Why are the dividends distributed in peercoins?

I understand that distributing dividends in peercoins is better for the long run than distributing dividends in bitcoins or litecoins since bitcoin and litecoin will have to raise their tx fees in order to stay decentralized.
Peercoin network security is very cheap so distributing dividends in peercoins is very cheap as well.
But instead of using peercoins why not using nubits?
Nubits tx fees are even cheaper (if 1ppc>1usd) than peercoin tx fees and it seems natural to use the same currency as the currency minted or issued.
For example the FED prints usds and gets paid interests in usds (the dividends)
Would that make more sense to use nubits rather than peercoin for distributing dividends?

I’ll let somebody else answer your question, but this was on the website in case you didn’t see it…

“We require an asset external to our system to distribute dividends. The purpose of creating NuBits is primarily to meet increased demand for NuBits in a way that prevents the rise of the NuBit price. If we distributed NuBits to shareholders instead of bringing them directly to market, there would be no way of knowing whether shareholders would hold them or sell them, or for how long they would hold them. It wouldn’t permit the network to tightly control the supply of available NuBits, which is necessary to maintain the pegged price.”

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Nubits project created only for solve the problem of volatility. Distributing Nubits as a dividends will make lot of problem to be a stable coin. Nubits project don’t care about PPC price. So, distributing PPC as a dividends will effect on PPC not Nubits.

M A Rouf

Tks for the pointer.
Well I do not understand why distributing dividends in nubits would hinder the knowledge of how much supply there is out there since I assume that it is very easy for the network to know exactly how much dividend has been paid, meaning returned to shareholders wallets…

On the contrary, we care a lot about the price of PPC. If we felt that PPC was useless or worth nothing, why would we risk profit for our shareholders by using a dividend currency that we felt could become valueless?

As someone who has been involved with the Peercoin community for a while, and as a holder of peercoins, I continue to find it very strange that portions of the community actively opposed to having Peercoin used as as it was intended – as a “backbone” used by other cryptoassets as a finiancial transfer mechanism.

If price wasn’t important, why would the first grant custodian, @KTm explicitly call out how she intended to do her part in preventing “boom and bust” and even lists the long-term health of the Peercoin network in her “Goals” section of her grant proposal?

Hi Ben,
I think you misunderstood my comments. I didn’t say that, Nubits don’t care PPC. I want to mean that, Stability will mainly effect on Nubits as $1 Value. PPC price can go below $1 or above $100.


Ah, yes, in that case, I did misunderstand your comments.

What you meant makes a lot of sense. For the Nu network, the daily/hourly/minute fluctuations of other cryptocurrencies are a concern, but the stability of NBT over the same timeframe is a concern.

That’s right. :slight_smile:

I thought several times about it but I still do not get why it is a bad thing for supply control to distribute dividends in NuBits.
In my understanding, those NuBits would come from custodians whose one role is to distribute dividends.
The custodians are the entities that are granted the newly created NuBits.
Let us grant custodians some NuBits.
At that stage, we know how much the available supply is (by the way, supply = available supply (non parked) + non available supply (parked) in my understanding.)
They go to open markets and sell the NuBits.
With the proceeds, they get Peercoins.
They distribute the Peercoins to shareholders.
But nothing prevents them from keeping a portion of the granted NuBits.
So they could distribute that portion to shareholders.
Since that portion comes from the available supply (from the granted pool), shareholdesr would end up holding a portion of the available supply, which would be contradictory to [quote] , there would be no way of knowing whether shareholders would hold them or sell them, or for how long they would hold them.[/quote].
And even if shareholders get dividends in peercoins, nothing would prevent them from selling those peercoins for nubits right after receiving then…

You are absolutely right about that. What is done with the Peercoins that were received as dividends is up to to the shareholders. The question why the dividend distribution is done in Peercoin was answered by Jordan in an interview:

Or you might want to read a third party interpretation of the fact that divideneds are paid in Peercoins:

Right. I understand now.
I think the argument of not paying one’s self with the currency you can create out of thin air is the right one.
You need to back the value of NuBits by something valuable…like the USD used to be backed by gold.
Paying shareholders in peercoins is a wise choice, imho.
To make the parallel with the FED, it seems that the banks that are shareholders of the FEDs are paid 6% annual interest in USD.
I wonder if they used to be paid in gold in the past…

This is not a fair analogy. Gold was used (during the Bretton Woods system) as the reserve currency and the usd was pegged to gold at $20 usd per ounce. This meant that only a certain amount of usd’s was allowed to be printed relative to the quantity of gold held by the US. The usd’s were simply IOU’s.

With nubits, there is nothing ‘backing’ their value except for promises from Custodians and the assets gained from selling those nubits all the while they are being attenuated through dividends. This means that Nubits will be forever inflating where as the reserves will be forever deflating (with the exception of the ‘bail-outs’ by the Custodians when the shareholders vote them in).

That is only true if the Nu ecosystem isn’t able to develop ways to generate revenue (money loaning, arbitrage at NuBits/crypto coin trading pairs using an increased spread, venture capital financing, etc.).

Right. It is not exactly similar but forcing custodians to give dividends in peercoins give relative value to nubits assuming shareholders won t sell immediately.
Also limiting the amount of currency issued based on a external asset whose owned quantity is finite limits the development of an economy.
You need to find a good balance.

Yes, this will be very interesting to watch and see if it can be achieved in a decentralised way. I have my doubts but being a big supporter of peercoin and waiting for nubits for so many months, (with that countdown that had no time :frowning: ) I would love to see this platform thrive.

I actually disagree. I think it gives value to peercoins through the increased demand. I honestly can’t see why nubits should maintain their value, except through faith and large buy walls. If the nubits peg looked like it was going to fail, the nushareholders have 2 options, sell everything and run or bail out the current nu system and count on new demand peaks. Nushareholders are under no obligation to support the nubits price with their funds, we just have to trust they will for their sake (and stake).

Through prosperity and growth, I can see a much larger influence on nushares though. I see all of the value that should be staying behind nubits, being transferred to nushareholders as dividends.

If the quantity of the external asset is limited, the currency pegged to it should be revalued periodically based on economic growth to maintain a stable prices. But gold was great because it was inflating close to real economic growth and couldn’t be gamed i.e. it made countries accountable.

Well isn’t the purpose of trading bots and parking/unparking to maintain a constant value in a guaranteed fashion?

That is why Jordan is selecting only people that want to support nubits as shareholders at least at the beginning.

This is I believe the role of central banking: to control inflation.

Inflation is not bad, contrary to what bitcoiners think. It is uncontrolled inflation that is bad, imho.