My gut feeling agrees with you.
But my apprehension tells me that having an equal compensation for both sides is better because it will make the market situation more clear.
With equal compensation of buy and sell side Nu will know when to increase or decrease NBT supply:
if the sell side is lower than the buy side, additional NBT are needed on the market.
if the sell side is higher than the buy side, NBT need to be removed from the market.
If you compensate buy and sell side differently it will be harder to know when and how to react.
You need a coefficient instead of only a threshold.
Equal compensation of buy and sell side allow Nu to know which side to seed - once seeded auctions are available again.
Nu needs to connect the liquidity “in the wild” with an ongoing adjustment of the NBT supply.
Unequal compensation rates make that more complicated and are only good for short-term reduction of costs.
I’d say Nu shouldn’t afford saving these few costs now.
Be glad that fixed cost pools very easily can adjust the sizes of buy and sell sides by increasing or decreasing the payout (assuming that the compensation rates, which LPs demand, stay the same).
In addition to (or instead of…) voting for this motion and dictating a business partner conditions, consider trying something different to reduce costs and improve liquidity service in a more fair and sophisticated way.
Make fixed cost pools a reality!
Vote for this motion:
If you missed the discussion, I urge you to have a look here:
Can the concept of Fixed Cost Liquidity Provision Compensation Scheme help us reduce the oversupply of sell liquidity of NuLagoon and all ALPs in general?
EDIT: I think I already got the answer below
But we could do the same (naively?) within the current ALP scheme (Fixed Reward) by decreasing the sell side daily rate reward, couldn’t we? Which would bring back to OP’s motion…
Let me reformulate my question: To which extent it would be much easier and fairer and more transparent in case of Fixed Cost ALP (newly proposed scheme by nagalim) compared to Fixed Reward ALP (current scheme derived by creon) when it comes to adjust the liquidity provided on each side?
I doubt the power is that great and it shouldn’t be the case. I don’t think it is a good idea to support this motion. I agree with MoD here. The route to fixed costs is a better one and therefore I will support Nagalims motion to experiment with fixed price instead.
However I still have an uneasy feeling about our current liquidity costs. That is clearly not sustainable given the current network utilisation. Will certainly revisit this motion when other attempts to reduce liquidity cost are delayed or fail in the next 2 months.
Which is a good idea.
Nu continuously needs to track costs and strive for more efficiency.
Accounting is still one of the rather blind spots of Nu.
I hope that the liquidity costs are reduced by that time. This hope is based on fixed cost compensation being tested, ALP integration in NuBot is being prepared, the parametric order book is almost here - just to name a few major improvements that help reducing liquidity costs.
Nu will soon pay less money for the liquidity that has a small offset and some more money for liquidity with some more offset. The peg will be safe, arbitrage risk for LPs is reduced, the liquidity costs will decline.
Add competition for the fixed cost compensation to the equation and you have Nu’s liquidity situation in a way better shape than it is now.
After that has been accomplished it’ time to get seeded auctions running to tie tier 6 down to tier 1 to 3.
There’s a lot of work to do, but all is moving in the right direction.
NuLagoon will be one of the competitors for liquidity compensation soon, which I consider more fair than just cutting down costs by reducing compensation for sell side liquidity at NuLagoon…
If NuLagoon works efficient enough - in relation to the market - everything is fine.
If not, it will have a hard time, but by more efficient market participants and not by a business partner which dictates new conditions.
Since Nulagoon’s operators can control exactly how much fund is exposed to BTC volatility, it is in a better position to improve its service by implementing an insurance for its customer liquidity providers. MLPs can have many advantage over ALPs.
Because this is not close to passing and is no longer receiving additional support, it is reasonable to unpin it, especially since there are so many other pinned topics.
I still think this motion is a good idea. In light of the powerful affect our first share buyback in the amount of $2500 had on share price, we can understand the importance of holding down costs.
It has been criticised because it would make the peg somewhat asymmetrical. There are other factors already at play that make the peg asymmetrical. A preference to avoid the volatility and additional risk of BTC appears to be causing the sell side (where NuBits are used) to be favoured at the current time. Therefore, a counter measure would increase liquidity wall symmetry. While fixed cost liquidity is an exciting innovation that is likely to reduce liquidity costs soon, we have every reason to pursue as many cost cutting measures as practical.
This motion was just ahead of time and in addition I doubt that treating buy and sell side differently is the right way.
Nu needs to lower the liquidity costs. That much is sure.
But before this can be done reasonably, Nu needs to know how much liquidity it can get at an exchange it wants to support with X liquidity.
It would be a bad move to lower compensation before it’s clear that the minimum liquidity Nu wants to have there can be purchased with that compensation.
I agree our current liquidity provision is too much compared to the actual use of NuBits. That is why we need to decrease it. I would be in favor of decreasing the sell side liquidity across all ALPs and MLPs and not only NuLagoon.
Maybe we need a motion for all ALPs and MLPs to lower the liquidity cost with 20%. Just to make it an even playing field and still achieving the liquidity and cost reduction. The ALPs can lower the caps on all their pairs accordingly and NuLagoon can lower the monthly cost.
Can you please elaborate on your reasoning for your favour of having different compensation for buy and sell side?
What benefit do you see in this?
What condition would you base the ratio between buy and sell side compensation on?
In particular I’d be interested in the advantage over an equal compensation of buy and sell side.
With this 20% thing, how would you phrase something like that? If you say NuPond has to reduce costs by 20%, well I would just say that NuPond expands by 20%, then go ahead and reduce that by 20% and I’m right back where I started. Would you say something like “the next term must be 20% less than the last term”? Then do rollover funds count for or against us? How about operator fees? It seems to me that such a blanket motion would kill competition and expansion like moving to hitbtc or expanding nuriver on cryptsy.
I think the reduction of liquidity costs is necessary, but it’s just a little bit too early, because Nu has no reliable information about all exchanges and trading pairs Nu wants to support.
Ideally Nu would sustain an ALP (fixed cost version) at each exchange and trading pair Nu wants to have liquidity.
The ALP is used to determine the minimum required compensation rate.
If Nu has a budget of “n” NBT for liquidity operations per month, it can then
offer x1 NBT for liquidity at exchange y1 and pair z1
offer x2 NBT for liquidity at exchange y2 and pair z2
offer x3 NBT for liquidity at exchange y3 and pair z3
offer xi NBT for liquidity at exchange yi and pair zi
etc.
until the sum of x1 … xi equals n.
At the moment Nu can only guess how much liquidity can be bought at an exchange and pair for the offered compensation.
Agree, it has to be a bit smarter than just a blanket. Here are some thoughts;
E.g. reducing the liquidity caps equally on either side in a way that results in a decrease of 20% of the liquidity costs for each ALP excluding the operator fees. These new caps will be put in place within 10 days of the passing of this motion. Excess funds will be either burnt or used as roll-over for the next term.
After that everyone is free to increase the caps, however that requires the passing of a motion or grant. The Shareholders might think twice to vote for increments again except maybe for new exchanges.
A more firm motion is a motion with a reduction of 20% and then a freeze of the caps and rates for 60 days, but maybe that is only required when the situation with the excess of liquidity escalates further.
