[Withdrawn] Motion to create a new Tier 6 (Restricted Network Access) of liquidity

Nagalim 2015-12-09 06:15:29 UTC #33

This argument can just as easily be applied to NSR sales and buybacks, which can happen theoretically at the same speed as a block, meaning once per minute. I am unconvinced that capital controls can be applied faster than NSR sales on a fundamental level.

We’re skipping point 2 then? Alright, but this is one of my favorite points. It just further stresses how not-ready we are to talk about volume dependent fees this way.

I’d love to have this conversation five or ten years from now. For the time being, the shareholders are not informed enough to pass a motion about this. You can talk theoretically all you want, but you posted this thread as a draft.

The nature of the beast with volume-dependent fees is that you have to pay the fee to move money from one address to another no matter what. That means that if an address is compromised or a mixer is used the fee will end up being paid multiple times. This is an inconvenience with normal fees, though most would agree people have to pay for the added security. For exorbitant fees, it makes advanced security measures nigh impossible. And stuff like this is just completely thrown out:

The blockchain is our voice as shareholders, but it is a time sensitive record. If we make this declaration now, the assumption is that we intend to use it. However, we don’t. The only real tangible effect this motion has is 2 fold. Firstly, it renames the tiers just to make all our discussions that much more complicated. Secondly, implies an arbitrary 10% threshold without proper definition (10% of what? T1-3? No concern for T4?) to trigger a state that shareholders can’t yet apply.

I’d love to have this conversation in Nu 3.0, once we understand the network implications of volume-dependent fees.

Sentinelrv 2015-12-09 16:07:55 UTC #34

@tomjoad, how do you feel about using NuShare sales in a limited fashion before activating tier 6 restricted network access? I’m thinking about what @Cybnate said below…

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.

I’d like to hear what @Nagalim and @tomjoad think about adding in this limited NuShare buffer before restricted network access kicks in.

Nagalim 2015-12-09 16:24:27 UTC #35

I’m sorry, I know I’m being Mr. Cynical all over this thread, but it seems like the only concrete statement that people are making here is:

Park rates are already chosen by consensus, nsr is already used to support the peg when T4 funds are low, and shareholders already know it’s probably a good idea to increase fees when we’re having trouble making ends meet. So ultimately, this thread is just about the T4 % threshold.

tomjoad 2015-12-10 01:34:35 UTC #36

I would prefer, as others have suggested, increasing T4 reserves if that’s the case. Tier 4 should have enough reserves to cover the majority of minor demand crash scenarios, and to prevent against speculative attack. NSR sales are unlikely to be very effective in a severe crisis that tanks the value of NSR, especially if there is a time urgency that limits the amount of investors able to provide new capital.

Your proposed sequence of actions makes intuitive sense, except that those 82,000,000 NSR may have lost 90% of their value overnight if the crisis is severe (such as a government announcing its intentions to search for and prosecute NuShareholders, and to criminalize NuBits usage). Tier 4 reserves are more reliable, especially if methods are ever devised to privately hold stable USD among multisig groups. I appreciate that you are thinking through this problem with us.

I will be placing this up for voting within a few hours. Thank you everyone for the discussion; even if this doesn’t pass in the near future, we still have the beginnings of a debate for a mechanism when Nu 3.0 is released.

mhps 2015-12-10 02:24:33 UTC #37

I can understand that you may have a unique perspective, from NSR buyback, in seeing what would be coming when an extreme adverse event drives down NSR prices. The capital control idea is interesting and I suggest you bring it up whenever there is supporting evidence, so that shareholders can see what you see as Nu grows, paving the way of a consensus. As a motion it is way too early now I think.

tomjoad 2015-12-10 02:33:46 UTC #38

Based on feedback here I don’t expect it to pass anytime soon, but I do think there is value in signalling our willingness to consider new macroeconomic tools. Even if it only has 5% support for months, I’m okay with that. It’s a good thing that motions can be voted on forever!

Nagalim 2015-12-10 03:41:41 UTC #40

That’s park rates. We haven’t implemented % fees yet.

masterOfDisaster 2015-12-10 03:43:40 UTC #41

Erm… right. Confused me tried to get some rest…
Maybe I better delete my post before I confuse others as well

Cybnate 2015-12-14 09:06:32 UTC #42

Still having a hard time weighing up increased T4 against the value of NSR in T6. I think we need a few scenarios of those adverse events. One obvious one is BTC halving in value, would NSR also half in value? If so then you are right. When NSR can stand on its own it would make sense to keep NSR. I tend to believe the latter, but again the reason of the halving of BTC might affect this.

It is hard to assess these scenarios as we haven’t seen it happening, but would be keen to hear whether some might have seen some trends during extreme volatility of Bitcoin and the response of NSR. That might help this discussion. It might just be too early to tell however.

tomjoad 2016-01-12 04:57:35 UTC #43

This motion has been hashed and put up for voting: abab44f623bb3c5b29ce0d2dc873798cf2bfb8ae

I spent a great deal of time thinking about my arguments in the original post above, and I am convinced this Tier is the missing piece to a crisis response. With this new Tier, our network will have a capital controls tool that every national government has for managing their own currencies. We ought to continue pioneering our macroeconomic toolkit as a global leader in cryptocurrency.

In short, I believe this motion enhances our network by using empirically-proven currency management techniques approved by the IMF. Our ideal liquidity operations structure for maximum stability might look like this:

Tier 4: Increase the USD-value of reserves to 30-50% (outside the scope of this motion) to prevent speculative attacks.
Tier 6 (Restricted Network Access): Place this safety valve on our network to restrict panic sell-offs in a severe crisis and give the FLOT team time to sell their NSR from the next tier.
Tier 7 (NSR Sales): Use this tool as a method of speeding up the return to equilibrium between buy-side and sell-side, and to symbolize NuShareholders’ commitment to sharing risk.

I did my best to answer questions that were raised, so thank you to everyone who contributed to the discussion. For those looking for more in-depth analysis of this issue, please have a read of my responses in the thread.

I am aware of at least one major shareholder who is against this motion, so I won’t be personally offended if shareholders disagree with this idea. However, I hope that with consideration of the arguments I’ve presented above a majority of shareholders will eventually vote to add Tier 6 (Restricted Network Access) to our macroeconomic policies.

Cybnate 2016-01-12 23:12:32 UTC #44

I’m not in favour as it is presented. Tier 6 and 7 can only be somewhat effective when activated at the same time. Restricting network access and with that further lowering the value of the shares and then selling shares makes no sense to me. It also looks bad from a PR perspective.
Therefore I’m not voting for the current proposal although I like the proposed Tier 6 (restricted network access) approach very much. It is just the order of activation.

cryptog 2016-01-13 01:41:52 UTC #45

I am studying the motion…

tomjoad 2016-01-25 02:47:26 UTC #46

This motion is currently attracting about 25% of the vote in the past 100 blocks. Thank you to everyone who is voting for it so far.

All NuShareholders should be in favor of this motion if they agree with my logic presented in my above posts and summary here: [Withdrawn] Motion to create a new Tier 6 (Restricted Network Access) of liquidity . One common viewpoint I think is held by @Cybnate, so I’ll share my counterpoint.

I encourage you to write out a scenario explaining how you think this chain of events would unfold, because I still don’t agree with your view here. In the event of a critical emergency where we would expect 80% of demand to disappear overnight, the very first thing I would do as a shareholder would be to sell all my NSR, because I know the value will tank. I’m saying this as an actual shareholder, not a hypothetical shareholder. This sell-off will require NSR sale dilutions that inflate the NSR supply by many orders of magnitude, because NSR will have lost most of its value. Imagine the NSR supply inflating from 800M to 5B or 10B or more. We cannot reliably back the price of an asset (NBT) with a second asset (NSR) that derives most of its valuation from the success of the first asset (NBT); we can only use it as a marketing tool to assure NBT users that NSR holders share in the risk of the network.

My proposal gives shareholders the confidence that mass NSR dilutions won’t be required, so that shareholders hold their NSR during crisis periods. The increased NBT transaction fees will slowly reduce the excess circulating supply over time while limited NSR sales occur to help keep our public relations positive and speed the removal of Restricted Network Access status.

I encourage everyone to take 5-10 minutes to read the motion and vote. This is a critically important feature for our network in my opinion, as it will allow shareholders to strengthen their guarantee of a stable NBT price peg over long periods of time.

Cybnate 2016-01-25 04:05:00 UTC #47

That is partially true. When NBT holders know that NSR shareholders have barely any stake a NuBits sell-off will be even faster and with that encouraging a further decrease in NSR value.

You may try, but you won’t see much, if any, value of it back in such a situation especially not in a panicking market. No buyers. You and other Shareholders most likely end up as a bagholder in such a situation as it is already too late. Most of us know that. So most likely a large number of Shareholders will try to jump ship as soon as ‘Restricted Network Access’ (your T6) will be in place, basically diminishing NSR value for T7 at almost the same time. T7 is therefore useless by the time it is required.

With turning it around some NSR value could be used to buyback NBT before Restricted Network Access comes in place. This would likely slow down panic from NBT holders more than restricting Network Access basically implying that they may foot the bill.

As said before I can see a scenario where both measures would be activated at the same time. Dilution of shares and Restricting Network Access. Users and Shareholders would be both punished for panicking behaviour equally. It will be messy anyway.

We need to keep in mind that when Tier 6/7 needs to be activated, most likely there already will be panic. The real problem is how to get individuals (both NBT and NSR holders) behaving when the odds of losing are getting more favourable. I don’t have all the answers and literature is thin on this subject. It balances between rational and psychological responses which happen when certain triggers occur and one sheep crosses the dam. Usually thereafter the rational goes down the drain.

I’m still not convinced of the value of your proposal as currently worded. I would settle to have both Tier 6 and 7 combined in time. Still appreciate the concept of Restricted Network Access as an ultimate measure.

tomjoad 2016-01-25 04:40:45 UTC #48

I think we’re in agreement here, and my intent was for both Tier 6 (RNA) and Tier 7 (NSR sales) to be used simultaneously. Both can be activated at the same time, with Tier 7 only taking a little longer to complete due to the logistics of selling NSR. Here is the section of the OP where I discuss this, where I assume a future network state that has the ability to set transaction fees quickly:

tomjoad:

A solution that I hope would satisfy proponents of both approaches is to have Restricted Network Access as Tier 6, and NSR Sales as Tier 7. In a catastrophic emergency (like my scenario in the original post) Restricted Network Access will immediately stop the bleeding within a matter of hours. At that point, shareholders can begin coordinating Tier 7 NSR sales, and then slowly lower the capital controls as funds are raised to bring the network back into equilibrium. Think of Tier 6 as a bandage to prevent complete collapse, and Tier 7 as proper medical care that will hopefully heal us faster.

From a logical perspective this should satisfy everyone, because:

If you believe NSR sales are an effective form of peg defense, then Restricted Network Access shouldn’t be in place for more than a few days or weeks. NSR sales will begin, funds will be raised, and then capital controls will be lifted. Plus, NSR will be more likely to maintain their value during the sale because the dilutions will be slower and more gradual, as opposed to an emergency unlimited dilution. The peg will be maintained.

If you do not believe NSR sales are an effective form of peg defense, the peg will still be saved while better measures can be thought of. The peg will be maintained.

My intent with the motion wording was to keep things very high-level, so that shareholders could have maximum flexibility in prescribing the tools during an emergency. I share your view that Tier 6 (RNA) and Tier 7 (NSR Sales) should activate at the same time.

Cybnate 2016-01-25 04:52:10 UTC #49

Unfortunately your motion is drenched in statements as the above quotes show that there is a strict order. Tier 6 should be the plasters while we are preparing for proper medical care representing Tier 7. During that we will still need more plasters (NSR sales). Your motion clearly suggest the opposite intention in my opinion which makes it hard to support it.

masterOfDisaster 2016-01-25 07:14:17 UTC #50

Not having NSR sales before or at least simultaneously with RNA will undermine the trust in and the credibility of Nu.

Restricting access before shares get diluted to mitigate a crisis is skinning customers before owners taking on responsibility.

That is too close to what we already know from traditional banking/social misconceptions to hope for being able to resemble it.

Does Nu want to become something better than current central banks, something that limits the devastating power of central banks, something that might make the world a slightly better place?
Then it shouldn’t try to step in the shoes of central banks.
No skinning of customers!

I was for that reason I included sale of NSR in a draft I once created - way before the situation is absolutely dire:

cryptog 2016-01-25 14:35:16 UTC #51

I think also we should show that Nu cares about NuBits holders and that Nu will do everything in its power to protect the holders even if dilution is needed.
In other words, Nu will protect the interests of customers before the interests of shareholders…
But that sounds anti-capitalistic …Well yes but Nu is a new form capitalism.

But protecting the peg could be regarded as the best way to protect the value of nushares on the long run so after all it is not that anti-capitalistic.

Nu holders already take a risk when they use nubits compared to FIAT so we should counterbalance that with a thick protection, I feel

So when could RNA be activated.
Maybe when a lot of nubits are help by bad actors for example?

tomjoad 2016-01-27 00:57:40 UTC #52

Nothing in the hashed motion text indicates that they cannot be executed simultaneously. What are you referring to? You’ve only linked comments of mine from various points of discussion, none of which suggest that only Tier 6 (RNA) could be applied while ignoring Tier 7 (NSR sales).

However, as this motion seems to be stalling between 20-25% I would like to ask both @Cybnate and @cryptog what proposed wording changes to the motion would increase their likelihood of adding it to their data feeds. As others such as @Nagalim have noticed, you two have significant voting power under your control and it appears I will need to work with you to arrive at a motion wording that has a chance of passing.

masterOfDisaster 2016-01-27 06:46:47 UTC #53

Which as a side note - and not trying to side track the discussion - is another great integral part of Nu’s governance (so please, rather don’t comment that here; I just couldn’t forbear writing this).

I’m so overly happy that @Coingame stated what’s obvious for most of us, but hidden for so many.
And until recenty I wasn’t aware of the importance for Nu - the inner workings and as a means to attract active contributors, who favour agile endeavours, which have a solid consensus mechanism.

Data feeds belong to that.

With them you can delegate your vote, but need to keep that delegation up only as long as the delegate acts and decides more or less according to your interest.