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.
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.
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.
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.
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.
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.
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.
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.
i read somewhere that providing liquidity would be something like mining bitcoin, so next thought was, why not make liquidity providing pools? where it is easy to just deposit coins, and get some expected return, the pool could even return in nubits possibly, and spread their liquidity among different exchanges maybe , i know it is also controversial because it introduces centralization, maybe there should be two or three pools from start, idk, it is still complicated to manage this i guess, but maybe it can be done, and pool operators can emerge , just my two nubitcents
Pools are for sure more centralized as individual LPC would be.
But in fact liquidity providing is even more centralized right now with almost all liquidity being provided by @KTm and @jmiller.
Pools could be a step into the right direction; liquidity providing mustn’t end at pools.
But I guess that the fees for being a pool member could be somewhat different from mining pools. Another aspect that will hinder wide-spread adoption of pools is the need to trust the pool with money.
So I think and hope that pools can play a role, but it will be hard for them to dominate the liquidity market.
It all depends on the fee that will be paid for liquidity providing long-term, once this business is standardized.
This is in my opinion still the main reason: standardization.
I’m not saying that we need a blue print and everybody has to follow that precisely.
But I for one didn’t know what it’s required to be a LPC in enough detail to make a decision for providing a proposal - even if I had the funds (and I read as much as I can here in the forum and consider myself familiar with big parts of the Nu network).
where do you host the NuBot (I guess a server; if hosted at home: does it work if you have an internet access with changing IP address; besides I wouldn’t want to trust a server with hosting the bot…)?
how much effort is the operation of it?
what happens if a malfunction of the NuBot leads to loss of money?
is there a monitoring of the NuBot (e.g. an email being sent it if shuts down)?
what other (manual) activities are required?
I think it will bring a lot LPC in the game if there’s a checklist and a kind of guide how to do it.
Just like @creon said: you need to dig deep for the information you need to become LPC or even make an educated guess whether or not you can/want to be one.
If it’s easy enough, there will be way more LPCs than now.
The entry seems to be the main problem.
We need to make it more convenient.
Say it would be not very much effort maintaining it; installing a NuBot could be done like installing an application on your PC, configuring some parameters and that’s it.
That would attract some LPCs.
Currently it seems to be complicated; so complicated that a lot of compensation for the LPC seems to be appropriate - otherwise they wouldn’t get any votes.
Every custodian is free to implement this pool idea right now. The custodian just offers some interest on coins borrowed by customers (through a personal contract, maybe multisig to reduce risk) and use these funds to support the liquidity as promised in the grant proposal. Its a way to share risk that is perfectly possible in the current system.
@irritant I don’t see how p2p pools could work since you need to have one node with the exchange access.
“Minting pools” don’t work if you’re assuming that individuals would use a multi-signature address because you cannot mint with them. For the wallet to be able to submit a block to the network (and receive the reward) it has to be able to automatically sign the transaction that it submits. Currently this isn’t possible if the address’s private key is split between multiple holders.
@Ben Its not about PoS or minting, the idea is just that a custodian is free to balance risks by using external investors. “Pool” is a misleading word here.
I only mentioned multisignature addresses because they can be used to provide these investors with more security, since otherwise they have to trust the custodian with their money blindly (which maybe ok depending on the reputation of the custodian). Of course then investors have to be available to sign the corresponding transaction if access to their funds is required.
