What is the risk of being a custodian on NBT/PPC?

[cryptog]

I am thinking about submitting a proposal to get elected as a custodian on the NBT/PPC pair.
I am wondering about the risk involved.

Jordan Lee talks here about a significant loss of principle…but is that significant?

Suppose that I deposit 10,000 ppcs into the ccedk.
NuBot divides that amount into a buy side and a sell side.
We have 5000 ppc on the buy side, 5000 nbt on the sell side.
I assume for simplification that at the beginning 1ppc=1nbt=1usd,
If the market goes wild and we get quickly 1ppc = 2nbt = 2usd and stays that way, then at the end of the liquidity providing period, I end up with 7500 ppcs if I convert my 5000 nbt back to ppcs, losing 1/4 of my original holding.
This is only one scenario so scenarios in which I end up making profit exist as well but I guess this is the risk that Jordan Lee talks about.

Anyone would care to confirm my view?

Tks a lot in advance

[masterOfDisaster]

Unexpected volatilty issues are associated with a loss.
But there’s another risk that is hard to determine (but above 0%): the risk of a total loss of owned NBT.
It is possible that all NBT are worthless due to (to be filled out; examples might be: regulation, manipulation, technical flaws, etc.).
And that leads to a risk for total loss.
In case you have sold all 10,000 PPC to NBT and NBT ultimately fails, you have lost all your 10,000 PPC.
Although I think it’s unlikely to happen it’s possible nevertheless.

You need to remember that this is an experiment (goiing very well so far and I’m confident it will continue and prosper)!

[cryptog]

Well I am not too worried about the value loss of NBT.
So I just need to be aware of the potential risk caused by volatility.

[masterOfDisaster]

I don’t consider the total loss a high risk.
But it would be wrong to ignore it completely.
And a total loss would be for sure a kind of significant risk, don’t you think?

[Chronos]

I believe that the potential loss to which Jordan refers is capital losses in the non-NBT pair. For example, if the custodian holds some PPC, and PPC value falls.

[cryptog]

If PPC value falls, says by 50% compared to USD, then there is a scenario in which being a dual custodian actually protects you.
Because you could buy back your peercoins by selling nubits at the end of the custody period Not only you could get 50% more peercoins, you would be able also to limit the loss of your peercoin portfolio value in USD (-25% instead of -50% in the case you would not be a custodian).

By the way, let us say that I offer 10,000 ppcs as a dual liquidity provider.
My understanding is that the bot would divide up that amount into a buy wall and a side wall on NBT/PPC.
So the bot would sell 5,000 ppcs into nbts to put the corresponding amount of nbts on the sell side and keep the remaining 5,000 ppcs on the buy side.
Is that correct?

[masterOfDisaster]

This is just another risk. One might say that everything related to crypto currency/asset/whatever is risky…
…it’s good to remind people of that especially when dealing with something that is supposed to be stable.
Better to keep in mind that you can lose something or all!