As pointed out by Jmiller here, we need much more liquidity providers than what we have right now if we want to increase drastically the liquidity that Nu can offer and be better than bitcoin as envisioned by Jordan Lee.
As the same time, we need a quicker way to elect providers.
For example, it has been more than 1 month since I posted my proposal here, but it is still undecided, somewhat.
Since I am not sure whether or not it could pass (unlikely now), I am leaving it for a while but much more competition with better proposals would make me remove it quickly.
Now, what are the strategies that we can think of to get more providers on board?
I believe this is a crucial question.
One possible strategy
- Granting providers shares instead of nubits by protocol so that providers do not need to wait for Jordan Lee’s bonuses proposals. That will be possible when the burning mechanism is in place. Shares give you some ownership of the network so I believe it is a better incentive in order to get providers work on the long term for Nu.
- Then, getting directly exchanges as liquidity providers in exchange of shares.
However, the thing with providing liquidity right now is that it causes a potential loss when BTC is on a downtrend.
Which makes potential providers reluctant to providing liquidity, generally speaking.
As implied in this thread, minimizing the loss incurred by providers 1) and incentivizing them better 2) are very important topics.
For 1), I guess only considering NBT/USD as a pair would solve the problem but that would come later once there are more people that want to buy NBT with fiat in the first place.
Perhaps the order book mirroring mechanism envisioned by Jordan Lee, starting with a parametric order book would help contribute drastically to that goal.
For 2), we could increase the spread between the buy side and the sell side, so that providers can pocket more profits at each trade.
In conclusion, I believe liquidity providing needs to become a profitable business.
Once we achieve that, then it is difficult to imagine how Nu cannot get thousands of liquidity providers.
Once we achieve that, NuBit becomes de facto the most liquid cryptocurrency on the Planet.