I like this proposal for two reasons (I might be able to think of more if I have digested it a bit more):
- it’s able to balance individual exchanges while FLOT should be mainly focused on the overall liquidity
- balancing the sides of single exchanges aids the purpose of overall balancing (in addition to the effect of arbitrage) making interventions of the FLOT less frequent
Especially the second benefit is valuable. Activating the FLOT creates a lot more effort for the members (because of the multisig) than activating a single custodian does.
As long as the custodians don’t have to handle significant amounts of BTC or NBT, but still enough to balance walls, this should be way cheaper than T1 liquidity (no risk, only “locked” funds).
T3 custodians could put an NBT or BTC address into the grant to register this address as their T3 address. The first grant would be made with 1 NBT. Following grants would include a back pay of the preceding term.
That enables them to operate NuBot if they want to use it to promote funds from T3 to T1. I’m skipping T2 until we have a sound definition if T1 and T2; T1 for me is funds in orders with a spread within limits that allow compensation.
As soon as fixed cost pools are widely available, promoting funds from T3 to T1 is directly incentivized by the compensation that is increased (in relation to the invested funds) if walls are small.
Funds on T1 in excess can be moved to the registered T3 address again. Compensation for funds on that address should be oriented on the average amount on that address.
If funds leave a T3 address, but don’t show up at T1, T3 custodians would receive compensation for simply owning NBT or BTC.
That’s not how it should be, but it will be hard to identify it. With NuBot it’s at least possible.
A lot of data gathering and data mining is necessary and a part of it is tricky.
For NBT that already requires inspecting the UTXO on that address each block. For BTC it also requires logging the BTC/USD exchange rate per block, because the USD value of the BTC fluctuates.
The liquidity broadcast by NuBot needs to be correlated with the UTXOs of the T3 addresses. Then you know that T3 funds were used to prop up T1.
My interpretation of the T3 custodians more or less leads to liquidity providers that operate NuBot instead of participating in ALP who provide information about the T3 funds they control by registering T3 addresses together with the grant.
I fear that fair accounting of T3 funds is cumbersome.