BTSX+BitUSD vs NuShares+NuBits - which will win the USD peg war?

[supranetico]

Short answer - Neither
Long answer - Both of them have an inherited structured which relies of market management (more like manipulation) by largest holders - the fight to fix price to $1.

[d5000]

Both are "first tries", and as far as I understood the whitepapers, both can manage the peg well in a stable or bullish market (regarding the "shares", not the "pegged assets").

But I worry that both will have a hard time when the first serious bear market (e.g. after the first great bubble) arrives.

Until now I like the bitUSD concept a little bit more, as it doesn't rely so much on centralized exchanges. NuBits on the other hand seems to be a more flexible concept with a greater "human factor", and bitUSD seems to rely 100% on mainstream-economics market mechanisms. I have still to understand some of the mechanics of NuBits.

Disclaimer: I am a Peercoin fanboy

[nomoreheroes7]

I'd appreciate to have a discussion because I think it is very important to discuss this topic.
But a discussion needs next to a position arguments for that position.
Will we read arguments or does it remain an unfounded accusation?

The process looks to me like NuBits (NBT) are sold for roughly 1 USD and they are bought for roughly 1 USD by the custodians who act on behalf of the NuShares holders.
So for each NBT that is sold, theres 1 USD available to buy it back.
Where's the Ponzi?

A Ponzi scheme requires that a system can only be sustained by new participants entering the scheme.
NuBits is designed to be sustainable independent from the amount of NuBits in circulation, being brought to market or being removed from it.

Others can explain it better than I ever could, so if you're truly interested in this discussion take a look at the BitShares post regarding it:

https://bitsharestalk.org/index.php?topic=9057.0

The good stuff starts around pages 8-9. Most interesting thread I've seen in a long while, and Jordan Lee is also there participating.

[BigOrangeBee]

Where are NuShares sold?

[toast]

[...] there's legitimate discussion that NuBits' system may in fact be a form of Ponzi.

I agree 100%

I agree 100%

+1

I'd appreciate to have a discussion because I think it is very important to discuss this topic.
But a discussion needs next to a position arguments for that position.
Will we read arguments or does it remain an unfounded accusation?

The process looks to me like NuBits (NBT) are sold for roughly 1 USD and they are bought for roughly 1 USD by the custodians who act on behalf of the NuShares holders.
So for each NBT that is sold, theres 1 USD available to buy it back.
Where's the Ponzi?

A Ponzi scheme requires that a system can only be sustained by new participants entering the scheme.
NuBits is designed to be sustainable independent from the amount of NuBits in circulation, being brought to market or being removed from it.

I think the "ponzi" is that demand for NuBits are supposed to come from people willing to park them in exchange for interest in the form of more NuBits. There is no way to reduce the nubits supply, only "kick the can down the road" by paying more nubits which the holders have to hope they can resell for a dollar later, the demand for which comes from people holding nubits for the interest which they hope to sell for a dollar later, etc.  Jordan incorrectly compares this to how the fed controls USD demand via interest rates, except that in the case of the fed the USD paid back with interest is actually destroyed.

With bitUSD, there is real buy demand from shorts who should be willing to buy at any price below $1 because it is collateralized by more than that value worth of BTSX. When they buy and cover the supply is reduced. If there's not enough demand for bitUSD, then there won't be any bitUSD!

[jlspartz]

So, if I've got this straight, NuBits requires human custodians to keep the currency pegged to USD, but claims to solve market manipulation    I don't see how something cannot be manipulated if requiring people to make adjustments.  Is there a plan to switch these custodians out with automation when it's more established?

[toast]

Short answer - Neither
Long answer - Both of them have an inherited structured which relies of market management (more like manipulation) by largest holders - the fight to fix price to $1.

bitUSD does not depend on market "management", only people competing to make a profit. It assumes people act greedily and are not "fighting" any market forces (any deviation is an opportunity to trade profitably).

[d5000]

I have two questions about bitUSD:

1) What happens if a whale sells bitUSD in the bitUSD/BTSX and in the bitUSD/USD market simultanously* and so the price goes down in both markets? Then the arbitrage USD -> BTSX -> BitUSD -> USD is not possible anymore.

2) In a long BTSX bear market, there would be naturally more demand for bitUSD than for BitSharesX, and there would be few people willing to short them. I have read in bitsharesx forum that there was an example with an hypothetical "BitDouble" which would duplicate every year its value, and the answer was nobody would be willing to short. In a real BTSX bear market the situation would be similar, as BitUSD would continously appreciate vs the BTSX. What would happen in this situation?

(* It must not be necessarily the same whale, it can also be market forces driving down BitUSD price in both markets.)

[toast]

I have two questions about bitUSD:

1) What happens if a whale sells bitUSD in the bitUSD/BTSX and in the bitUSD/USD market simultanously* and so the price goes down in both markets? Then the arbitrage USD -> BTSX -> BitUSD -> USD is not possible anymore.

2) In a long BTSX bear market, there would be naturally more demand for bitUSD than for BitSharesX, and there would be few people willing to short them. I have read in bitsharesx forum that there was an example with an hypothetical "BitDouble" which would duplicate every year its value, and the answer was nobody would be willing to short. In a real BTSX bear market the situation would be similar, as BitUSD would continously appreciate vs the BTSX. What would happen in this situation?

(* It must not be necessarily the same whale, it can also be market forces driving down BitUSD price in both markets.)

1)  Remember that the demand for BitUSD ultimately comes from shorts trying to cover, and that arbitrage is just what market makers do to provide liquidity. So the answer is, "real" shorts (not liquidity providers) would start buying back bitUSD to lock in their profits, and speculators would start buying up bitUSD in anticipation of this movement and the knowledge that they can sell it back to the market makers at a profit. So really this question isn't different from what happens if someone dumps on just one of the markets you mentioned.

2) If no new shorts are willing to enter then margins start getting called and bitUSD is bought up and taken out of circulation and destroyed until bitUSD is overvalued enough that either existing bitUSD holders take the opportunity to cash out into real USD at a profit (via bitusd -> btsx -> usd) or new shorts are finally brave enough to enter ("bitUSD is $1.50, BTSX won't fall by 50% faster than other new shorts will enter, so I'll short").

[tk808]

NuBits/NuShares Article Published on Coins Source. Enjoy

https://twitter.com/CoinsSource/status/515233053455568896

[d5000]

@toast: Thank you for your answers. I think I got the mechanism for 1) now. As for 2), I must digest it a bit It's possible that events 1 & 2 together (bitUSD going down versus USD, btsx going simultaneously down versus bitUSD and USD) could be a problem. I try to explore worst-case scenarios, so this is not meant as FUD or something alike, in fact, I think the BTSX model is a really nice innovation.

[peligro]

I think that it has to keep printing more NuBits to profit the existing NuBits. Thats why the ponzi word is being mentioned.
Was quite interested to see what the scheme they have for maintaining peg, and so far it just looks like they have to rely on more and more users to keep it viable.

[supranetico]

Short answer - Neither
Long answer - Both of them have an inherited structured which relies of market management (more like manipulation) by largest holders - the fight to fix price to $1.

bitUSD does not depend on market "management", only people competing to make a profit. It assumes people act greedily and are not "fighting" any market forces (any deviation is an opportunity to trade profitably).

Here's the thing if people act "greedily" they should be acting greedy about their BTSX holding too. That would mean net shorts will always be higher than net longs - isnt that the case in the current market? There have been quite a lot of restrictions put in place to not allow people to short. Something like - you cant short below 5% (not sure) below the MA price or interest bearing etc. So BTSX on one hand believes people to act rationally (greedy) but disallows people to act on their own accord (based on their greed). How is that a good thing?

Problem with NuBits and BTSX is same, free market reign is restricted given, while talking about the market is free. Not a good combination.

[toast]

Short answer - Neither
Long answer - Both of them have an inherited structured which relies of market management (more like manipulation) by largest holders - the fight to fix price to $1.

bitUSD does not depend on market "management", only people competing to make a profit. It assumes people act greedily and are not "fighting" any market forces (any deviation is an opportunity to trade profitably).

Here's the thing if people act "greedily" they should be acting greedy about their BTSX holding too. That would mean net shorts will always be higher than net longs - isnt that the case in the current market? There have been quite a lot of restrictions put in place to not allow people to short. Something like - you cant short below 5% (not sure) below the MA price or interest bearing etc. So BTSX on one hand believes people to act rationally (greedy) but disallows people to act on their own accord (based on their greed). How is that a good thing?

Problem with NuBits and BTSX is same, free market reign is restricted given, while talking about the market is free. Not a good combination.

Restricting shorts based on a price feed is not "restricting the free market". When you enter a contract for a difference, you and the other party have to agree on a real-world price.
Not having this restriction would be like forex allowing you to do naked shorts at a price other than the current market price for the real asset.

You're basically saying that an open-market exchange prohibiting selling boxes labeled "1 oz gold inside" when it actually has half an ounce inside is restricting the free market.

[Yurizhai]

One thing I can say for sure. The reaction from a lot of the BTSX crowd has been very disappointing. Seeing bytemaster use words like 'suckers' and 'ponzi scheme' is just ridiculous. It doesn't matter if BTSX ends up  the greatest thing that graced the human race, and NuBits a terrible idea - let it be known that Jordan Lee acts more professional when he  is taking a dump, and that counts for something in my book. I think it's important people remember that in the end it's not crypto vs. crypto, it's crypto vs. state.

[toast]

One thing I can say for sure. The reaction from a lot of the BTSX crowd has been very disappointing. Seeing bytemaster use words like 'suckers' and 'ponzi scheme' is just ridiculous. It doesn't matter if BTSX ends up  the greatest thing that graced the human race, and NuBits a terrible idea - let it be known that Jordan Lee acts more professional when he  is taking a dump, and that counts for something in my book. I think it's important people remember that in the end it's not crypto vs. crypto, it's crypto vs. state.

You are right.

That said, if you knew BM's normal extremely measured and objective mode of communication, I think you'd take what he has to say about nubits more seriously. BTSX is accused of being a ponzi all the time so it is dangerous to recklessly accuse others, and bm knows the "real" critieria of ponzi and does not use the term lightly.

Fact is, nubits requires constant influx of capital in the form of nubit holders to maintain the peg. It is not like the fed, those analogies are dangerously flawed.

[Yurizhai]

One thing I can say for sure. The reaction from a lot of the BTSX crowd has been very disappointing. Seeing bytemaster use words like 'suckers' and 'ponzi scheme' is just ridiculous. It doesn't matter if BTSX ends up  the greatest thing that graced the human race, and NuBits a terrible idea - let it be known that Jordan Lee acts more professional when he  is taking a dump, and that counts for something in my book. I think it's important people remember that in the end it's not crypto vs. crypto, it's crypto vs. state.

That said, if you knew BM's normal extremely measured and objective mode of communication, I think you'd take what he has to say about nubits more seriously. BTSX is accused of being a ponzi all the time so it is dangerous to recklessly accuse others, and bm knows the "real" critieria of ponzi and does not use the term lightly.

I believe you believe that, but I also think he just did. We're talking within hours of it's release, the mere infancy of a new system and he called it that. If Jordan thought something was a ponzi scheme, I still do not think he would say those words. He would voice his concerns in a very detailed and professional manner, and wait for a response. Apparently this doesn't matter to a lot of people, as BM seems to have quite a few followers ready to back him up regardless.

Still, I thank you for speaking cordially with me!

[CoinHoarder]

One thing I can say for sure. The reaction from a lot of the BTSX crowd has been very disappointing. Seeing bytemaster use words like 'suckers' and 'ponzi scheme' is just ridiculous. It doesn't matter if BTSX ends up  the greatest thing that graced the human race, and NuBits a terrible idea - let it be known that Jordan Lee acts more professional when he  is taking a dump, and that counts for something in my book. I think it's important people remember that in the end it's not crypto vs. crypto, it's crypto vs. state.

That said, if you knew BM's normal extremely measured and objective mode of communication, I think you'd take what he has to say about nubits more seriously. BTSX is accused of being a ponzi all the time so it is dangerous to recklessly accuse others, and bm knows the "real" critieria of ponzi and does not use the term lightly.

I believe you believe that, but I also think he just did. We're talking within hours of it's release, the mere infancy of a new system and he called it that. If Jordan thought something was a ponzi scheme, I still do not think he would say those words. He would voice his concerns in a very detailed and professional manner, and wait for a response. Apparently this doesn't matter to a lot of people, as BM seems to have quite a few followers ready to back him up regardless.

Still, I thank you for speaking cordially with me!

I think BM has a lot of people willing to back him up, especially in the Bitshares community, because over time he has proven himself as being much smarter than the average bear. He is one of the most intelligent people I know of in crypto, and I don't ever say that about anyone so that goes to show you how highly I and the Bitshares community value his thoughts and opinions. I think his statements on Nubits have been genuine and not a "knee jerk" reaction. Sure he could of possibly toned it down a little bit but at the end of the day Bitshares is a decentralized autonomous company, and BM's statements shouldn't reflect upon Bitshares as a whole just as Bitcoin core dev statements or actions shouldn't reflect upon Bitcoin as a whole. He was quick to form an opinion because he is a very smart guy with the ability to understand Nubits quickly and think through the possible implications better than most.

/BM fan boy  

[sumantso]

Short answer - Neither
Long answer - Both of them have an inherited structured which relies of market management (more like manipulation) by largest holders - the fight to fix price to $1.

bitUSD does not depend on market "management", only people competing to make a profit. It assumes people act greedily and are not "fighting" any market forces (any deviation is an opportunity to trade profitably).

Here's the thing if people act "greedily" they should be acting greedy about their BTSX holding too. That would mean net shorts will always be higher than net longs - isnt that the case in the current market? There have been quite a lot of restrictions put in place to not allow people to short. Something like - you cant short below 5% (not sure) below the MA price or interest bearing etc. So BTSX on one hand believes people to act rationally (greedy) but disallows people to act on their own accord (based on their greed). How is that a good thing?

Problem with NuBits and BTSX is same, free market reign is restricted given, while talking about the market is free. Not a good combination.

Restricting shorts based on a price feed is not "restricting the free market". When you enter a contract for a difference, you and the other party have to agree on a real-world price.
Not having this restriction would be like forex allowing you to do naked shorts at a price other than the current market price for the real asset.

You're basically saying that an open-market exchange prohibiting selling boxes labeled "1 oz gold inside" when it actually has half an ounce inside is restricting the free market.

I think the market limitations and reliance on feeds is a short term measure to help during the initial low volume phase. Might be wrong, though.

[CLains]

Can't blame Daniel Larimer for sneering just a little bit, when he has published and educated people on his idea for over a year, and along comes the hype of "something Nu" that aims to accomplish something similar but is developed entirely in secret, leaving him unable to even evaluate it, during the most critical phase of his own project.