The BKC fee and Nu

Nagalim 2015-09-01 15:33:36 UTC #21

BTC/NBT, just like we’re doing at all the other exchanges. It’s possible we might be able to get USD on B&C via third parties that deal with the KYC regulations. But for now it’s all about the bitcoin. Why would we not support a BTC/NBT pair on B&C when we support it on other exchanges?

Dhume 2015-09-01 15:50:03 UTC #22

Because at other exchanges Nubit is just an alternative, on B&C it’s the market maker. How would you imagine us the exchange supplying all the BTC/NBT liquidity? It means we would have to buy up all the XXX/NBT pairs on the exchange. It would mean we aren’t running an exchange but just an huge Nubit dispensary. All we need to do is supply customers with a place they can buy Nubits for dollars so they can transfer funds into the exchange.

There is no exchange in the world buying up BTC or anything else with their own dollars. Just as we won’t buy up BTC or any other coin with our own Nubits. The goal is to have traders use nubits the same way they use dollars. We provide a peg at other exchanges so people have places to buy Nubits.

Nagalim 2015-09-01 15:58:40 UTC #23

We just provide a small reward for people that are putting BTC and NBT up as buy and sell walls on the NBT/BTC pair, like we’ve been doing on all the other exchanges. Why does this mean we need to sell or buy NBT? It’s just a normal liquidity operation (albeit with more complicated technical details using RPC rather than API).

BTC is the marketmaker everywhere and will be on B&C. For instance, Poloniex doesn’t use USD, it uses USDT, but we are not providing a USDT/NBT peg; we’re providing a BTC/NBT peg.

crypto_coiner 2015-09-01 16:08:02 UTC #24

Why not having BCEx where NBT is a market maker (do you mean liquidity token for trading?) AND giving the space for liquidity custodians to peg NBT to the USD?

Nagalim 2015-09-01 16:14:57 UTC #25

BTC has the marketcap, BTC will be the market maker. We can’t choose what the market maker is unless we do something to force that (like having no BTC pairs other than BTC/NBT, for example). Forcing the market like that is a good way to lose trade volume and dividends.

Dhume 2015-09-01 16:44:07 UTC #26

NBT/BTC price will be determined by the market just as USD/BTC price is determined by the market. If we artificially create supply for NBT/BTC we are opening ourselves up to massive hedging risk as well as disrupting the normal market functions of price establishment by searching for supply and demand. We don’t need to peg NBT/BTC on B&C we just need to make sure that enough NBT is available at several places so people can transfer NBT to B&C (whereas normally they would transfer dollars to an exchange) and that Nubit is externally stable (aka pegged). Of course they will also transfer BTC and other crypto’s to B&C.

Any movement in NBT/BTC at B&C is market movement, there is no reason for us to create supply and demand artificially with a liquidity provision.

Nagalim 2015-09-01 17:40:26 UTC #27

The price of BTC/USD is ~$230 across 50 exchanges with over 20 million $ daily volume total. If someone puts up a buy bid of 1 BTC for 300 NBT on B&C, what does that mean? To me, it means that they are selling NBT for $1.3 because BTC has the bigger marketcap and daily volume so it is the fixed number. That is what a broken peg looks like.

While technically true, these philosophies are at odds. NBT/BTC price is determined by all market movement including that 20 million $ daily volume on 50 different exchanges. The NBT/BTC movement on B&C is a very very small part of the total market movement. The BTC market price is determined external to B&C because B&C does not have the trade volume or liquidity to market make on it’s own (assuming people don’t immediately start trading millions of dollars the moment it starts operating, which is a pretty good bet). That’s where Nu comes in, by supplying the liquidity so trades can happen sooner rather than later.

Basically, what I’m saying is that arbitrage is the market maker. We are not creating supply and demand, we’re arbitraging it from other NBT and BTC markets on other exchanges. B&C will not exist in a bubble.

Dhume 2015-09-02 01:26:26 UTC #28

[quote=“Nagalim, post:27, topic:2578, full:true”]
The price of BTC/USD is ~$230 across 50 exchanges with over 20 million $ daily volume total. If someone puts up a buy bid of 1 BTC for 300 NBT on B&C, what does that mean? To me, it means that they are selling NBT for $1.3 because BTC has the bigger marketcap and daily volume so it is the fixed number. That is what a broken peg looks like.[/quote]

It means someone is making a very bad deal…….If someone puts out a buy order of 1 BTC for 300 dollars with current market price it’s the same. He’s buying above market value, which is not our problem but the traders. The price of 230 across 50 exchanges is not some fixed and agreed upon price, its market functioning and currently that means supply and demand set the price at 230. On B&C its very likely we’ll see similar prices as we do on other exchanges, its however not us setting the price and supplying liquidity its supply and demand.

As long as Nubits are pegged to 1 USD we have no business pegging the BTC/NBT pair. The only reason to currently do this on other exchanges is to supply additional means for customers to buy Nubit and give them an option besides NBT/USD. On B&C however they can’t use dollars and are forced to use Nubits, as long as we make sure enough Nubits are readily available on multiple places (other exchanges and perhaps a new site where customers can trade Nubits for dollars directly and vice versa). The peg will be established naturally due to market functioning if the “peg” gets broken it just means B&C is out of sync with other exchanges and will correct naturally duo to supply and demand (arbitrage).

[quote] While technically true, these philosophies are at odds. NBT/BTC price is determined by all market
movement including that 20 million $ daily volume on 50 different exchanges. The NBT/BTC movement on B&C is a very
very small part of the total market movement. The BTC market price is determined external to B&C because B&C does not have the trade volume or liquidity to market make on it’s own (assuming people don’t immediately start trading millions of dollars the moment it starts operating, which is a pretty good bet). [/quote]

Yes, the CNY/BTC and to a lesser extend the USD/BTC price on other markets will determine the NBT/BTC price. We don’t need to sustain a peg since it is sustained naturally as long as we make sure NBT are pegged to USD on other exchanges. Since we don’t offer that pair we don’t need to peg. Again Nu offers the peg on NBT/BTC on other exchanges to make sure there is enough liquidity available since most traders don’t like to trade with fiat.

[quote]That’s where Nu comes in, by supplying the liquidity so trades can happen sooner rather than later.

I could see a scenario where we might do some liquidity provision the first 2 or 3 months when B&C go’s live to generate some additional liquidity but after that the market itself should provide liquidity. If it doesn’t it means people are not trading on B&C and we have a whole different set of problems.

Nagalim 2015-09-02 01:30:16 UTC #29

Why can’t we do this directly on B&C and avoid depending on other exchanges? Why would we waste the opportunity to provide liquidity on an exchange where we don’t have exchange risk? That’s the entire reason why Nu shareholders voted to fork: so we can provide a place where people can buy NBT with BTC at fair market prices without worrying about exchange risk.

I see this stuff all the time on Bter. I saw some NBT bought for $15 at one point. Low volume = irrational markets

Dhume 2015-09-02 01:40:21 UTC #30

Because B&C will not feature us dollars. By establishing a peg at B&C we would counter market movement dictated by supply and demand. Say we have a 20k peg and on Okcoin CNY/BTC drops 20% traders are the first to respond to these moments instantly dumping BTC into our buy walls, leaving us with a net 20% loss on our liquidity provision. Hedging is already a huge liability in liquidity provision with the BTC/NBT pair if we would allow hedging on our main trading pairs we will go bankrupt in weeks.

The difference is other exchanges use USD or an equivalent, so our NBT/BTC pair needs to be in sync with our NBT/USD pair otherwise traders could take advantage of arbitrage between the pairs.

I would favor a new dispensary for Nubits where people could directly buy or sell they Nubits from Nu (maybe with a tiny fee attached to it), that way we effectively wouldn’t need other exchanges except for visibility and exposure. However until there is an actual need (B&C) for Nubits this is not applicable.

Nagalim 2015-09-02 01:58:50 UTC #31

But other exchanges don’t? Bring it on. If other exchanges do then this is just a price feed problem, mitigated by the parametric order book. This issue is exactly the same as liquidity provision on any other exchange, B&C is not special.

Why is it hard to be in sync with something that is always equal to $1? NBT/USD pair has no price feed for Nu, it is equal to $1. That’s the whole point. Therefore NBT/BTC tracking is equivalent to BTC/USD tracking. Again, this is the same as any other exchange. Why we would avoid providing liquidity on B&C just seems to me to be completely counter productive.

What do they trade for the Nubits? If USD, who’s going to deal with the KYC? B&C is our ‘dispensary’, that’s the entire reason why we forked. In this very thread I am arguing for having literally 0 fees short of custodian costs on dispensing NBT at BTC prices of our choosing. Why would that be a bad idea for Nu?

Dhume 2015-09-02 02:27:29 UTC #32

Nagalim:

But other exchanges don’t? Bring it on. If other exchanges do then this is just a price feed problem, mitigated by the parametric order book. This issue is exactly the same as liquidity provision on any other exchange, B&C is not special.[/quote]

When bitcoin fell recently the dumping started on Bittfinex making traders on other exchanges dump as well. It’s the market correcting itself, when traders dump on other traders that’s one thing but when they dump on our artificially created buy and sell walls we’re the ones taking the hit. It would mean we’d lose tons of coins every time bitcoin price jumps. This problem is already huge on other exchanges where we provide NBT/BTC and on those exchanges NBT/BTC is a minor pair compared to the main pairs like USD/BTC, this hedging problem would be much worse on B&C which by comparison is very slow and where the main pair will be NBT/BTC.

Why is it hard to be in sync with something that is always equal to $1? NBT/USD pair has no price feed for Nu, it is equal to $1. That’s the whole point. Therefore NBT/BTC tracking is equivalent to BTC/USD tracking. Again, this is the same as any other exchange. Why we would avoid providing liquidity on B&C just seems to me to be completely counter productive.

We don’t need to provide the liquidity, you still haven’t explained why you think we need to provide liquidity. No exchange provides liquidity for their traders, they’d be foolish to do so since it would bankrupt them.

[quote]What do they trade for the Nubits? If USD, who’s going to deal with the KYC? B&C is our ‘dispensary’, that’s the entire reason why we forked. In this very thread I am arguing for having literally 0 fees short of custodian costs on dispensing NBT at BTC prices of our choosing. Why would that be a bad idea for Nu?

USD or anything else we choose, the whole point is having Nubit easily and readily available at one dollar each. If you want to dispense additional Nubits through B&C you could easily give a custodian Nubits to sell on the exchange at slightly above market value and even issue buybacks at slightly below market value this however is very different from maintaining a strict peg which would constrict normal market movement and open Nu up to hedging. This would also be profitable to Nu on its own even with having some BKC costs.

You cannot sell your bitcoin for dollars on other exchanges if no one wants to buy your bitcoins for dollars. Just as you shouldn’t be able to sell your bitcoins for nubits if no one wants to buy your bitcoins. No exchanges provides the dollars people use to trade with as dollar buy/sell walls on the USD/BTC pair, nor should B&C provide the dollars (NBT) for people to trade with.

mhps 2015-09-02 02:31:21 UTC #33

It’s been recognized that NBT/BTC pegging is a money-losing business. Nu is paying for it as a promotion or a customer acquisition operation, because BTC is the base currency in the cryptoworld. The cost of it could be very high if BTC price crashes or major exchange defaults. B&C is good at cutting down the exchange default risk.

Nagalim 2015-09-02 02:38:01 UTC #34

Correct, because a third party like Nu or USDT does it for them. I can’t help but think you’re just arguing against BTC LP’s in general. I could argue the merits of liquidity provision for holding a long term peg as a marketable product, but I’d really rather not do that in this thread.

I disagree. What you are ignoring is the spread after fees and the parametric order book. High trade volumes are not bad for us, they are very very good, so an exchange where NBT/BTC is the main pair should actually lower our liquidity costs, not magnify them. As for the speed of the B&C exchange, I have outlined a process that could be done quite quickly, moving orders around by the minute. This is definately on par with the pybot software.

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?

mhps 2015-09-02 10:15:44 UTC #35

Most of Nu’s liquidity cost is due to exchange rate (BTC volatility) risk, which B&C can’t help with. B&C might cut the current 10%/mo rate by 2-4 percentage points.

Note that B&C is still not delivered so how efficient the system works is unknown.

masterOfDisaster 2015-09-02 10:50:53 UTC #36

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

mhps 2015-09-02 13:06:23 UTC #37

I agree. But high spread in nbt/btc is not happening (B&C or not). It’s telling something,

Nagalim 2015-09-02 13:14:18 UTC #38

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).

crypto_coiner 2015-09-02 23:56:13 UTC #39

To me, these 3 statements appear reasonable and yet not compatible.

Dhume 2015-09-03 01:17:56 UTC #40

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.