[Withdrawn] Motion to create a new Tier 6 (Restricted Network Access) of liquidity

[Cybnate]

If we’re worried about the protection, let’s increase our USD reserves in Tier 4 from 15% to 50%.

Holding USD reserves, that is potentially expensive due to the risk of confiscation, I suppose you refer to the equivalent in USD in crypto-currencies.

Maybe we need to define better what NSR is at risk. To me that are the NSR FLOT is holding (25m) as a reserve. As others have mentioned you can argue whether this is tier 4 or tier 6. Suggest to make it all tier 4 in your proposal.

Next thing is that we are looking for a trigger to activate tier 6. With selling all NSR we are already having parking rates for more than 30 days. What timeframe and under what rules do we consider the NSR selling as complete? When they have all been sold to any price? In a day, a week? Does it matter? A better indicator is probably whether the buy side is still under a % threshold.

A scenario
Given we have already high parking rates for 30 days and have sold all the T4 reserves, the current 15% and the 25m NSR (current T6) are on the exchange for sale decreasing say daily in value with 10% to meet the market. When we can’t keep up meeting the sell demand of the NBT and say the buy side is still sustained under a certain threshold (say 20%), then we would activate RNA.

In this scenario the NSR are still for sale while the RNA gears up with ever higher transactions costs. This would suit your perspective, wouldn’t it?

Other issues
Thinking of these scenarios the following occurred to me:
I think it is clear that in the above scenario the peg is already lost when T4 is being sold on many exchanges to some extent. The selling of the NBT on exchanges are not subject to transaction costs and speculators would jump in to determine a marketprice based on partly potential Nu reserves left to buyback the coins and emotional senses (not likely to be rational) for the NBT still floating around on these exchanges.

To reduce the risk of this situation from occurring in the first place it would make sense to increase the T4 reserves from 15% to say 50%. I would support that as the above scenario is not attractive as a Shareholder. I also know this comes at a cost as always when you are trying to cover risks. It is a difficult balancing act for Shareholders between costs and risk taken.

Also just like to say that the measures to prevent a risk from occurring are different than the measures when a risk is eventuating and actions are urgently needed to protect the peg and NBT holders. They should be clearly separated out and weighed against each other in future proposals.

[mhps]

I agree control capital into and out of the system is a useful tool.

NuBot actually already does it by increasing spread when volatility is high, to discourage hedging which is at the expense of Nu. How about we go a step further in this direction, and drastically increase spread or even pull liquidity out of peg when sutained extreme selling side pressure happens (BTC price collapsed) or buying side pressure happens (BTC price exploded) ? Nu could do this as long as the pressure doesn’t let up, and resume after chaos is over.

This taxes those who sell/buy (traders), instead of those who pay/receive (end users and merchants).

[Cybnate]

This taxes those who sell/buy (traders)

A kind of RNA but mainly for traders, I like this even better as this is a far more likely scenario than end users and merchants suddenly returning their NBT. The professional traders would be first selling (or buying) anyway.

[masterOfDisaster]

Tier 6 is the last line of defense in our liquidity operations model; it is not there to be put into motion well in advance of an emergency.

As you are aware I’m not shying away from questioning the current schemes if I think there’s room for improvement.
Using NSR sale to support the buy side is such a thing.

The FLOT is in possession of 25 million NSR. If there’s need to support the buy side by selling NSR you can be sure that I’m going to try to convince FLOT members to do exactly that.
The FLOT is much more agile than an NSR grant, which can be passed by NSR holders. But refilling the FLOT T4 NSR funds would be the next task I’d start once the FLOT would agree to sell NSR way before the situation gets so dire that the value of NSR would likely be much lower and even more NSR need to be sold.

It’s one thing to claim, that NBT are ultimately backed by NSR and wait until the last possible point of time to do exactly that.
Maybe we should adjust our thinking from "NBT are ultimately backed by NSR to “NBT are backed by NSR”.
With NSR being used to support the peg way before the T4 reserves have run dry, a measure like RNA looks much less bad and desperate.

I agree that RNA can be useful. But we need to make sure to do all in our power to prevent it from being used.
I consider selling NSR rather early than too late a prerequisite for RNA.
Increasing the ratio of T4 reserves is in my view another prerequisite, although I’d like to postpone that until tools like NuSafe are available and could be tested. The volatility risk is a serious issue, which is the main reason why we just don’t keep more BTC.
The diversification (beyond including by NuSafe) of T4 reserves is another helpful step.

RNA is great. It’s just not the right time for it.
I’ve experienced what can happen, if there’s a tool for emergencies - it seduces people to be slow in the creation of tools that prevent emergencies.
Just look at the NuBot gateways and what happened to them (and me)…

I’m totally for RNA - later…

[Nagalim]

With bitcoin having the governance problems it’s having i would be against raising the btc reserve threshold. Money is safer in nsr or an alt, or NuSafe.

[Nagalim]

Lack of commitment to liquidity is our biggest threat now

It is unnecessary to raise fees to support the peg, and planning to do so will certainly have a negative impact on NuBit adoption. It is exactly the sort of thing that I would characterize as a suicidal tendency.

The International Monetary Fund (IMF) has published an extensive series of articles and papers on capital inflows and outflows. In the case of Nu, our largest risk comes from capital outflows (ie. NBT being sold for fiat). One excellent IMF paper that is relevant to our network is here: http://www.imf.org/external/np/pp/eng/2012/111412.pdf beginning on page 25. In particular, points 42, 45 and 51 are very relevant to our network. This paper shows there is empirical evidence that capital flow management measures such as Tier 6 (Restricted Network Access) are perfectly acceptable as part of a toolkit for managing a currency, as long as they adhere to certain criteria, such as being temporary in nature.

I’m hoping to get @JordanLee or anyone else to speak to the above quotes. I also am not a big fan of RNA, but for reasons I’ve spelled out in this thread. Namely, that I don’t think it works without volume-dependence, I worry about the security risks it poses, and I question the application without a fundamental use like governmental taxation.

However, I am not against RNA as a concept. RNA is for sure a real thing that works for governments, there’s really no question about that. The question is about the analogy to Nu txn fees.

[tomjoad]

I wanted to draw attention to this withdrawn motion again in light of the proven ineffectiveness of NSR sales. I have removed all references of NSR sales as Tier 7; I now believe they should be removed from our liquidity model permanently.

[Sentinelrv]

I wanted to draw attention to this withdrawn motion again in light of the proven ineffectiveness of NSR sales. I have removed all references of NSR sales as Tier 7; I now believe they should be removed from our liquidity model permanently.

I agree with replacing the current tier 6. NuShares sales just aren’t reliable because the share price crashes when we need it most.

Let me ask you a question though. @JordanLee has said he doesn’t support raising transaction fees like this…

Lack of commitment to liquidity is our biggest threat now

Lack of commitment to liquidity is our biggest threat now

So you unilaterally reject all attempts at RNA?

Absolutely.

It is unnecessary to raise fees to support the peg, and planning to do so will certainly have a negative impact on NuBit adoption. It is exactly the sort of thing that I would characterize as a suicidal tendency.

In your reply though, you said that you only intended for RNA to be used in the absolute worst case scenario as a last line of defense where our reserves have been wiped out and raising interest rates proves to be ineffective.

Since activating RNA would be very damaging to our reputation, would you classify our recent situation as one where we would have activated RNA or one where we could have gotten through the crisis by using only tier 4 and 5? Would it have been necessary to activate tier 6 RNA? We would have to have no other option when considering activating RNA. What do you think?

[tomjoad]

Since activating RNA would be very damaging to our reputation, would you classify our recent situation as one where we would have activated RNA or one where we could have gotten through the crisis by using only tier 4 and 5? Would it have been necessary to activate tier 6 RNA? We would have to have no other option when considering activating RNA. What do you think?

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 support @JordanLee in his statement that we should maintain a tight spread and high levels of liquidity during normal operations.

[masterOfDisaster]

In another thread I put some words regarding RNA describing the current situation:

Wall Observer - NuShares price movement tracking & discussion

This is not to be confused with restricted network access that makes transferring NBT expensive or impossible at all.
This is a reduced quality for a synthetic peg.
While it reduces the availability of good trading options, it’s a different animal than RNA.

There are not only differences, there are similarities as well.
At the moment it’s more expensive to buy BTC from Nu than it is to sell BTC to Nu.
One could argue, that buying BTC is partially restricted. But at the same time Nu is offering NBT at a tight offset.

More important are the differences

• paying/transferring with NBT isn’t restricted at all; their usability for tx isn’t impaired
• while the tx fee needs to be set by voters, the “restriction” from increased offsets can be automatically adjusted with market aware trading - even per side if necessary (Nu might not want to sell NBT at a tight offset, depending on the market situation)

A high tx fee (that isn’t dependent on the transacted volume) wouldn’t have stopped the big BTC trades on NuLagoon. It wouldn’t be able to stop people from trading funds that are already on exchanges for crazily low prices.

The high buyside offset on the other hand can protect the peg - to some degree and on a degraded level. But it’s working.

At several places, there was the notion that the market can be predicted and the risk from having NBT used to hedge is not big.
Either Nu was very unlucky or the BTC surge had a pattern that made people empty the BTC reserve (except for some buffer), which Nu had.
Nu is low on reserve and the BTC, that were traded for NBT at the begin of the surge, would have increased by over 20% in value.
If BTC nosedives the opposite may happen. An increased sellside offset (im not talking emergency offsets here, but maybe up to 1%?) may do Nu a favour.

Market awareness is necessary and will work better than RNA, being an immediate feedback from the market instead of having a delayed effect, that depends on the shareholders’ votes.
Market aware offsets don’t impair NBT transactions.

[Sentinelrv]

You should take (withdrawn) out of the title. Shouldn’t it always be available for people to vote on in case they change their mind? Recent events may have caused a lot of mind changing, but they currently can’t vote because the motion was withdrawn.

[tomjoad]

You should take (withdrawn) out of the title. Shouldn’t it always be available for people to vote on in case they change their mind?

By removing the Tier 7 (NSR Sales) information, I’ve materially altered the motion and will need to re-submit for voting. I plan on introducing it again in the next day or two.

[mhps]

I think it is more relevant to post here.

Our forum is incredibly active compared to other cryptos

NuShares do support the peg, but shouldn’t do so in a tier 6 way through NSR sales. Rather, NuShares are the mechanism that give shareholders control over the network and its liquidity operations, which provide peg support.

You can vote with NSR no matter what price it has. Nubits don’t need to care about NSR price. If giving dividends is just for encouraging votes, considering only 15% of them are voting, we are paying too much.

So how about this solution:

When we need to dilute N NSR to support the peg, we print M NSR more to fully compensate all addresses that have voted yes on any passed motion in the last 6 months, and only half compensate all addresses minted but never voted yes to any. We basically dilute apathetic shareholders’ share to support the peg

The way to calculate compensation for a legible address is
(N+M) / NSR_money_supply * address_balance

[Sentinelrv]

If giving dividends is just for encouraging votes, considering only 15% of them are voting, we are paying too much.

There was also this…

Limiting dividends distribution

@CoinGame could you move the 4 posts under the one quoted above after this one? Thanks.

[cryptog]

We basically dilute apathetic shareholders’ share to support the peg

That s a great idea.

[masterOfDisaster]

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. Passiveness might have drawbacks for the shareholders beyond the lack of ability to contribute to consensus and security of the network they own.

[crypto_coiner]

'll always support that kind of dilution - I proposed it f

I have no objection either

[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