[Superseded] LiquidBits term 7 grant - Automatic Liquidity Pool (ALP)

[Cybnate]

Given the discussion in the last few weeks about liquidity provision and costs I had to rethink this a couple of times. The result of that is what I think a great deal for the Shareholders which balances the costs of liquidity versus the benefits of still having fiat gateways available on both the NBT/EUR and NBT/USD pairs while maintaining minor support on the NBT/BTC pair on CCEDK

The cost for the next 60 days minus the roll-over is just NBT 299 !

I can offer this because of the Dutch auction model in the current ALP software and the changes below to further reduce the costs. The current software have proven reasonable stable with just 2 unexpected outages in the 60 day period. I’m therefore comfortable to continue running this software until the ALPv2 has proven its workings and stability.

Changes made since term 6
Reduced maximum from 5000 NBT to 2500 NBT on both sides of NBT/USD pair
Reduced maximum from 1000 NBT to 500 NBT on both sides of NBT/BTC pair
Reduced payout from 0.18% to 0.17% for NBT/USD pair
Reduced payout from 0.20% to 0.19% for NBT/EUR pair

You can find the full proposal including the calculations here: https://daology.org/proposals/8bbc95f76e5942018daa4b811b19308ed424c7b0

This is still a draft so please wait with adding it to your client or datafeed as changes may occur based on feedback received or other developments in the next week or so.

*Edit: Version two of this proposal has been published here:
https://daology.org/proposals/f6349c0339f210f4a26a91acc10b085a03640a9b. See thread below for tracking of changes.

[Cybnate]

[Withdraw] Ending NuPond Operations on Bter

…, is to set up a PPC/NBT pool to prepare for the upcoming transition to PPC reserves.

Happy to add a proposal for say 500 PPC on both sides of the NBT/PPC pair on CCEDK (total 1000 NBT). Assuming we would have it at the same rate as BTC it would cost the Shareholder up to 144 NBT for a 60d period. More is possible of course.

[mhps]

Reduced maximum from 5000 NBT to 2500 NBT on both sides of NBT/USD pair
Reduced maximum from 1000 NBT to 500 NBT on both sides of NBT/BTC pair
Reduced payout from 0.18% to 0.17% for NBT/USD pair
Reduced payout from 0.20% to 0.19% for NBT/EUR pair

I don’t understand. this proposal reduces liquidity allowed to enter while apparently much liquidity is waiting in the queue. why not
Maximum from 5000 NBT to 10000 NBT on both sides of NBT/USD pair
maximum from 1000 NBT to 2000 NBT on both sides of NBT/BTC pair
payout from 0.18% to 0.09% for NBT/USD pair
payout from 0.20% to 0.1% for NBT/EUR pair

The cost is the same and reward much more transparent.

[Cybnate]

Interesting thought. My proposal is based on the limited volume/usage on those pairs.
What would be the reason to increase liquidity? To allow more LPs to participate? What is in it for Nu?

[mhps]

What is in it for Nu?

Someone with 10 grant fiat can see enough available liquidity and feel worth it to use the direct fiat-nbt route instead of fiat-btc-nbt.

plus “0.09%” number gives some pressure to other pools to lower reward.

[Cybnate]

I can see some merit in this, worth considering this approach. Interested to hear whether there is more support for:

1. increasing potential liquidity significantly and decrease rewards as MHPS proposes OR
2. decreasing liquidity and only slightly decrease rewards as per OP.

The cost for the shareholders would be about the same.

[mhps]

Another option is increase the target to 10k and lower the reward to 0.15%, for those do see the value of nbt/fiat pairs. It increases liquidity AND lower the cost [edit: per unit liquidity]. If target is met, then increase target to 15k and lower reward to 0.1% …

The 0.9% number was there by me to match the 50% reduction in target in your proposal because I don’t like to see and reduction in target. Reducing fiat operation by half seems too big of a change.

[Nagalim]

Yah, like 7500 and .15% would work too.

[zoro]

Yah, like 7500 and .15% would work too.

me too. We have to keep the factor ‘exchange risk / LP rewards’ stable in some way
I also like the ppc/nbt pair, please remind me why this had been stopped?

[Nagalim]

please remind me why this had been stopped?

No good price feed / required tolerance to avoid manipulation is like 3-5%

[nmei]

I’m for increased liquidity and lower rewards. However the numbers shake out.

[Cybnate]

Right, the direction the LPs want is clear. Any other Shareholders willing to share their views to the contrary? Otherwise I’m inclined to adjust the proposal to increase the targets and decrease the rates while being cost neutral.

[Cybnate]

Based on the feedback in this thread I’ve published a second version (v2) of the original proposal for term 7:

Key changes from term 6 in v2 of proposal (see link at bottom of post):

• Increased maximum from 5000 NBT to 7500 NBT on NBT/USD pair
• Increased maximum from 2500 NBT to 3750 NBT on NBT/EUR pair
• Increased maximum from 1000 NBT to 1500 NBT on NBT/BTC pair
• Reduced payout from 0.18% to 0.14% for NBT/USD pair (-/- 33%)
• Reduced payout from 0.20% to 0.15% for NBT/EUR pair (-/- 33%)
• Reduced payout from 0.24% to 0.20% on average for NBT/BTC pair (-/- 20%)

The changes in this updated proposals are aimed at increasing liquidity while decreasing the liquidity cost per unit. The overall maximum cost are about the same as in term 6 but higher than the original term 7 version 1 proposal.

However, while still following the Dutch auction, fixed reward model, I expect the actual cost to be lower as the rates have decreased 33% for the fiat pairs and 20% on the BTC pair and the LPs are likely going to respond to that.

From a Shareholder perspective it will be interesting to see how the ‘market’ responds to this. I hope this is a way to reduce the overall liquidity costs. At least it will help with the price discovery for liquidity.

The revised proposal (v2) is published here: https://daology.org/proposals/f6349c0339f210f4a26a91acc10b085a03640a9b. The original proposal is also still published for comparison purposes. See OP.

Looking forward to your comments.

[nmei]

Considering the desire to decrease NBT/BTC and move to FLOT funds…I’d keep the pair @ 1000 NBT.

[Cybnate]

Good suggestion, will take that aboard in the final proposal.

[mhps]

0.14%

Just to bring it to attention that if the mean time between total failure (100% loss of fund) of cryptoexchanges is 2 years, which I think is a fair number, then the average daily loss is 100% / 2 / 365 = 0.14%

So being compensated at 0.14% in a pool is already below average risk-adjusted return of putting funds in an insured bank earning any above-zero interest.

[Cybnate]

I believe you are now making a case to go with the original submission and just leave LPs competing until they think it is not worth it any longer according to their risk appetite. Just leave the compensation high, but the pool small in order to reduce the costs for the Shareholders. I’m on the fence but tending to my original proposal leaving the compensation high and reduce the pool size instead of the second one.

[mhps]

I believe you are now making a case to go with the original submission and just leave LPs competing until they think it is not worth it any longer according to their risk appetite.

For the same total reward Nu wants more liquidity and LPs want better reward for the same risk (fund on exchange). So the OP prroposal does seem to be better.

btw The reject rate is very high lately.

[Cybnate]

I’m seeing between 93% and 96%, it is not too bad, but it appears to be deteriorating indeed.

[mhps]

I get as low as 26% in the last hour and many 30-70%. Maybe it’s my ISP?