[Withdrawn] Motion to create a new Tier 6 (Restricted Network Access) of liquidity

[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I wanted to draw attention to this withdrawn motion again in light of the proven ineffectiveness of NSR sales.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I wanted to draw attention to this withdrawn motion again in light of the proven ineffectiveness of NSR sales.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

[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.