No there is lot to interpret. This is the key: every participants just puts their funds at the auction and takes back an amont that is splitted according to an average “price”.
Participating in the auction is balancing one’s dual-component (NBT and NSR) portfolio in a NBT/NSR price index fund, where the price is only determined by the auction participants. Or you can just say participating the auction is buying a price index fund.
The above view has several implications understandable in more conventional terms:
- It’s perfectly OK if someone only submits NBT or NSR to the auction. She just buys a basket of NBT+NSR (at auction price) with one kind of fund.
- If the reserve participates just like any participants (see question in my post above), then the reserve buys into this index fund.
- If NU comes behind the reserve to buy the index fund, and a lot of shareholders participate, the price will hopefully be a stable one.
- Since in fact not all NBT and NSR in existence will participate in the auction, the auction price will be influenced by supply and demand of NBT and NSR. For example someone sells a load of NSR on NSR/BTC market or buys a load of NBT for his business, and causes a price dip or supply to change in external markets, the effect will show in the auction price as arbitrageurs react.
- The above seems to suggest that even without external signal to choose which side of seeding to place, as long as the reserve is open end, the auction will balance NBT/NSR with the help of arbitrageurs, and that choosing seeding side and amount will accerlate the price movement but is not critical to establish an equilibrium price eventually. However I haven’t taken pegging NBT to USD and burning into consideration. I just stop here and see what others think.