Timeline of events related to the peg break 2016

[Sabreiib]

Let’s think creatively on how we could reduce those costs or what could be done differently why keeping liquidity provisioning decentralised.

What’s your opinion about my “Plan B” ? I believe it’s sustainable and decentralized.

[Phoenix]

I appreciate the tone of this conversation.

in any case regardless of this motion, as a flot nsr member i was reluctant to sell nsr. The reason is simple. I got all my nsr at 0.2c the unit back in 2014. jordan lee should not be surprised that people are reluctant to decreasing the value of their holding by fostering sales unless you have a short position. I was long. The error of Jordan was to ignore that flot members were all long.

I disagree that FLOT members being shareholders was a problem. More likely the problem was not understanding what dropping the peg would do to the NuShare price. It seemed like Jordan Lee talked about the tremendous hit NuShares would take in the event of compromised liquidity quite pointedly and repeatedly in the weeks before the peg was abandoned.

Whatever FLOT members thought about how dropping the peg would impact the NuShare price a year ago, can we all agree this portion of the system is architected with proper incentives that only require accurate perception of self interest? The system was designed to punish NuShare holders for poor liquidity and reward them for excellent liquidity. Our experience provides ample evidence that is working just as designed. The problem is FLOT members didn’t seem to understand this cornerstone of the design. They thought they could cheat NuBit holders and be alright themselves as NuShare holders. We have learned this last year that isn’t the case. If shareholders try to cheat NuBit holders in any way, the resulting hit on the NuShare price will be much worse than the expense of paying the pegged price to NuBit holders.

So, while the architecture doesn’t guarantee the peg will be kept, it does guarantee that NuShare holders cannot gain financially from abandoning the peg. Do we have agreement on this point?

[Cybnate]

The system was designed to punish NuShare holders for poor liquidity and reward them for excellent liquidity.

The punishment was not timely enough and after the peg broke. Apparently the threat of it was not strong enough or not recognised. Either way something has to change in either simplifying the model with direct feedback incentives instead of way after the fact or by training the people who need to operate it.

The problem is FLOT members didn’t seem to understand this cornerstone of the design.

If so, the question is why? I don’t believe they were all dumb people. Something else we overlook must have been at play. Possibly seeing a doom scenario unfold and clutching at straws while the ship was sinking? Some group thinking possibly in combination with a lack of time/attention. I’m kind of guessing based on what I saw happening from the outside. I still stick with the (irrational) fear of their (and other NuShareholders) investments being hurt by selling NuShares fast and swiftly. The consequence of pulling that trigger can cause hesitating and division with untrained and unprepared people. Going with my black hat some might have also tried to beat the market so they could sell their NSR themselves before selling on behalf of Nu knowing the price would go down fast. Whether that happened is of less importance, it is important to address these false incentives in the operating model going forward.

it does guarantee that NuShare holders cannot gain financially from abandoning the peg. Do we have agreement on this point?

That makes sense, but we still have a problem to solve/address…

the architecture doesn’t guarantee the peg will be kept,

I agree that this can never be achieved for 100%, as there will be many external factors and attack vectors we can’t barely think off, but we should start by addressing the most obvious ones and those which can be fixed at relatively low cost.

[cryptog]

it does guarantee that NuShare holders cannot gain financially from abandoning the peg.

agreed.
however asking shareholders to defend the peg by selling shares invites obviously many opportunities for insider trading. well it s the crypto world: we cannot prevent that from happening.

so far selling shares for liquidity provision has been proved to work; i cannot deny that.

we need now to create a need for liquidity if we want nushares to go up.

[Dhume]

Conveniently left out of this whole timeline is the methodology by which FLOT was supposed to sell all this NSR. At the time there was no precedent set by either shareholders or Jordan on how to actually conduct such an emergency NSR sale. Also at the time there were between 10-15 BTC on the total buy side on Poloniex. In order to get even 5 BTC we’d already be forced to crash NSR price by over 50%.

It’s very easy to “claim” NSR sales is a viable mechanism when you have months upon months to slowly sell them to the market. If there was a way in which FLOT could have sold enough NSR in a short enough timeframe to prevent the peg from collapsing we’d have done so without a doubt. Unfortunately there was no method available as there was and is next to no demand for NSR.

[jooize]

I haven’t intentionally excluded anything relevant, but I have no doubt picked with bias when I browsed for data points. I planned to have more in the timeline before publishing, but as I began replying in “Actively Maintained Data Feeds” the other content I’d written came together in form of “Possibility and implications of a majority shareholder” and “Cause of the peg break 2016” so I posted them all.

At the time there was no precedent set by either shareholders or Jordan on how to actually conduct such an emergency NSR sale.

Agreed. I’ve addressed that.

Actively Maintained Data Feeds

Actively Maintained Data Feeds

FLOT failed to sustain the peg with Tier 6.

Explain to me how FLOT could have raised 50-100k in a few days with less than 15 BTC on the buyside on Poloniex. Don’t confuse the slow selling of small amounts of NSR over a period of months if not years with the ability to generate large amount of funds in a short interval. We needed to raise at least 50-100k USD in a matter of days to prevent the peg from collapsing which was impossible. Trying to claim that the current method of selling a few hundred bucks a day for months on end is proof that tier 6 works in an emergency situation is absolute nonsense.

Also at the time there were between 10-15 BTC on the total buy side on Poloniex. In order to get even 5 BTC we’d already be forced to crash NSR price by over 50%.

Do you remember when? The day FLOT placed NuShares on Poloniex (2016–05–28), @mhps saw at least 21 BTC on the buy side.

The day @JordanLee held 59.8 BTC (2016–03–19), he said that after park rates have been offered for 30 consecutive days (without satisfactory results I assume), NuShares must be sold. I’d like to see the motion for this. Could NuShares be sold anyway?

About 30 days later (2016–04–18), @masterOfDisaster begins talks of NuShare sales. At that time Tier 1–4 contained 82 BTC, then 2016–05–05 @JordanLee holds 126.04 BTC. Can someone explain how his holdings increased by the way?

NuShares were put on the market at Poloniex 40 days after NuShare sales were mandated according to a supposed motion I don’t have, and 70 days after @JordanLee had stated that NuShares will likely have to be sold soon.

The reserves may have been too low at 15% to handle realistic sell-offs regardless of panic using Tier 6. A problem could have been lack of NuShare buy support. Was that a problem and reason not to sell any NuShares for 40 days?

Was it idiotic (or malicious) timing by @JordanLee posting the firing motion? He did that four days after @masterOfDisaster announced the proceeds of the NuShare sales had been placed at … 180% spread! I paraphrased to “20% spread” in the timeline thinking 10% offset.

Again, I probably wouldn’t have done better, but FLOT was incompetent.

---

Is there any software to work with timelines?

[ConfusedObserver]

FLOT was incompetent

From a more distant point of view it looks like FLOT did remarkably good in an environment that didn’t have regulations for extreme situations.
I know there have been attempts to create feedback loops between the reserve ratio and NSR sales. But I don’t know about any attempt that was put in a motion that passed.

You blame FLOT for a design that’s flawed, that relies on selling shares in times of trouble where no sane person would pay high prices.
Waiting until the price has bottomed out and until the prospect of the corp is more clear is the rational choice.

The problem was homemade and started with the NSR buybacks and the thinking that in times of need NSR could be sold without massive discount.
NSR can’t be a reliable store of value.
If Nu had followed the design and focussed on NBT/USD, where custodians get paid for providing liquidity with own funds, all trouble would never have existed.
It would have worked with NBT/BTC as well as long as liquidity providers had served the market with own funds instead of Nu funds.

Alas, that hadn’t brought BTC under control of Nu, which then could be used for dividends and NSR buybacks.

The root cause for Nu’s failure was not an incompetent FLOT or a bank run.
It was the decision to provide liquidity with Nu funds, which allowed the abuse of the proceeds from sold NBT.
Who proposed providing liquidity with Nu funds?

[DavidMc0]

You blame FLOT for a design that’s flawed, that relies on selling shares in times of trouble where no sane person would pay high prices.

The model doesn’t require sane people to pay high prices - it requires enough people to pay enough to provide liquidity until the situation improves. Those who took the risk at that stage would be richly rewarded if the system made it through, and given BTC prices wouldn’t keep rising forever, there was a real chance this would work.

Can you be sure that it wouldn’t have worked?

It seems clear that by removing the ability for people to convert Nubits for an amount very close to $1, confidence was hit spectacularly. And so it should have been given this action undermined the product Nu is offering.

If Nushares were printed to the point of worthlessness & then the peg was lost, the model would have failed. But this was never tested due to the actions of FLOT.

If I had been in their position, I can’t say I would certainly have done any better. I agree that NSR buybacks were premature, and reserve ratios too low, but for now I can’t conclude that the model failed because the rug was pulled from under its feet ahead of the crunch that would have severely tested the model.

The make or break test for Nu was avoided by accidental self-destructive actions of FLOT.

In hindsight (and a non-thorough understanding of Nu, which is quite complex), that’s the way I currently see it.

[Phoenix]

Thank you for your thoughtful and accurate post @DavidMc0. I agree with what you have said.

[ConfusedObserver]

Can you be sure that it wouldn’t have worked?

Ikr, having proceeds from NSR sale of daily a few hundred bucks would have done the trick although tens or even hundreds of thousands USD have been needed within a short time.
But I get it. You want to believe.
That’s why you don’t wonder that @Phoenix doesn’t answer crucial questions and gets away with it. It looks like he inherited both from @JordanLee.
Dream on.

[DavidMc0]

But I get it. You want to believe.
That’s why you don’t wonder that @Phoenix doesn’t answer crucial questions and gets away with it. It looks like he inherited both from @JordanLee.
Dream on.

I only want to see things as they are. As I said, one possibility was that the system would have failed, but there are also alternative possibilities, and we didn’t get to find out which way it would have been had different actions been taken.

I have seen questions go ununswered. If there are important unanswered questions, perhaps these could be noted and re-asked in a thread? I can’t remember any critical ununswered questions other that what happened in the first recently reported theft of NSR (the second theft has been explained well, which is good).

Jooize is doing a great job at laying out important events and the order of them, and this is helping me clarify my view on events.

If you feel Jooize misrepresent what happened, please post quotes and notes to show your thoughts. If there is a good argument to contradict the story Jooize has put forward, it should be laid out (though I’m aware this would take time).

I don’t want to falsely believe in an unworkable system, but the evidence so far leads me to think that it could work, especially with higher reserves.

Of course weaknesses going forward should be addressed & improvements made, but I certainly see promise & the peg failure doesn’t prove the system to be unworkable due to explaining factors that seem to make sense. In my view the network’s recovery from that state and its strengthening foundations demonstrates real potential.

However, if there is good reason to suspect the model can’t work, I’m willing to listen & see if the issues can be overcome.

[ConfusedObserver]

I only want to see things as they are.

Feel free.

If there are important unanswered questions, perhaps these could be noted and re-asked in a thread? I can’t remember any critical ununswered questions other that what happened in the first recently reported theft of NSR

The questions reach far back, way beyond the first odd blackballing of addresses. I won’t dig here to find and list them, because I already know they won’t get answered.

I don’t want to falsely believe in an unworkable system, but the evidence so far leads me to think that it could work, especially with higher reserves.

There’s no revenue. Nu can only survive as long as NSR can get sold to pay for its efforts. Reserves play a role, but the missing revenue will break Nu’s neck.
Can you explain why Nu is no Ponzi scheme?

[cryptog]

There’s no revenue. Nu can only survive as long as NSR can get sold to pay for its efforts. Reserves play a role, but the missing revenue will break Nu’s neck.
Can you explain why Nu is no Ponzi scheme?

The same statement is valid for all cryptos, including bitcoin, no revenues and yet …

[ConfusedObserver]

You are comparing apples and oranges.
Bitcoin or other cryptos don’t claim to be a DAC. They don’t offer a product about which they purport it has a stable price.
Without revenue for Nu, NBT can only have a stable price as long as Nu can sell NSR. Reserves etc. are just a buffer prolonging the inevitable end.
That can only be changed with revenue. It’s pretty much economics 101.

If you want to compare Nu with Bitcoin, you have to scratch out NBT and only deal with NSR.

Again, why is Nu no Ponzi scheme, if it can only survive by selling NSR?

[Phoenix]

@ConfusedObserver while I admit I don’t have proof, the circumstantial evidence is strong and there is a consensus that you are @masterOfDisaster, who not only blatantly stole 13 BTC from NuShare holders, but caused millions of dollars of damage with other illegal acts against shareholders.

Your posts seem to be motivated by a sense of injustice about how shareholders fired you and ejected you from the team. There was no injustice, and you would do well to grow up, begin to face the serious crimes you’ve committed here, and make amends to the degree possible. This means sending 13 BTC to @jooize, a proper shareholder representative. That is all we want from you. We aren’t interested in your vindictive posts trying to destroy Nu, just because you are hurt it rejected you. It will reject anyone who broke the law as you have.

I’m not willing to discuss anything with you except the return of stolen funds.

[ConfusedObserver]

It’s interesting how you don’t have any proof, but nevertheless address me as someone else.
But hey, you have circumstantial evidence!
One might call that baseless accusation.
You try to create a narrative here, right?
And sooner or later people will remember what they did read, but not that it only was without proof, proclaimed circumstantial evidence and purported consensus. They might remember what you want them to remember.

I have circumstantial evidence that you don’t answer questions, which are uncomfortable
They should remember that as well
I have no BTC for you. I have not broken any law. Please spare me with your allegations.
And I have no desire to destroy Nu. I’ll leave that to you. It’s broken by design and you fight against fixing it.

Once I was interested in a reworked Nu with revenue. I’d have become shareholder in that case.
I’ve learned the lesson that Nu doesn’t want to be a business and only appear as one instead.

Have fun with your Ponzi scheme and better not get caught!
This warning goes especially to @jooize, who isn’t as anonymous as the puppet master @Phoenix.

[cryptog]

Again, why is Nu no Ponzi scheme, if it can only survive by selling NSR?

I do not see much difference between Bitcoin.
Miners sell bitcoins to survive.
So miners survive because people buy bitcoins.
So miners survive there are other people that are ready to sustain the value of the bitcoins you have.
If Nu is a ponzi then bitcoin is a ponzi.
Nu sell nushares to sustain itself. No more no less.
The value of my nushares are sustained because there is someone out there that buy nushares after me.

[ConfusedObserver]

The value of my nushares are sustained because there is someone out there that buy nushares after me.

Allow me to intersperse some education.

[quote]
Ponzi was paying early investors using the investments of later investors. While this swindle predated Ponzi by several years, it became so identified with him that it now bears his name. His scheme ran for over a year before it collapsed, costing his “investors” $20 million[/quote]
Source: https://en.wikipedia.org/wiki/Ponzi
Remark: $20 million was in 1920 a lot of money.

The problem at Nu:
not only NSR holders will suffer from the collapse, but NBT holders as well.
So it will not only hit “investors”, but “customers”, too.

If you still don’t understand the problem, I’m unable to explain it to you.

[DavidMc0]

Can you explain why Nu is no Ponzi scheme?

Yes.

A Ponzi scheme creates nothing of economic value - it only redistributes revenues from new participants to previous participants. When no new participants can be found it collapses.

Nu doesn’t redistribute money from new entrants to old entrants dressed up as returns.

Nu offers pegged crypto assets that are designed to hold their value against fiat currencies.

Nu generates revenue on the spread between buy / sell side of its pegged assets and from transaction fees.

Nu can stabilise and continue to operate indefinitely given a sufficient pool of customers buying & selling Nu pegged assets.

Given that Nu provides a useful product, generates revenue, can reach sustainability, and doesn’t provide returns based on the redistribution of income from new entrants to old entrants, it is not a Ponzi scheme.

There’s nothing wrong with criticising the Nu business model where there are weaknesses, or pointing out risks, but calling it a Ponzi scheme is wrong, dishonest, and misleading.

[ConfusedObserver]

A Ponzi scheme creates nothing of economic value - it only redistributes revenues from new participants to previous participants. When no new participants can be found it collapses.

When Nu can’t find people who buy NSR, the system collapses.

Nu doesn’t redistribute money from new entrants to old entrants dressed up as returns.

If there’s enough money in the cash register, it will be used for buybacks:

[Poll] When do you think the next NuShare buyback will happen?

I have am quite confident we will see NuShare buybacks again.

Nu sells NSR to new participants and distributes the funds to old participants through buybacks.

Nu offers pegged crypto assets that are designed to hold their value against fiat currencies.

And to achieve that, Nu needs to find new participants who buy NSR.
If Nu fails to find new participants, Nu collapses.
Nu would have collapsed already, if it couldn’t have milked B&C Exchange, which sadly got it’s fate tied to Nu’s. I fear for B&C.

Nu generates revenue on the spread between buy / sell side of its pegged assets and from transaction fees.

Regarding transaction fees: in the first 1.5 years Nu made a total of 254 NBT from fees. That’s close to nothing.
Any calculation for the revenue from trading? And please don’t start a calculation based on the spread.
While Nu might make tiny revenue from spread, it’s the net asset value that worries me and should worry you as well, because NBT are valued in USD, but Nu only trades in NBT/BTC.
The fluctuating BTC/USD rate combined with the customer trend to sell NBT when BTC rises and buy NBT when BTC falls endangers the NAV in Nu’s books.
Oh, right, Nu has no books. No need to worry here.

Nu can stabilise and continue to operate indefinitely given a sufficient pool of customers buying & selling Nu pegged assets.

First you have to find out whether the NAV increases by trading the pegged assets.If it doesn’t, Nu can only survive by selling NSR. That’s why I call it Ponzi scheme unless someone shows me reliable accounting information that prove Nu’s sustainability without NSR sales.
A pity, no books, no proof.

Given that Nu provides a useful product, generates revenue, can reach sustainability, and doesn’t provide returns based on the redistribution of income from new entrants to old entrants, it is not a Ponzi scheme.

Nu provides a useful product. I agree.
But I dispute the (net) revenue and sustainability. Without NSR sale Nu collapses. There’s no significant revenue from fees and the NAV is likely declining by trading. Catching falling knives is rarely a good idea. That’s a major part of Nu’s business. Sigh.
As you find in the beginning of this post, Nu is designed to redistribute money from new entrants to old participants.
That’s why it’s a Ponzi scheme.

There’s nothing wrong with criticising the Nu business model where there are weaknesses, or pointing out risks, but calling it a Ponzi scheme is wrong, dishonest, and misleading.

You find my explanation why calling Nu a Ponzi scheme is not wrong above.
It’s not dishonest. Saying Nu makes revenue without having accounting to show it is dishonest.
Claiming that Nu can survive without selling NSR is misleading.

NSR holders as well as NBT holders are in danger.
If you can’t or don’t want to see it, I can stop wasting my time.
There’s plenty of information in the forum and there are plenty of warnings by now.

Have fun!