What is Nu's plan for BTC fork event?

Liquidity
#1

I think it would be wise to have a discussion about protecting shareholder funds. In the event of a split, which chain will we support?

Should we possibly halt peg activity due to the nature of things and secure BTC in off exchange wallets where we can ensure the safety of funds on all possible bitcoin blockchains? I am not advocating any of this right now but would like to hear what others think.

We should really have had a motion passed, so I guess it’s all up to the liquidity team this late in the game.

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#2

A long time ago pegging was mostly done via a (supposedly) decentralised mechanism so there wasn’t an urgency for that (just realized it has been over a year… and I’m still coming back here), which explains the absence of a relevant motion.

#3

There are exchanges which would support both coins (if that happens) going forward or just stop trading. Haven’t heard what Bittrex and Cryptopia’s policies are. @jooize, is there already a strategy for the BTC funds in Nu’s control?

#4

With my personal funds, I have decided to keep a very large portion of BTC in private keys I control. I think worst case scenario, BTC could split into many different chains (more than 2) with one being an obvious winner, but still I would like to have the security of collecting all tokens instead of hoping an exchange supports (and protects) all of the tokens.

Anybody will have the ability to create their own fork and there is a lot of financial incentive for alt-coin developers to create a fork. There is much division on the issue at hand. I think it is definitely possible that this could be a new era for alt-coin development, even if short lived before an obvious winner emerges.

#5

I do not have a strategy for such an event. Can we have potential consequences and our options mapped out?

#6

I may very well be over cautious, but I think preparing for the worst is always best.

I think the option I would throw out there is to announce to all exchanges that we will be removing our liquidity for a few days. Maybe even ask them to halt the USNBT markets. The nature of our liquidity leaves us at the mercy of the exchanges policy.

Here is a hypothetical scenario:

Cryptopia only supports BitcoinA, while Bittrex supports BitcoinB. Let’s say we have 100 BTC for simplicity. If this scenario were to play out, and the exchanges didn’t honor the other token, we would only have 50 BTCA and 50 BTCB. If we held all of our reserves in private key form, we would have 100 BTCA and 100 BTCB.

Meanwhile, Bitmain is creating BTCABC in private. When it goes public, we can be certain that we will also have 100 BTCABC if we held our BTC in private keys during the fork event. We would ensure that we could provide liquidity to all chains if necessary.

The risks of halting trading (or peg activity) are inciting a NBT market panic or being on the losing end of massive a massive BTC price change. Since we believe that fractional reserves are sustainable, it wouldn’t take a very large panic to do some real damage. This is why this discussion is so important. Let’s be real here though, the USNBT market is used for trading BTC. We put ourselves out there with all the risk in providing the USNBT product. The largest exchanges in crypto have said they may halt trading if they deem it necessary, which is why I do not think we would be necessarily wrong to take this action, but exchanges have all funds secure and are insured. Nu cannot compete with that as it stands today.

2 Likes
#7

i agree with you. we should reduce liquidity operations around the fork day if there is such a fork.

#8

I think it is a certainty that there will be at least one fork. The debate would be whether or not the forked blockchain holds any relevance. Looking back on the ETH and ETC fork, I think everyone can agree that both ETC and ETH are currently relevant. ETC today is at $1.5 billion market capitalization, so those who had ETH on BTC-e during the hard fork really missed out since they were not credited their ETC. This is why I feel we should be proactive.

Still there are risks that need to be treated with caution. Would suspending or substantially reducing liquidity prompt a run on the bank? Would a large BTC price drop/rise while liquidity is paused substantially reduce our ability to provide liquidity? Would ignoring the fork event leave us stuck holding the losing BTC fork token?

2 Likes
#9

when such a fork is going to happen? 01AUG ?

#10

That is the plan. I have decided to withdraw myself from crypto for a few weeks. It’s been a pretty exciting summer already. I hope Nu capitalizes on this whether the exchanges support and credit the fork(s), or liquidity is paused. One important thing shareholders should seek is transparency. I think it would be kind of Liquidity Operations to list our BTC balances and addresses prior to the event so shareholders will not be forced to have blind faith that tokens are handled properly.

Good luck everyone!

#11

I have full trust in the Liquidity Operations Team consisting of @Phoenix and @jooize. They are the most professional members on this forum and they will do everything in their power to ensure that shareholder will is ultimately going to be enforced. One thing I found funny is that someone holding hundreds of thousands of shareholder funds seeks advice only after someone brought up the question about how to handle the potential fork situation. Well done @jooize, on point like always :smiley:

#12

Any idea how to treat the upcoming Bitcoin fork?
What will happen to liquidity?
Where will the BTC be kept?

1 Like
#13

Liquidity was reduced on exchanges, and most BTC kept in local wallets. Further observation and considerations are necessary to know how to proceed from here. I welcome you to participate in exploring the possibilities.

1 Like