[Withdrawn] Make Firing and Replacing Incompetent Liquidity Providers Our Top Priority

[JordanLee]

You’re slaughtering me, because it’s that important.

@masterOfDisaster please improve your understanding of our liquidity model and then start doing things again. Or, just stay outside the liquidity operations space.

[ChrisS]

This has to include you as the buyback program ultimately failed the ability for the system to provide proper liquidity.

[crypto_coiner]

All right–
I am in too with this plan.
I want to experiment with this.
Who is going to operate the LP? @jooize and @JordanLee at first
If it is easy and makes money I want to try.

[Sentinelrv]

What we have in our network is a liquidity engine. Ours is not a reserve model. Reserves are there just while the system is immature. I have never heard of anything like a liquidity engine before. It is a novel design made possible by crypto.

@JordanLee, I’m trying to understand your liquidity engine model better. You say that it is made possible by crypto. Is this model only possible in crypto because it is possible for users to destroy/erode the currency supply itself through transaction fees? Without crypto I don’t think this is possible to erode the currency through fees in order to keep the peg. Even as a crypto right now, we don’t have enough transaction fees in order to make a dent in eroding our supply, which I believe is why you say that reserves are needed until the system matures. If the system matured in the future, there would be no need for a reserve, because there would be enough transaction fees by users of the network to burn away whatever amount of NuBits we needed to create in order to incentivize liquidity providing. Without enough transaction fees though, the network remains immature as it can’t sustain liquidity provision without keeping a reserve.

Is my understanding of your liquidity model here correct? Am I missing anything? If it’s correct, it seems that we were well on our way to this scenario last January with the huge volumes we received. The engine seemed to be getting stronger with each passing day, however the engine stalled and Nu was derailed when our exchanges got hacked. Since then we have struggled to restart the engine back up and we’re running out of fuel to do so.

[crypto_coiner]

Now I get it: LPs will never make a profit.
The plan is that they just sit there giving away their liquidity and because there s a tight spread NSR value goes up eventually in the long term.
We just have to compensate them with nbt and nsr systematically to recoup their costs?

[crypto_coiner]

Some data

[Confucius]

The empirical evidence is now very clear that this works as designed. Three times shareholders have dropped liquidity (twice when they very much had other options) and each time shareholders have been sorely punished. Sometimes I think shareholders are like a stubborn 2 year that refuses to learn to not touch the oven after repeated burnings. Have shareholders had enough of getting burned? Have you learned yet that there is a strong causal relationship between liquidity quality and NuShare price. Stop touching the oven!

First of all, there are no 2 year old’s that get burned repeatedly, they’re curious and it only takes them one time to learn. The notion that it is the fault of the owners of NuShares because they ‘have dropped liquidity’ is scary. I guess that means they should have forked over more BTC to support the buy side? As one of those 2 year old’s you seem to be referring to, I’m not going to get burned again.

The obvious issue here is that Nu is a tiny little boat that is driven up and down by BTC. It has an inverse relationship with BTC, and it gets eaten alive by traders, because it’s method forces it’s system to buy BTC when everyone else thinks it’s a good idea to sell, and sells BTC when everyone else thinks it’s a good idea to buy, all while not profiting off of the transactions.

[Hyena]

It’s a damn dangerous game to play against BTC. BTC will rule the world. Nu was doomed ever since the initial plan to have only NBT/USD trading pairs failed.

[Sentinelrv]

@JordanLee, is my above post correct? You said you wanted us to understand your model. Is my understanding correct? I just can’t see a zero reserve model working without high amounts of transaction fees. In the reserve model we are using right now, the reserve itself is used to provide liquidity, but in the zero reserve model we are printing NuBits in order to incentivize people to provide liquidity. The only way that can be sustainable in the long-term is if the number of NuBits we print to incentivize liquidity operations is equal to the number of NuBits burned through transaction fees from users of the network. If more NuBits are burned through fees than the amount it costs to pay LPCs, then the network should have profit. We can’t use this model in our immature state though because there aren’t enough fees to sustain paying out that many NuBits to LPCs. An answer to the above would be appreciated, as I can’t be sure I understand the model without your response.

[Sabreiib]

jooize:
Am I missing something?

Liabilities:

NSR buyback calculations

Total NBT in circulation is 710197.995900 NBT

Assets (BTC)

Get NuBits’ liquidity flowing

buy side funds (currently 39.74 BTC)

valued at $575 approximately $23,000

Liablilities to assets ratio: 30:1

@masterOfDisaster, when game theory involved, the basic accounting is not everything, as long as the free market believe Nu has the value above 400,000USD, they will buy NSR. Anyone selling NBT @ 0.8$ will regret when Nu survide. I admit this is dangerous game, Nu maybe survive and maybe dead, good luck Nu!

[NuWorld]

About tier 5, all I can say is what I’ve said before, that I was recently planning on parking NuBits, but decided against it because I’d most likely lose money trying to cash back out at $0.95 cents. I’m sure there are others like me. @Dhume thinks that tier 5 may just not be attractive in a BTC bull run. I personally would have rather parked than put my money in Bitcoin. I have no idea when the bull run will end and could end up losing money because of not timing it right. With parking, at least I know I’m going to get a specific amount of NuBits back as long as the peg is being tightly held.

Would you find the current park rates were attractive if at random times, once a day the peg were at 0.99 and the rest of the time there was no peg? Would you be confident that when your park time was up you’d be able to sell when the peg was in force? Or would you be worried you could end up losing money because of not timing it right? That is what Jordan is proposing.

We didn’t raise rates high enough to be attractive.

If raising rates were sufficent, and if nu shareholders had raised rates high enough to be attractive, the FLOT wouldn’t have run low on reserves in the first place.

[mhps]

@masterOfDisaster,

When was the idea of widening the spread above 1% SAF to keep the (degraded) peg validated? I remember seeing your post about it. When was it? What feedback did you get?

Was the spread widened above 1% SAF at this time on your gateways?

When was the spread widened above 1% SAF after April on your gateways? When was it first reported in the forum?

Stick to the fact please.

[NuWorld]

I’m voting for 75%+ APR park rates. That way, even if the offset doesn’t get changed in the near term - there is still profit.

Excellent Idea, I encourage other shareholders to do the same. Nu has held a 95% weakened page for 10 days now, if people believe that they can buy Nubits for under a dollar, sell them for 95 cents and earn enough interest to make up for that loss and provide them some profit, there is a chance they will. We should encourage parking for a long enough timeframe to have worked our way out of the immediate crisis (1.5 to 3 months)

[NuWorld]

For those advocating extremely high interest rates, Park rates, this does nothing and only exacerbates the issue of insolvency.

High rates are only a problem if there is still a crises when the park time is up. High rates at a very short duration (days to a few weeks) will probably make the situation worse, high rates for park periods of several months have a good chance of helping.

[nmei]

I agree - High rates lead to inflation - which leads to more coins on the market Nu has to account for in the long run. However, if the liquidity comes back we will be in a better situation in the future.

Up front members should park now at “reasonable” rates to help save Nu. But to draw more liquidity from outside we need a carrot.

[mhps]

Plan

I replied here

basically there is no advantage of pushting all buy fund to NLT if all exchanges are set to <1% SAF.

and

Get NuBits' liquidity flowing

Jordan’s idea of extracting value from NSR as if there is no tomorrow may scare most investors away permanently. We have been discussing gradually closing the spread using existing T4 and NSR sales. Since there seems to be an agreement that on-off tight peg is still very effective, we can for example

1. use limited fund to close the spread to <=1% SAF
2. observe how fast it is broken,
3. commit most of our T1 fund to where the selling stops
4. replenish T1 with existing T4 and NSR sales. the amount is limited, approximately equal to that lost in the first 2 steps
5. do step 1 again after some interval or trigger
6. until the spread is not broken again.

Isn’t this a better path ?

[crypto_coiner]

Would you find the current park rates were attractive if at random times, once a day the peg were at 0.99 and the rest of the time there was no peg? Would you be confident that when your park time was up you’d be able to sell when the peg was in force?

I must admit: no

[crypto_coiner]

Go away. I’m in this to win.

What is your vision for Nu – any projection and roadmap?
For example - in 2020:

• nubits in circulation: $10b
• nushare market cap: $1t (with 10b NSR)

[crypto_coiner]

I must admit – the peg is currently broken and I would not use NBT for payment settlement nor for parking, as long as I know that US-NBT does not tether very closely (-+1%) the USD.
I am willing to give it a try to this motion, for lack of an alternative.
Will add this to my data feed

[NuWorld]

Would you find the current park rates were attractive if at random times, once a day the peg were at 0.99 and the rest of the time there was no peg? Would you be confident that when your park time was up you’d be able to sell when the peg was in force?

I must admit: no

I wouldn’t either. So if you wouldn’t, and I wouldn’t, why do we think anyone else would? But this is what Jordan is proposing with his motion. Here is what he says earlier in this thread:

Let’s say we restore the peg and tier 4 is completely cleaned out. That is a real possibility. Improvement in the functioning of tier 5 (park rates) will take days or weeks of restoring the peg. So, if we end up with an empty tier 4 right away, we can’t use tier 5 right away. So we use tier 6. We say we are going to sell x number of NuShares each day to get funds to buy NuBits at 0.995. So, in this hypothetical narrative, we have zero tier 4 at a moment in time, but everyone knows it will be refilled from tier 6 each day. Some NuBit holders may choose to sell when there is no wall. Speculators will set a price according to the probability they think they can sell NuBits for more later. Let’s say a speculator says, “Hey, I will buy NuBits for 0.90 because I think I can sell them the next day for 0.995 with new funds from NSR sales are placed on the order books.” That may work, or he may need to try in subsequent days if other sellers beat him to the limited liquidity on a particular day.