Three roles that need to be filled by shareholders

The Plaza
#61

I guess my question is why not just buy nbt from the ALPs with tier 4 and burn, skip the auctions and nsr market all together?

#62

Thatā€™s another option.
And I wouldnā€™t want to limit it to just the ALPs :wink:

As the future tier 4 custodians will be dealing with multi signature addresses which I hope to be well-known, the fund activity can be tracked in the blockchains (Nu, BTC) as well as with the seeded auctions.

The benefit I see with seeded auctions is that Nu provides the market with an offer to remove NBT from the market or inject some to the market and the market participants need to accept it.
Having tier 4 custodians actively buy or sell NBT is something different, which can easier lead to wrong decisions.
I rather have the market decide than tier 4 custodians whether itā€™s time to buy or sell NBT.

#63

but the LPs are the market just as much as the auction participants are. The fundamental aspect here is that tier 4 cannot be a network reserve, it must exist outside the system in BTC or USD or whatever. Then, if we wish to shrink that reserve, we have to buy a network currency on the open market or via private escrow. For burning NBT with tier 4, itā€™s clearly simpler to just buy it from the LPs and burn it. For burning NSR with tier 4, however, the situation becomes interesting if seeded auctions are on the table. It can be seen how tedious it is to do a share buyback on the open market and simply buying NBT from custodians and trading that for NSR via the seeded auction starts to look not only economically efficient, but just plain easier.

I donā€™t think Nu should ever buy NSR on the open market to seed an auction, that seems like economic suicide to me.

#64

We need to move to nsr/nbt eventually. Given the low liquidity of NSR, there will be people who want to skip BTC/fiat and go straight into NSR, so thatā€™s where we grow tier 6 operations from nil. So we can let tier 4 have multiple assets like BTC and NSR, and use them in their respective markets to offset excess NBT liquidity, and it will be more effective than just having either one. If tier 6 becomes mature enough then it could spin off as a stand-alone unit that doesnā€™t need full support from tier 4, fulfilling our decentralization ideals.

And Iā€™ve always been a bit disgruntled with exchanges taking all the profits but giving us all the default risk, so Iā€™d love to be able to save some exchange fees, even if it means we have to pay up to an equivalent amount to shareholders whoā€™d be in charge. Buying NBT from ALPs is a good idea - it would probably save us from the ā€œcan of wormsā€ you mentioned for reducing sell-side liquidity payout. But so is buying NBT using NSR, and I donā€™t see why these two canā€™t co-exist. That said Iā€™m not in favor of using Tier 4 to buy from open markets as a regular occurrence.

Anyway, I admit Iā€™m hung up on tier 4 because we need to cultivate a workforce within the community and among shareholders. Thereā€™s a steep ladder (Iā€™d say itā€™s actually a rocket) from being a peasant shareholder to being a paid anything, and the result is weā€™re putting too much work in the hands of just a few people who have more important duties to attend to. So I just need any excuse to bring community-sourced ideas into tier 4.

#65

Iā€™m finding myself with less and less time each day to handle extra roles. Iā€™m removing myself from consideration. I hope others will continue to discuss ways on moving forward on this issue.

#66

I think this thread reached its consensus-finding limit, this is a very important and active role requested and requires more interaction .

I propose to candidates of group #1 to schedule an open meeting on gitter to have a synchronous and in depth discussion about it and come up with a model to propose to shareholdersā€¦

Does it make sense?

@woodstockmerkle

@masterofdisaster

@nmei

@cryptog

@dhume

@mhps

Anybody else?

If you agree - or better, if no-one voices concerns with this approach - I will send out an invitation to a doodle in 24 hours and then publish the result here so everybody can participate.

1 Like
#67

I think discuss here is better because the community can participate and the discussion is documented. That said having a meeting is fine with me but I only have a lot of short pieces on-line times.

#68

same goes for gitter, you can have the history.

#69

I am fine with having that meeting on gitter.

#70

Iā€™ll join when it turns out you canā€™t get 7 people.

#71

Hypothetical mechanics:

Presumably the public/private keys used for custodiansā€™ NBT addresses can also be used to identify an associated BTC (or PPC, etc.) address.

With the cooperation of a liquidity provider, the Tier-4 team would deposit BTC into the BTC version of the address associated with an LPā€™s NBT grant address.

In exchange, the liquidity provider would then transfer a like amount of NBT to a limited-use address used by the Tier-4 team.

The Tier-4 team then disposes of the NBT thru some method. More detail of a unique opportunity in the 2nd post; stay tuned.

All of the above logic may be adaptible for the Tier-4 sell-side team.

Detailed exchange of funds:

Presuming the BTC are held in a 4-of-7 multisig, when time comes action to be taken, a limited-use address is created, with the same signers, but perhaps 2-of-7 or 3-of-7, enabling more rapid and tactical execution of the Tier-4 to LP exchange with fewer signers.

With a majority action, the Tier-4 team would sign a transfer of funds into this limited-use address and identify the candidate LP to be funded.

It is possible that the additional transactions to complete the transfer are created at this time and/or a ā€œrescindā€ transaction with a 4-of-7 signing that would return the funds to the core address. The details of this are not yet thought thru.

A ā€œprobeā€ transaction of BTC is signed and sent to the LPā€™s address, with a message included of the expected number of NBT to be returned.

The LP reciprocates by sending NSR to the NSR version of the BTC address, establishing that there is communication.

The exchange of BTC to the LP, and NBT to the Tier-4 team proceeds, perhaps in 10 to 20 tranches.

The first-step and risk is with Tier-4; however with the probe transaction and tranching of distribution could minimize risk.

CHECKLOCKTIMEVERIFY may help in some way.

Collaboration with liquidity providers, and possible protocol enhancements:

Perhaps the liquidity protocol could be enhanced with an LP also being able to indicate:

  1. indication of which Cryptos they could be funded with
  2. indication of the price at which they will exchange.
  3. indication of the volume they will transact. (It may be wrong to assume all of Tier-1, 2, 3 are available and liquid).

Presumably this would make a market of LPā€™s to all offer exchange rates to Tier-4 near market.

And presumably all of this would work in inverse on the buy-side.

Tools that would make the above easier:

  • easy ways to identify / generate BTC multisig addresses (Nu client using the BTC clientā€™s APIs)
  • A UI that would maintain the public key addresses of the Tier-4 board
  • A UI that would generate the limited-use multisig BTC address, and generate associated multisig transactions
  • A UI that would make it easy to choose an LP and initiate the Tier-4 to Tier-3 process (limited-use address creation, identifying the associated BTC address, etc).
  • A UI that would show transactions on the Tier-4 address that require signature by the Tier-4 board (almost like an inbox)
  • A UI to help tranche and effect the exchange of NBT for BTC tactically with the LP (some sort of transaction-review console).

Perhaps NuBot could be enhanced as well with similar LP-side needs:

  • Communicating the willingness to interact with Tier-4 in the an augmented version of the liquidity protocol

  • Looking for transactions on the associated crypto address and taking action on them to reciprocate to Tier-4.

Threats / Questions

  • Could the mechanism of exchange be abused by a 3rd party? I presume if the BTC/NBT exchange ratio is at or near market, then this may have the upside of potentially facilitating off-exchange transactions, albeit with the seller of BTC taking the first risk. (This probably gets into B&C territory.) Maybe this could be functionality written into the Nu wallet, to interact with the BTC wallet and provide a micro exchange-less method of BTC <-> NBT transaction.

  • Is it safe to assume that withdrawing NBT from one LP will have a ripple effect in liquidity, or will this cause persistent imbalances on the participating LPs? (i.e.: notwithstanding the NuLagoon discussion, do the LPā€™s collectively self-balance, or does it need management? Because this could make it worse)

  • Is there a benefit / value to the LPs for participating in this transaction, due to some new risk they may be taking on?

Opportunities

  • It does not seem as if the above would limit the functioning to just one Tier-4 provider.

  • ā€œProbeā€ transactions could be done regularly (i.e.: once a month) to test full readiness of the system ā€“ Tier-4 participants and LPā€™

  • Further discussion about an election / transition process would be needed. Once bootstrapped one-time, perhaps the rollover of custodial board could happen every 3 to 6 months, and the tools would help in facilitating a rollover to a new multisig address.

  • Could this be used to balance funds between LPs?

4 Likes
Protocol Level Burning of NBT in Exchange for NSR at Dynamic Rate Similar to Park Rates / Voting
#72

In going thru the above thought process, I wondered what would be done of the NBT now held by Tier-4 buy side.

  • They could be burned
  • They could be transferred to Tier-4 sell-side (perhaps FSRT)
  • They could be used to buy something.

In the spirit of the NSR buyback, and with the context that if Tier-4 is interacting with Tier-3 there may be some selling pressure that may require a NSR auction, I wondered if buying NSR with NBT could help be a countering force. This is not necessarily exclusive to Tier-4 responsiblity, so I am posting it separately.

i.e.: could Nu be both a buyer of NSR as well as a seller, to preserve NSR pricing, liquidity, and discovery in a time of downward pressure on NBT and the value of the Nu ecosystem.

The magic ingredient: if such an exchange mechanism ā€œbuy NBT with NSRā€ can be incorporated into Nu, and if the purchased NBT are held time-locked like they are for interest rates, then perhaps there is a way we can transfer immediate sell-pressure to one that is more time-deferred, and bring in more participants by being rewarded for time-risk in a way that is blatantly obvious.

One-sentence summary: Within the Nu wallet, NSR are bought for NBT at above-market price (5%? 10%?) in exchange for time-locking those NBT. A rational actor who can calculate risk (and probably many that wonā€™t) would arbitrage buy buying NSR on an exchange (perhaps the result of a NSR auction / raise),
and selling NSR in the wallet.

Buy being both a buyer and a seller, perhaps the price of NSR can be better influenced or bounded, to keep NSR value from plummeting precipitously at a time when funds are needed the most.

i.e.: if the peg is at-risk, presumably the market will also put pressure downward on NSR as well knowing that more NSR are on their way. This is a method to counteract the downward pressure by time deferral and the transfer of risk.

Graph:

First loop:

  1. ā€œMarketā€ sells NBT to LP in for BTC ā€“ this is assumed to be the downward pressure
  2. Tier-4 in provides BTC to LP for NSR, keeping the LP alive and the peg held

First-loop-to-second-loop connection: The NBT held by Tier-4

Second loop:

  1. Tier-4 offers to buy NSR at above market price for NBT.
  2. ā€œMarket participantā€ gets excited by the arbitrage opportunity and the chance to make 5% - 10% immediately.
  3. In parallel Nu Network is auctions ining off NSR for BTC.
  4. ā€œMarket participantā€ purchases NSR from Nu in open market (providing BTC to Nu into ā€˜first loopā€™)
  5. ā€œMarket participantā€ sells NSR for NBT in their wallet, with no exchange interaction.
  6. ā€œMarket participantā€ receives NBT, but they are time locked by way of new functionality in the protocol. This is the fire-break that will diffuse the selling pressure over time at a knowable cost to Nu, and with a future impact that can be measured ā€“ i.e.: by knowing how many NBT are going to be unlocked.

2nd-loop-to-1st-loop connection: the BTC raised by Nu thru NSR auction / raise.

The UI can be greatly enhanced to show these rare opportunities.

In everything mentioned, swap BTC for PPC, etc.

And someone would have to update that crazy Nu flowchart. :slight_smile:

3 Likes
#73

By the way, we have till the end of Oct to start the operations. From Nov, Jordan Lee will get paid by Nu to fulfill the custodial roles.

But it seems that B&C would greatly facilitate the 3 roles, I feelā€¦

#74

I regrettably have to withdraw myself. Due to home improvement expenses, I cannot support any more major costs. I apologize.

#75

Erm, you wonā€™t have costs. In fact you can rather earn money with this job :wink:

3 Likes
#76

you only need to have time and good will :slight_smile:
edit: MoD i like your ā€œsplashā€ puddle :smiley:

#77

Well I have the will to help out Nu. But I donā€™t have the $$$ that I can park somewhere in case of need.
I have $ in the LPs but, pulling that out to put it into tier 4 - I donā€™t know which is more important?

#78

I think thereā€™s a misunderstanding of this topic.
It doesnā€™t deal with putting peopleā€™s funds into tier 4.
Tier 4 holds funds that belong to Nu and this topic deals with having Nuā€™s tier 4 (and tier 6) liquidity managed no longer by JordanLee, but by a group of people.

5 Likes
#79

OK! Understood. More than willing to collaborate then.

#80

Tomorrow (thursday 15th october), at 10PM GMT, we will have a first chat about fund managing on gitter : https://gitter.im/NuNetwork/Fund_Management?utm_source=share-link&utm_medium=link&utm_campaign=share-link

save the date, if you can be there.

2 Likes