We need much more liquidity providers....Let us think of strategies

NuBits
#1

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.

1 Like
Grant to provide 50,000 liquidity to Exco.in for 60 days
#2

I want to help by being an LPC! Vote for my motion written here:

1 Like
#3

tks!

1 Like
#4

All of the custodial grant proposals contain giant sums which are out of scope for many people. It would be nice if NuBots could harmonize with each other so we can have 10 custodians providing 5k each on the same exchange instead of having one providing 50k. I’d certainly be interested to take this smaller risk (for a correspondingly smaller reward).

4 Likes
#5

That’s certainly possible. NuBot 0.1.5 is expected to include a (re-)release this functionality. We had to pull it when a technical issue was discovered.

I’d love to see a large number of small(ish) liquidity custodians all online and supporting the network.

5 Likes
#6

This is the NuBot development roadmap, with the next two releases quoted below:

So, the very next release focuses on enabling multiple LPCs on the same trading pair. The following release does something even better: it changes LPC wall collisions (the current problem preventing multiple LPCs on the same trading pair) from being a bug to a feature. This will be even more true as additional releases move toward order book mirroring. Where we are headed no coordination of LPCs will be needed and when LPCs fill one another’s orders, it will constitute arbitrage, a healthy and profitable type of trading.

However, it seems likely there are some currently unsupported trading pairs where 5k would be useful. @desrever has more information about this than I do. I would like to know if he sees a use case for 5k in liquidity right now on one of these unsupported pairs.

3 Likes
#7

This sounds great, I hope you found a solution so custodians cannot trick the system to reduce their own risk.

Interesting, I messaged @desrever to see if it would make sense for me to make a proposal.

Park Rate Voting
#8

One approach to liquidity is to have exchange operators provide it. Much of the cost of liquidity is compensation for exchange default risk. While exchange operators are not immune to exchange default, they are in a uniquely empowered position to defend against it.

So, my question is are any of the operators of Bter, CCEDK, Excoin, Bitspark, Allcoin or Poloniex in a position to run NuBot on their own exchange at a cost lower than what @muchogusto is proposing to charge (10% per month) here:

If exchange operators can offer better pricing, it would be a solution that would benefit shareholders, the exchange and its customers.

Anyone willing to contact exchange operators about this possibility? It’s a pretty appealing deal: shareholders pay you to bring liquidity to your own exchange.

4 Likes
#9

I am proposing a small liquidity here. Please consider voting.

1 Like
#10

Since it would imply paying the exchanges upfront with a high amount of NBTs, it would have to be an exchange we can trust well, which is the case of Bter, CCEDK, Excoin, Bitspark, Allcoin or Poloniex it seems.
In case shareholder do not want to “print out” NBTs in case those NBTs do not come from the reserves, we could wait for the burning mechanism implementation and offer NSRs instead. which would be more natural since we would want the exchanges to contribute to Nu on the long run, I guess.

1 Like
#11

What about exchange loss risk? (liquidity provided on NBT/BTC and BTC goes down for example)
I feel most of the cost goes in there.
It is because the exchange rarely defaults but BTC going down is a reality.
For example, here the provider lost 2600 NBT more or less on BTC going down.

#12

@bitcoincoid and @Excoin you should jump on it.

#13

This can be economically addressed by shorting BTC using OKCoin futures market or Bitfinex (on margin if desired). I spent a bit of time looking into it. Both markets are very liqui, and pricing is quite economical. So, by owning BTC that is used for liquidity provision, you are necessarily going long BTC. You can negate your exposure to price changes by going short in an equivalent amount. This is not a novel thing to do. For instance, farmers and oil producers do it all the time to ensure they can predict the price they will receive for their product. So, you can do that if you wish. @muchgusto mentioned he is a BTC bull at these prices and isn’t interested in hedging. So, it is an individual choice. Liquidity providers can do whatever they like in this regard.

2 Likes
Decentralized liquidity without counterparty risk not yet implemented
[Passed] Motion to provide seed funding for B&C Exchange - a decentralized exchange built on the Peershares platform
#14

No. You still don’t understand the design of liquidity operations. I suggest you read the whitepaper to come to an understanding. Liquidity operations as described there DO NOT REQUIRE LPCs TO BE TRUSTED WITH FUNDS.

#15

If anyone attempts this, I would highly recommend using Okcoin futures over Bitfinex. Don’t get me wrong, Bitfinex is a very good exchange with good liquidity but the margin interest rate adds up fast. I don’t like holding shorts there for more than a day or so. Okcoin futures are a flat fee per contract, at a very reasonable rate. Just note that you’ll probably want to use the 3 month contract to avoid weekly contract expiration. Expiration is not a big deal, just something to be aware of.

#16

I think @cryptog might be referring to what I wrote here

#17

Well I was referring to the situation in which shareholders need to grant the reward in NBTs to custodians once the proposal is voted. It is the case of my proposal.

In that case you need to give the reward upfront, thus entrusting the funds to the custodian.
This is ok as long as the amount requested is relatively low but I understand of course that we do not need to trust the custodian if the custodian is fine with being paid once the operations are completed.

In my proposal, I guess I should have asked for 1NBT as a reward upfront and then asked the shareholders to pay me the remaining at the end of the operations.

1 Like
#18

Sorry, I misunderstood.

#19

I believe we should stop asking for LP within this inner circle and make a public “call for liquidity providers” blog post and advertise it properly

2 Likes
#20

Right. @tomjoad is currently preparing infographics for general marketing efforts. Maybe we should also make one for custodians, which explains the basic concept and the required steps to execute this task. Right now you still need to read into the forum, the nubot and ideally the whitepaper to fulfill this role although all the required information for an LP could be summarized on one page.

4 Likes