[Passed] NuPool Grant Proposal 2

NuShares Passed Grants
#1

Hi Shareholders,

This proposal has been updated based on the feedback of community members and the discussion that follows the first post.
The major changes are that the target liquidity for this run over two exchanges will be 70,000 NBT and not the 100,000 NBT proposed in the draft.
The fee will be reduced to 700 NBT in line with this.
This fee is asked for as a lot of suplimentary work will go into this run. We will be posting on other communities and answering the inevitable questions that arise there. We will also be drafting FAQs, HowTos and other supoprting documentation which will benefit not only NuPool, but other TLLP operations that follow.
All this means that the total amount requested for this grant will be 7,000 NBT. This is inline with Jordans comments that 10,000 NBT seems a fair comepnsation for Liquidity at this current time. With the other pools in operation, 7,000 NBT for NuPool takes the total network spend to ~10,000 NBT.

Following a successful run on Bittrex the NuPool team would like to expand the operations of the TLLP. This second grant will allow for an extension of the running period, an increased target for provided liquidity and expansion onto other exchanges.

This operation will continue to be maintained by @woolly_sammoth and @willy. It will still be formally run by @woolly_sammoth.

Please note, that @creon is no longer involved with this project.

We would like to ask for another 30 day term, as we still cautiously consider the software as "beta."
This 30 day term will begin at the earliest point after the first period ends on May 14th 2015 or whenever this grant passes after that. The official beginning of the second term will be announced on the NuBits forum.

In the first run, the liquidity targets were easily met solely by users from this forum who were aware of the pools existance and operation. For this next run, we want to put a larger emphasis on attracting liquidity providers from outside of the Nu community. We would like to make liquidity provision an attractive and financially viable alternative to mining as this will attract and keep these external providers, enhance the visibility of Nu in these other communities and help make the peg more secure.
We would also like to show that operating a pool can have financial benefits for the operator as this should prompt other to start their own pools. That will drive competition and result in cheaper liquidity for Shareholders. These wants are reflected in the terms of the operation and, this being a draft, we would welcome comment on them as ideas before starting the vote on this proposal.

We have done some maths on the amount of funds left over from the first run. We will be left with ~138 NuBits once the 30 day operation period is over (this assumes that target liquidity has been reached continuously for the next 7 days. Hence the ~). As per the conditions of the first grant proposal, these funds will be removed from the amount requested in this proposal

Proposal RIPEMD160 hash: 9a13182e18122bafb5c21374b3355880ac6291fc

=##=##=##=##=##=## Custodian Hash starts with this line ##=##=##=##=##=##=

Custodial Address: BNUPooL5Q4THaAQV3gz3tuPuagVaiwtCaK
Amount Requested: 6,862 NBT

We (@woolly_sammoth and @willy) will continue to provide our TLLP server on nupool.net for 30 days. The operation on Bittrex.comā€™ BTC/NBT pair will persist with an increased liquidity target of 35,000 NBT split equally between the buy and sell side.

Secondly, we would like to expand our operation to Poloniex.com to provide liquidity on their BTC/NBT pair. The liquidity target on Poloniex will also be 35,000 NBT split equally between buy and sell side.

In order to provide an attractive offering to external liquidity providers, we would like to increase the maximum interest offered to our pool participants to 9% per month or 0.3% per day.

The pool fee will be 700 NBT and will be used to fund time spent on supporting documentation and outreach to other communities to promote liquidity operations within Nu.

As with the last proposal, funds that remain at the end of the 30 days will be rolled over into the next proposal or burned should NuPool cease operation.

Here are the figures:

  • 70,000 NBT total liquidity target
  • 2 Exchanges, Bittrex and Poloniex
  • Funds to compensate pool participants: 6,300 NBT (9%)
  • Pool fee: 700 NBT (1%)
  • Total of 7,000 NBT (10% total fee)
  • Asking total of 6,862 NBT (7,000 - 138)

=##=##=##=##=##=## Custodian Hash ends with this line ##=##=##=##=##=##=

Verify. Use everything between and including the <custodianhash></custodianhash> tags.
6 Likes
End of NuPool's 1st operation - 2015-05-14 23:59 UTC
[Discontinued] Cybnate's Nu datafeed - BETA
#2

The draft looks good, is designed to provide a big amount of liquidity at 2 exchanges and at a fee that is competitive.

3 Likes
#3

I would support it, but would be keen to see whether this liquidity is actually used over that 30 day period **
There is a feedback loop in these things, no liquidity, no use and the other way around. On the other hand paying for an excess of liquidity provision on relative risky NBT pairs might also be a waste.

** I have to think on how you would do the reporting, outside asking the exchange itself or manually scraping the orders of their website. And their is an element of making it up easily. I think showing the demand for a service is an important aspect for liquidity pools, not sure how to solve it though and it is an issue for all liquidity pools not just Nu-Pool.

1 Like
#4

Very good points. I am currently working on a script that scrapes the .credits files from the server and calculates minute by minute breakdown of the liquidity provided. It is expected that this can be checked against the reported liquidity from the Nu client for that time.
As for checking how much volume the liquidity has generated, that may be a little more tricky. Should be posiible with some api calls and log parsing though.
Anything that gets coded towards these ends will be made available publicly for review and also to be available for future pools reporting needs.

#5

So this proposal would generate as much as 5 times the liquidity provided currently.
I feel it is a healthy boldness
That would certainly make Nu look bigger and would be good for its visibility.
That is why I would like to support it.
However Nu has already 40k on the buy side and 63k the sell side at the time of this writing but only 9k of trade volume over the last 24h.
So the question we need to ask ourselves is as follows: would increasing drastically the liquidity stimulate the trade volume? In other words, what would be the cost performance of such an increase?

Canā€™t we check that in CMC?

1 Like
#6

Volume can be seen here: https://www.cryptocoincharts.info/pair/nbt/btc/bittrex/1-month

Its the grey areas on the bottom, probably a running 24h average. So it peaked twice to around 4k but otherwise rarely went over 2k. There were a lot more trades on bitcoin.co.id. It really depends on the current hype of NBT and the BTC price fluctuation.

So I donā€™t know if we really need this much liquidity to support the natural market, but we will soon need a similar buy side liquidity to compensate the sell pressure from the B&C development.

1 Like
#7

Also very good question.

That is the main aim of this proposal. It provides a very attractive offer to get fresh funds into the liquidity system as well as hopefully stimulating others towards running competing pools.
The worry is (as has been pointed out privately) that the amount of NBT generated by the grant is certainly unsustainable in the long term, and possibly the short term. This is the reason for providing the proposal in draft form rather than just going straight for the vote, so that this question can be asked and debated.
Itā€™s certainly true that there is a link between the amount of liquidity provided to market and the volume. Whether providing this liquidity will stimulate that volume isnā€™t a question I can answer with any degree of certainty.
It is certainly a risk, both to the peg and to Nu. The question from me is: is it a risk worth taking when weighed with the benefits of raising the visibility of Nu and aiming for the end point of reducing the cost of liquidity provision through increased competition? I like to think so but Iā€™m sure that others have opposing views.

1 Like
#8

The question is more if there is any better use of the 10,000 NBT printed through this. As pointed out in the PM, 0.1% / day customer fee + 300 NBT operator fee has always been kind of the target, and I think I donā€™t spoiler the competition in the current nupool operation if I say that you all seem to agree on this since the minimal interest rates you provide are mostly around this area. This would be at most 3,300 NBT liability per month - something we might even be able to afford. I would even be ok with 50k total liquidity and 0.2% per day for customers to attract more users, but the deal is already pretty damn good. And we will surely find somebody to burn 3,300 NBT.

Will we also find someone each month to burn 10,000 NBT?

#9

I have outlined the only solution (I can think of) to reduce costs dramatically here:

In short:

  • if you have a NBT/crypto pair increase the spread
  • trade a decent amount of crypt you receive to USD, put it there and keep it as Tier 2 liquidity reserve until itā€™s needed

That reduces the volatility risks when trading NBT/crypto and the spread can even generate revenue if itā€™s in excess of two times the exchange fee.

Iā€™m not glad about putting the Tier 2 liquidity into USD, but as we canā€™t trade the crypto to NSR and burn them to receive new NBT, ā€œparkingā€ Tier 2 in USD seems to be the only way to get rid off a big part of the volatility risk.

Iā€™d prefer increasing the spread and keeping a big part of the liquidity in USD to trying to find each month somebody to burn 10,000 NBTā€¦

1 Like
#10

I understand what you are saying and sympathise with your concerns.
I would like to reitterate that I don;t see the figure being 10,000 NBT month on month. This is a ā€˜big bangā€™ introductory offer to provide the big headlines that will attract outside users who may or may not have heard of Nu.
I fully intend for the cost to Nu of providing Liquidity to go down. Whether that is through reducing this grant to reduce the immediate liability or taking the risk and keeping it as is, and using it to drive competition.

I think you would agree that we have reached somewhat of an impasse in our private discussion of this. I would be very interested to hear what other Shareholders views are on the current state of Liquidity provision and this proposals place in it.

2 Likes
#11

When evaluating liquidity proposal such as this, several questions should be answered first:

  1. What is the total amount the network should pay for liquidity on a monthly basis at this time?
  2. How much is currently committed to other liquidity operations?
  3. Could and should the costs to shareholders be reduced by increasing the spread between the walls?

I think around 10,000 NBT is a reasonable monthly liquidity budget at this time. 75 NBT is likely to be committed to NuPond, 1750 to Liquid Bits and 1100 to NuLagoon. That leaves a little over 7000 unallocated. While I would like to see a better distribution among the pools (not so much at NuPool), the other pools are not prepared to ramp up right now.

If transaction fees are 0.2% for each side, perhaps a spread of 0.3% or 0.4% for each side could be considered, with profits reducing the fee to shareholders. It is also possible to negotiate exchange fees as we were doing in January and February. Certainly pools that can negotiate fee reductions will be at an advantage over pools that canā€™t or wonā€™t. @willy and @woolly_sammoth what are your thoughts regarding the suitability of raising spreads and negotiating discounted fees?

2 Likes
#12

The spread already has a 0.5% tolerance. If pool operators increase the spread, then we donā€™t have a pegged currency anymore. If someone wants to provide liquidity with a larger spread, then I can write a bot for that which uses existing LPCs to take the profit, but those operations must not be shareholder funded. 10,000 NBT are about 5M NSR dilution every month. I would rather say letā€™s shift the payout to NSR for such a large operation.

Can you please tell me the state on this? I just made an NSR grant on testnet by simply removing all your hardcoded checks. Its only the restrictions on the coinbase transactions that are a bit tricky. When will we have NSR grants officially implemented?

#13

I would be in favor of increasing the spread because providing a stable crypto at this time is a service that costs. So traders that use NuBits must pay somewhat for this service.

Canā€™t we increase easily that tolerance in the tllp bot you created?

I think I could consider such a way to reward lpcs.

This is only my opinion.

#14

Of course.

This corresponds to an NSR inflation of 7.2% from liquidity provision assuming we can keep the current NSR price + 2% block reward. So about 10% inflation. Most PoS coins have around 1% yearly inflation today. So we have to get about ten times the value in our ecosystem than these coins.

This is why I like the idea of NSR provision so much, because it directly affects current shareholders and doesnā€™t allow to shift liability into the future. This establishes trust to the outside world. Again, @JordanLee, please give us some ETA for the NSR grants. Iā€™ll set up a pool immediately once this is implemented.

#15

What normally happens to these profits?

Iā€™m concerned that paying NSR to pool users could have a negative impact on the price of NSR. It is well understood that most Bitcoin miners immediately sell their BTC. Right now NSR is relatively illiquid. It is better to sell NSR to investors that are likely to want to hold and use the sale proceeds to pay pool users.

You can watch the ongoing progress and conversation about this here:
https://bitbucket.org/JordanLeePeershares/nubit/issue/180/permit-nushare-custodians-and-burning

It is our top development priority.

1 Like
#16

NBT/BTC is already unprofitable. The way the bot works is to move the orders if the price exceeds %0.5 from where the order is. This is to stop rapid movements of orders. There is not a catch-all btc price, we should be using a btc sell price and a btc buy price like coinbase does.

I agree with Creon about paying out liquidity with NSR, to promote the crossover between shareholders and custodians. Miners are a third party to BTC holders, and we should be paying any third party developers or what have you with NBT. However, I do not believe custodians should be entirely third party, I think we should incentivize custodians to become shareholders by giving them NSR instead of NBT so they donā€™t have to trade for it.

1 Like
#17

Nice, the issue tracker is open :smiley:

I donā€™t think that there is much profit from that, but large liquidity provider will be able to say more about this. The main reason to handle it this way is to reduce API calls from the client side, i.e. the server allows for a 0.25% deviation from the actual spread, which is the exchange fee (usually around 0.2 - 0.25%, so its about 0.5% in total).

I would like to have this as separate pool. Right now all pool operations are mostly funded by shareholders. Many of them will be more than happy with the NSR reward in order to improve their voting power and influence. People who prefer a stable value payout can stay on the NBT pool.

Letā€™s consider the alternative: Can we really expect someone to burn 10,000 NBT at market price? I think we probably would need to pay more here.

#18

Giving a choice for NSR payout while leaving NBT as a convenient option is likely to prevent large numbers of NSR from being sold, so I would support that.

3 Likes
#19

I feel the amount in NSR should correspond to 1/2 or 1/4 of the amount in NBT at market price or perhaps even less because getting NSR should be considered more valuable.

#20

Iā€™m not sure Iā€™m getting this correctly.

You propose that if someone has earned a compensation of 1 NBT, you want to give them 0.50 NBT or 0.25 NBT equivalent in NSR?