[Withdrawn] T3 Trusted Custodianship @Nagalim

[Nagalim]

Whoever I can make a deal with. I’m paid by comission.

[zoro]

Have you considered using NuLagoon Tube instead of trying to arrange a deal with FLOT?

Yes, but you know NUlagoon is like trying to rebalancing using other exchanges. It cannot print NBT or use BTC “reserves”. It has to make deals with FLOT, too!
Thus, it acts like a middleman in this case.

Or even thought about becoming a T3 custodian yourself?

I was thinking of continue my operation as a T1+T2(+T3) LP. Even if i become a T3 custodian i want to operate like a
freelancer not be in NU’s payroll, if you know what i mean

[masterOfDisaster]

NUlagoon is like trying to rebalancing using other exchanges. It cannot print NBT or use BTC “reserves”. It has to make deals with FLOT, too!Thus, it acts like a middleman in this case.

Middlemen are required. T3 custodians would be middlemen, too.
The thing is that with middlemen the FLOT can do its job more planned and less in reaction to immediate market needs.
The middlemen would act as a buffer.

[zoro]

Middlemen in all businesses are always the reason for higher product cost!
How can we eliminate middlemen and keep the cost down?
If a T1 custodian gets NBT for 1,003 then it has to sell it higher than that.
But if he/she gets it at 1$ then the spread will be lower.
The real problem here is how we can put printed NBTs in the markets with the lower cost.

[Nagalim]

Middlemen get the product where it needs to be faster and take a small cut. Clearly, we are having problems selling wholesale to every vendor and employing a few middlemen is a step forward not back. Complex financial systems have middlemen for a reason, they aren’t useless.

Besides, gateways have 2 middlemen: the exchange and the gateway operator. Basically, someone will take the role of middlemen, so why not create the position explicitly so we can control the rules?

[zoro]

But in this specific T3 case you can be middleman of your self
Think about it, you buy NBT at 0.997 and sell it directly as T1 custodian for 1.003 by setting gateways
or using ALPs. Don’t you like it?

the gateway operator

is a T1+T2+T3 custodian with the difference that he/she is using NU funds without any collateral!

[masterOfDisaster]

How can we eliminate middlemen and keep the cost down?

We can’t eliminate them - at least not if we want to maximize the benefit for Nu.
Getting the most for the money is what this all is about.

Middlemen are required to find a balance between extremes:

• no care for liquidity provision
• no risks from exchange defaults
• no direct costs
• sooner or later (rather sooner) an immense backlash for NSR rate
• ultimate care for liquidity provision
• full risk from exchange defaults
• compensation for LP
• sooner or later (like in the early months of Nu with liquidity provision done with Nu funds: (like already experienced):
  risk for potentially huge costs with an effect for NSR rate

The tiered liquidity model is already something in between those extremes.
Middlemen would support that model.
I’m sure that the benefits outweigh the costs.

[zoro]

Thanks guys, i m learning a lot from you. Now we have to find one or more suitable models for T3
custodian that will convince the shareholders to vote for it.
What if T3 can print its own NBT (by grants) providing collateral to FLOT
and then ask for the collateral back when
he/she needs to burn NBT?
Just throwing ideas here

[Nagalim]

In the case where the trusted T3 custodian sells to themselves and places it in an ALP, the result will be the same as buying from FLOT directly at $1.001, except that it will be done on collateralized credit and so FLOT can get around to it in their spare time.

[Cybnate]

What if T3 can print its own NBT (by grants) providing collateral to FLOT and then ask for the collateral back when he/she needs to burn NBT?

I thought about that, you are then cutting out FLOT.

Let’s revisit FLOT’s role:
Summarising; FLOT was created as a custodian of T4 (our reserves). Both for the sold NBT in the form of BTC (or else). Holding these significant amounts of BTC and NBT as a reserve as agreed and distributing excess funds in BTC (sold NBT) to custodians burning shares or paying dividends. This role is clear to me and adding value. Incentives have been agreed in separate motions with each FLOT member.

Besides the holding role, additional NBT can be created by FLOT but only when the Shareholders support this into FLOT’s multisig addresses. This role is less clear and has overlap with T1-T3 custodians as it will be triggered by them.
T1-T3 custodians have two basic roles in my opinion:

1. Ensuring that T1-T3 is balanced. NuLagoon plays a role in this by moving funds across multiple exchanges through the 3 tiers. Ideally we would have more so called MLPs like NuLagoon, although the dynamics between them would be interesting.

2. Ensuring there is adequate overall liquidity across T1-T3. This could mean creating new NuBits for sale or burning NuBits (either with NuShares or BTC) from T4 when there is an excess supply.

Role 2 is the most interesting part as it control the money supply. This appears to me as a role for FLOT as money creation or burning would not be a more than weekly activity under normal circumstances. In emergencies (more than once a week) we have the gateways.
It could also be done by a T1-T3 custodian with their own transparent T3 wallet collateralized moving funds to T1 and T2 where required according to agreed contract with Shareholders.

My point with the above is that I still fail to see the value of a specific T3 custodian over a T1-T3 custodian role.
Less great but better than a specific T3 custodian is to extend the role of FLOT into T3 dealing directly with T1-T2 LPs like Zoro suggests in this thread. The advantage of that is that there is no additional overhead/handover of funds and the reserve keepers can deal directly with the LPs.

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Short description of tiers for the uninitiated readers:
T1 = On exchange funds, on offer
T2 = On exchange funds, but not placed as an order
T3 = Off exchange funds which can be transferred at short notice (day- or days) to exchange.
T4 = Reserves in NBT or BTC which will take up to a week or more to get to the exchange.
*LP = Liquidity provider
*FLOT = [Passed] FLOT Management

[Nagalim]

Again, competition for Nu Lagoon would be great. I, however, am not up to the monumental task of duplicating NuLagoon’s efforts. So I created something simple and manageable to give Nu exactly what was needed: cheap, passive T3 liquidity.

You gloss over the part where the MLPs interact as if it’s not one of the most important parts. A T3 custodian is a natural addition to the tier structure, giving the MLPs a common place to rebalance from that T4 can refill at leisure.

[Cybnate]

So I created something simple and manageable to give Nu exactly what was needed: cheap, passive T3 liquidity.

With whom the funds held by nagalim would be traded?
[/quote][quote=“Nagalim, post:61, topic:3189, full:true”]
Whoever I can make a deal with. I’m paid by comission.

To supply to who and why wouldn’t they take also the T3 role like MLP does and e.g. Zoro offers and can be done e.g. with MoD’s gateway model?

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You gloss over the part where the MLPs interact as if it’s not one of the most important parts. A T3 custodian is a natural addition to the tier structure, giving the MLPs a common place to rebalance from that T4 can refill at leisure.

Trying to get to the core of it as I still don’t get your rational. Why can’t an MLP directly interact with e.g. FLOT (as already happened)? Are you seeing T3 as a market managed by one T3 custodian? If not, how would several T3 custodians interact with FLOT? The real market is at T1/T2, T3 to me is just an administrative/technical mechanism or buffer which can and therefore should be automated.

[Nagalim]

Credit is the reason some random T1 with no history or pseudonym would want to buy from me. Zoro would most likely put up some collateralization and get some credit as well, and when that credit line runs out he would come buy from my credit line.

Each week FLOT can simply refill the passive custodians (i.e. those with a credit line) up to their allotted credit in the same Txn as the buybacks and everything else, or separate txns, or whatever is easiest for them. That’s way better than FLOT trying to come to consensus on a price feed with irregular timing and amounts for MLPs, of which we have 1, and supposed ‘trusted’ community members, of which we have no standards. This proposal generates the concept of a credit line to individual pseudonyms in the community for the purposes of trading nbt and btc on commission.

[zoro]

I understand that the main issue here is how we could be able to "interconnect"
funds from a slow multisig trustless entity (T4) with a fast onesig trusted entity (T3), correct?
Perhaps there isn’t only one method that is suitable. We can try different approaches. I liked Nagalim’s proposal as a trusted T3 entity working as a buffer although i doubt that i will use his service (profitwise) and not going “rogue” making a deal directly with FLOT (if time will not be an issue), and of course if FLOT accepts the deal.
Another way will be for an already elected FLOT member to take this T3 buffer role as singlesig and sell cheaper NBT. I guess FLOT members know its other (real identities), or not?

[Nagalim]

If we really make use of this, FLOT would stop offering deals and would only do its weekly obligations and trade with gateways in times of emergency. The idea is that you can buy from your own credit line at 0.1% over $1, someone else’s credit line for 0.3%, or on-exchange for 0.7% over $1. No more of this buying nbt from T4 at $0.97 in times when nbt is breaking upward. That’s just downright silly.

Anyway, maybe no one wold have used it, maybe it would have been the best thing since sliced bread. Without shareholder support, it doesn’t matter and we have to wait for some one else to find a miracle solution. What’s the list of requirements again? Free (or super cheap), simple, all tiers, lots of liquidity, scalable, efficient, no additional development, no collateralization or trust, rarely activates T4. Yah, good luck with that tall order.

Remember that Nu Lagoon is still our most expensive operation.

[masterOfDisaster]

What’s the list of requirements again? Free (or super cheap), simple, all tiers, lots of liquidity, scalable, efficient, no additional development, no collateralization or trust, rarely activates T4.

Trying to group the requirements into groups

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Implementation efforts:

• Free (or super cheap)
• (no) additional development

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Running efforts:

• simple
• scalable
• efficient
• rarely activates T4

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Risk:

• (no) collateralization or trust

---

Range:

• all tiers
• lots of liquidity

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Some of the requirements (often the ones in the same group) can be met at the same time, while others are sometimes on opposite ends.

You can have low/no implementation efforts and just use the available tools (e.g. NuBots as gateways).
That will keep most of the running efforts under control as well, except for activation of T4.
It will on the other hand not solve the problem with risk. Gateway operators need to be trusted with funds that Nu owns and they are put at an exchange. This poses a bunch of risks and increases thereby the running costs.

I won’t do that assessment with each of the requirements. I think the idea is quite clear.
We should look for a solution that has a good combination of implementation efforts, running efforts, risk and range.

Reducing the risk and being able to steer the range of the solution should be worth a decent implementation effort and some running costs!

Unless someone proposes a better solution, I suppose we try improving @Nagalim’s proposal or even try it as it is and improve it with the experience that can be made with it!

[mhps]

Why can’t an MLP directly interact with e.g. FLOT (as already happened)?

I seriously don’t want to deal with individual LPs as a FLOT member because either the FLOT is in the way of creating a mafia inner circle vulnerable to complacency, favor deals, and corruption, or FLOT has to be responsible for checking the integrity of random LPs. Neither direction is good.

Other FLOT members could comment. @dysconnect @ttutdxh @jooize @cryptog @Dhume @masterOfDisaster @woodstockmerkle

[cryptog]

We need a buffer between T4 and T1+2. That buffer is T3. This is a T3 proposal.

So T3’s purpose is to balance liquidity walls of T1 and T2 by sending nbt or btc depending on the situation.

But isn’t Fixed Cost scheme supposed to be able to automatically balance the walls?
What are the pools that use Fixed Cost right now?

I seriously don’t want to deal with individual LPs as a FLOT

I d rather prefer much more to deal once a week with a T3 trusted custodian

I am now convinced that Nu should give a try to T3 trusted custodianship.

[dysconnect]

Dealing with LPs is hard for FLOT. @zoro has offered several times to exchange with FLOT but we have never been able to actually strike a deal. Recently the path of least resistance is going straight to @masterofdisaster’s gateways. Here are some things that could make it easier:

• A clear specification of FLOT trading prices
• A smaller window for FLOT signing
• Automated multisig blockchain trading
• Having a real t3 LP

Basically we lack a good protocol for initiating and carrying through off-exchange trades between a clumsy multisig party and an impatient LP.

[Cybnate]

lack a good protocol for initiating and carrying

I suspect an expensive solution paying a T3 custodian who is going to make arrangements with T1/T2 providers which will take time.[quote=“mhps, post:77, topic:3189”]
I seriously don’t want to deal with individual LPs as a FLOT member because either the FLOT is in the way of creating a mafia inner circle vulnerable to complacency, favor deals, and corruption, or FLOT has to be responsible for checking the integrity of random LPs. Neither direction is good.
[/quote]
I agree, but why would we accept this for T3 custodians? They will be put into the same position. This role needs to be transparent. A middleman usually doesn’t benefit from transparency. [quote=“cryptog, post:78, topic:3189”]
But isn’t Fixed Cost scheme supposed to be able to automatically balance the walls?
[/quote]
Always wondered about that. It still hasn’t proofed itself. There is another discussion about this going on. Fixed costs requires a lot of adjustments just to even come close to our current fixed rates with Dutch auction.[quote=“cryptog, post:78, topic:3189”]
I am now convinced that Nu should give a try to T3 trusted custodianship.
[/quote]
I’m not really, it should be someone able to place funds into T1 and T2 directly to be effective e.g. with MoD’s gateways. I don’t see a reason why we need a T3 negotiating with T1/T2 LPs and making potentially ‘shady’ deals to succeed in getting the funds to T1/T2. It is disappointing to see that the forum doesn’t appreciate this issue. Not sure what the value is of trying something which is broken from the start.

But hey, if no one else is interested in this P1-P3 role then maybe it is better than doing nothing and see if @nagalim dealing with random T1/T2 liquidity providers can compete with NuLagoon.