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Author Topic: Ahead to Nu worlds! (liquidity provision for fun and profit, 9% monthly return)  (Read 3237 times)
Nagalim
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June 19, 2015, 12:58:16 PM
Last edit: June 19, 2015, 02:00:06 PM by Nagalim
 #21

There are many flaws in what you're saying.  You're starting out by saying that the peg will break, then saying that when that happens everything will fail.  My counter argument centers around the fact that the peg has broken many times on individual exchanges, and we've gone to $0 buy side support before.  Yet NBT is still worth $1.  How can that be true if what you say is true?

There are tiers to our system.  Liquidity is what you are calling '% backing' and it is only the first defense.  It represents how much money we can mobilize near-instantly to reestablish the peg.  To balance our liquidity and leverage the NSR market for additional support, we perform share auctions and buybacks.  As a final, overarching mechanism we can implement parking (interest) rates and peercoin distributions.

You keep trying to talk about % backing.  If you are stuck in that paradigm, fine, let's talk real numbers for % backing.  Yes, there are 600,000 NBT in existence, but 400,000 NBT are held by trusted people currently as a reserve because we are not fully able to create and destroy NSR and NBT yet (still a work in progress).  That means the total 'debt' for Nu is $200k while it's NSR marketcap is $1.7M (% backing = 850%).  Let's even go so far as to say they all sell them at once (a situation which would in reality never happen).

So your only question here is can Nu absorb a $200k loss without NSR going to $0?  If you look at the NSR marketcap it's clear we can.  If we print 200mil NSR and sell them at $0.001 (which would be reasonable in my opinion) we could buy back and every single NBT at $1.  Since you said the peg was broken in this hyper extreme situation, we wouldn't even have to pay the full $200k because NBT is being sold on the market for less than $1 if the peg is broken.  Buying back every NBT would make NSR bleed red, but we could do it.

The real question is why would we (the crypto community) do that?  That would destroy our momentum.  Yes, we would survive it.  Yes, the nbt/usd peg would be reestablished.  Yes, we would finally show doubting people like you that the system clearly works.  But we would burn all the great actors that have played a part in this movement thus far.  The better option is to continue to support this working system, as it has actually succeeded at separating the volatility out of its unit of account.

If your issue is black swan events, I would argue that intelligent use of developer money can turn the tide until the immediate crisis is averted for a more long-term issue where we can pass motions to rectify the issue.  Jordan Lee himself proposed this as a tier of liquidity in case of dire need.

Additional profit is a whole different conversation.  We don't need to make 100%/year, we only need to make 100% of the average liquidity, which is like $70k, and future operations will cost less and generate more support.  There are many sources of revenue available once we have widespread support, such as modified transaction fees and NBT loans.  You're looking for a complete money-making business that has a net return within 6 months of its creation.  This technology is so new it makes bitcoin look like a grandfather.  The prospects for Nu are extremely high and it is changing continuously.  Rest assured that the fundamental economics of it make sense and the only barrier to our pure profit is some hard work, dedication, and time.
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June 19, 2015, 02:53:29 PM
 #22

There are many flaws in what you're saying.  You're starting out by saying that the peg will break, then saying that when that happens everything will fail.  My counter argument centers around the fact that the peg has broken many times on individual exchanges, and we've gone to $0 buy side support before.  Yet NBT is still worth $1.  How can that be true if what you say is true?

That sounds interesting. But it didnt happen to the big exchanges yet and did it happen at the start, where only the hardcore fans were in it or did it happen later, when all the fans were attracted? I guess the core will way more likely hold and not be shaken, though speculators most probably will do this fast.

There are tiers to our system.  Liquidity is what you are calling '% backing' and it is only the first defense.  It represents how much money we can mobilize near-instantly to reestablish the peg.  To balance our liquidity and leverage the NSR market for additional support, we perform share auctions and buybacks.  As a final, overarching mechanism we can implement parking (interest) rates and peercoin distributions.

You keep trying to talk about % backing.  If you are stuck in that paradigm, fine, let's talk real numbers for % backing.  Yes, there are 600,000 NBT in existence, but 400,000 NBT are held by trusted people currently as a reserve because we are not fully able to create and destroy NSR and NBT yet (still a work in progress).  That means the total 'debt' for Nu is $200k while it's NSR marketcap is $1.7M (% backing = 850%).  Let's even go so far as to say they all sell them at once (a situation which would in reality never happen).

So your only question here is can Nu absorb a $200k loss without NSR going to $0?  If you look at the NSR marketcap it's clear we can.  If we print 200mil NSR and sell them at $0.001 (which would be reasonable in my opinion) we could buy back and every single NBT at $1.  Since you said the peg was broken in this hyper extreme situation, we wouldn't even have to pay the full $200k because NBT is being sold on the market for less than $1 if the peg is broken.  Buying back every NBT would make NSR bleed red, but we could do it.

The real question is why would we do that?  That would destroy our momentum.  Yes, we would survive it.  Yes, the peg would be reestablished.  Yes, we would finally show doubting people like you that the system clearly works.  But we would burn all the great actors that have played a part in this movement thus far.  The better option is to continue to support this working system, as it has actually succeeded at separating the volatility out of its unit of account.

Additional profit is a whole different conversation.  There are many sources available, such as modified transaction fees and NBT loans.  You're looking for a complete money-making business that has a net return within 6 months of its creation.  This technology is so new it makes bitcoin look like a grandfather.  The prospects for Nu are extremely high and it is changing continuously.  Rest assured that the fundamental economics of it make sense and the only barrier to our pure profit is some hard work, dedication, and time.

You assume that it would be possible to support NBT with selling NSR. Are NSR backed by something? I thought they are a normal altcoin whose price is established on the markets. So why are you so sure that, in case NBT is crashing, NSR will hold its value so that it could support NBT? Though you say that probably wont happen because NSR holders would be screwed. That sounds like you say NSR have an intrinsic value? Funding, or did you mean they trusted the system till then?

Lets go at it another way... the USD isnt backed by gold, its backed by the economic power of the US in the future. Though even though many think its way too underbacked there.  Roll Eyes

Anyway... nubits are backed by NSR, which seems to be a similar approach. NSR is a company of some form. Or a stock of a company.

So can you first explain how the liquidity provision works? Does someone buy NSR with money to fund the development of the company? And what are the dividends be paid out in, NBT?

Anyway... the underlying thing would be that you hold stocks of a company you invested it. Luckily an investment you can go out anytime if all goes well. Though the question is if that company can yield those returns. Its similar to a country. You dont want that this country gets in debt more and more each year. At the moment nubits look a bit like they take more debt than they can pay back... so to say.

Can you explain why thats not the case? Thank you!

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Nagalim
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June 19, 2015, 03:06:14 PM
Last edit: June 19, 2015, 03:22:34 PM by Nagalim
 #23

You are thinking about it the right way now, it is like a company.  Do you really think $100k/year is more than we can ever pay back?  The NSR marketcap fluctuates by more than $100k in 1 day.  Companies like Tesla have liabilities in the millions.  Our assets will grow.

NSR holds its value because of the investment to infrastructure we have in Nu.  Even beyond the actual infrastructure, what you have to realize is that history of maintaining a peg while simultaneously having market volume is what gives NSR its true value.  The longer we hold the peg, the more valuable NSR becomes.  There is a concept of reputation here.

By the way, the buy support went to zero a couple months ago, which prompted the NSR auction motion that bought back 6,000 NBT in the last month.

I just realized you're calling liquidity rewards 'dividends'.  We have an actual dividend mechanism that distributes PPC to all minting NSR holders, but it will not be used again until we have surplus profit to distribute.  The liquidity rewards are currently paid in NBT, but we are rapidly moving toward a system where they are paid in NSR.
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June 19, 2015, 03:36:41 PM
 #24

You are thinking about it the right way now, it is like a company.  Do you really think $100k/year is more than we can ever pay back?  The NSR marketcap fluctuates by more than $100k in 1 day.  Companies like Tesla have liabilities in the millions.  Our assets will grow.

NSR holds its value because of the investment to infrastructure we have in Nu.  Even beyond the actual infrastructure, what you have to realize is that history of maintaining a peg while simultaneously having market volume is what gives NSR its true value.  The longer we hold the peg, the more valuable NSR becomes.  There is a concept of reputation here.

By the way, the buy support went to zero a couple months ago, which prompted the NSR auction motion that bought back 6,000 NBT in the last month.

Its not about being able to pay it ever back but to be able to not collect debt all the time. And yes, Tesla has the trust of those investing or giving that credit. They are a great innovative company and the outlook is great. You most probably will say the same about nsr.

Though... what is that infrastructure of NSR? Voting rights, liquidity provision tools, wallets, whatsoever are all tools that only have a value in NSR NBT. Its not that both can crash in value and you still can sell the infrastructure. They are bound to it.

So you say, even when nbt would die, it would not hurt nsr? Hm...

Anyway... i still dont fully understand the process of liquidity providing. Let me know where im wrong:

You need an account at the exchange and then you fund your account with any currency you want and that can trade against nbt. You need an account with the exchange though the software can trade in your account. You have to trust the software and the exchange.
The open source software is using your account to trade nbt.
Will you get rewarded for trades happening or for offering the value?
It sounds like you only have to put the threshold as low as possible in order to get rewarded with the server max reward? Dont know what that means.
Do the actual happening trades bring you losses in the form of trading fees and losses in the form of traders trading against nubit? If so is the 9% already cleaned from this?
How do you get rewarded? In NBT? I believe i have read the rewarding coins are created so that users that dont take part get their value diluted.
So if you want to go out you need to liquidate all your nbt at once, probably doable for around $1, right?

What i would like to know... whats the amount of NBT that is paid out for liquidity providing each month. And what value is created with nsr to back this? And which part of this value is not bound to nsr or nbt, that would survive even both things die.

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June 19, 2015, 03:51:37 PM
 #25

If NBT dies, NSR will certainly be damaged a great deal, I have no illusions about that.  What I am saying is that even if 0 NBT exist, NSR's blockchain and history still exist and carry with them all the tools (wallets, programs, what have you) that would allow a functioning peg, to be revitalized at will.  As long as there is demand for a pegged cryptocurrency, NSR can print NBT to satisfy that need.  If they have a history of keeping NBT = $1 even when there is no market demand for it, why wouldn't people trust it enough to just use it as a unit of exchange?

The way trustless liquidity provision works is by making API calls for a particular user account on an exchange on the behalf of a client.  The client (you) runs a python script which places orders and lets the server verify where its orders are placed.  The server then registers a liquidity reward every minute and sends the reward once a day.  The system is trustless, meaning that you can read and edit the python script you run in any way you wish without compromising the integrity of the operation.  If your orders are not where we want them to be, we will not credit you.  You do not have to run any code you cannot read and edit freely.

Actual trades are not registered by the server and do not count for or against your reward.  On an NBT/BTC pair, you can see how this introduces complications of losing funds when BTC price declines or fluctuates greatly.  On an NBT/USD pair, however, it should be clear that actual trades do not hurt the liquidity provider but are rather a source of profit depending on the allowed spread.  NBT/fiat pairs are also reasonably stable and provide a similar benefit.  The high liquidity rewards are because liquidity providers are either on a volatile BTC market or providing on an exchange with dubious solvency.  B&C exchange will change this and should drastically lower liquidity rewards in the long term.
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June 19, 2015, 05:34:39 PM
 #26

If NBT dies, NSR will certainly be damaged a great deal, I have no illusions about that.  What I am saying is that even if 0 NBT exist, NSR's blockchain and history still exist and carry with them all the tools (wallets, programs, what have you) that would allow a functioning peg, to be revitalized at will.  As long as there is demand for a pegged cryptocurrency, NSR can print NBT to satisfy that need.  If they have a history of keeping NBT = $1 even when there is no market demand for it, why wouldn't people trust it enough to just use it as a unit of exchange?

Though it might be open if someone would trust a nubits2 then. Which ultimately would put the value of nsr under pressure since the tools owned by nsr look very specialized for exactly this topic. Nearly no value outside of nsr and nbt, am i right?

The way trustless liquidity provision works is by making API calls for a particular user account on an exchange on the behalf of a client.  The client (you) runs a python script which places orders and lets the server verify where its orders are placed.  The server then registers a liquidity reward every minute and sends the reward once a day.  The system is trustless, meaning that you can read and edit the python script you run in any way you wish without compromising the integrity of the operation.  If your orders are not where we want them to be, we will not credit you.  You do not have to run any code you cannot read and edit freely.

So the software is open source and a backdoor is unlikely because of that. Its not even so that a nsr company server is placing the bets. Your software places the bets and the server checks if the bets are placed correctly. Though i wonder how the server can be sure you report the bets correctly, when he cant check himself. So that you dont claim orders placed by others.

Actual trades are not registered by the server and do not count for or against your reward.  On an NBT/BTC pair, you can see how this introduces complications of losing funds when BTC price declines or fluctuates greatly.  On an NBT/USD pair, however, it should be clear that actual trades do not hurt the liquidity provider but are rather a source of profit depending on the allowed spread.  NBT/fiat pairs are also reasonably stable and provide a similar benefit.  The high liquidity rewards are because liquidity providers are either on a volatile BTC market or providing on an exchange with dubious solvency.  B&C exchange will change this and should drastically lower liquidity rewards in the long term.

Ah... you mean the 9% isnt for the NBT/USD or FIAT pair, its compensation for a risky pair or exchange in order to compensate for the risk?

Then whats the dividend on nbt/usd pair?

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June 19, 2015, 05:44:52 PM
 #27

Nubits2 could steal all our utilities cause they're all open source.  However, they would lack our momentum, history of maintaining the peg, nsr distribution, and world class developing team.

The only nbt/USD pair is on ccedk and is compensated like a btc pool because ccedk may or may not be insolvent.  I personally run a nbt/cny pool on bter which used to be %1.5/month and will be %4.5/month after this new grant proposal passes.  Tllp is a new system, and we're still growing and expanding.  That, in additional to the other considerations mentioned, is why liquidity provision is so costly: the tech is very new.

The server checks your orders by making api calls in your name.  You must have the api secret to the exchange account to get credited for the orders.
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June 20, 2015, 09:40:25 AM
 #28

So the open source software ensures that the server only can send commands to check the orders, not placing orders i guess.

Is there a table or something where one can see the actual monthly return per exchange and so on? Maybe even with a calculated in risk? So that its a more reality near return? Maybe the profits arent really that high that its not possible to create the profits back by nsr. I guess the 9% is only for advertising then.

I see the irony if true. You need to advertise with high profits, that you actually only pay on high risk exchanges, and on the other hand it makes potential provisioners cautious because its open if actually a worth can be created that is matching this additional value. Cheesy

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June 20, 2015, 01:51:03 PM
Last edit: June 21, 2015, 02:51:41 AM by Nagalim
 #29

Yah, I mean we are probably not as conscious of marketing schemes or whatever as you might expect.  This is still a 'best endevors' project and we haven't ironed out all the issues and inconsistencies across the board.  We are working on a liquidity pool marketing website, but this is what we have for now:

https://discuss.nubits.com/t/liquidity-pool-marketing/2166/13

As an added bonus, you can see that I got the link to talk to you from Sam.  He's the one working on the tech, so his pools are probably the most stable and certainly provide the most liquidity.
I have made a website for my pool (http://nupond.net), but if you want the most professional experience you might want to try Sam or Henry's pools (Henry's NuLagoon is not trustless, but it's a solid investment opportunity).
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July 17, 2015, 10:29:53 AM
 #30

Is this the bot that is used to provide liquidity? https://bitbucket.org/JordanLeePeershares/nubottrading

Lets say i want to support nubits on poloniex, will the profit be similar to those liquidity pools? https://nubits.com/liquidity-pools

How can i raise profit on poloniex? And will i risk losing value when my nubits are exchanged to btc while btc goes down? I mean when i hold btc and btc goes down at a day 13% then the monthly profit from nbt would be lost already isnt it? Can this be avoided?

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July 29, 2015, 07:42:08 PM
 #31

Coin volatility is certainly an issue.  If you are looking for a pool without volatility, try my nbt/cny pool at http://nupond.net
The rate is 0.15%/day.  The main risk in that pool is exchange default.  If you want to support the pool on poloniex, you will be using nupool run by willy and wooly sammoth, which will certainly have btc volatility risk.  Try here: https://nupool.net
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September 12, 2015, 02:23:07 PM
 #32

What does that mean?
Code:
2015/09/12-16:21:36 ERROR: server missing in /tmp/tmp.7S2PqmgFsR
Nupool not start!
Help me!
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September 13, 2015, 03:35:08 PM
 #33

I dont get this idea,but I use NU as a free park to keep value when BTC is high i try to get NU and like now i get btc, been working well for me,better thn USD.
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December 05, 2015, 09:19:08 PM
 #34

Who would i need to talk to for getting a liquidity pool on my exchange? Currently we offer NBT/BTC and BTC/NSR trading pairs. We are planning on starting a nubit<->fiat service similar to localbitcoins.com in a few months. we have a fully functional API and would offer a liquidity provider 0.0% trading fee's

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