Thank you for answering my question. I have a few more.
In the whitepaper, the author comments on the shareholders of NuShares doing certain things like voting and such. But how do we know that the shareholders will increase the interest rate in a time of need? How do we know the shareholders will grant more NuBits when necessary? What is the incentive for the shareholders to help the network?
Also, how are shareholders making money (what is the benefit for them?)? When they mint, they only make 40 nushares more, and the nushares have no value. When do they get paid the dividends?
Also, how do we know that the custodians will help the network? What if they run off with the money?
Is there a transaction fee when people send their Nubits to someone? Is there a network fee?
Lastly, what is the benefit of me buying Nubits? I pay more money and spend more time to actually buy NuBits than actually paying for an item with regular USD. Meaning, when I buy NuBits from an exchange, I still have to pay a 0.2% fee; when I use USD I donāt need to pay a fee. Can you explain to me a scenario when NuBits would be useful?
Sorry for asking a lot of questions. I am just a little skeptical of how the Nu network works.
Hi Lako, Iām going to try to answer some of these.
In the whitepaper, the author comments on the shareholders of NuShares doing certain things like voting and such. But how do we know that the shareholders will increase the interest rate in a time of need? How do we know the shareholders will grant more NuBits when necessary? What is the incentive for the shareholders to help the network?
To protect and increase the value of their shares, as well as keep the stream of dividends coming. The same reasons people would vote in any company that has shares, voting, and dividend payments.
Also, how are shareholders making money (what is the benefit for them?)? When they mint, they only make 40 nushares more, and the nushares have no value. When do they get paid the dividends?
Shareholders get dividends when custodians pay them out. Shareholders vote a custodian and create NBT for them, the custodian puts the NBT into circulation ( by selling them ) and the money earned goes to shareholders. See KTmās proposal, which I think is the first and only live custodian that will be paying out dividends currently.
As you can see, when $720k worth of NBT has been sold by this custodian, he/she will pay out $72k to shareholders. The more shares you own, the bigger dividend you would get. Nushares will have value. They already do in fact.
Also, how do we know that the custodians will help the network? What if they run off with the money?
As the whitepaper notes, a custodian would probably show their interests align with shareholders by proving they are a large shareholder them-self. But imagine NuBits was as big as Bitcoin. There would be hundreds, thousands of custodians asking for money for this or that, eventually someone is going to run off with some NBT or otherwise fail shareholders. In most cases it wouldnāt be the end of the world, but itās going to be up to shareholders to pick custodians wisely, especially if itās for a large amount of NBT.
Is there a transaction fee when people send their Nubits to someone? Is there a network fee?
I think the fee is currently 0.01 NBT per kb, same as Peercoins. This fee is destroyed as there are no miners.
Lastly, what is the benefit of me buying Nubits? I pay more money and spend more time to actually buy NuBits than actually paying for an item with regular USD. Meaning, when I buy NuBits from an exchange, I still have to pay a 0.2% fee; when I use USD I donāt need to pay a fee. Can you explain to me a scenario when NuBits would be useful?
The same benefit as using any cryptocurrency, except you can rest knowing your value will stay the same. Iāve already used NuBits to my advantage. I needed money for something, however a lot of my money was in Peercoins. The value of PPC kept changing, mostly downward, I had to constantly recalcuate how much my coins were worth and how many Iād have to spend to do what I needed to do. So I just bought some NBT with it. Boom, done. No more worrying. No having to turn it into USD on some exchange and risk it being stolen. No sending it to my bank account. Just a lighting fast NBT withdrawal to my wallet and I was all set.
I am a confirmed newbie to the NuBits community. I have searched the whitepaper, the entire forum, and the FAQs, and I cannot find a straightforward answer to these 4 questions.
Question 1: I do not have enough BTC to buy 10,000 NuShares on Bter, so I will buy substantially less, perhaps on the order of 2,500 to 5,000. I know that I wonāt be able to vote on motions, but will I still receive dividends?
Question 2: Are dividends paid out on a regular basis, as they would be on a traditional stock? If so, is the periodicity regular, like every two weeks? I understand that dividends are paid out by custodians, but do dividends get distributed evenly based on the number of NuShares you have (so would a person holding 5,000 NuShares get exactly half the dividend of a person with 10,000 shares)?
Question 3: Dividends are paid out from excess funds from keeping NuBits pegged at $1.00. Is this correct? Please tell me if my understanding of this is correct based on this example. I imagine a simple scenario where the price of 1 NuBit = 1 BTC = 1 PPC = $1.00. The price of 1 BTC and 1 PPC go down to $0.90, so people move from BTC and PPC to NuBits, which would tend to drive its price up. So the custodians put more NuBits on the market to drive the price of NuBits back down to $1.00. Since the custodians probably bought those NuBits at less than $1.00, and just sold them at slightly more than $1.00, there was a profit made. That profit is partially distributed to NuShareholders. Is this basically correct?
Final Question: If this is top secret information, no need to answer. Has anyone received NuShares dividends? If so, how much are we looking at per NuShare?
Yes, unless the dividend payment is so small that the custodian specifically excludes you. The dividend threshold for KTmās proposal is 0.01 peercoins.
This depends on the dividend custodianās proposal. So far, there have been no proposals for regular dividends.
Not quite correct. In general, dividends are paid out from funds generated by creating new NBT and selling them on the open market. The white paper at https://nubits.com/about/white-paper explains this in more detail.
No dividends have been paid out yet. When they do, all shareholders will receive their dividends in proportion to their shares.
NuBits donāt have a PoS reward. They are created when NuShares holders vote to grant a custodian fresh NuBits. Meaning they are created as needed in order to maintain the peg when demand increases.
NuShares however operate similar to Peercoin in that they are used to mint blocks and earn rewards. Minting a block allows you to vote as well. The block reward for NuShares is a static 40 NSR. With one minute targeted block times this turns out to be around 20 million NSR per year.
oh i see. then there is a difference from ppc since one can get the whole pos nushare block or get nothing at all!
about nubits, then the āstakeā in the wallet has no meaning?
Hi everybody! I have just know all the Nu scheme two days ago and I cant stop reading about it, it is fascinating to be honest.
I have a doubt hopefully you will be able to solve:
I understand that a Custodian receives newly minted NuBits when the Custodial Grant is approved. Then these NuBits are placed in exchanges to keep the $1 peg. If there is a demand of NuBits, this Custodian will receive, for example, BTC (if the NBT were sold for BTC).
Now my doubt is about how the custodian handles these BTC. I would think they should be used to create buy walls to help maintain the peg system. However, I have seen that some percentage of these BTC (which %? who decides this percentage?) become dividends to distribute between shareholders? Is not this somehow irresponsible? What would happen in the case the same people that bought NBT with their BTC decided to sell the NBT to get BTC again. There would be less liquidity, right?
let me know if I got this right or I am missing something.
The percentage is decided by shareholders. Dividend rates are currently very conservative because the network is young and shareholders want to make sure that there is no danger of the $1.00 US peg slipping.
Drifting off course for a second, there is a concept of āaggregate demandā that is used in discussions on the forum and on our website in sections like https://nubits.com/about/price-stability that is useful to think about.
Pretend there is worldwide demand (over long periods of time, such as weeks or months) for 100 NBT. Also pretend there are currently 100 NBT in circulation as the active supply. Demand equals supply, and the peg is easily maintained at $1.00 US.
Day-to-day however, the demand might fluctuate slightly. Some days the demand might be 102 NBT, other days the demand might be 98 NBT. This is where Liquidity Provider Custodians are useful. They provide buy-side liquidity to purchase those 2 extra NBT when demand is only 98 NBT, and sell them when demand is at 102 NBT. LPCs in effect cancel out the short-term variance in demand that is not representative of the true aggregate demand, and help maintain the peg tighter at $1.00 US.
What happens if long-term aggregate demand declines from 100 NBT to 99 NBT, and the active supply remains at 100 NBT? This is a problem, because now long-term demand is less than supply. This is where parking rates are useful. They incentivize users to purchase that extra 1 NBT surplus supply, and it is a winning transaction for a user as long as they believe demand will eventually rise to 100 NBT or greater again. There are also two other ideas being discussed on the forum (variable transaction fees, and NBT-for-NSR burning) that will be able to reduce the active supply down to 99 NBT. These price stability mechanisms will work in combination to ensure the peg remains at $1.00 US as long as possible.
My main point is that in a fractional system, full reserves of USD are not needed. Right now the Nu network is holding a ratio of about 90% coverage on NuBits; banks in the US federal system often operate at 10% coverage. As Nu grows and discovers clever ways of implementing variable transaction fees and currency burning, the risk of a peg collapse will be reduced further.
When a custodian issues a proposal to the community for voting, the custodian must outline how they plan on using the NBT granted to them. Some custodians for example might develop a project like a mobile wallet, while others like @KTm will sell the NBT for USD to be used for a dual purpose of buy-side liquidity support and dividends.
The Nu team has been hard at work on creating automated custodial reporting so that shareholders have a better idea of what the state of custodial funds are. Weāre not quite there yet, but regular operations reports are released in threads like this: Grant Operations Report
Bumped for visibility. I noticed quite a few users who are logging in each day and not posting much (or at all). Hopefully everyone feels comfortable asking questions that may already be known, but if not, our community members can take the time to answer questions here.
NuBits and NuShares concepts can be a bit overwhelming for the newcomers, but it is worth to get to know it better. Let us fast track you through all the information floating around here and on the website www.nubits.com
Does anyone have objections to pinning this thread globally? The scope of discussion on this forum can be fairly daunting for new NuShareholders and I think having this thread more easily visible would be helpful.
EDIT: Iām globally pinning this topic since there doesnāt seem to be any opposition.
