To which extent Liquidity Operation is decentralized?

[crypto_coiner]

This question is about decentralization of liquidity.
There s different type of decentralization.
Physical ( location) , architectural (function), political (decision making )etc…

Liquidity is crucial for nu.
And probably the more decentralized it is the more resilient it becomes.

What if @jooize or @phoenix are for personal reasons (e.g. health issues ) cannot attend their liquidity jobs, who is going to replace them and supplement them?

A system of liquidity operation at least architecturally and politically decentralized would allow anybody to participate as liquidity operator , join the operations freely without asking for anybody permissions, just as a new miner joins a bitcoin mining pool.

So when are we going liquidity managed on the blockchain?
We need probably a new coin, something like liquidNu invented…

[Mr.Crowly]

@jooize , @phoenix,
The people ask you to make a speech!

[Mr.Crowly]

Look this [Passed] LiquidBits term 5 grant - Automatic Liquidity Pool (ALP)

[Phoenix]

Sorry, I had started composing a response earlier, but couldn’t finish it at the time.

What if @jooize or @phoenix are for personal reasons (e.g. health issues ) cannot attend their liquidity jobs, who is going to replace them and supplement them?

@woolly_sammoth can also perform liquidity operations.

I am also working to finalize a contract for 2 of 4 multisig signers to manage much of the reserve.

Decentralized liquidity is certainly better than centralized liquidity, all other things being equal. What we found in 2016 is that liquidity operators (even those working for shareholders) were utterly inept at discerning what actions were in the interest of NuShare holders and NuBit holders, and unwilling to follow shareholder motions regarding liquidity operations. We learned that liquidity operations needed some expert guidance.

There are a number of mechanisms that can be explored to decentralize liquidity operations. I have no doubt it will be done to one extent or another as Nu continues to grow. However, it is of greatest importance that Nu have competent and stable liquidity operations, with decentralization of liquidity operations being a second priority.

[crypto_coiner]

I think the more liquidity is decentralized the more it is solid resilient competent evolutionary and stable.
Thats what bitcoin has showed us with putting tx verification on the blockchain.

[woolly_sammoth]

Agreed.
Arguably, this is what is being attempted. We are steadily moving away from having a single point of failure. Fully decentralised liquidity provision is definitely a target for me, I’m sure it is for the rest of the team too. This movement towards decentralisation is slower than it was previously in order to put proper rules and infrastructure in place to prevent the breakdown we saw in 2016. I ran a liquidity pool during that time and have to say that is was incredibly difficult to balance the running of the pool with the opposing demands being made on this forum (more funds to reward liquidity providers vs keeping costs low and using wider spreads), as well as getting grants passed to actually pay the liquidity providers. From that perspective, having a core team who can perhaps take some pressure off continually creating grants, but certainly provide clear guidelines for the pool parameters that should be in place, would be very welcome indeed.

View this period as using what was learned back then to put a more stable, less error prone system in place to support decentralised liquidity provisioning.

[Sabreiib]

I ran a liquidity pool during that time and have to say that is was incredibly difficult to balance the running of the pool with the opposing demands being made on this forum (more funds to reward liquidity providers vs keeping costs low and using wider spreads), as well as getting grants passed to actually pay the liquidity providers. From that perspective, having a core team who can perhaps take some pressure off continually creating grants, but certainly provide clear guidelines for the pool parameters that should be in place, would be very welcome indeed.

The mechanism before 2016 was a bad design, very slow, very manual, very tedious.

My suggestion is “pledge NSR to borrow NBT and become profitable LP”. This mechanism solves all the problems above. LPs automatically get reward via LP activities(spread fluctuates around 1%).

[woolly_sammoth]

I think your suggestion is definitely something that should play a part in future liquidity provisioning (if not be the model that is followed). My concern for it currently is that it leaves the setting of the spread to the Liquidity Provider. While the market should ensure that the spread does hover around 1% there will be occasions when it doesn’t. It also leaves the system open to a cabal of Liquidity Providers deciding to set lager spreads to increase profits which was one of the main arguments leading to the crisis in 2016.
I think your model has merit, it ensures liquidity through decentralised means and helps providers to turn a profit, I just think that Nu has to have a stronger product and a more resilient network to handle the few weaknesses it has.

[Sabreiib]

I think your suggestion is definitely something that should play a part in future liquidity provisioning (if not be the model that is followed). My concern for it currently is that it leaves the setting of the spread to the Liquidity Provider. While the market should ensure that the spread does hover around 1% there will be occasions when it doesn’t. It also leaves the system open to a cabal of Liquidity Providers deciding to set lager spreads to increase profits which was one of the main arguments leading to the crisis in 2016.

I think your model has merit, it ensures liquidity through decentralised means and helps providers to turn a profit, I just think that Nu has to have a stronger product and a more resilient network to handle the few weaknesses it has.

Free market is the invisible hand, this is the hardcore of Austria economic school. LPs will compete with each other, assume you have 2% spread while I have 1.5% on the same trade pair and same exchange, you will have much less trade volume than mine because my orders always get finished before yours, so you will get less profit. Then you will probably set 1.2% spread. In the end, the market reaches an equilibrium spreed: if some LP choose small spread, they will have insufficient profit or even die, if some LP choose bigger spread, same thing happens.

The equilibrium spreed is the real answer from free market. Perhaps it will be 0.8% on NBT/BTC pair, better than our artificial 1% setting.

[Sabreiib]

NuBits History – What the heck has happened?

@jooize @ConfusedObserver Any comment is welcomed, any comment is better than no comment. [screen]

I also made a diagram.