Yet another type of liquidity operation - fixed input MLP!

Continuing the discussion from [Passed] LiquidBits term 5 grant - Automatic Liquidity Pool (ALP):

I didn’t want to hijack the LiquidBits thread, but I think discussing this idea is worth making a post.

I know. I’m fully aware of the bad timing.
I trust you believe me when I say that this idea is not to benefit from your trouble and that’s starting with that idea on CCEDK was mainly due to the bad API performance at CCEDK.
I have an idea and trying that on CCEDK just seemed right, because I already used funds in the LiquidBits ALP pool - until I decided to try something new.

Here’s the verbose explanation.

I made the first steps with NuBot on hitBTC and my intention was from the start to expand (my) NuBot activities.

My idea to operate NuBots spawned from this assessment:

  • the scheme of the ALP implementation is amazing and it allows people who want to provide liquidity with a very easy entry to that business; the exit is just as easy and the funds stay in the control of the LPs (assuming the exchange plays nicely). LPs need to operate software.
  • the scheme of MLP (currently only NuLagoon) is something completely different. LPs can only enter and leave at accounting days, lose control over the funds, but don’t have to care for the operation.
    Exit only at accounting days provides Nu with more stable liquidity compared to ALP.

Maybe there’s a place in between the two.
A scheme in which the LP keep the control over the funds and needs to run and maintain software.
Sounds much like running an ALP bot but on top with the hassle of making a grant - which is work for the LP and NSR holders.

Yet I see a reason to do that. I try to help fixing something which ALP with fixed reward schemes aim to fix as well.
This scheme can provide liquidity with more continuity - more than ALPs can offer and even more than can be guaranteed by NuLagoon.

This type of liquidity operation could become a part of the first line of defense for the peg - funds which are contracted to be used for a certain amount of time that will stay on the order books no matter what happens.
ALP fixed reward already is a part of that (although it’s still in beta), because it provides LPs with an incentive to leave funds on the order books in volatile times in which other LPs withdraw their orders. The lesser funds on orders, the higher the reward (in percent) for the remaining funds.
This way ALP fixed reward is a big step towards continuity.

I intend to create another piece of defense: individual, distributed NuBot operations which work independent from any ALP or MLP.
We still don’t have a wiki for all these acronyms (do we?), but I have one more:
PLP - Puddle Liquidity Pool, because the total amount of funds will be low compared with other liquidity operations.
First I thought of YALP - Yet Another Liquidity Pool, but I think there’s potential confusion with ALP.
Having PLP(s) on an exchange stabilizes the liquidity situation in case (technical) problems prevent ALP or MLP from doing the job.

Managing and tracking those PLPs will be more effort (per liquidity volume) than doing the same for ALP and MLP, but I hope that this:

will make the handling easier.

The compensation (in percent) for PLP will be quite high - it should be oriented at the average compensation rates of fixed cost ALPs at the same exchange and pair. In fact it could be derived from the average compensation rate and paid after the PLP liquidity has been provided - assuming there’s a fixed reward ALP at that exchange.
A premium for compensating having the funds locked in the contract seems to be appropriate, because otherwise there’s no reason not to join the ALP.
Operator fees for the PLP are expected to be quite low. The effort for running a PLP is not much higher than running an ALP bot.
On top there’s effort for

  • balancing the walls (if part of the contact) and for
  • creating grants.; especially if it’s a recurring grant, this effort is limited

Benefit for the LP is a higher compensation (compared to ALP and MLP).
Benefit for Nu is a more reliable liquidity volume in the first line of defense.

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how is a PLP different from a private MLP? Shareholders don’t care if the money is yours or your best friends’, the pool has a manager with a pseudonym that is responsible for all funds and bots making it an MLP.

I’m down for making further divisions under MLP, like public/private (we’ve discussed that one before) or puddle/pool (micro operations or big concentrations of funds) or mess around with the method of compensation (NuLagoon is fixed rate up to a target, while modPuddle has a fixed input scheme).

Right. Why should they?

Once again completely right.

In fact the PLP is just a special type of MLP.
It’s not important whether it’s private or public.
The difference is the continuity of the liquidity providing.
NuLagoon can’t guarantee any liquidity. NuLagoon can only manage funds people deposit. That’s different in what I propose.

How about we call it a fixed input MLP, such that you put in a certain amount of funds and obey a full set of rules then are paid a certain amount at the end of operation. I would suggest you specify particular start and end dates and try to group your operations into a single grant. Pass all your operations as motions and group your post-operation payments together so we only have to pass 1 grant each month.

If you’re passing operations as motions, you could in theory propose a motion (or multiple motions) on every exchange and let the shareholders come to consensus about which ones to support. Of course, you’ll have more luck if you focus shareholders with really good options and avoid bloating the playing field.

Great idea - although I found YALP funnier and PLP looks nice; like 2 eyes and a nose and a mouth.
But I forgot - this is serious business; I promise to adapt!

Management wise that sounds like the way to go, although it might make comparison harder. I’m thinking of the future in which we are not yet. For now your proposal is making it easy for both fixed input MLPs and Nu.

For broadcasting liquidity I need an NBT grant. Is it possible to use the same grant for different NuBots?

Ive never used nubot so I don’t know. NuLagoon operates on multiple exchanges.

Good point!
So a single grant with 1 NBT should be sufficient to broadcast liquidity information.
The rest can be done with motions and grants independent from that one.