[Withdrawn] Motion to lower compensation for NuLagoon sell side

JordanLee · October 4, 2015, 5:15pm

There is currently more than $41000 in tier 2 and 3 sell side liquidity, which is either all or mostly from NuLagoon. The value this brings to shareholders is quite modest. It isn’t available immediately as it isn’t in tier 1. FSRT and myself both have large quantities of shareholder NuBits that can be brought to market quickly if needed. Its value lies in being a redundant source of NBT (in addition to myself and FSRT). I believe the current compensation rate for Pool A of 0.34% per day is well above the value the network receives for compensation. This is particularly true in light of the fact that total sell side liquidity has been hovering mostly between 90,000 and 100,000 recently, while the buy side has been considerably less. The optimal way to balance the two liquidity walls is to reduce compensation for the sell side.

Motion RIPEMD160 hash: 5a37c1d4abadffbded0ebbdfedb40cbfa68a49ef

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Beginning November 1, 2015, shareholder funded sell side liquidity at NuLagoon will be capped at 0.08% per day. This is the cap for what shareholders pay NuLagoon, not what NuLagoon pays pool users.

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Verify. Use everything between and including the <motionhash></motionhash> tags.

NuLagoon operations are complex, so it is possible that I haven’t understood the optimal way to structure the cap. My understanding is that the cap will only impact Pool A operations.

@henry please let me know if this can be improved by structuring the cap differently (due to ignorance on my part about the details of your operation). I realize you won’t be pleased with this motion, and you are free to oppose it or attempt to marginalize it by offering your own alternative motion.

willy · September 15, 2015, 7:28pm

FSRT?
Did I miss something here?

CoinGame · September 15, 2015, 7:43pm

Nagalim · September 15, 2015, 7:49pm

I wasn’t able to find out what was meant by that, but that was the response when I asked this question.

MLP’s (NuLagoon being our only one) have a unique perspective of the switching problem, so I really am interested in the response to this.

P.S. the only true solution to the switching problem is Tier 6 balancing of the network, but with the semi-centralization of an MLP the problem should be easier, or at least different.

henry · September 16, 2015, 1:01pm

It is not fair to say the sell side is redundant on the NuLagoon. The fact is that the sell side is redundant on the network-wide.

NuLagoon want to balance the buy and sell side liquidity network-wide. For example, when the BTC price is at round 220 at 24 Aug, NuLagoon has about 120 BTC on buy side, but the buy side network-wide is low, so we promote most of our BTC into tier 1 and sell BTC for NBT. resulting NuLagoon holding lots of NBT now.

This motion will change the formula used to calculate NuLagoon’s NAV dramatically. (I havn’t figured out the new formula yet). What is more important, This motion will impose a discrimination against NBT on the free market, damaging the confidence of people who believes 1 NBT always worth 1 USD.

Nagalim · September 16, 2015, 1:28pm

How would you feel about fixed cost? I.e. always guarantee a certain total payout per month on each side like 1,500 nbt to sell and 1,500 nbt to buy such that no one can say we incentivize one over the other yet we still pay more to people providing less redundancy and less to those providing more? This is a concept we’re also discussing with ALP so you aren’t alone.

Also, with MLP you should not be taking on the burden of balancing the global peg. There is no situation where an MLP should be less balanced than the sum of ALPs, which is very much a situation NuLagoon is in right now.

If the statement is that MLPs cost more, are harder to balance, and are less decentralized can you remind me why we fund them so well?

cryptog · September 16, 2015, 2:09pm

What about transferring a large part of the liquidity (Tier1 and 3) from sell side to buy side?

masterOfDisaster · September 16, 2015, 3:02pm

And who buys the NBT?
New users (let them come! where are they?)?
Liquidity providers at ALPs?
Or the Nu network?
For the latter one seeded auctions would be very helpful. A pity that they are mostly ignored…

Nagalim · September 16, 2015, 3:07pm

ALPs will buy them and we will increase park rates or perform an auction. Good, the world keeps turning. To pay 0.34%/day on them is a terrible idea. That’s why I say an MLP should never be less balanced than the sum of all ALP’s.

cryptog · September 17, 2015, 7:04am

I think we need to know in real time the exact buy and sell side liquidities provided by NuLagoon in order before considering such a draft.
So could someone give the exact buy/sell side liquidity given by NuLagoon currently?

Nagalim · September 17, 2015, 12:23pm

Just look at your client. NuLagoon is tier 1 through 3 while ALPs are the unknown tier. I think you’ll fine there is something like 4x more ask than bid in NuLagoon. Basically, if NuLagoon represented our peg we would be flipping out right now for park rates and nbt burns.

cryptog · September 17, 2015, 1:07pm

Isn’t balancing supposed to occur?

Nagalim · September 17, 2015, 1:09pm

That’s what this thread is about. We’re all confused as to why NuLagoon isn’t balanced and why we are funding such an unbalanced operation with so much money.

cryptog · September 17, 2015, 1:13pm

Isn’t supposed to be done manually according to this motion?

Nagalim · September 17, 2015, 1:19pm

The only balancing I can find in that motion is from tier 1 to 2 to 3, not from sell to buy side. Asymmetric rewards or fixed cost rewards appear to be necessary for balancing. Honestly, I’d rather see fixed cost rewards so we can pin NuLagoon down to a particular amount of NBT/month.

If NuLagoon cannot be balanced then it is worse than current ALPs and we should stop funding it.

henry · September 17, 2015, 10:41pm

NuLagoon is balancing lliquidity at tier 1 and 2 network-wide Detail can be found at The improvements in the operation of NuLagoon
.
If Nulagoon try to balance its own buy and sell from tier 123, all the other tllps will be completely unbalanced, obviously not good for the whole Nunetwork.

Nagalim · September 17, 2015, 11:26pm

Why exactly is that worse for the Nu network than having NuLagoon be completely unbalanced? I can’t help but disagree with your fundamental premise.

If we need to raise park rates or do a burn, we will know via the ALPs being unbalanced. Do we need to do a burn specifically for nulagoon? That seems like a highly inefficient (and potentially corrupt and centralized) way to go about this.

If it’s such an obvious statement then why do I think it’s completely wrong?

I didn’t want to bring this up, but what NuLagoon is doing right now is very much an attack vector on the network by storing large amounts of nbt so shareholders feel like they can make more then threatening to drop them all on the peg all at once. Carry out your attack, we will prevail. We certainly will not give in to intimidation attempts.

woodstockmerkle · September 18, 2015, 12:08am

Henry, help me understand this balancing operation and the value of it more. You have done tremendous work and service with NuLagoon, but the present situation at a minimum is unclear, but further may be interpreted as a risk to the network.

If NuLagoon is balancing tier 1 and tier 2 network-wide, I interpret that to mean that in my Nu client, I should see approximately equal amounts on buy and sell columns in the Liquidity view in the client. At the moment of writing this I see Buy-Tier1 = $6.7k, Buy-Tier2 = $1, Sell-Tier1 = $13k, Sell-Tier2 = $10k which is not balanced.

If NuLagoon is presently mostly buy-side, then the only way for Nu to balance in isolation is to sell, which is downward pressure on the peg. Nu would recover from any dump, for sure, but this does feel like a shareholder-funded Sword of Damocles.

I propose that as standard practice, a liquidity provider should have a goal to be balanced buy and sell where possible, but if there is a need to choose, bias on the side of creating upward pressure on the peg than downward pressure.

If all LP’s take this approach, then there should be balance. Any unbalanced LP can be identified and asked to account / explain their situation.

There may be other actors in the marketplace that aren’t reporting liquidity (as they were never shareholder-approved). This does pose the question: should the network react to those actors or ignore it? My immediate thinking is to “ignore but explore”, as any data shown on an exchange may be manipulated.

Please tell me where I am wrong …

cryptog · September 18, 2015, 7:18am

Can you clarify why you think so?Since NuLagoon and other pools are independent from each other, I do not see how it could be the case.

We need more buy side liquidity from NuLagoon, I think. So an addendum motion that balances the overall liquidity provided by NuLagoon between buy and sell sides is necessary, I feel.

henry · September 18, 2015, 7:24am

I am sorry to let you feel unclear. Let me clarify current liquidity info and operations in more details:

 All the unknown tier liquidity info showed in your Nu client at the moment is tier 1 liquidity, which placed at the order books of exchanges.

 All the tier2 fund are also placed at exchanges and fully controlled by the NuBot, and could be automatically promoted into order book in one or two minutes.

 Fund tier 1 and tier 2 are all placed at exchanges and are available immediately or in a very short time. NuLagoon try to balance the total amount of BTC (buy side) at tier 1, 2 and the amount of NBT (sell side) at tier 1,2 Nu network-wide. They all subject to the exchange default risk.

 Current tier1 buy is: 52k, tier2 buy is: 0, total is 52k. tier1 sell is: 56k , tier2 sell is 10k, total sell is: 66k. Because the buy side (52k) and sell side (66k) is only unbalanced by ((66-52)/2)/(66+52) = 5.9%, which is less than 10%, so NuLagoon don’t need to take any action now.

 If NuLagoon try to balance its own buy and sell from tier 123 (7k buy, 44k sell), then about (44-7)/2-7 = 15k NBT have to sell to the market, more specifically, these NBT have to sell to other tllp pools, as a result, other tllp pools will be unbalanced and funds placed on exchanges will be completely unbalanced. (buy side will become 52 – 15 = 37k, sell side will become 66 + 15 = 80k)

That’s why I said It is not fair to say the sell side is redundant on the NuLagoon. The fact is that the sell side is redundant on the Nu network-wide. NuLagoon is only passively managing the fund, all the orders are automatically placed by the NuBot. NuLagoon passively holds lots of NBT because NuLagoon acts on the behalf of the Nu network. NuLagoon shouldn’t be punished for this.