation (exchange default risk, high BTC volatility)
• NBT/(EUR|CNY) moderate compensation (exchange default, low volatility)
• NBT/USD (exchange default risk, no volatility)

Aside from the category the exchange that is used for liquidity providing will for sure have an influence on the compensation.

I hope that NBT/BTC will rather sooner than later not be supported by Nu any longer.
Until that happens, liquidity providers like NuLagoon might provide cheap NBT/BTC liquidity by proxying the NBT/BTC pair to a NBT/USD pair.

[cryptog]

I hope that NBT/BTC will rather sooner than later not be supported by Nu any longer.

If we suppose that B&C will get most of the liquidity, NBT/BTC will become the main pair for a while.//

[Sabreiib]

B&C exchange is an excellent chance for us to try a new pegging method, since we have no guarantee on BKC pegging, let’s wait and see if a second BKC market can come into being or not.

[crypto_coiner]

NBT/USD (exchange default risk, no volatility)

I hope that NBT/BTC will rather sooner than later not be supported by Nu any longer.

Anyone has an idea on how to peg NBT to USD on BCEX without using any crypto pair?

cc @cryptog @Sabreiib

[Nagalim]

peg NBT to USD on BCEX

BKC/NBT. I know that’s not the answer you wanted to hear, but you might be underestimating the relevance.

[crypto_coiner]

What about BKC?

[Nagalim]

Sry, you’re very right, I meant BKC. Edited.

[crypto_coiner]

That seems like a very good idea.

[JordanLee]

a) the zero reserve cannot give enough confidence to customers, if something bad happens, LPC may refuse to help. We all knowt that when you are rich banks are keen to lend you money but if you become poor, banks shut door to you.

Nu cannot guarantee that liquidity providers will keep a strong support of the peg in case the network is in trouble

Today it is true that for tiers 1 to 3 there is no guarantee liquidity providers will continue providing liquidity at the same price, but this is not the case for tier 4. In the future, I expect we can use the escrow feature of B&C Exchange to ensure designated liquidity can’t be withdrawn and orders will be placed automatically by reputed signers as a matter of protocol. Once this is done, we could guarantee a certain sum of liquidity for a certain period of time into the future. Even if the risk to funds rose and the liquidity provider preferred to remove funds due to some emerging condition, they would have no choice but to keep their contract and provide liquidity because the funds would be in the distributed hands of reputed signers.

[Sabreiib]

Jordan, How could B&C and Nubits help each other?

1. Nu community provide NBT/BKC (1:1)pair to help BKC pegged with USD
2. B&C will help nubtis if it’s in trouble, eg, use BKC to buy NBT and destroy those NBT.

[Nagalim]

2. B&C will help nubtis if it’s in trouble, eg, use BKC to buy NBT and destroy those NBT.

This will not happen. The synergy for Nu and B&C is limitless, but Nu’s debt is not B&C’s debt.

The main method by which B&C will help Nu is by providing alt/NBT pairs with actual volume. At least, that’s what I think will happen.

they would have no choice but to keep their contract

This is pretty cool, by the way. I still think it leaves open the need for tllp that can be withdrawn at will, but I really like that we will have mechanisms for these types of insured liquidity available. I am seeing it as a kind of trustless NuLagoon, is that the idea?

[Sabreiib]

Although B&C and Nu are two different DACs, B&C is designed to provide safe exchange for Nubits LPC. And 40% BKS held in NSR holders’ hands.

A win-win deal can be make by B&C / Nu

Nu provides BKC pegged with USD, B&C provides NBT based pairs on B&C exchange, also a friend in need for Nu.

We may even avoid BKC/BTC pair, customers can only buy BKC with NBT, thus NBT trading volume encouraged.

Perhaps in future, B&C breaks up with NBT, but before that happens, they are close firends.

[Sabreiib]

I have an idea, the B&C signers not only confirm customers trade, but also trade BKC/NBT by themselves via multisig for one public BKC address.

The original design is to sell BKC for BTC and distribute those BTC as dividend, now BKS holders may vote to sell BKC for 1 NBT, and buy back at 1NBT, the BKC selling is also the pegging process. BKS holders can vote to take a portion of NBT(BKC sale proceed) into dividend and keep the remaining NBT as liquidity for BKC.

[mhps]

they would have no choice but to keep their contract

This is pretty cool, by the way. I still think it leaves open the need for tllp that can be withdrawn at will, but I really like that we will have mechanisms for these types of insured liquidity available.

It will come with a cost. These liquid providers see that they would have no way to withdraw, they would demand premium or compensation or insurance from Nu.

[Nagalim]

no way to withdraw

Oh true, this is fundamentally different from NuLagoon.

sell BKC for 1 NBT

Yah, this is what I doubt will happen, but I hope I am pleasantly surprised. It is true that not only are a large number of BKS holders also NSR holders, but also that intersection is the voting body that has experience with the consensus process.

[Sabreiib]

@Nagalim

It depends on B&C exchange business, if trade volume is big, we can use “scalper scheme” to directly peg BKC to USD via BKC/BTC pair.

And Nubits can be pegged by BKC/NBT pair, when NBT liquid providers oeprate on BKC/NBT pair, there is no couterparty risk or exchange default at all.

In fact, the B&C signers can act as NBT LPC easily.