Terms for glossary / dictionary on NuBits.com

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Let’s start with fixed reward (FR). With FR a liquidity provider (LP) is awarded a fixed percentage of their provided liquidity per minute. This can be done up to a limit, described as a target, above which a different mechanism is used to determine payment. In the current ALP model, like that used on poloniex, this mechanism is the ‘dutch auction’ whereby LPs state the minimum rate they are willing to accept and providers are paid at the rate that edges out enough LPs to attain the target. If you think this is complicated, you’re right to some degree. However, the end result is that an LP just states the minimum rate they are willing to accept and the operator goes from there.

Fixed Cost (FC) on the other hand strives to simplify the process by doing away with targets entirely. Instead, a fixed amount of nubits are paid each minute, distributed evenly amongst LPs proportionally based on liquidity provided. The end result is that as long as there is competition an LP can get more reward for submitting more liquidity and if there isnt competition the reward rate can approach infinity, which theoretically ensures competition.

Combined Reward Fixed Cost (CRFC) seeks to find a happy medium. The basic functionality is FC as opposed to dutch auction, but a target is reintroduced. Below the target, as measured by the total liquidity provided, the shareholders sustain a smaller cost. This means that a pool operating below target (again, combined sell and buy side) will simply award proportionally less nbt total. The end result is that pool balancing is incentivized while maintaining a reduction in cost to shareholders for an under performing pool.

Please note that CRFC with a zero target is equivalent to FC. FR on the other hand requires a dutch auction model that has not been coded in ALP 2.0. However, a pool with balanced provision operating on a CRFC pool below target is indeed promising a fixed reward measured in % of total supplied liquidity.