Why NuShares Minting is Better Than Investing in a Bitcoin Mining Fund

[rodchi]

@zoro

There will initially be 1 billion NuShares once @JordanLee distributes all of the NuShares that he originally created. That number will increase at a rate of 2% per year through the minting process.

So to find the number of NuBits that will exist in the future, you just have to use this equation:

N = 1 billion * (1+I)^Y

N = the total number of NuShares Y years after NuShares were created.
I = the interest rate, 0.02.
Y = the number of years after NuShares were created.

Lets look at some examples:

• 1 year: 1.02 billion NuShares.
• 5 years: 1.104080803 billion NuShares.
• 20 years: 1.485947396 billion NuShares.
• 100 years: 7.244646118 billion NuShares.

I would imagine that the interest rate will be lowered at some time between year 20 and year 100.

[cryptog]

market_cap(nsr)/market_cap(btc)

[cryptog]

@rodchi regardless of the market cap, nubit is much more appropriate than nushare if you wanna compare it to bitcoin.

[rodchi]

@cryptog You may be right. But the way I see it, NuShares will end up with a much bigger marketcap that NuBits. We have already seen this. NuShares passed up NuBits yesterday, and I think that the gulf between the two will only increase. This is because of the positive feedback loop that encourages NuShares minters to buy more NuShares. NuBits will grow in marketcap also, but much more slowly than NuShares. Too many people have invested too much money into Bitcoin for NuBits to completely replace it. However, I do see a future where almost every site will accept both Bitcoin and NuBits. NuBits will generally be used for purchases of less than $1,000 or so, and Bitcoin will be used for purchases greater than $1,000. I’ll explain why in a moment.

Let’s say that the year is 2030. The price on a single NuBit is still one US dollar, and the price of a single Bitcoin has stabilized at $5,000. If you want to buy a $40 device for your computer, 40 NuBits is a lot more convenient and easy to visualize that 0.008 BTC. Conversely, if you want to buy a $25,000 car, it would be easier to pay 5 BTC that to pay 25,000 NuBits. So the two will coexist, and I would imagine that most other crypto-currencies will have long since died off.

I basically see a future where the following coins will continue to exist: Bitcoin, NuShares, NuBits, and perhaps one or two more.

[masterOfDisaster]

I basically see a future where the following coins will continue to exist: Bitcoin, NuShares, NuBits, and perhaps one or two more.

In the year 2030 I see no Bitcoin. Bitcoin will have died because of economical problems long before. Bitcoin mining will have turned out to be unsustainable and will have died. Popular Proof-of-Stake concepts or its followers (Proof-of-Burn?) will have taken its place. Peercoin is one of those that has a chance to step in. And conceptionally NuShares has a good chance to continue as well as all products of the Nu network have. NuBits will have lots of brothers and sisters if the whole Nu idea is succeeding.
But Bitcoin? Not in 2030… I’m glad that Bitcoin has paved the ground for all this. I doubt it will stay to the end (whatever and whenever that is), though. It would need to switch to a sustainable way to confirm transactions, to secure the block chain. I doubt this can happen easily. So I fear for Bitcoin’s long-term success. Peercoin is in a much better position
…or why do you think Peercoin was chosen to be the medium of dividend distribution? …not only because lots of NuShares supporters are expected to be Peercoin supporters as well, but because Peercoin has the better chance to survive. In less than 90 weeks there will be another halving of Bitcoin’s PoW coinbase reward (from 25 to 12.5 BTC per block); let’s see what happens…

[rodchi]

@masterOfDisaster I could see what you are saying happening. The more that I learn about Peercoin, the more I like it. The only thing is that Bitcoin got such a massive head start. It is difficult to see everyone dumping Bitcoin, then switching to Peercoin/NuBits/NuShares. A lot of people have heavily invested into the Bitcoin ecosystem, and inertia is a very powerful thing.

But let’s say that you’re right. Bitcoin’s difficulty will start to drop as people switch from Bitcoin mining to Peercoin/NuShares minting. The price of Bitcoin will go into a death spiral, making even less of an incentive to mine it. Somewhere around the early 2020s, the last Bitcoin miner will shut down. It is possible, but I suspect that if Bitcoin does die, it will be a much slower death. Those who put a lot of money into it will keep trying to revive it. As the difficulty starts to drop, they will buy more to try to prop it up. It will die only when all of the fat cats give up on it. However, for this to happen, merchants also have to give up on Bitcoin. If the Winvlevoss Bitcoin ETF is successfully launched, this will never happen. Once the Wall Street fat cats start investing in Bitcoin, it’s over. Bitcoin won’t be going anywhere.

Here are 400 million reasons why Bitcoin probably won’t fail: https://www.cbinsights.com/blog/bitcoin-startup-funding-2014/

I still believe that Bitcoin, NuBits, NuShares, and Peercoin will co-exist, each providing a slightly different function. I expect that the 500+ crypto-coins that now exist will consolidate down to fewer than 10 or 20, perhaps even as few as 5 to 10.

[cryptog]

less than 90 months

it is actually estimated to be in 18 months actually.

[cryptog]

I tend to agree with @rodchi here. There is too much momentum for bitcoin to be another myspace.
I believe it will last at least a decade but maybe this is what you have in mind @masterOfDisaster ?
Even if it gets centralized which is likely it won t matter that much.
Therefore I see it keep going a few decades.
The world needs a digital gold, whether it is centralized or decentralized.

However I think there is a lot of cognitive dissonance or fallacy on bitcoin
Bitcoin is mistaken with the notion of blockchain generally speaking among VCs.
Take a look at http://www.coindesk.com/blockchain-application-stack/
First of all it is wrong since you can create any blockchain you want independently from bitcoin but it is also not feasible to decentralize everything in one single blockcain…
It is pure megalomania.

[masterOfDisaster]

Right. I had “90 weeks” in my head, but wrote nonsense. I’ll fix my post. Thank you!
Here’s my assessment on Bitcoin’s future:

With halved PoW block rewards (from 25 BTC/block to 12.5 BTC/block) operating miners that are running on knives edge (in terms of economical aspects) might sooner or later need to be turned off. The only thing that can prevent that from happen, is sufficient income with mining by a higher BTC price or more income due to way more transaction fees. It will be a dangerous time for Bitcoin. At the last block reward halving there was not this type of economy in place with data centres full of miners etc.
But that does not mean a majority doubts the sustainability of Bitcoin.

If Bitcoin can handle the next halving (and that trick can be repeated!) it might survive for some time. In the end Proof-of-Stake (or their successors) coins will have an easier time, because their sustainability is not depending on the coin price level.

Peercoin is the real digital gold (in difference to Bitcoin): once you have made it your own (by purchase or mining), it can be kept for very little effort. You don’t need much to maintain its value.

[Ben]

is the amount of nushares infinite? like ppc?but at least in ppc we have a burn mechanism with every transaction. i like also the NXT mechanism regarding minting and burning

Presuming a static 40 NSR reward for each block solved, going forward, Nu’s NSR supply inflation rate will follow this table. This does not take into account NSR destroyed by the protocol during each transaction (1 NSR per 1kb). If the network can sustain ~40 transactions per minute the rate of inflation will drop to 0%. Anything over 40 tx/min will result in deflation.

Approximate NuShares Supply Inflation Rate (for the first 100 years)

I’ve also included a calculation that shows the rough number of blocks that someone could expect to solve per year with a hypothetical 1,000,000 NSR balance (and the increasing year over year gain from those blocks’ rewards if they had been held from the start of the Nu network). This presumes a 100% minting rate for all NSR (not realistic), so if someone has an equation that they would prefer, I can update the function and generate a new table taking into account only a portion of the NSR minting at any one time.

[Cybnate]

Those who put a lot of money into it will keep trying to revive it. As the difficulty starts to drop, they will buy more to try to prop it up. It will die only when all of the fat cats give up on it. However, for this to happen, merchants also have to give up on Bitcoin. If the Winvlevoss Bitcoin ETF is successfully launched, this will never happen. Once the Wall Street fat cats start investing in Bitcoin, it’s over. Bitcoin won’t be going anywhere.

The cost of running the Bitcoin network in its current form is too high and lower cost alternatives are already available. So either the Bitcoin protocol will change soon driven by the fat cats protecting their investment and sunk costs or Bitcoin will fade out slowly. Bitcoin will have to compete (read change) to survive or it will be send to the relics of history. No-one is building and selling T-Fords any more, we moved on to better products doing the same thing in essence for a better price. Let’s see if Bitcoin can change, if so it will be a strong competitor.

[crypto_coiner]

What are the ways it can change and what would be the consequences for its price, (read its economics)?

[mhps]

So either the Bitcoin protocol will change soon

Ha. Even talking about theoretical pro and cons in the bitcoin board is not tolerated.

[masterOfDisaster]

Bitcoin will have to compete (read change) to survive or it will be send to the relics of history.

Based on my experience so far I expect the latter to happen…

[cryptog]

NuShares will end up with a much bigger marketcap that NuBits.

@rodchi To me it sounds counter-intuitive. Does it require that much capital to maintain a peg?
If nsr market cap is 100m USD and nbt market cap is 10m USD, what does it mean?
Would that mean that maintaining a peg is expensive as bitcoin is expensive to mine?
Maybe this could be the weakness of nubits…Just a thought.

[masterOfDisaster]

NSR market cap can easily be way beyond the market cap of NBT.
You need to take into account that NBT is currently the only “product” in the Nu network, but it is likely that others will follow.
The only real revenue of NBT so far is from spread at the non-USD trading pairs (that is wider than +/- exchange fee) and the NBT destroyed by tx fees.
That is not much and needs to be extended by other means of making money.
And yet the market cap of NSR is rising; not mainly by more NSR that are distributed, but by a rising price per NSR!
If you ask me why people pay a lot (more than a few days ago) for NSR, although the business model for the Nu network is still in its infancy, I can’t tell you for sure, because I can’t read people’s minds.
But I can assume it has to do with the potential that can be seen for Nu.
People want to take part in the development and I mean that in terms of financial development as well as the chance to vote for technical development by minting and voting with NSR.
So the market cap of NSR can exceed the market cap of NBT by far, because the product that will gain value if it succeeds is NSR and not NBT.
Remember: NBT is always one Dollar and so you can only have a rising market cap if more NBT are in circulation

[cryptog]

I do not know what should be the right ratio for nsr/nbt but it seems natural to think that if the demand for nsr increases, that means that people think that nbt is useful and the more nbts there are in circilation the more useful it gets.
Of course there must be a speculative aspect to it…

[rodchi]

@cryptog I’m sorry that I did not answer your earlier question. I am swamped with a new class that I am taking is very time intensive. I was going to go into a long explanation of why I think that NuShares will have a much higher marketcap that NuBits. Just suffice it to say that I see NuShares as being the tool that backs NuBits, so it must be bigger, or else NuBits would be insolvent. This is somewhat counter intuitive. The US Dollar is backed by the GBP of the United States, so if the GDP drops to less than the total number of USD in circulation, then the US is, in my view, is technically insolvent. This means that if every person owning a US dollar tried to turn that dollar back in the the US government, the US government would not have enough goods are services to compensate each and every one of them. For example, if the Chinese government wanted to “cash in” 5 billion dollars in USD that they hold, they might accept one US aircraft carrier as payment. But if the US runs out of things that the Chinese government would accept, then what happens next?

I think of NuBits in exactly the same way. If every person holding NuBits tried to “cash them in” at the same time, how would we pay them? With the Bitcoin + NuShares + Peercoin that we have in reserve and maintaining the peg. Once we run out of compensatory funds, the remaining NuBits are worthless. So to back every NuBit in existence, the NuShares + Bitcoin + Peercoin MUST be higher in value than the market cap of NuBits. Since the values of Bitcoin and Peercoin that we hold are relatively small, this situation is guaranteed if the value of NuShares is higher than the value of NuBits, just as the total “market cap” of the goods and services generated by the US goverment SHOULD be greater than the total number of US dollars in circulation within the United States.

[cryptog]

@rodchi I see your point. The US GDP is around 17 trillions of USD.
The total amount of USD in circulation is around 1.3 trillions of USD according to http://www.federalreserve.gov/faqs/currency_12773.htm

So perhaps we could have market_cap of NSR ~ 10 * market_cap of NBT

[desrever]

While the current financial systems are worth investigating, we should try to build a different system that ideally works better .