I believe we at least need a limited number of NuShares to act as a buffer before activating the new tier 6. For example, let’s say we have a supply of 822,144,717 NuShares as we do right now. Shareholders would create a buffer grant of NuShares for FLOT to hold, which would only be around 10% of the existing supply. So that 10% would mean FLOT would hold 82,214,471 NuShares in multisig as a backup buffer for the peg.
In the case that parking interest rates failed to stabilize the peg, this limited NuShare buffer would kick in and FLOT would sell these NuShares in order to buy and burn NuBits. If it became apparent that this limited NuShare buffer wasn’t going to be able to hold the peg, only then would shareholders activate tier 6 restricted network access and higher fees. This buffer would either be enough to stave off the NuBits selloff and protect the peg, or it would give shareholders enough time to activate restricted network access.
The 10% number is just an example and could be adjusted up or down depending on what shareholders felt was a safe number of NuShares for this buffer. Setting it up this way, tier 4 buy side and tier 5 parking rates aren’t the only things protecting the peg and using a limited buffer (instead of LOTS of NuShares) in the event tier 5 fails prevents the NuShares supply from being quadrupled. So the following liquidity model would take effect, altered from what I wrote in my reply above…
1. Tiers 1-3 decentralized liquidity provided by ALPs and MLPs.
2. Tier 4 buy side (Bitcoin) and sell side (NuBits) managed by FLOT.
3. A raised tier 4 threshold for NuShare buybacks to allow for a higher tier 4 reserve.
4. A lower bound tier 4 threshold when it is advised that shareholders activate tier 5 parking rates.
5. If tier 5 parking rates are having no effect and tier 4 buy side funds are still dropping, FLOT will use the limited number of NuShares granted to them to act as a buffer for the peg in case tier 4 buy side funds run out.
6. If it appears that the limited buffer of NuShares isn’t going to hold the peg, then shareholders will need to activate tier 6 restricted network access and higher fees.
7. If tier 6 stabilizes the peg, then shareholders will stop voting for higher fees and the network will return to normal. If tier 6 slows the panic selling, but doesn’t completely stop it, then shareholders can active tier 7 and sell even more NuShares to reduce the NuBits supply even further until the network stabilizes.