[Withdrawn] T3 Trusted Custodianship @Nagalim

[cryptog]

I will definitively re-read the whole thread and study more carefully the proposal, it seems that it is much more important that originally thought.

[masterOfDisaster]

Trying to word it simple:
there’s too much friction between T4 and the lower tiers.
Bringing money from T4 to T1 (via T3, T2) and vice versa doesn’t work well.
That’s why the Poloniex gateways are used quite often.
This proposal creates a buffer between T1 and T4 (on T3) and makes liquidity provision more reliable and allows the FLOT planning (some) interactions better.

I think I made a mistake not charging any fee for the Poloniex gateways. I thought having them when needed and providing a valuable service would be enough compensation.
Now I realize that this hinders creation of intermediate interfaces and relaying T1 activity on FLOT is easy and cheap, because FLOT members have a fixed compensation.

I feel both the gateways and the FLOT are being abused this way and NSR holders seriously need to think about the consequences of

• the Poloniex gateways not being available and
• FLOT members taking as much time for signing as stated in the terms

for the liquidity situation.

I won’t shut down the gateways without prior notice. But maybe it’s necessary to schedule their end or limit their availability to something like “at maximum once per [appropriate time frame]”.

[mhps]

Re 1 and 2 Collateral is required either way, gateway or T3.

I didn’t know the gateway operator needs to put down collaterals. Does @masterOfDisaster ? If yes, the exchange default risk is totally on the operator, also is opportunity cost. I doubt if Nu can find such gateway operator.

feed dripping the gateway instead of dropping large amounts on it.

Who does the dripping? Not the FLOT I hope. If you find the person, I call this person a T3 custodian.

[masterOfDisaster]

I didn’t know the gateway operator needs to put down collaterals. Does @masterOfDisaster ?

No collateral. No compensation.
I thought that under the rare circumstances the gateways get used, the very temporary exchange default risk would be dwarfed by the consequences of not having such gateways.
I couldn’t offer sufficient collateral for the amounts that are exchanged by the gateways and even if I could, I wouldn’t do it for free.

[zoro]

Just “rename” the gateways to T3 and problem is solved
Seriously, you may propose to operate gateways as a T3 custodian with your terms (fee included).
You just make a draft

[masterOfDisaster]

That would be way worse for Nu, because of the missing collateral.
If I offer collateral, it will lead close to where @Nagalim’s proposal already was, but without solving the problem of heavy FLOT utilization.
It would still be of inferior quality as T3 instrument.

[zoro]

But this (gateway) has already shown that it is working and NU shareholders are happy with it. (i guess)
Then why not transform it a little.
@Nagalim,
this is also valid for you.
What if we can somehow make T1+T2+T3 working as one?
It is like building up from a working solution, this is what shareholders want to see (i think)

[masterOfDisaster]

NSR holders are happy, because nothing went pear-shaped so far.
I highly recommend to visit [Withdrawn] T3 Trusted Custodianship @Nagalim
again.

[Nagalim]

. An agreements with a a gateway would be up to say 10k, collateral would be at least 10k or more with both gateway or your T3 proposal

This is critical. A T3 custodian uses less funds over a longer period of time whereas gateways use large amounts of funds over a short time. Therefore, T3 is easily collateralized and gateways aren’t. You can collateralized 10k with a gateway or 2k with a custodian and get similar results. The reason for this is because the gateway realizes that it is in possession of risk and is trying to get rid of it while the T3 custodian is in a steady state.

I think you are shifting the risk to another LP taking care of the T1 and T2 when provided from T3.

Bingo. No shareholder funds on-exchange. Shift the risk from Nu to the LPs. This is why we developed the Tier system, and has been our bread and butter since the exchange hacks. Did you not realize this is what we were doing when we created ALPs?
Also, why does the NBT have to get to T1+2 at all? Why can’t the customer just deal directly with the T3 trusted custodian? Thereby, Nu gets 0.1%, the custodian gets 0.2%, the customer gets a happy price and external third party exchanges get 0%. Clearly, if there is demand on exchanges, that customer can turn around and sell at a profit if they want. The point of T3 is to balance the sides using T4, not to force liquidity on exchange.

Re 4 This is a real risk which can be mitigated by feed dripping the gateway instead of dropping large amounts on it. This can be done with a simple triggering script and a wallet used by T4 which releases a certain amount every hour or every day till empty.

I thought your argument was that we already had everything we need for gateways to work? Who is doing this triggering script and who owns that wallet? Dare I say, a T3 trusted custodian? What’s their motivation for behaving properly?

Re 5 Alix would make that clear or just looking at the actual order books.

How do you distinguish between an order put up by the custodian and an order put up by someone else? You don’t. The custodian will just claim that all those other orders on the books are theirs. Remember, you want to activate the gateways during normal times, not necessarily during peg break events. During normal times, we would have no way of knowing if the gateway is behaving properly because we don’t have exchange records.

Re 6 See 4 scripts and a wallet

Let me know when you actually figure out how to do this magical procedure that is not complicated and has no overhead or costs.

Re 7 Not sure if I understand this. Why wouldn’t a gateway operator be able to have a trading fee mechanism. E.g. just a bit of spread.

Ok, so you’re saying we pay the gateway operator based on volume. To do that reliably, we’d have to pay them based on how many NBT we deposit and how many get withdrawn. I.e. we’d pay the same thing as for the T3 custodian, therefore the overhead for T3 custodian and gateways will be the same. Also, just so we’re keeping track, this is another thing about the ‘everything works’ gateway process we are changing to make it actually work.

Re 8 This is relative small risk.

Lol at market manipulation being a small risk.

Re 9 It still needs to be distributed to T1 and T2.

The difference is that you don’t have to withdraw from exchange to use this service like the gateway does. The trade happens off-exchange, meaning no withdrawal fees.

Literally the only acceptable argument I’ve gotten is that this procedure is ‘too complicated’. Weak.

[Nagalim]

FLOT BTC Operations (buy side)

I can understand a high frequency of intervention may burn out FLOT members, and we wouldn’t want that. I am just trying to determine what my own role should be right now. I am willing to provide balancing for the fees already approved by shareholders as a temporary measure. Shareholders would then have a little time to set up tier 3 liquidity providers like what Nagalim is proposing.

A month later and nothing to show for it.

[masterOfDisaster]

A maybe relevant piece of information (the reasoning can be found in the post from which the quote is):

Current Liquidity

both Poloniex gateways are on standby (and no longer always on) after round five of the NBT entry gateway has been completed exchange wise (withdrawal will take another 24 hours).

[zoro]

Why can’t we try something else.
What if an active LP wants to act like a T1+T2+T3 custodian and make weekly or twice a week transactions with FLOT?
The LP will first sent the BTC or NBT required to FLOT addresses and then he/she will wait for FLOT to sign the transaction.
He/She needs to be trusted in what way? I mean a motion will be necessary then?

[Nagalim]

What is the incentive mechanism? Are we paying them as T1? So is this just an MLP operation like NuLagoon? A NuLagoon competitor would be fantastic.

This proposal can exist alongside MLPs.

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.

[zoro]

What is the incentive mechanism?

If he/she gets funds from FLOT at exactly 1$ and then uses the ALP servers with a spread 0.5-1% isn’t enough?

[Nagalim]

So you’re buying from FLOT directly and putting it in ALP? Isn’t that just what you’ve been doing already?

[masterOfDisaster]

[LPs] buying from FLOT directly

And that’s exactly what’s unsustainable (FLOT members will sooner or later burn out always being required of tracking the liquidity situation, answeringto requests and being ready to sign) and unreliable (FLOT multisig slow compared to singlesig T3 custodian).

Maybe the way to T3 custodians is easier without gateways (sadly only available for Poloniex, but required for all exchanges) always in standby.

The gateways are a kind of shortcut around LPs buying from FLOT.
To rely on this shortcut is dangerous for the health of liquidity provision for several reasons, the most important being the risk for Nu funds.

[zoro]

Not yet. It seems that FLOT prefers the gateways than me

[masterOfDisaster]

No offense intended, but dealing with you would be just as bad as using the gateways (in terms of sustainability)

The benefit for Nu (not for FLOT members!) when dealing with you (instead of using the gateways) would be the eliminated/reduced risks (most risks are in fact eliminated).

Have you considered using NuLagoon Tube instead of trying to arrange a deal with FLOT?
Or even thought about becoming a T3 custodian yourself?

[Nagalim]

We can change gateways into passive liquidity sources, it’s true. The only difference then is literally the Tier: either we are keeping our reserves on exchange and using NuBot, or we are keeping them in single-sig wallets using manual trades. I hope shareholders learned not to keep Nu-owned funds on-exchange.

[cryptog]

purchasing of NBT at $0.997 and the selling of NBT at $1.003 off-exchange

With whom the funds held by nagalim would be traded?