[Withdrawn] Make Firing and Replacing Incompetent Liquidity Providers Our Top Priority

[JordanLee]

Motion hash for voting: c070f654c2ff3e43a10fc5ff1dbf8ad74e36b18f

This motion content is being managed on Daology here.

Here is the full text, for convenience:

It is the highest priority of NuShare holders to fire and replace
incompetent liquidity providers. There are many ways liquidity providers
can demonstrate themselves to be incompetent. This motion is not
intended to create a comprehensive list of actions that demonstrate
incompetence. It is reactive to actual incompetence displayed in recent
days by many of our liquidity providers.

Incompetent liquidity providers are defined as any person who
has control of shareholder buy side funds (in single key addresses,
multisig addresses or on exchange accounts) who increases the buy side
offset above that of the sell offset or advocates doing so as a means of
dealing with reduced liquidity. Dealing with reduced liquidity
by reducing it further to save it for later is dysfunctional. It erodes
confidence, which will only cause NuBit users to abandon our product.
Liquidity providers who have increased the buy side side offset above
that of the sell side offset may continue in other roles, so long as
they do not hold NuShare holder funds intended for use in liquidity
operations.

Jordan Lee may appoint and compensate successors to the fired
liquidity providers for a period of 30 days after this motion passes
using shareholder funds. This is intended to allow for a very rapid
transition to responsible liquidity provision while allowing longer term
liquidity provision to be chosen by shareholders through motion or
custodial grant.

The recent loss of liquidity was not necessary. There were ample
funds available in tier 4, tier 5 and tier 6 to purchase the NuBits of
all those who desired to sell. Our current troubles are not a result of
running out of buy side funds. They are a result of foolishly refusing
to use buy side funds. Buy side liquidity should never be withheld when
the market demands it, because each new day brings new opportunities to
add to tier 5 and tier 6 buy side funds.

The network is designed to punish NuShare holders for poor liquidity
and reward them for excellent liquidity. The system is working exactly
as it should in this regard. NuShare holders have been severely punished
recently for severely reducing liquidity unnecessarily. Passage of this
motion indicates NuShare holders understand this and is an expression
of commitment to high liquidity at all times.

On May 27th 2016 and since the network has not run out of buy side
funds. Passage of this motion indicates NuShare holders understand the
huge decline in the NuShare price since May 27th is not the result of
losing the peg against ovewhelming market forces. Rather, the decline is
due to voluntary abandonment of the peg, which was both unnecessary and
counterproductive.

Tier 4 funds should be offered at a tight spread, even in the most
heated crisis. If anything, tighter spreads can help increase NuBit
demand when NuBit demand is low. Increasing spreads when NuBit demand is
low can be expected to lower demand further. It is an incompetent
action that shareholders cannot afford to tolerate. As tier 4 funds drop
below healthy levels as defined in the NSR buyback/sales calculation,
the appropriate action is to aggressively refill it with tier 5 and tier
6 liquidity.

tl;dr: The peg has not been lost. It has been abandoned. Replace everyone who abandoned it.

[masterOfDisaster]

Incompetent liquidity providers are defined as any person who has control of shareholder buy side funds (in single key addresses, multisig addresses or on exchange accounts) who increases the buy side offset or advocates doing so as a means of dealing with reduced liquidity.

I’m guilty.
Put it up for voting and have the shareholders redeem me from all the trouble trying to keep the last piece of the network running.

It erodes confidence, which will only cause NuBit users to abandon our product.

Wann know what erodes confidence even more than offering a buyside with 5% offset?
A buyside with no support whatsoever.

The recent loss of liquidity was not necessary.

When did you last have a look at the buyside? Do you know why we have to increase the buyside offset?
Because the buyside was sold out for a buyback:

Supply, Reserves, and Equilibrium

During the rally in mid-April and late May Nu T4 reserve lost rate was about 90BTC/week to defend the peg. Had there been no buybacks, Nu would have 555.6 BTC more in its reserve. These reserve could last 6 weeks of unstopped btc rallying, starting May 21.

We could still offer a tight spread, if we still had those funds on reserve.
Alas, we haven’t!

Our current troubles are not a result of running out of buy side funds. They are a result of foolishly refusing to use buy side funds. Buy side liquidity should never be withheld when the market demands it, because each new day brings new opportunities to add to tier 5 and tier 6 buy side funds.

You are aware that the abilities to sell NSR are limited and T5 is not exactly successful, although the rates are crazy high?
How will you serve the buyside once there’s no single BTC left?

Did you recognize what happened with the operations that ran at a tight spread (eg @Cybnate’s PyBot, or one of my NuBots)?
They ran out of buyside funds in no time.

Please compare Poloniex, Bittrex and hitBTC and tell me where the peg looks best, although there’s more trade volume than at other exchanges:

I would very much like to always offer BTC at a tight spread.
For that reason we are working on improving the USD stability of reserves:

Gateway with built-in USD reserve

The following describes how a gateway with a build-in 90% USD reserve (and with reduced exchange risks) works. Nu sends 10000 Nubits to the sell side of the gateway The gateway sells Nubits to customers and accumulates bitcoin on the buy side order book Once the buyside has more than 1000+B NBT worth of BTC, it converts B NBT of BTC to the USD token on the exchange. B is a settable parameter. Once the buyside has less than 1000-B NBT worth of BTC, it converts B NBT of the USD tokens to BTC an…

[Passed] NuSafe - An 30k hedge of Tier 4 funds in USD

@Dhume, would you feel comfortable to have FLOT keep your collateral a bit longer? Just in case BTC were about to nosedive, Nu were to sell NBT and had BTC to be put into NuSafe again? I can even imagine oversubscribing NuSafe. By that I mean putting more BTC into NuSafe than is backed by collateral, because even if you ran with the funds, Nu might be better of with that than trying to sell NSR. Let’s see what the outcome of the NSR sale is. What do the other FLOT members think of that? @cry…

etc.

But the truth is: the buyside support by T4-T6 has limits. We are close to them.
Have T4 empty and see the peg fail completely.

It’s up to you, shareholders.
Ignore the experience from the operations that are at a tight peg (empty buyside on ALP, NuLagoon Tube, PyBot, 2% buyside offset NuBot) and throw the rest in the hands of those who bet on rising BTC.
Leave Nu with empty hands and NO way to support the peg.
Even if Nu could buy NBT at $0.10 in that case, it wouldn’t have BTC left.

The only thing that can save Nu now, is leaving a rest of confidence in the peg and a nosediving BTC.
One of these things is in the hands of Nu.
The other isn’t.

Your draft is full of emotion. That’s why I felt it proper to respond in a similar way.

Where are the facts that support your theory? I have provided facts that underline my position. I will provide more, if necessary.

[JordanLee]

You are aware that the abilities to sell NSR are limited

NSR sales have been successful in the past. The decline of NSR since May 27th is more the result of abandoning the peg than of selling NSR. When we sold NSR before we did not see this type of decline, because we were providing high liquidity and demonstrated a high commitment to the peg.

[JordanLee]

Wann know what erodes confidence even more than offering a buyside with 5% offset?A buyside with no support whatsoever.

As long as the NuShare price is greater than zero, there should never be a buy side with no support because NuShares can be sold for BTC, which can be immediately placed on the buy side.

[masterOfDisaster]

NSR sales have been successful in the past.

With 2.4 million we dropped the price to below 300 Satoshis.

The decline of NSR since May 27th is more the result of abandoning the peg than of selling NSR.

The decline looks rather directly related to the sale. The rate is stable since the last sale was ended.
Wanna make a bet what the next sale does to the NSR rate?

When we sold NSR before we did not see this type of decline, because we were providing high liquidity and demonstrated a high commitment to the peg.

You can’t demonstrate commitment to the peg, if you are out of BTC.
The only reason we’re not out of the BTC is, because the buyside offset was increased.

Can you do me a favour and put this draft up for voting?
It’s absolutely great like it is.
It gives the shareholders the chance to answer the question:
do they rather want to have a weak peg support that can be continued, or a good peg support, that ends abruptly, once the BTC are empty.

I can’t answer that on behalf of them and only do, because I think it’s right.

It’s the shareholders corporation. They need to decide, which road to take.
How fast the remaining BTC will be gone can be seen, if you have a look at ALP, NuLagoon Tube, @Cybnate’S PyBot, or my NuBot, that ran at 2% buyisde offset.

Once the BTC are gone, there will be no buyside support, except for the arbitragers, who do that because of self-interest and to make money. I’m not blaming them for doing that. All I’m saying is, that they have no incentive to keep the peg tight.

As long as the NuShare price is greater than zero, there should never be a buy side with no support because NuShares can be sold for BTC, which can be immediately placed on the buy side.

Then we should start a grant for NSR. The remaining millions will be gone soon, if they are to be dumped on the market to follow the dream of an everlasting tight peg.
This dream will end sooner than you think.
But maybe a BTC nosedive comes first. Who knows.

Put it up for voting!

Need some food for thought?

Current Liquidity

0.014 also just did that at Bittrex (MoD doesn't need to reply) BTC is again over 500. As long it makes those upward swings, there is not much we can do. Get every BTC we can find to zoro at high spreads to at least have some kind of a peg… BTW Have to grab some sleep, just hope BTC stays around 500 for a while, we can't bear any more.

[JordanLee]

When did you last have a look at the buyside? Do you know why we have to increase the buyside offset?Because the buyside was sold out for a buyback:

It is apparent that more liquidity is needed, either in the form of reserves or funds like that held by NuLagoon, which are not strictly reserves but behave like them in many ways. That is a separate issue.

[JordanLee]

Once the BTC are gone, there will be no buyside support

Not true. Once the BTC are gone, more should be had through NSR sales and NuBit sales that result from offering park rates.

[masterOfDisaster]

If T4-T6 aren’t strong enough to keep a tight peg, the logical consequence is to widen it.

We can try selling more NSR, although shareholders explicitly approved “Standard and Core” motion, upon which the NSR sale is being calculated.
How will you support T1, if not from higher tiers?
Where will you get the support from, if you are the limit of what the higher tiers can do?

Why don’t shareholders make an NSR grant to extraordinarily sell NSR? This can of course be done in addition to “Standard and Core” if it’s their explicit will.
Why don’t shareholders raise the park rates even higher? They don’t need data feed providers to do that.

You need to first increase the reserve, before you can allow the low tiers run empty.
Or do you rather want to have the buyside emptied only to find out that nobody wants to buy NSR?

Not true. Once the BTC are gone,

they re gone. There will be a time of no buyside support - until BTC can be retrieved from either selling NSR or selling NBT (from people who want to park them at x% per year (x is a big number in this case…)).

Getting the reserve low was a mistake.
Making it empty would be an even bigger mistake.

I stop here for now.
I’ve said what I had to say.

[jooize]

What happens when we have no more funds?

I want to know what the idea is for how things should go down with all liquidity pushed into tight spreads. FLOT is pledged to obey, but with a lack of understanding for how the peg will function without any funds has made us hesitant to use them (at least as I view it). Perhaps our discretion has been misused, but I haven’t seen much shareholder outcry other than yours, and I feel like we could have been guided in a better way than this aggressive approach, but whatever gets us where we need to be is fine with me.

I consider the peg already broken with wide spreads. The white paper (or elsewhere) says peg failure is straight to zero, not as what has occurred with wider spreads.

Selling NuShares takes time, and I think some believe peg support will fail before they’re sold and proceeds are put on the wall.

Working with a degraded/broken peg was presumably chosen to buy us time for discussion and potential other measures.

Is it accurate to say that you want FLOT and Nu to:

• Push all remaining FLOT funds into buy side at tight spread.
• Set appropriate Park Rates and advertise them to have people buy NuBits.
• Sell NuShares and push proceeds into buy side at tight spread.

Consequences that may result are that peg will look worse, and …?

I’ve expressed that I don’t see any other way than NuShare sales to get us out of this, and my uncertainty of pushing all FLOT funds into the wall is about the value of peg perception against providing actual liquidity.

We need to provide liquidity eventually (and before faith in Nu is lost). A reason to delay providing that liquidity is believing there’s a better way. We’ve taken time to think. Is there a better way?

[Sentinelrv]

We have never sold NuShares directly on exchanges before for fear of pushing the price too low. Was this done because we needed the Bitcoin quickly and couldn’t wait for an auction to be held?

[masterOfDisaster]

One last message for now:
it wouldn’t have been necessary to insult people like @zoro and me as incompetent for keeping the peg on a degraded, but reliable level.

Why not just forcing a tight spread by motion?

Would have appreciated that instead of being called incompetent when doing all I can to support the peg as good as possible given the circumstances after the reserves were torn down to the level that’s the reason for the increased buyside offset.

Shame on you for that, @JordanLee!

[JordanLee]

Park rates were working to stimulate NuBit demand until the last 10 days. We have increased the risk of parking a great deal by abandoning the peg. It is the abandonment of the peg that is impairing the usefulness of tier 5 and tier 6.

[masterOfDisaster]

Park rates were working to stimulate NuBit demand until the last 10 days

It’s so hard to stay silent if I read so much &#?@@
Tell me, how many parked NBT are from BCE funds?

[JordanLee]

Is it accurate to say that you want FLOT and Nu to:

Push all remaining FLOT funds into buy side at tight spread.
Set appropriate Park Rates and advertise them to have people buy NuBits.
Sell NuShares and push proceeds into buy side at tight spread.

Yes.

[Sentinelrv]

Jordan thinks parking has been impaired by the higher spread, but then there is the other issue that I have been mentioning. How many people here have been advertising park rates using the single park period percentages, rather than the much larger APR?..

Why are tier 5 and 6 (park rates and NSR sales) only being partially utilised?

Good example So APR is a kind of financial measurement tool then, which is helpful to compare rates from various sources, correct? If so, then APR can be helpful to different people and we shouldn’t remove it completely. However, we should reduce its significance in our advertising. I agree with you and @cryptog here that we should mainly advertise interest rates for single park periods. In reality, NuShareholders are only going to pay out NuBits for single park periods. Advertising 50…

[JordanLee]

Then we should start a grant for NSR.

Indeed.

[JordanLee]

then there is the other issue that I have been mentioning. How many people here have been advertising park rates using the single park period percentages, rather than the much larger APR?..

Sentinelrv’s proposal for how to advertise park rates is a good one.

[JordanLee]

Would have appreciated that instead of being called incompetent

While it is impossible to understand the motives of each buyer and seller in the market, my guess is that the choice to offer low liquidity has knocked 40% off the NuShare market cap. Any action that results in destroying 40% of the market cap when there are alternatives that wouldn’t do that is indeed incompetent and cannot be tolerated.

Shareholders will decide. They may side with you. I felt it was necessary to articulate the reasons for the situation we are in and the proper solutions as I see it.

[Sentinelrv]

Park rates were working to stimulate NuBit demand until the last 10 days. We have increased the risk of parking a great deal by abandoning the peg. It is the abandonment of the peg that is impairing the usefulness of tier 5 and tier 6.

I was actually considering using my Peercoin stash to park NuBits, but then I questioned why I would do it if when it came time to unpark I couldn’t sell my NuBits back for what I paid for them because the buy side wall still wasn’t back to normal. This is why I haven’t parked so far. I would end up forfeiting any interest I made when selling back the NuBits. Could others be thinking the same exact thing? That would validate what you say here about the current buy side impairing parking.

Edit: I don’t mean the total Bitcoin on the buy side, but the lowered price per NuBit sold I will receive back.

[Sentinelrv]

For example, if I sold $5k worth of Peercoin to buy NuBits and park them, I would need to be sure that when it came time to unpark and sell my NuBits, that I could receive back the normal amount and not at a reduced price per NuBit like $0.95 cents. Whatever interest I made on parking would be forfeited through the reduced NuBit price. It would therefore be too risky to park.