[Withdrawn] *DRAFT* Proposal for Mining-Driven Dual-Side LCP


#1

Hi Folks,

This is my first post on the forum and I’m already offering a proposal :smiley:

Please have a look at it here: https://gist.github.com/megabigpower/cc91e114665e648ddac4

Briefly, we (MegaBigPower) are proposing to sell BTC or PPC mining contracts for NBT in order to create buy-side support for NBT.

I’m hoping that our very public faces and reputation for reliability and honesty in the BTC mining industry will offer you all some assurances of our integrity. I’m also looking forward to answering questions about myself, the proposal, and MBP. So fire away!

Also, this is a draft proposal. Some specifics might be missing that you would like to see, and some specifics might be in there that will have to change based on timing (as network difficulty changes over time). Feel free to offer whatever feedback you have.

Thanks so much! I’m looking forward to working with you and being part of the community.

Cheers,

MegaBigBen


#2

Well this is very interesting. Going to need some time to read through it all.


#3

Thanks Ben!

Ben and I have been beating up ideas for several weeks now. We believe that mining companies can make a positive contribution to this project and are excited to be the first large mining operation to show their support.

We hope that by injecting fresh capital (in the form of BTC buying power), we can make the most positive impact to NuNet.

Looking forward to seeing the community response. Our ideas are transparent and flexible - so let’s work to make this a good fit!

Best
Dave Carlson, CEO
megabigpower.com


#4

Hi @buzzdave and @MegaBigBen ,

If I understand correctly, granted NBT (plus a 25% premium) goes into the custodian’s pocket, and mining output, in a projected equal amount, supports the buy wall and is eventually paid in dividends. This 25% premium is much higher than what shareholders have approved in the past (KTm’s grant premium was 2.025%, and Jmiller’s was 2%).

What are the advantages to shareholders of this mining pipeline approach, over the approach of granting NBT to support the buy wall directly, as in the case of the custodians so far elected?

Also, what ideas do you have regarding transparency, so that shareholders can confirm that the proposal is being carried out according to plan?

Thanks for your time.


#5

Hey @Chronos,

Thanks for taking the time to read the proposal and ask some questions.

It’s true that the premium is higher than that paid to KTm and Jmiller. Both of those proposals included zero risk from the custodians. Other than their time, they contributed no funds or resources. We are proposing tying up 150 TH of mining equipment for the voting period, which is in effect investing almost 18 BTC (at today’s prices). Since that represents a significant investment at what we think is a considerable risk, we’re asking for a higher premium. This number is negotiable. We have debated how high to ask for and are open to the idea that we might have overshot. We are asking the shareholders to acknowledge some risk on our part and participate in that risk with a higher premium. As the system matures and stabilizes, and if this grant works out and is rolled forward into more voting periods, the premium could also be reduced to reflect reduced risk.

The problem with granting NBT directly to support a buy wall is that the NBT have to be sold before the funds can be used to buy NBT. With our proposal, the granted funds will be available to the buy wall relatively quickly. If we are able to roll the proposal forward into further periods, the buy wall will be totally secured by the mining contract.

As far as transparency goes, we plan to publish mining and trading data on a regular basis. We aren’t sure yet what the shareholders would want to see on this. The data from previous grants is not very regularly published, nor is it published in a digestible way. We plan to set up automated reports and publish them as often as is requested by the shareholders.

Please let me know if you have more questions or if I’ve misinterpreted anything.

Thanks!

MegaBigBen


#6

Hi guys and welcome on the forum!

I am (also) very interested in knowing what are your drivers for doing this, beside the margins and probably good marketing for megabigpower.

Do you own shares? :EDIT yes, the gist clarified it.
When did you get interested in this project?
What do you think about NuBits?

And, beside the fact that you are probably very busy, why you never posted on this forum before this proposal?

Its important to establish trust among shareholders.


#7

As NuBot maintainer, I worked closely with both custodians and I guarantee that managing those funds, multiple trading bots, analyse logs, making reports, keeping funds safe, has been a pretty tough job. I wasn’t managing any funds and I had several sleepless nights myself, I can guarantee that being a custodian wasn’t easy and work required on the custodian side was particularly high. Now with NuBot getting more stable its probably better =) .


#8

Yes! I’m sorry if I implied that they didn’t put in a bunch of time and effort. I’m sure it was more than a few headaches.

I appreciate the work you all have put into making those bots work. I’m hoping we can take advantage of walking in the first round’s footsteps.


#9

That’s correct, but I meant to ask this: How is your proposed grant better than the following example, where a fee is paid to bring a custodian’s own funds to the peg? (9000 NBT is the mined amount in this example)

  1. Grant a custodian 9000 + 25% NBT, which they keep
  2. One week later (to simulate the mining period), the custodian puts BTC worth 9000 NBT of buy support on market
  3. As that BTC sells, the custodian moves the NBT to the sell side of the market
  4. As that NBT is sold, the custodian prepares dividend payments

Is this model, in effect, the same as your proposal, but without the mining variability risk/reward? Note that this leaves shareholder funds in custodian hands for a possibly lengthy amount of time, because the wall(s) may take a long time to fully sell.

Now, compare that model to the following:

  1. Grant a custodian 25% of 9000 NBT in fees (but not the base 9000 NBT amount)
  2. Custodian brings 9000 NBT-worth of BTC of their own funds to the buy side immediately
  3. Custodian supports the peg under the same plan as before, but this time, keeps the funds at the end instead of distributing dividends. Buy wall -> Sell wall -> Withdraw support.

I could be wrong, but I think this simpler model is the same peg support mechanism, except with immediate support instead of one-week-delayed support, and without the extra 9000 NBT granted and paid as dividends. In a strange twist, I think this could be made equivalent with the following final step:

  1. At the conclusion of the support lifetime, issue a second grant of 9000 NBT to the custodian, which they keep. They immediately pay out 9000 NBT worth of dividends out of their own funds.

Is this also equivalent to the draft proposal under discussion (but without the extended period of dividend-bound funds under custodian control)? Please correct anything I’ve overlooked. :slight_smile:


#10

I’ll address a couple of the comments in the thread in hopes of providing clarity.

We see our most positive contribution coming out of our business focus, which has been mining BTC or PPC for the past 2 years. Since we (megabigpower) are both a NSR and PPC holder, we seek to increase the value of those assets.

I became aware of NuNet before it was launched, probably through the Coindesk article. Once the idea was made public, Ben and I saw the value of NBT as a safe haven asset, a digital version of USD, a potential vehicle to promote arbitrage, etc. I think there are many exciting uses for this tech. The voting via-blockchain and shareholder via blockchain implementations alone are evolutionary.

I immediately contacted Jordan to ask how I could help and how I could become a shareholder.

We haven’t had a lot of time this past 18 months, being solely focused on bringing BTC mining technology to market and then building our operations. Despite mining PPC from day one, I didn’t engage the PPC community either.

NuNet brought enough innovation to get me to peel off some of mine and Ben’s time to focus on this project - it’s extremely interesting to us!

Best
Dave


#11

Personally, I don’t feel comfortable with this. To me, it actually exaggerates the criticisms we have heard over the last month. If this proposal goes through, then 11,250 NBT is generated. Over the course of the next week BTC/PPC will be mined and will be roughly 9,313 NBT (by estimations in the proposal). After some buy support and sell support, we should expect 9,313 NBT returned to the shareholders in the form of dividends in PPC. Doesn’t that mean that there is a total of 20,500 NBT out in the network with no direct backing? If so… not cool. We want large liquidity and with the current status of NuBits there is already 200,000 NBTs unbacked (since no dividends have been paid back and Jordan’s inital development custodian proposal). I understand that this won’t be problem once NuBits is accepted places but it currently is not.

I would suggest maybe forming a grant to rent the hardware and use that to create buy and sell support. Any profits off of rentals can then be used as dividends and custodian pay while keeping the original money there. In other words, we need to be looking for other forms of dividend generation.

Please correct me if I have made any mistakes.


#12

I’ll let Ben speak to the specific numbers, but our perception is that the biggest need for NuNet is to secure the peg on the buy side. In order to do this correctly we need fresh capital input to the system. Do we have this correct?


#13

Welcome Dave and Ben to experss interest in adding a new component in Nu ecosystem. The risks outlined in the proposal:

  • That we will not be able to immediately liquidate all awarded NBT, or even liquidate during the course of the mining period.
  • Theft or failure of exchange(s) holding our NBT may cause losses.
  • Seizure of funds and/or injunction against unregulated exchange(s).
  • Complete failure of the NBT buy-side peg and the total loss of our funds.

seem to be either high probability but not costly or very low probability but costly. Over all there doesn’t seem to be a lot of risk.


#14

I am no expert of cloud-mining, and not a particular big fun of large scale mining-operation. I want to learn more. I read more criticism on their operators than prise : cex, ghash and its near 51%, this today trending on r/Bitcoin… I would like to see clear through (sometimes) shady waters .

I am not particularly informed about megabigpower . If is not asking too much, I would love to hear more (maybe just links) about reputation of its operation.

In case of your NuBits mining op, do you need to buy more machines to support it? Are you going to use “otherwise wasted” mining equipment? Or are you already running at capacity and need to take down some client offers to reserve machine to NuBits?


#15

Hi @desrever,

Thanks for the questions and the welcome.

Our reasons for wanting to do this are:

  • We believe in the Nu project and want to support it using our company’s resources if we can.
  • Dave has been watching the project evolve since we learned about it and have been trying to figure out how we could get involved. I got interested more recently. This proposal seems like a good marriage of the core needs of the project right now and our core competency.
  • I love the idea of NuBits and I’m curious about what it will be used for in real life. I see it as a way to move fiat currency through crypto-currency channels and tech without volatility risk, which is awesome. The holdup is that once you get it where you want it, you still have to either find someone who will accept it in exchange for their goods and/or services, or you have to convert it to something they will accept. Both of these are still fairly painful exercises right now. So I think NuBits has a long way to go, and the first step is to establish a strong peg and then expand the trading reach to as many exchanges as possible while maintaining the peg.

I haven’t posted on the forum because I really haven’t had much to add since I started looking at the Nu project. Now that I’m getting a lot more familiar with it, I like it more and more and will likely have more to add as time goes on.

I totally agree that it’s important to establish trust with the shareholders. As a shareholder myself, I want to know as much as I can before I am willing to vote for a custodial proposal. That said, I think there is a certain amount of trust inherent in working with a company like ours which has been very public in its operations and always followed through on its commitments to its customers and partners.

Looking forward to getting to know you all a lot better!


#16

Hi @Chronos,

How is your proposed grant better than the following example, where a fee is paid to bring a custodian’s own funds to the peg?

It’s really very similar. The difference is just that instead of supplying currency, we are supplying mining power which will produce currency. We could just as easily change the proposal to supplying raw currency. The net effect to the shareholders, the network, and the flow of currency outlined in the proposal would be identical. We prefer to offer mining power because a) that’s what we are good at, b) because we prefer to risk lost income from the mining than risk straight capital, and c) we think introducing the mining sector to the project could be of benefit to the project.

I would love to know why a fairly minor change to the structure of the proposal is causing such objection when the net effect is the same. I really want to understand the nuances of what you (the shareholders) feel makes a good proposal. In my mind, this proposal is not very different from others that have been approved other than the slightly higher premium, which as I said is negotiable.

Thanks for any feedback!


#17

I’m not sure I know what you mean by profits off of rentals. Mining hardware produces revenue at a very predictable rate. Are you suggesting renting the hardware for a cost below that rate? And what do you mean by original money? I’m a little confused about your question, but I want to address it. Any clarification you can give would be a great help. Thanks!


#18

Here’s how the mining market breaks down:

Definitions
Cloud Mining - presold mining contracts against hosted mining machines. These can be fixed length contracts or arranged as a per-share ownership of a mine.

Mining Pool - aggregated mining power, usually from retail and hobbyist miners. Some larger industrial operations still contribute to pools.

Industrial Mining - privately held operations that build and operate mines. These operations use mining rewards and transaction fees to pay operational costs. The most successful are also manufacturers of their own hardware.

Megabigpower is an industrial miner (and manufacturer). We do not sell cloud mining contracts. We do not contribute to, or operate a public pool. In my opinion, public pools (ghash for example) are the biggest threat to security due to their ability to amass large percentages of global hashpower. Even though they make very little from their public pool, the sheer size of it gives ghash the ability to threaten the network.
Megabigpower currently operates only about 2% of global hashrate. Growing towards 50% would require $100M, so its very unlikely that we would ever find ourselves in that position.
We are proposing to take some of our mining output and use it to support NuNet. This will tie up a portion of our normal revenues that would otherwise go towards paying the bills. I hope that the rate of recovery will be fast enough that I won’t have to dip into our savings, but this is why we want to test the idea on a smaller basis before proposing something larger.


#19

I haven’t had time to reply. Really busy with next release of the client and some promotional stuff. I like the information being presented and I think there’s a lot of value to this proposal. Working with a well known company and individuals who have an open internet presence is something I hope we can see more of in regards to custodian proposals. Hopefully I can offer more thoughts on the proposal itself shortly, but I do like the direction that has been taken here.


#20

I hope I’m not coming across as “such objection.” (Where’s my doge emoticon?) Just trying to understand the details. Thanks for explaining.

Well, for the record, I may or may not be a shareholder. I just like posting here. :smile:

Personally, I think good proposal is easy to verify that it is being fulfilled. For example, it’s easy to verify, “9000 NBT of liquidity was provided on this day.” It’s harder to verify, “the result of some mining was about 9000 NBT of liquidity.” So, I think this proposal could be improved by committing to hard numbers instead of leaving the mining variability exposure with shareholders.

That’s a good point. The question is: would shareholders like to generate unbacked NBT in exchange for a commitment to temporary buy support on the peg? That’s the typical question, I think, when it comes to custodial grants.