[Withdrawn] T3 Trusted Custodianship @Nagalim

[Nagalim]

I have a 0.3% spread. I charge Nu 0.2%, therefore there is 0.1% straight profit for Nu from every transaction (assuming random price feeds). I will add up the number of NBT in all non-T4 transactions, multiply by 0.002, and ask someone (T4 or shareholders) for that amount sent to a private address. It’s not much, but it would be if I had a bigger credit line and thereby a higher minimum Tx size.

I will attempt to report this as T3, so ideally there will be $1000 extra T3 buy and sell side reported liquidity as long as I’m not empty. However, I get the feeling I’ll probably be emptying my coffers every week very quickly.

[Dhume]

Voted, interested how this “trial” run so to speak will unfold. Could be a solution to our T3 problem.

[Cybnate]

Not voting for this, NuLagoon Tube is superseding this imo although further testing may need to occur.

[Nagalim]

So you think we only need one T3 custodian?

[Cybnate]

So you think we only need one T3 custodian?

Maybe I misunderstood, but everyone can make transactions on NuLagoon Tube. Questions is what is the incentive to do that for each Shareholder. Still thinking of that, but I think another model is required than what you propose.

Edit: what might be required is more instances of NuLagoon Tube. We are still waiting whether this solution will be open sourced or not.

[Nagalim]

So the question comes down to how T4 distributes funds. NuLagoon’s tube actually does very little to change the liquidity situation (though I still totally appreciate the initiative). NuLagoon simply has a limited amount of buy and sellside funds. What’s more, NuLagoon balances using arbitrage. While this is a fabulous service for T1-3 fluidity, it really is not the most efficient entry point for T4 because it will attempt to balance itself.

What I am proposing increases total liquidity in the network and creates an efficient entry point for T4 funds. My proposal will service NuLagoon and will be a place NuLagoon can rebalance from for cheap. I don’t have the funds that NuLagoon has, but this proposal is the start of a new category of T3 custodian.

The way I see it, there are 3 types of T3 custodian, depending on where they get their funds.

1. T1-3 MLP has funds already and is trusted to report T3 accurately by virtue of a connection with the directly verifiable T1.

2. Trusted T3 custodian. This type uses Nu’s funds, and so must already be trusted. Whether this is accomplished via collateral or simply pseudonym recognition, the custodian has an incentive to report accurately.

3. T3 custodian using their own funds. This is an unsolved problem that I am trying not to get into here. There are possibilities, but it gets complicated. The issue stems from what reward mechanism we use to pay custodians.

Basically, why would a person hold btc and nbt in their own tube without getting paid by Nu for doing it? And if they’re getting paid, what incentive do they have to perform? Finally, if they are being paid to perform, how do we ensure they aren’t just trading with themselves to rack up fees? It makes sense for NuLagoon as an MLP, it doesn’t make sense for anyone else. So even if they open source we will still only have one T3 provider.

[cryptog]

To me it is not clear what the motion intends to do in terms of liquidity operations.

[Nagalim]

It provides $1000 T3 buy and sell side liquidity indefinitely.

[cryptog]

It provides $1000 T3 buy and sell side liquidity indefinitely.

What is the cost for Nu shareholders?

[Nagalim]

It’s developing a lot of precedent about what trust, collateral and credit mean. Biggest risk is that NSR devalues and I take the funds and run. However, that risk is vastly under spoken in T1 operations and this type of grant will help shareholders understand what trust and credit mean.

Other risks are that I abuse the liquidity reporting system or manipulate price feeds slightly in my favor. Again, all these attacks are totally within the grasp of a T1 pool operator.

The cost is that I take the initial 1000 buy side from T4 reserves. This will reduce T4 overflow by $1000.

[cryptog]

that risk is vastly under spoken in T1 operations

You mean in case of NuLagoon?

[Nagalim]

No, in the case of ALP. I could drain NuPond nbt and run at any time, leaving Nu with no collateral.

[Nagalim]

It is my opinion that if we have ~10 of these trusted custodians with similar trust levels (1-5 kNBT each) we would completely solve our short-term liquidity problems. (T4 would only activate once/week except in extreme scenarios)

[cryptog]

The cost is that I take the initial 1000 buy side from T4 reserves. This will reduce T4 overflow by $1

Nu needs to pay for 1000 nbt upfront. So 1000 nbt is the cost?

[Nagalim]

So the reason why I have a hard time defining cost is that this proposal is really at heart an entry point for T4 funds into the T1-3 ecosystem. It’s more an exchange than a reserve. The funds I will hold will not be my funds, they will be owned by Nu and I will just be holding them.

If you count the 1000 NBT and the $1000 of BTC as costs, then the 500,000 NSR I am burning is a profit. However, these are better seen as collaterals for a trust based relationship.

[Nagalim]

I’m not really clear on why this failed. I think shareholders are waiting for some miracle that is never going to appear. Anyway, I’m withdrawing this proposal because it puts an unnecessary hold on my funds.

[masterOfDisaster]

Sad to see this fail, but understandable that you don’t want to wait any longer

I had to think about it, but now I’m sure that my first response doesn’t suffice.
I would really like to know why only roughly 25% of minting NSR holders supported this proposal.
Do they really want to rely solely on NuLagoon Tube? This is not exactly in favour of decentralization.

<rant>
NuLagoon Tube can be used whenever LP want to use it in difference to this proposal that requires to make deals. But it’s less convenient than doing an exchange with such a “T3 Trusted Custodian”. NuLagoon Tube requires that address pairs are registered and the funds need to be sent from a registered address.
If an LP wants to balance the funds, they need to be withdrawn to the registered address (BTC, NBT), sent from there (TubeIn), exchanged and sent to the associated (registered) address (TubeOut).
That is much less convenient than sending directly from the exchange to the deposit address of the trading partner (T3 Trusted Custodian) and receiving the exchanged funds directly on the exchange deposit address.

I don’t know whether this is related to a test phase, but the last NuLagoon Tube transaction took close to 12 hours to be processed.

Don’t get me wrong. My intention is not to bash NuLagoon Tube. I think it’s a great service, but in my opinion not exactly for the purpose of balancing funds used for liqidity provision.

So I want to know why this proposal is neither supported nor improved by feedback.
I’m asking in the light of the use of the Poloniex gateways (NBT entry; NBT exit). Each of them has been used more than once in the lat weeks. I thought them out for emergencies. We seem to have a lot of them.

This proposal of T3 custodianship is very well suited for being applied to each (automated) liquidity pool (ideally multiple times).
Each pool operator could think about applying for such a custodianship.
Each NSR holder should think about applying for such a custodianship.

How can we even imagine introducing additional products if we can barely manage to keep the balancing of NBT buy and sell side under control?
</rant>

What are the alternatives?

[cryptog]

What is the problem that this proposal wanted to solve in simple term? I think shareholders do not grasp it and therefore cannot judge if it worth or not. They abstain from voting as a consequence, including me.
Maybe it comes down to: what are the problems that the current liquidity operations have?
I think we need to go back to basic questions.

[Nagalim]

Mod’s gateways prove that we are in emergency situations constantly. We need a buffer between T4 and T1+2. That buffer is T3. This is a T3 proposal. Is that not clear enough?

Can you not see that the situation is dire?

[Cybnate]

If an LP wants to balance the funds, they need to be withdrawn to the registered address (BTC, NBT), sent from there (TubeIn), exchanged and sent to the associated (registered) address (TubeOut).That is much less convenient than sending directly from the exchange to the deposit address of the trading partner (T3 Trusted Custodian) and receiving the exchanged funds directly on the exchange deposit address.

I’m asking in the light of the use of the Poloniex gateways (NBT entry; NBT exit). Each of them has been used more than once in the lat weeks. I thought them out for emergencies. We seem to have a lot of them.

What are the alternatives?

I’m wondering why we need additional T3 funds when we have a way dealing with it although ‘less convenient" through NuLagoon Tube and it is not used at all as far as I know. Is Nagalims’ T3 proposal more convenient than the gateways? I don’t think so, and I believe it is more work/overhead for operations.

The lower the hoops and loops for rebalancing the better. If that can be done without further T3 (outside NuLagoon) then why not? Maybe we should even revisit the T3 maintained by NuLagoon. My apologies if I annoy people to challenge status quo, but I think it is time to rethink this.

Maybe we should use the automatic gateways for normal operations instead of only emergencies. I’m interested to hear why that is not a good alternative. I imagine that we need a few more operators though and revisit MoD’s terms of reference. This maybe a lot simpler and therefore more cost effective.