[Withdrawn] T4 Dividends

[Nagalim]

Motion RIPEMD160 hash: a0a57d12ec67ac6816532f8a0afffd9b7ce14329

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Tier 4 buy side liquidity in excess of $120,000 shall be used to conduct PPC distributions at a rate of 5% of the excess per week. As this is intended to overlap with share buybacks as defined in motion 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3, shareholders must be cautious about keeping the dividends from preventing a low-price buyback. For that purpose, the dividends will be calculated on the same Saturday as the buyback, while the actual distribution will be performed using a cutoff timestamp at 11:59 PM GMT on Wednesday. The intent is to allow shareholders the opportunity to both recieve their dividends and then sell their shares into the buyback a brief 2 days later.

The dividend distributor has seven full days to buy the peercoin to be distributed, with a distribution deadline of 11:59 PM GMT on Saturday. The distributor has no obligation to announce buy orders or any other publicity overhead aside from the weekly dividend calculation when T4 is >$120k and the average price of purchase for the PPC each week. The group in control of Tier 4 liquidity, which may change in the future, is ultimately responsible for performing the distributions. However, @Nagalim is available for performing this service as well at no charge.

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

[zoro]

what is the purpose of this distribution at this time?
how NU and/or PPC will benefit from this?
edit: asking only to learn how this dividend thing works

[Nagalim]

Effects:

1. Increase sell side liquidity
2. Reduce counterparty risk
3. Give back to shareholders that stayed in for the long haul
4. Increased public perception of Nu profitability
5. Reinvigorate PPC base and show that we still can and may do dividend distributions

Basically, we’ve got some room to sell some NBT. We can either put them into NSR buybacks or do a little dividend distribution on the side. Basically, I think we’re already doing a lot of share buybacks and this is an opportunity to do a distribution as well to try to spread around the money. The PPC orderbook is much more liquid than the NSR orderbook.

[zoro]

Got it.
so, the needed NBT amount is calculated how exactly?

[Nagalim]

It’s not. The more nbt you give me, the more PPC I will distribute. 10 kNBT is a substantial amount that will help us balance our sell and buy liquidity. 10,000 NBT will give ~0.3 PPC per 10,000 NSR.

[zoro]

well, i see buy and sell sides are balanced now. i don’t see btc’s value to decrease soon thus it is a question if more NBT are needed. if we think that we should be ready “in the future” to “support” BTC’s devaluation, then fine by me

[Nagalim]

Yah, this is something of an experiment as well, to see how much shareholder support there is for a proposal like this. I would still prefer we distribute dividends regularly, like 1,000 NBT/month.

Maybe we could do it like:
“If T4 buy side goes above $80k, start buybacks (like we’re doing now). If it goes above $120k, start ppc distributions.”

[zoro]

i like it.
but as a simple shareholder i would care less if more NBT than needed are produced since i would get “free” ppc
how NU will be “protected” from this?
(i am not sure if i ask it correctly)

[Dhume]

Self-restraint, we as shareholders vote on the distribution of additional NBT and PPC dividends. If we put our hands in the cookie jar to much so to speak NBT peg will be endangered and thus our investment will be at risk. I do like the idea of a small dividend distribution, mostly as a great way to advertise NSR.

[Nagalim]

So what just happened in our system was that the sell side fell to 40% of our total liquidity. As a result, JL moved some funds around and sold some NBT for BTC. That BTC he put back into the T4 fund, so I am assuming the T4 fund is now bigger than it was yesterday. As our T4 is already so big that we are performing share buybacks, I am suggesting we perform a small distribution with the extra money.

Nu is not ‘protected’ against these NBT, per say. The concept is that our marketcap will grow if we perform dividend distributions because a) our shareholders are given some ‘free’ ppc to buy more nsr with and b) we get some additional marketing and popularity from the PPC holders. If the buy side started shrinking again, we would eventually need to perform NSR buybacks and we would need to materialize the marketing benefit into real $$. This is not preferred, and so we should really only do irregular dividends like this if we think we’ve got a true NBT supply deficit. A large T4, much larger than the buyback threshold, would be an indicator of such a supply deficit.

[zoro]

do we have access to t4-t5-t6 liquidity? i mean info, not control.
a site showing these numbers would be awesone

[Nagalim]

When we make it multisig, you can just look at the address balance. T5 has nothing right now.

[zoro]

and we shouldn’t forget about the montly NBT amount produced to pay the LPs. currently >10k per month

[Nagalim]

Yah, but we have been consistently giving out those NBT every day and yet we still went under 40% sell today. It seems clear to me that there is demand for us to expand our NBT marketcap. The question is what the best method is for cementing that demand into our NSR marketcap; clearly we keep doing NSR buybacks, but maybe a small ppc distribution would also be well timed.

I do think it would be instructive to know how much T4 buy side we have after today. It may be better to modify the OP to simply buy PPC using T4 funds.

Edit: Completely changed OP

[Nagalim]

Any comments? I want to hash, but no one’s commented since I completely changed the draft.

[masterOfDisaster]

I like it how this motion creates a rule set of what do to based on defined thresholds.

Let me see if I understand this right

Share buybacks, as defined in motion 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3, shall be limited to $7,000/week (10% of the excess when Tier 4 has $150,000) to avoid complications in accounting.

There’s a limitation of money that is used for NSR buybacks for tier 4 funds below $150,000 to $7,000/week, but if tier 4 is above $150,000 10% of the excess are available for NSR buybacks?
That would mean with tier 4 at $160,000 only 10% of $10,000 would be used for NSR buyback, right?

Don’t get me wrong - I think dividends in addition to NSR buybacks is the way to go.
What I find problematic is that all buy side liquidity in excess of $150,000 shall be used for PPC dividends.
What if selling 100,000 NBT piles up to the current tier 4 buy side funds?

As PPC leave the Nu ecosystem this creates danger for the peg stability
If the majority of revenue were being distributed as dividend, the rational choice for NSR holders (if things really go pear-shaped) is selling NSR instead of bailing out Nu.
Selling NSR makes protecting the peg by selling granted NSR even harder.
My take is that Nu can only afford a fraction of the revenue being paid as dividends.

I’d rather have 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3 untouched, lower the threshold at which PPC distributions kick in (to to something between the $150,000 from this draft and the $80,000 from 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3), but create a ratio that is used for PPC dividends.

Something like

Tier 4 buy side liquidity in excess of $120,000 shall be used to conduct PPC distributions. Shareholders are not directly concerned with the instability of the PPC price, but need to keep the soundness of the peg in mind. For that reason not all funds in excess of $120,000 shall be distributed as PPC dividends at once.
Instead 10% of the excess should be used for distributing PPC dividends per week.

As long as motion 7b4955e91781e0e32f1e0c0c974fd4a7a9f972a3 is in place, the amount of liquidity in excess of thresholds gets determined at the same time for both motions.
In other words: if both PPC dividends and NSR buybacks are being conducted, they are based on the same amount of buy side liquidity in tier 4.

The group in control of Tier 4 liquidity, which may change in the future, is ultimately responsible for performing the distributions. However, @Nagalim is available for performing this service as well at no charge.

This way there’s a buffer between $80,000 and $120,000 in which only NSR buybacks are conducted.

If the tier 4 funds are below $80,000 nothing happens in terms of distribution.
If the tier 4 funds are above $80,000 and below $120,000, liquidity in excess is being used exclusively for NSR buybacks.
If the tier 4 funds are above $120,000, liquidity in excess is being used evenly for NSR buybacks and for PPC dividend distribution.

If the tier 4 funds exceed $120,000 Nu is in such a good shape that it can afford paying dividends in addition to conducting NSR buybacks

Example:
Tier 4 funds are at $200,000 for whatever reason (NBT sale, rising BTC rates…).
$80,000 are excluded from calculation of NSR buyback and
$120,000 are excluded from calculation of PPC dividend.

That’s $120,00 in excess regarding the NSR buyback motion. 10% of it or $10,000 are being used for NSR buybacks.
And that’s $80,00 in excess regarding the PPC dividend motion. 10% of it or $8,000 are being used for PPC dividends.

Does that make sense? Having a buffer before PPC dividends kick in?

Remark: current tier 4 buy side is at 443.9 BTC (466.2 BTC - 22.3 BTC). At current rate of $445 that’s $197,535.5
If NSR buybacks and PPC dividends were based on this amount, it would be close to my example above

I’d very much like to have variable values for the thresholds (in relation to the total NBT in the wild) instead of fixed amounts like $80,000 and $120,000.
If Nu needs to sell NBT soon, because of rising demand for NBT, the buy side buffer should be increased accordingly.
I can’t imagine the peg being safe with an untouched amount of buy side buffer in a future in which double, triple or even more the NBT is out compared to now.
But that might be something for a different topic.

[Nagalim]

So I totally get what you’re saying, and it was my first instinct too. However, the actual underlying reason for this grant is to reduce counterparty risk. If we kept a % rate for both dividends and buybacks, we could still enter a spiraling scenario wherein we sell a lot of nbt and end up with tons of btc (>>$150k) in T4 for long periods of time.

Then again, if T4 grows out of control we should have time to pass a grant or motion to take care of it in a different way. However, what method do we have for reducing counterparty risk other than nsr buybacks and ppc distributions? If we assume that a buyback should have a maximum market velocity to avoid pump and dumps, we are basically forced to do ppc distributions to lower counterparty risk.

Edit: development, donations (a la red cross), and growing liquidity operations are all counterexamples to what I just said. Maybe what @masterOfDisaster suggested would work just fine.

[cryptog]

I think it is reasonable. Too much time has elapsed with no dividends. I think it is important to show that NuShares are real assets that putt money in your pocket, even at a small rate, when the dao that Nu is is going well, which seems to be the case right now.

[masterOfDisaster]

I don’t see the need for hurry. Tier 4 buy side has been high for a long time. It was voted on reducing it, but without throwing out the baby with the bath water.
I’d rather increase the 10% in excess of $120,000 to a higher value than to have all in excess of $150,000 at once.

How shall Nu treat the next NBT sale?
Conceptually the revenue of selling NBT ends up at tier 4 buy side. That would mean another PPC dividend distribution if the $150,000 are hit (again).

What about 25% for dividends for tier 4 buy side liquidity in excess of $150,000? That alone (NSR buybacks not considered) would reduce the excess of liquidity in 4 weeks to (3/4)⁴ or 81/256 which is below 32%.
4 weeks is not much time and NSR buy backs will do their part.

Please, anything but 100% PPC dividend.

[Nagalim]

I like what you’re saying and will probably accept the modification. However, devil’s advocate, what are you scared of? I’m assuming your concern is that someone buys a billion nbt, we distribute a billion USD of ppc, price of ppc crashes afterward and attacker sells a billion nbt, which we have no chance of catching.

Actually, that’s a pretty bleak scenario, isn’t it?