[Withdrawn] Motion to create a new Tier 6 (Restricted Network Access) of liquidity

[JordanLee]

I’ll always support that kind of dilution - I proposed it for the BCE upgrade for the same reason: active contribution needs to be honoured.

We ought to be careful not to do anything that would alienate shareholders or potential shareholders. The network works quite well with a large percentage of shares not minting. If someone wants to put their money in our network and then forget about their NuShares for a few years, that is OK with me. We shouldn’t refuse money from such shareholders. Doing so lowers our market cap and our ability to fund operations.

We already dilute non-minters with the 40 NSR block reward. That’s helpful. It is also fair because everyone understands that block rewards are part of the deal and that it is a standard feature of blockchains.

Let’s be very careful about punishing any class of shareholder ad-hoc because that could reduce confidence in the future value of NuShares.

[masterOfDisaster]

Let’s be very careful about punishing any class of shareholder ad-hoc because that could reduce confidence in the future value of NuShares.

That needs to be considered, of course.
Ad-hoc punishment is not as helpful (and maybe rather harmful) as announcing that punishment is, if you can hope to awake some discussing such a punishment.
The discussion about punishing BCE minters, who don’t upgrade (last time I had a look the 4.0 blocks were down to 55%) has a more important reason than this discussion here.
The upgrade of the client at BCE by minters is crucial.
This here is just an option that has, like you explained, potential drawbacks for the perceived value of NSR.

[crypto_coiner]

If someone wants to put their money in our network and then forget about their NuShares for a few years, that is OK with me. We shouldn’t refuse money from such shareholders. Doing so lowers our market cap and our ability to fund operations.

We already dilute non-minters with the 40 NSR block reward. That’s helpful

Ah right
About the 40nsr dilution this is not perceived and understood as such yet and ppl might care.
That they dont care get what minting is.
I believe this is an incorrect wording inherited from peercoin

[Cybnate]

I envision RNA as the worst-case scenario that should only be used when everything else has failed. While we lack precise data, a 10% demand drop like the one we experienced would be easily handled with a higher level of Tier 4 USD reserves and modest Tier 5 parking rates.

I don’t see the RNA working at all under our conditions. This could work in an on-chain payment network with considerable liquidity, but not for the off-chain trades on exchanges network we are running now. It wouldn’t help to restore the peg on the exchanges which is where most of the liquidity is. It will also always be too late to beat the bankrun even it was only remotely useful.

I don’t see any other measures than what is currently being done with widening spreads to protect 90%+ of the intended pegged value. This is clearly the last tier and if it fails beyond a certain, yet unknown threshold a sudden bankrun on exchanges is inevitable and the last reserves will be depleted resulting in NBT to be free floating.

I hope we don’t have to try RNA out to prove to you and others that it won’t help to restore the peg or the confidence in Nu as a network in general.

[Sentinelrv]

I would have to agree with that. So the only way RNA would really help Nu is if we had already become a payment network with the majority of transactions taking place on-chain, rather than on exchanges where tokens are used in place of real NuBits.

[tomjoad]

I hope we don’t have to try RNA out to prove to you and others that it won’t help to restore the peg or the confidence in Nu as a network in general.

If NuBits achieve widespread usage, less than 1% of the supply will be on an exchange at any given time, similar to USD. RNA would be devastatingly effective. I suspect even now the majority of NBT are held off-exchange and transferred on-exchange when a user wants to sell; this is especially likely for large NBT holders who are educated enough to know the counterparty risks of exchange storage. You’ve missed my primary point as well, that increased Tier 4 reserves and effective Tier 5 parking rates can greatly reduce insolvency risk.

I don’t see any other measures than what is currently being done with widening spreads to protect 90%+ of the intended pegged value.

That may be true for the current situation we’re in, although when Bitcoin begins to decline in price again we will see increased NBT sales, which can fund higher Tier 4 reserves.

It’s quite obvious that increased Tier 4 USD reserves and effective use of Tier 5 parking rates would be advantageous for our network. Our network long ago recognized the advantages of a USD reserve for US-NBT but simply set the reserve ratio too low; it has learned from that mistake. As an extreme example, if we held a 99% USD reserve for US-NBT in a reliable multisig asset, it’s unlikely we would ever become insolvent except in the final stages of the network’s life. The trick for our network will be finding the correct USD reserve ratio and assets that can be responsibly managed, value-protected, and profitable for shareholders. I will be proposing a series of smaller motions soon that align with this vision.

[Sentinelrv]

I suspect even now the majority of NBT are held off-exchange and transferred on-exchange when a user wants to sell

This would be a nice fact to know. If only our exchange partners were able to reveal the amount of NuBits deposited at any one time, we would know what percentage of the entire supply would need to be sent to exchanges using on-chain transactions.

[Cybnate]

If NuBits achieve widespread usage,

We are quite some time away of that I believe.

this is especially likely for large NBT holders who are educated enough to know the counterparty risks of exchange storage

Very true and very adverse to the effect of RNA. Only a few transactions would be needed to get the funds from large NBT holders to the exchange. RNA wouldn’t stop that or would be way too late to have any substantial effect. As said it could work when there are thousands, if not ten of thousands smaller holders. They might assess it not to be worth to bring their funds back to an exchange when the fees are extraordinary high. At least they would consider delaying it.

You’ve missed my primary point as well, that increased Tier 4 reserves and effective Tier 5 parking rates can greatly reduce insolvency risk.

Not sure what you mean, but your statement is very true in preventing RNA from happening, although I have my doubts regarding the T5 interest rates.

when Bitcoin begins to decline in price again we will see increased NBT sales,

That may take a while given the imminent halving of BTC creation by miners.[quote=“tomjoad, post:98, topic:3160”]
The trick for our network will be finding the correct USD reserve ratio and assets that can be responsibly managed, value-protected, and profitable for shareholders. I will be proposing a series of smaller motions soon that align with this vision.
[/quote]
That is almost the holy grail we have all been looking for and we had many discussion about. Unfortunately any solution is either very expensive, increases counterparty risks and/or requires trust in one person.
Looking forward to your proposal, but wonder why we haven’t seen those earlier. Maybe it takes a crises to get creative?

[cryptog]

That may take a while given the imminent halving of BTC creation by miners.

I do not think there is any guarantee that btc price will go up after the halving.
Look at the price of ltc last year. No change.

[Sentinelrv]

Look at the price of ltc last year. No change.

Did the price increase leading up to the halving? What happened to it immediately after? Did it drop back down or maintain?

[Cybnate]

I do not think there is any guarantee that btc price will go up after the halving.

After the halving, not likely unless Bitcoin utilisation increases further. However with more competitors around, especially Ether I doubt it would be significant. But hey, who has a good crystal sphere, mine is a bit hazy

[masterOfDisaster]

who has a good crystal sphere, mine is a bit hazy

My crystal sphere tells me, that for economical reasons the price needs to be worthwhile to continue mining.
If it doesn’t, Bitcoin starts to fail.

Reasoning:

It's Happening!!!! • r/Bitcoin

We need to prepare the network for a failure of BTC. Fortunately we are in a good way.

This is it in a nutshell:

The trick for our network will be finding the correct USD reserve ratio and assets that can be responsibly managed, value-protected, and profitable for shareholders.

[cryptog]

The halving happened on 25AUG16.

2 months prior to the halving the price started to increase a lot.

Speculation on the positive effect of the halving is most likely one reason.

https://atriark.com/blog/litecoin-become-best-investment-2015/

As you can see in the plot, the price of litecoin stayed the same after the halving.

[mhps]

2 months prior to the halving the price started to increase a lot.

Many are suspecting this surge of btc price is crafted by the miners to save themselves before halving.

[Cybnate]

that for economical reasons the price needs to be worthwhile to continue mining

With the current price rise and high fees, miners must earn a lot of money right now. I bet they invest in the latest efficient energy to power ratio equipment so there mining cost would be relatively low going forward.
When the miners are behind this price rise, it will get even more interesting, but there is no proof for that.
But I think we are digressing…

Edit: @mhps, same thoughts at the same time.

[cryptog]

Reasoning:https://www.reddit.com/r/Bitcoin/comments/2s8qge/its_happening/cnndc36

This is an interesting theory. I am gonna re-read what you wrote 1 year ago.[quote=“mhps, post:106, topic:3160”]
Many are suspecting this surge of btc price is crafted by the miners to save themselves before halving.
[/quote]

Very interesting. Do you have any links?

I suggest we continue this discussion here: How is Nu prepping for Bitcoin halving?

[masterOfDisaster]

This is an interesting theory. I am gonna re-read what you wrote 1 year ago.

You have to flip some things around to make the post match the coinbase reward halving.
In the end it’s no difference whether the price drops by 50% or the coinbase reward drops by 50% (without being compensated by BTCUSD).

[mhps]

Do you have any links?

No. Read them in forums several times. Can’t remember the source.

[cryptog]

es. Can’t reme

I see. I would not be surprised that the price is manipulated.
As it was in 2012 and 2013 by mostly mtgox, it seems.
So we surely need to prepare for a big drop in price.
bitcoin price will never be stable. it will always undergo huge surges and huge drops.
So Nu should always be in business even in the hedging market.

[Cybnate]

So we surely need to prepare for a big drop in price.

In my opinion it is more likely to be a gradual drop and not starting till closer or after the halving date.