[Passed] Outstanding Nubits

NuBits
#1

This motion is split off from a larger motion:
[Draft] A Comprehensive Upper Tier Model

https://daology.org/u/nagalim/proposals/2d0836069185b195572bc8a60efbf0057ef9ec88

#Motion Hash:
3867806079bb45338c233ebd3dd364f40df69334

#Text:

##Preamble
NuShare buybacks, as defined by 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3, led to a definition of buy-side reserves held by the network. This properly defined the place that Tier 4 (T4), described by motion 65CB60D096508A7FA9ECC2017B38BC3AFEB5663D, held as a decentralized network of reserves. It also defined a limit to the liability risk that T4 can hold. The goal of this motion will be to further define the reserves and powers of T4 signers.

##Reserve Definitions
Reserves can generally be classified into two types by referencing the unit of account the NuBit risk is pegged to. Either the reserve liquidity is stable with respect to a NuBit unit or it is considered dynamic.

Stable Liquidity is all T4 liquidity denominated in native NuBit units. This includes all stable cryptocurrencies and contracts like NuSafe that are denominated in USD with reference to US-NBT.

Dynamic liquidity is all T4 liquidity denominated in other units. This includes the BTC and PPC multisig, but does not include any collateral for current operations as that is not considered operating liquidity.

The Outstanding NuBits in the network is equal to the quantity of circulating NuBits, as defined by b1ef96aed5c7f9dec482467b254b40c82bf66d23, minus the sum total of T4 stable liquidity, but must be no less than 400,000 US-NBT. NuBit units other than US-NBT are contrasted individually with their stable reserves (minimum of zero, ignore negative results) and converted to US-NBT using a price feed. Dynamic reserves will be measured as a fraction of the outstanding NuBits in the network rather than the circulating NuBits.

##Stable/Dynamic Strategies
Choosing when to buy and sell auxiliary reserves can be a challenging endeavor for a decentralized organization. As such, FLOT and shareholders are encouraged to manage the reserves in an intelligent way by keeping in mind two contrary effects for each reserve unit:

  1. Risks
  2. Use cases

Fortunately, reserves tend to be influenced more by one of these effects than the other at different stages of Nu. When Nu is in a recession, use cases become very important and the organization has many options for where to put liquidity to attain the highest effect on Nu finances. When Nu is in surplus, risk of default and heavy loss becomes more important and Nu should seek to diversify liquidity as much as possible. As such, additional stable liquidity sources should be bought when Nu has a surplus of dynamic reserves and conversely sold when Nu has a deficit. The liability risk of such stable assets should not be ignored in the same way that it is not ignored with dynamic reserves. However, stable reserves enjoy a different atmosphere of risk than dynamic reserves: a stable reserve tends to either be reliable or to default, whereas a dynamic reserve can fluctuate in value. Therefore, stable liquidity is considered a virtual buyback wherein Nu takes on some counterparty risk to avoid affecting nubit supply. As such, Oustanding NuBits will be used as opposed to Circulating Nubits for all network calculations and measurements.

Proposal created with Daology.org by nagalim for Nu

Wake up Shareholders! Raise Park Rates Now or FLOT Will Need to Start Selling NuShares to Increase Reserves!
[suspended] Cryptog's Nu data feeds - BETA
[suspended] Cryptog's Nu data feeds - BETA
Supply, Reserves, and Equilibrium (superseded by automation)
Supply, Reserves, and Equilibrium (superseded by automation)
[Discontinued] Cybnate's Nu datafeed - BETA
#2

Yah, it looks like we need to make things more modular and stuff less in a single motion.

On a side note I’m a little bit worried that we can lose the overview if there are too many motions woven with each other. NuLaw might be able to fix that.
On the other hand I tried to create a draft for a very complex motion once to have guidance for liquidity operations. Now I believe that was no good idea and making it modular is better.

Which brings me back to this motion: it contains definitions (which are necessary to have a name for things) as well as a viable strategy. It names other motions, which have a relationship to this motion.
I don’t see room for improvement.
I haven’t checked other liquidity related motions to see whether this motion is connected to other motions as well.

#3

I made some edits. Shareholders please look this over because I will be putting this up for voting in the next day or so.

1 Like
#4

#Motion Hash:
3867806079bb45338c233ebd3dd364f40df69334

#5

What is the main idea of this proposal?

#6

Last line this time.

2 Likes
Supply, Reserves, and Equilibrium (superseded by automation)
#7

It would set the context if there is explanatioin of why Outstanding is better than Circulating. Is it only so that dynamic reserve won’t go negative? and how the 400k number us determined (and how it would be updated in the future).

No need to change the hash. Explaining in this thread is good enough.

#8

Circulating nubits cannot go negative, that wouldnt make sense. Outstanding nubits constitute a virtual buyback of nubits via stable reserves, so the minimum is just there in case our stable reserves grow a crazy amount. Basically, without this there is no real place for stable liquidity in the model and there would be low general incentive to create additional stable nubit reserves because they would have no effect on the buyback calculation yet would cost money to create.

Outstanding nubits represents the concept of treating stable reserves as a virtual nubit buyback without affecting the supply/demand dynamics of the open market.

Supply, Reserves, and Equilibrium (superseded by automation)
#9

400k0.150.05 = 3000 > 2500, the minimum for dilutions to work properly. It would need to update when the standard calculation changes.

#10

what is te 0.5 for?

#11

*.05. Standard velocity (5%)

#12

This motion would increase our standard by $225 immediately upon passing. ($30k0.150.05 from NuSafe)

Supply, Reserves, and Equilibrium (superseded by automation)
#13

Right trying to wrap up what my understanding is of this proposal:

  • Definitions of reserve types to be used going forward
  • Strategy on how to handle these reserves.

The first item is clear, the second not really. On first read I couldn’t find a clear strategy other than that we need to manage reserves in an intelligent way in the context of risks (not mentioned) and use cases (not defined) :wink:
Maybe it is the way it is written in the proposal, some bullets and paragraphs may have helped for readability e.g.

  • When Nu is in a recession, use cases become very important and the organization has many options for where to put liquidity to attain the highest effect on Nu finances.

  • When Nu is in surplus, risk of default and heavy loss becomes more important and Nu should seek to diversify
    liquidity as much as possible.

As such, additional stable liquidity sources should be bought when Nu has a surplus of dynamic reserves and conversely sold when Nu has a deficit.

The liability risk of such stable assets should not be ignored in the same way that it is not ignored with dynamic reserves. However, stable reserves enjoy a different atmosphere of risk than dynamic reserves: a stable reserve
tends to either be reliable or to default, whereas a dynamic reserve can fluctuate in value.

Therefore, stable liquidity is considered a virtual buyback wherein Nu takes on some counterparty risk to avoid
affecting nubit supply.

As such, Outstanding NuBits will be used as opposed to Circulating Nubits for all network calculations and
measurements.

Or did I mess up your proposal? Hope not, not my intention, just trying to help others an myself here.
Anyway with having it broken down a bit I think I get it although not entirely to support this. Maybe you can comment on my breakdown and talk through the bit about virtual buybacks and Nu taking counterparty risk affecting NuBits supply.

#14

It’s just Outstanding = Circulating - Stable

Most of the stuff mentioned here is just setting up a background for future motions regulating reserves. There is a basic idea being hammered home: sell stuff when we need liquidity, buy stuff when we have too much. There are no specifics mentioned about how or why other than the most general statements. The only protocol change is that mentioned above, to include stable reserves in the calculation.

#15

Why is it convenient to subtract stable reserve from circulating nubits?
Shouldn’t stable reserves be first and foremost reserves and as such shouldn’t they have nothing to do with circulating nubits?

#16

The quantity of outstanding US debt is not equal to the total supply of circulating dollar bills. Should we be making policy based on total supply, or bassed on a concept of outstanding debt? I thought it was pretty obvious that we should use outstanding rather than circulating.

However, the network is in trouble right now and arguing for this motion as a subtle change to the process is low the priority list.

1 Like
#17

All right. I ll be probably voting for it at my next update.

#18

voted.