Right, but the parametric order book can help a big deal here.
By the time BCE is operational this parametric order book should be available - it’s planned for the next release of NuBot
In addition to the vastly reduced exchange default risk trading on BCE NuBot improvements can reduce the costs for liquidity providing even further.
In the end the risk can be mitigated by a bigger spread between buy and sell walls (and in the future by the shape of the parametric order book). It’s up to Nu to decide how much to pay for what tightness of spread on the NBT/BTC pair.
I wouldn’t wonder if we face times in which the spread for NBT/BTC on BCE won’t be as tight as the spread of NBT/USD pairs on centralized exchanges.
After all Nu guarantees a peg of 1 NBT to 1 USD and not to the USD equivalent in BTC
It’s just telling us what the default parameters of our bots are. The parametric order book is a push service. Orders will be placed based on a bigger picture rather than always at some fixed spread like they are now. B&C lends itself to this concept nicely by providing a method for publicly verifying orders (talking to the decentralized block chain instead of to a centralized exchange server).
Nubits are a third party to B&C, poloniex is not paying to upkeep tether USDT liquidity buy and sell walls on their exchange and I don’t see why B&C should pay Nubits to do so either. Explain to me why B&C would want to pay for a Nubits liquidity pool at B&C, since that’s what you’re asking B&C to do.
[quote]If an LP were to propose a grant that offered to provide Tier 1 liquidity at a fraction of the reward as the other pools, would you really turn it down? How would you justify that?
[/quote]
As stated earlier I don’t see why B&C would want liquidity pools on its trading pairs. No exchange does this and with good reason. Also I think it would be far more beneficial to Nu to just sell and buy Nubits for 1 dollar without trying to upkeep buy and sell walls on B&C. When B&C is live people will need Nubits you don’t need to maintain costly inefficient pegs to sell them to people.
If the NBT/BTC price on B&C will get out of sync with other exchanges and thus a “broken peg” there will be traders profiting (arbitrage) until balance is restored. I don’t see a need for liquidity pools on B&C except for maybe the first few weeks to get some instant liquidity going. After that the traders themselves will provide the liquidity just as on every other exchange.
I am 100% not saying that it should. I am saying that B&C should allow Nu to operate LP’s at 0 fees. That is distinctly different from paying for the operation, as the only cost to B&C is blockchain space. This will not lower dividends, it will amplify them. It is not costing B&C money, it is allowing for more trade, thereby helping to generate money for B&C.
This is false. Poloniex does this, Bter does this, Bittrex does this, CCEDK does this. Practically any NBT pair with volume does this. The exchange doesn’t pay the liquidity costs, Nu does. CCEDK has mentioned that it would love to drop the fees for LP’s if it could figure out a verifyable way to do that. We have that opportunity on B&C in ways that centralized exchanges can only dream of.
The tendency for arbitrage (i.e. price slippage) is going to be equal to the sum of all fees. That includes the network fees, but it also includes the trade fees on the exchange as well as withdrawal fees. That means that when Nu wants to sell 1 NBT for some BTC it has to pay the trade fees and withdrawal fees on arbitrary exchanges. That’s wayyyy less efficient than simply trading on B&C.
Why would we make B&C if we aren’t going to use it? You think trade volume will magically appear overnight, but without liquidity it will be a long time before people start trusting B&C exchange.
So you even agree that there is a clear benefit toward stimulating trade using liquidity.
Is your argument that liquidity provision on B&C is not worthwhile for NSR holders, BKS holders, or both? Because you’ve simultaneously said you don’t know why Nu would do it and you don’t know why B&C would do it.
I just cannot fathom why you think B&C is a bad exchange for Nu to operate a liquidity pair on. That’s the entire point of B&C. Let me just quote from JL’s initial announcement of B&C:
I’m not saying don’t have a Tx fee. I’m saying Nu should provide BKC to LP’s and B&C should provide BKC to Nu. There will for sure be a Tx fee on the blockchain and for all traders.
If Nu said that it would provide 10K liquidity if B&C forced Nu to buy BKC for $1 a piece, 20K if it’s only $0.5 a piece, and 40K if Nu gets free BKC for liquidity operations, which would you vote for a s a BKS holder?
BKS holders are not begging Nu LPC to trade on our exchange. BKS holders care about revenue by charging trade fee(such as 0.2% on BTC-E), if Nu LPCs wouldn’t pay that trade fee(not the trasaction fee on blockchain, I mean the buy/sell fee), I would vote to ignore any request from Nu company.
B&C can survive WITHOUT Nu at all, eg, we can survive by providing BTC/LTC, BTC/Doge pairs. Yes, NBT stable currency is welcome, but if bitUSD/USDT are more popular, I as a BKS holder or potential signer, will vote for more bitUSD/USDT rather than NBT pairs.
B&C is neither a branch nor a subsidiary corportation of Nu company. For B&C shareholders, any stable currency’s success (TRMB,bitUSD,USDT,NBT) is welcomed, we don’t care about your liquidity, we care about our trade volume which is related to our profit.
All decision should be voted by shareholders, not by we several men.
Personally I like to reward something to attrack Nu LPCs in early days of B&C operation, but if in future B&C business grows big, I dislike that expenditure: why should B&C give money to another company? At least NBT should compete with other stable currencies and satisfy BKS holders, otherwise, you can go.
Even if NBT liquidity providing were in any way sponsored, the fee from other people trading thanks to NBT liquidity on the exchange were available in full height.
Would you rather have (knowing that it can’t be calculated like this) 0.2% fee from each side of the trade with little volume “thanks” to low liquidity or 0.2% fee from one side of the trade and maybe less than 0.2% fee from the other side with way bigger volume?
If BCE can only double the volume (I’m still aware that it can’t be calculated like this) with 100% sponsored liquidity providing (not saying that 100% is necessary), BCE is at break even. With more than doubling volume, it’s for the benefit of BCE.
I know which way I’d like to go
Because BCE can make even more money by “investing” some money!
Reasoning see above.
I tend to disagree with a lot of this post.
The lead architect is the same, the dev team is the same and although the initial funding that would have made BCE a 100% subsidiary of Nu wasn’t successful, 85,000 BKS were paid to NSR as dividends.
That makes 85,000/184,811 = 0.459 or 45.9% potentially in the hands of NSR holders.
I won’t find out, but I wouldn’t wonder if some more percent have been sold to NSR holders.
At the very start Nu and BCE are tied to each other.
That might change over time.
But liquidity providing to get the ball rolling is an important task for the early phase of BCE, a phase where Nu and BCE interests are economically tied to each other.
BCE needs to care about liquidity, because that’s the key to volume!
It’s as convenient for BCE to have good connections to a provider of a pegged currency as it is for Nu to have good connections to a decentralized exchange
If bitUSD, USDT or others approach BCE to provide liquidity for better conditions than Nu does, fine. I haven’t seen the queue of stable currency providers in front of BCE’s doors so far…
Option A: The largest exchange in cryptoworld with 1millions USD revenue annually.
Option B: The 4th largest exchange with less trade volume, but 1.2 million revenue annually.
Definitely I will choose B.
That is possible because the revenue is not a simple proportianal relation to trade volume, I guess if everything else being equal, if you raise the trade fee, initially the revenue increases and then drop.
Revenue = (trade volume) X (trade fee rate)
BKS holders’ task is to find the opitimized trade fee rate which gives us the largest revenue. A proper fee rate.
Perhaps B&C holders should have more ambition than some Nu people think: this is a credit broken cryptoworld, we don’t trust Mtgox, nor BTC-E, Poloniex, etc, in fact I trust none of them.
B&C’s goal should be as high as being a famous, big, perhaps top 5 exchange in cryptoworld.
To sum up, how much invest should be put into reward Nu LPC, will be fully discussed and voted by BKS holders. For a new born and not rich Company(B&C), it’s not wise to give too much money to Nu, unless there are quite some big Trojan in B&C’s “board of directors”/decision making process.
Revenue = (total transaction size in byte) X (fee in BKC per byte)
What about Option C:
the 30th largest exchange with very low trading volume, because of lacking liquidity and only $12,000 revenue annually?
I’m in favour of incentivizing liquidity providing (even at an expense!) to turn Option C into Option B
Then I need to adjust the formula:
Revenue = (total transaction size in byte) X (fee in BKC per byte) - expenses
B&C exchange’s core competition is its decentralized feature. I have much confidence that people will like B&C than any other BTC-E, Poloniex, XXStamp etc, sooner or later.
We may lower our trade fee(on byte basis) to attack more customers.Very possible.
But one thing you should remember, today NBT/BTC trade volume is 2,000$, while Bitfinex LTC/BTC pair trade volume is 36,000$. 18 times difference.
Who tell you NBT pair will be the large pair during first operation year of B&C? If NBT trade volume on B&C is only 1/10 of LTC/BTC pair, who cares you?
I’m not able to foresee the future, but looking at the USD pairs at Bitfinex (linked form here) I see demand for an USD equivalent crypto currency.
NBT trading pairs won’t necessarily be the ones with the most volume in normal times. But I expect the volumes of other trading pairs to be much lower (without sufficient NBT liquidity), because there’s nothing to hedge volatility available at BCE without NBT liquidity.
The trick might be to provide sufficient NBT liquidity to attract volume, use parametric order books to save the liquidity providers from paying the full price for the hedging and make BCE a success for every party: customers, BCE and Nu.
ninjaedit: Thank you for this picture showing LTC volume by exchange and trading pair.
You recognize the volume of the USD pairs?
I guess you are a bit opitmistic, if NBT is as same as USD, free market would already give LTC/NBT, BTC/NBT a very large trade volume.
For majority customers, they are speculators, that’s why LTC/BTC trade volume is so big, 30 or 100 times of NBT pairs? If they wanna hedge, just remove BTC from B&C and sell for USD, yes, there will be some people keeping NBT on B&C for convenience, but I guess mot many which you may disagree.
It’s premature to predict trade volume on B&C, but my prediction is that NBT pair will be the 4th or 5th large trade pair.
As a 4th or 5th large customer for B&C, NBT pair natually has some “Negotiating capital”, but not so important for BKS holders as BTC/LTC/Doge/ETH pairs.
If B&C manage to reach LTC/BTC trade volume of BTC-E, we can enjoy our lives, ad forget NBT.
Assume LTC/BTC pair is avalible on B&C, why not people trade LTC directly with BTC and sell BTC on other exchange for FIAT? Why do they need to use BTC to buy NBT first, and then buy LTC using NBT? How many customers will keep NBT for a long time? They have to sell NBT for FIAT, inconvenient.
Of course I am! NBT are on earth for close to one year and have been rock-solid ever since. It’s only a matter of time until the NBT rocket takes off!
Where would they do that? On centralized exchanges? Those exchanges they tried to escape from coming to BCE? Why not keep all the funds safe in multi signature addresses?
Oh, that leaves NBT!
And it has more to do with security awareness than convenience.
There will be occasions where traders have to rely on centralized exchanges (or similar services). If they want to trade crypto coins to money on their bank account, they won’t find support by BCE soon, I guess.
But just for hedging NBT pairs on BCE are a good choice.
BCE has a vital interest to support NBT trading pairs. If that requires free/cheap access to the blockchain for Nu to allow NBT liquidity providing it’s a small enough price to pay for BCE.
Ultimately you are right when you say that BKS holders will decide.
They will either vote on a motion that creates a framework for this or on grants to support liquidity providing this way.
If it weren’t a little premature - being still far away1 from a BCE that supports trades, with so many questions not answered - I’d be happy to start preparing such a motion or drafting grants.
But I think this discussion about fees we have here is helpful for the time when BKS will need to vote.
Discussion in this thread – The BKC fee and Nu – should happen when there is some conclusion in a thread on The BKC fee itself.
B&C needs to run to show the actual relation between fee rate, volume, liquidity, operatiional cost, and maybe other parameters such as performance (e.g. tx excution speed).
