As many of you are aware, I am obligated by shareholder motion to burn the 172 million undistributed NSR that remain no later than October 24. I advanced the motion and choose the deadline to be 60 days after the protocol permits NSR grants. The reason I did this is so shareholders would be able to pass an NSR grant to a multisig based group for use in maintaining the peg in extreme circumstances. Under normal circumstances interest rates should be used first to maintain the peg, and NSR sales combined with NBT burns should only occur when there is prolonged use of interest rates. Such NSR sales are not urgent and time can be taken in setting them up. However, it is possible that in the case of a very rapid drop in demand for NuBits, that both interest rates and rapid NSR sales combined with NBT burns would be needed to maintain the peg. Having the ability to quickly use both methods at any time increases the strength of the peg and confidence in it. So even it will rarely be needed, it still brings a lot of value to the network. Therefore, before all the undistributed NSR is burned I would like to see an NSR grant in range of 20 to 40 million NSR, preferably to a group of trusted community members using multisig. Rules should be set up to govern the use of those NSR for supporting the peg. For instance, it might make sense to require that they be used when less than 25% of all liquidity is buy side, and only then.
We also need a group to hold NuBits using multisig that can be injected into the market on very short notice in order to protect the peg with downward pressure. Whoever does this needs to formulate rules for when NuBits would be introduced into the market, such as when the sell side is less than 40% of total liquidity. They would also need to propose rules for using funds raised from NuBit sales: either as dividends, for development or NSR buy backs and burn, or a combination of those. It is possible that FSRT (First Strategic Reserve Team) could take on this expanded role using the NuBits that have already been granted to them. As an aside, there is a consensus that most of the NuBits in their possession should be burned, as the amount is far more than would ever be needed over a couple weeks. Expect a motion on this soon.
Thirdly, there is a need for a multisig group to hold tier 4 liquidity. We probably won’t need this forever, but it will be needed at least until B&C Exchange escrow features support enforcing contracts for long term liquidity provision. Right now tier 4 liquidity consists of the only liquid cryptoasset that isn’t our liability: Bitcoin. I would like to see this maintained at around $80,000 of value at the present time.
With interest rates, the ability to very quickly sell NSR and burn NBT, $90,000 in tier 1 liquidity, $40,000 in tier 3, around $70,000 in tier 4 buy support and hundreds of thousands of NuBits available for sell side pressure, we can be quite confident in the reliability of the peg.
These changes will further decentralise the network. There isn’t a need to depend on me to fulfill these three functions. In fact, I’m confident others will do a better job. Complete liquidity figures ought to be available in real time for tiers 1 to 4. I only gave information on that at intervals of weeks. Also, I’m sure my time would be better spent on tasks related to architecture and core development. When the network began, there were so few of us and so many jobs to be done, that we each had to wear a lot of different hats. Now there are a significant number of people involved in liquidity operations and other aspects of the network that can readily perform these roles to a high standard. So, it makes sense for me to stop playing roles that are outside my expertise and which constitute a degree of centralisation.
If you are interested in serving in one of the roles described and have questions about it, feel free to ask me. This is a call for people to step up and replace me in holding NSR, NBT and BTC for peg maintainence purposes. Once the transition is complete, the only shareholder funds I expect to keep holding are development funds in the amount of 50,000 NBT or so. I’m intent on seeing others step up to fulfill these roles, so if no one does in the coming days I will likely provide incentive by requiring an increasing rate of compensation for performing these tasks myself. For instance, I might say that I will only provide these services for a certain fee beginning in 60 days. In 90 days, the cost will be 2 times as much, then 3 times as much after 120 days, and so on. The point of such a proposal would be to make my work in these areas uncompetitive, so that someone will step in and replace me. Hopefully that isn’t necessary.
I’m interested to see what you all think of the three roles I have proposed here, how they should be structured, and who should be cast in the roles.