How to measure the PEG....

[sschechter]

Jordan Lee is doing the digital equivalent of selling NuShares out the trunk of his car...sure...doesn't look sketchy at all.

[sschechter]

And if Nubits do this ? 

Attempt to remain completely anonymous while negotiating the untrusted sale of shares through an encrypted messaging service?

[sschechter]

Can some one tell me why I couldn't do this ?

The realistic threat that what you're proposing to do is probably illegal and you'd end up in jail.....just one theory

[CoinHoarder]

I have suspected for a while now that much of the Nubits volume is being faked. This conspiracy theory of yours makes sense to me.. they are faking volume in order to be picked up on more exchanges.

With a fat wad of cash (as presumably someone selling 2 million worth of Nushares has), you could fake volume for pretty cheap..

$100k volume costs $400
$250k volume costs $1000
$500k volume costs $2000

(In US dollars)

The beauty part is ,they only need to sell 2000NBT to make up the cost fee of 500000 USD trading volume .
So,it can totally last for a while,then people would have confidence in the system.

"Hey,man,how can you not trust MTGOX?They have the largest volume in the world".Sounds fimilar ?
Yeah,we trust MTGOX not because they are trust worthy,but just because we thought a big one can be trusted.

More trading volume means more fees.Eventually,more exchanges can not resist the temptation of the profit to enlist NBT,so as a currency,NBT would have more acceptance,and they could sell more NBT .

I personally think it would be a brilliant marketing scheme.

I was wrong in my original post... There are about 1 Billion Nushares the developers are selling not 2 million like I said, which will be sold for "no more" than 6.5 million dollars. 6.5 million U.S. Dollars.... I think the developers could afford $400 to $2000 a day for such a marketing scheme.

http://discuss.nubits.com/t/undistributed-nushares/125

It has the benefit of gaining trust from users that see the large volume and for enticing exchanges to add it... Win/Win situation there.

[CoinHoarder]

I have suspected for a while now that much of the Nubits volume is being faked. This conspiracy theory of yours makes sense to me.. they may be faking volume in order to be picked up on more exchanges on the assumption Nushares will be worth more if Nubits gains more users and adoption via being on more exchanges.

With a fat wad of cash (as presumably someone selling EDIT: er... 1 Billion Nushares has), you could fake volume for pretty cheap..

$100k volume costs $400
$250k volume costs $1000
$500k volume costs $2000

(In US dollars)

I'm not saying it is for sure true, but it is a possibility and no one knows for sure whether that would be true or not.

[Mtinie]

I'm not sure where you get your information, but the way that you've worded your comment makes me doubt your sources.

Bytemaster，I've heard that Nubits is try to enforce the NBT-PPC pair,use PPC to build buy wall and yet still maintain 1NBT=1USD value.

It's true that the automated trading bots do support NBT-to-coin markets (NBT/BTC, NBT/PPC). The exchange rates fluctate very frequently in response to changes in the BTC/USD and PPC/USD markets. As is the case on most exchanges (with a few notable exceptions) crypto/fiat pair buy-side liquidity is for all intents and purposes, abysmal. Providing access to a stable value unit is our end-goal, so while it's more complex, supporting NBT/crypto markets is part of that strategy. Attempting to maintain the 1 NBT to 1 USD (in crypto equivielent) is a side effect of the primary goal of NuBits, providing a stable, transactional currency.

And I've heard they are trying to be the PPC whale themselves,print more NBT to buy more PPC,so they can control the price of PPC and make a profit for the Nubits system.During this process,they'll make the trading volume of NBT larger to attract new exchanges to enlist.
(Because of the relations between Nubits and PPC,convince people trade PPC for Nubits would be easy)

I've never heard anyone on the team--seriously, or even in jest--discuss market making to end up as a (or the) "PPC whale." We've got enough things to keep us busy post-release, and attempting to wrest some form of control over the peercoin markets isn't on the list.

The trading logic that was responsible for NuBot's wall collisions was resolved a week ago (discuss.nubits.com/t/nubot-progress-reports/338/7), and as far as we can tell, all volume since then has been organic. We've noticed a few traders (at least two, possibly three or more) attempting to profit from price fluctations, but that's outside of our control and is something that is going to happen. These types of trades happen all over the place, in every market, so the NBT/BTC and NBT/PPC markets are no exception. I expect that a portion of the day-to-day BitsharesX volume is generated from the same types of trades.

If exchanges want to list NBT, it is their perogative. Having a large number of exchanges support NBT, today, doesn't actually benefit us much. It takes time to write wrappers for the automated trading bot so that it can work with different exchanges' APIs, and then it means having a custodian get set up to support one or more markets there. Besides, having a coin on an exchange is only the first step -- there are lots of exchanges that host lots of coins' trading pairs that aren't going to amount to anything without a focus on the fundamentals that make it an attractive transactional currency or asset.

---

While I'll admit that I do find a dark humor in the rumor mongering I read, the comments of yours that I've come across more often than not lack any evidence to support your criticisms. I guess that's your right, and I'm not here to try to "convert" you to any viewpoint, but I personally find it hard to take your critiques seriously when they lack substance or appear to be only driven by blind emotion.

I'm more than happy to have future discussions about BitsharesX, Nu, or cryptoassets in general, if they are useful to the larger community. My responses here may be reactive, in the context of this or another Nu-related threads, but ultimately I'm not here to shill for Nu. Hopefully my postings over time will make that clear. I'm equally interested in what the Bitshares team and community are doing because I see a huge number of interesting initiatives and opportunities.

[bytemaster]

First of all, I'd like bring everyone's attention to the fact that that our friendly competition will result in consumer needs being met more fully and at less cost than if we weren't both here. So, on behalf of the consumer, I thank you for your work.

What NuBits offers the consumer is quite simple to understand (crypto that is always worth $1), but how we do that is complex and difficult for the uninitiated to comprehend. I would like to take this opportunity to clarify some misunderstandings presented here.

In fact, they are so clever they hide the interest they charge you for using their NuBits in the spread...  100% guaranteed profit.  You buy NuBits for $1.00 and you can sell them back to them for $0.995   0.4% goes to the exchange, .1% goes to the market makers.   You are exposed to counter party risk and paying them for the privilege.  This might be their whole plan, to disguise a user issued asset as a decentralized trust-free crypto currency.   

Liquidity provider custodians use software called NuBot, which offers NuBits at $1.00 with a spread to cover the cost of transaction fees. On an exchange that has a 0.2% transaction fee, NuBits are sold for 1.002 and purchased at 0.998. Market makers do not profit from these trades, but they are offered separate compensation by shareholders. Purchasers of NuBits have no counterparty risk once they withdraw their NuBits from the exchange they purchase them at.

What if they take the real USD *off of the exchange* and spend it on something (to fund infrastructure).... now the "market makers" have to increase their spread to cover transaction costs *AND* NuBits has just gone fractional reserve.  It is the same old fractional reserve ponzi scheme... build confidence by maintaining redeem-ability for a long enough period of time to earn "trust" then slowly remove the backing.    My conclusion here is that NuBits will continue to hold with a much tighter spread simply because of how they were issued... "sold for USD" rather than "sold for crypto" the backers of NuBits will not spend much of the USD they received by selling NuBits. 

99% of NuBits have been sold for Bitcoin and Peercoin, while there is a trickle of volume on a USD trading pair. I can't see any circumstance where liquidity provider custodians would increase the spread on the liquidity they provide.

I struggled with the issue of backing assets when initially designing Nu. No one has figured out how to back assets without introducing counterparty risk. This is why Bitcoin is not backed by gold, like the failed E-Gold network. Even if backing consists of decentralized assets, the backing can fail if the backing assets lose value. Nu prioritizes reliability and the elimination of counterparty risk over backing.

So NuBits can be viewed as a "basket of USD" held on multiple different exchanges where the issuers reserve the right to spend the depositors money and not redeem it.   As a NuBits holder you are now subject to the combined risk of all USD exchanges that the market makers are participating in PLUS the risk of NuShare holders spending the deposited funds.   There is never anything that returns value to NuBits except market maker spreads... only things that can suck value of of it.   It is a one way valve.   

I have no doubt that at some point a liquidity provider custodian will lose some quantity of funds as a result of an exchange default. While initial liquidity has been provided by shareholder creation of NuBits, the quantity of LPCs that have provided their own funds already exceeds the number that received their funds from shareholders and I expect we will complete this transition soon. If one of these LPCs experiences an exchange default, they bear the loss themselves and it has no systemic implications.

Indigoman proposed a protocol modification that permits shrinking the supply of NuBits down to zero if necessary by burning NuBits in exchange for NuShares. This change has broad shareholder support and its inclusion in the protocol is all but certain. I will be posting the contents of a motion to implement this shortly.

While my initial design provided no way to substantially reduce the supply of NuBits, the design has been improved to allow the elimination of as many NuBits as necessary, making them the liability of shareholders.

So the question becomes:
1) Who gets the proceeds from the issuance of new BitNu? (It must be the market maker bot operators)
2) Are they obligated to buy it back?  (No)
3) If NuShare holders are funding the spread being paid to the exchanges... and paying market makers enough to discourage them from taking a "one time pay day"....  how do NuShares accumulate value.  What are they entitled to?  Why do I want to buy NuShares?     

[CoinHoarder]

Cool,

I wasn't open to dilution as a marketing scheme as proposed a while back as it wasn't a sure thing it would work- the people receiving free BTSX could dump on the market and it backfire on us. (Sorry BM!)

However, dilution for providing liquidity may be a good thing if everyone's open to it as that is one of the things holding bitUSD/BTSX back is liquidity in the Bitasset exchange. I think your proposal is interesting and perhaps deserves more discussion. Isn't this similar to Nubits?

But they could make the market maker algorithm adjust the spread such that it is always profitable for all shareholders. i.e. - never exceed the initial supply of BTSX.

In effect the DAC would operate like a true bank. I want to see that done just to prove my point, even if it is a hard fork of BTSX into a BTSY

I think it is a good idea as we could eliminate the only current benefit Nubits has over bitUSD... the liquidity.

Note that my proposal was at the time they thought the peg would work without using feeds. And many didn't like my proposal because it would require feeds. Well... at least it's a confirmation to me that may be I was onto something, since we now found feeds are pretty much inevitable.

Good point, perhaps it should be revisited now that we know price feeds are required.

[bitmeat]

Note that my proposal was at the time they thought the peg would work without using feeds. And many didn't like my proposal because it would require feeds. Well... at least it's a confirmation to me that may be I was onto something, since we now found feeds are pretty much inevitable.

[bitmeat]

Cool,

I wasn't open to dilution as a marketing scheme as proposed a while back as it wasn't a sure thing it would work- the people receiving free BTSX could dump on the market and it backfire on us. (Sorry BM!)

However, dilution for providing liquidity may be a good thing if everyone's open to it as that is one of the things holding bitUSD/BTSX back is liquidity in the Bitasset exchange. I think your proposal is interesting and perhaps deserves more discussion. Isn't this similar to Nubits?

But they could make the market maker algorithm adjust the spread such that it is always profitable for all shareholders. i.e. - never exceed the initial supply of BTSX.

In effect the DAC would operate like a true bank. I want to see that done just to prove my point, even if it is a hard fork of BTSX into a BTSY

[CoinHoarder]

Cool,

I wasn't open to dilution as a marketing scheme as proposed a while back as it wasn't a sure thing it would work- the people receiving free BTSX could dump on the market and it backfire on us. (Sorry BM!)

However, dilution for providing liquidity may be a good thing if everyone's open to it as that is one of the things holding bitUSD/BTSX back is liquidity in the Bitasset exchange. I think your proposal is interesting and perhaps deserves more discussion. Isn't this similar to Nubits?

[bitmeat]

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

Can you give me a link to your proposal?

I don't have a whitepaper, if that's what you are asking for, but the idea is very simple. Bytemaster actually liked the idea for its simplicity. Some interesting issues were brought, but I think you can have the blockchain adjust the spread such that it is always profitable (i.e. avoid diluting stakeholders):

Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.

If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.   

However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.

Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.

That said I really like the idea for its simplicity and clarity.   It would not have been possible prior to DPOS, but now is potentially viable.

[CoinHoarder]

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

Can you give me a link to your proposal?

[bitmeat]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

Yes, I do believe I understand what liquid means... I also believe that for you liquid means instant gratification...

I also understand that you are very particular about how  things must be presented  to you, in order for you to get them or ... not. And that presentation  determines in a great extend the stuff you get ...and the one you do not... so no bit in your meat... so to speak but then again...  I am regressing to my former self.

zerosum, please cool down - there is no reason becoming personal here. i don't think there is 100% certainty anywhere... sometimes minsky moment ensures that things which appear certain become no longer so... bitUSD hasn't grown big enough yet in terms of liquidity, there is little demand yet at these early stages, and the PEG hasn't been sofar seriously attacked. it is worth examining potential defences before nasty things potentially happen (even if hopefully they don't)

it doesn't look to me like bitmeat is seeking for instant gratification in trading bitUSD, rather the ability to get out quickly close to the peg is the essential value proposition of bitUSD. and we all know, it will take some time to establish such functionality, so patience is an important feature for all bitshares users and investors...

Precisely. zerosum, this is not a personal attack, but rather I am playing devil's advocate. I am asking myself - why is the currently created BitUSD so low? Especially given the turbulent price moves of BTC.

And the answer is - liquidity sucks. It is indeed a chicken/egg situation. If liquidity was better, more people would acquire BitUSD. If more people acquire BitUSD - liquidity would be better.

The bottom line is - if you don't measure liquidity, you are not really measuring the PEG. Proclaiming that "you could buy for 35 and sell for 34" is absolutely inaccurate, when it is only possible for 100 BitUSD.

And yes, the VERY definition of liquid - is one that can be INSTANTLY liquidated. That's the whole point of a hedge - to have the ability to liquidate, when needed.

Stop taking things personally, and this applies for everyone on the forum. It's kind of annoying to see a group of people ignoring the issues at hand, staying in the bubble, participating in a circle jerk. It's good to have constructive criticism.

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

[Mtinie]

Assuming you're one of the Custodians,would you consider withdrawing the buy wall after selling some Nubits a crime or fraud ?
Because I haven't seen the nature of this kind of behavior described in the Whitepaper.

Persumably it would be fraud, if those actions were not in line with the proposal that the shareholders agreed to in exchange for granting the NuBits that were sold to supply the buy wall. In the classical legal defintion fraud is both a civil wrong (the perpetrator can be sued) and a criminal wrong (possible prosecution and imprisonment).

So, to answer your question, I would expect that "both" is appropriate.

Edit: To address your restatement of the original question --

OK,let me put it this way.
If you and your pals(including shareholders that you've carefully selected and the custodians) sold enough Nubits to the public and never put the buy wall back,Would you consider it a crime or fraud or just "a fail experiment of Hayek's theory of Denationalization of Money"?
I'm not talking about "how impossible" or "you don't have any sane reason to do that",just saying what's your view on this behavior if god forbid something like that happens ?

If this were to happen, it would fall into the same class of actions that any asset is exposed to when there is no longer buy-side support at the previous price. Basically, when the price of a stock, precious metal, or cryptocurrency drops, it's because there is no longer money willing to be put towards its repurchase at the previous price. Lots of real funds are removed from stock, commodities, and crypto markets every day and in many cases people are no longer able to get back the same amount that they paid for something.

Is it fraud if you buy one share of AAPL at $96.25 right now, but tomorrow you're only able to get $87.50 for the same share? Or that the "Bearwhale" sold a large quantity of BTC the other day for substantially below market, temporarily cratering the traded price?

You're asking if it is possible that it could occur -- of course it's possible, to say otherwise would be impossible to support. Like any asset, it takes trust to give it lasting value, and an action like that would not be in anyone's best interests (shareholders, consumers, etc.). Nu is not unique in this, and while "trustless" is one of the major mantras of the cryptocurrency movement, it is referring to the protocol layer, not the community that develops around it. For an asset to be valuable, it needs both to be in concert.

For example, BitsharesX has value because of the protocol and framework that has been built *plus* the trust that people put in the developers and the community that has sprung up around it. But if people lose trust in the system, for various reasons, the value will approach zero as well.

[kisa]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

Yes, I do believe I understand what liquid means... I also believe that for you liquid means instant gratification...

I also understand that you are very particular about how  things must be presented  to you, in order for you to get them or ... not. And that presentation  determines in a great extend the stuff you get ...and the one you do not... so no bit in your meat... so to speak but then again...  I am regressing to my former self.

zerosum, please cool down - there is no reason becoming personal here. i don't think there is 100% certainty anywhere... sometimes minsky moment ensures that things which appear certain become no longer so... bitUSD hasn't grown big enough yet in terms of liquidity, there is little demand yet at these early stages, and the PEG hasn't been sofar seriously attacked. it is worth examining potential defences before nasty things potentially happen (even if hopefully they don't)

it doesn't look to me like bitmeat is seeking for instant gratification in trading bitUSD, rather the ability to get out quickly close to the peg is the essential value proposition of bitUSD. and we all know, it will take some time to establish such functionality, so patience is an important feature for all bitshares users and investors...

[JordanLee]

Assuming you're one of the Custodians,would you consider withdrawing the buy wall after selling some Nubits a crime or fraud ?

This question appears to presume a centralized structure that doesn't exist. Three weeks after release, there are 5 liquidity provider custodians elected by shareholders to manage buy walls independently. I expect this to grow to dozens of LPCs. As a result of this decentralization no one can remove the buy support wall, because there are many walls placed by independent people. The last three of these 5 LPCs will receive compensation after liquidity services are rendered, which I expect will be the practice going forward.

These individuals have no motive and nothing to gain from taking their own portion of the buy wall down. That would be a violation of their contract with shareholders, the penalty for which would be that they would not be compensated for their work and risk taken. The impact to the network and the peg would be quite modest as a result of the redundancy.

I'm quite proud to have designed a system that doesn't rely on threats of violence (arrest and imprisonment) for its functioning. Rather, it relies on decentralization, redundancy, positive incentives and self interest to function. Systems based on these attributes offer us more peaceful ways of interacting, which is of great importance to me.

[zerosum]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

Yes, I do believe I understand what liquid means... I also believe that for you liquid means instant gratification...

I also understand that you are very particular about how  things must be presented  to you, in order for you to get them or ... not. And that presentation  determines in a great extend the stuff you get ...and the one you do not... so no bit in your meat... so to speak but then again...  I am regressing to my former self.

[bitmeat]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

I doubt that will last long.  If you placed a large sell wall at 95% people would chip away at it.

Sure, but my point is this is the correct metric we should track. As you say it may improve. But it is important to track it and also track it against competitive products.

[bitmeat]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

[JordanLee]

Only when the interest rate starts rising does the market know demand is less than supply and then at that point they have to question how much decentralised backing NuBits have, how much interest they can afford to pay and how long the custodians will pay it before giving up.

Edit: Shareholders not Custodians. Maybe I should read the thing properly first. I guess the same cycle still applies if the interest is backed by NuShares? As once demand for NuBits drops then NuShares will drop in value too. Anyway I probably got to read this more.
- Ok yeah 'think' I understand it better. Same thing as soon as interest rate gets too high (5-7%?) or if net demand is absent for a little too long (1 month?) then confidence is rapidly lost and market collapses.

With our design change allowing the exchange of currency for NuShares the amount of interest that can be paid is complex with many variables. However, there is considerable truth to the simple notion that it is equal to the total value of NuShares minus the value of currency issued.

[JordanLee]

First of all, I'd like bring everyone's attention to the fact that that our friendly competition will result in consumer needs being met more fully and at less cost than if we weren't both here. So, on behalf of the consumer, I thank you for your work.

What NuBits offers the consumer is quite simple to understand (crypto that is always worth $1), but how we do that is complex and difficult for the uninitiated to comprehend. I would like to take this opportunity to clarify some misunderstandings presented here.

In fact, they are so clever they hide the interest they charge you for using their NuBits in the spread...  100% guaranteed profit.  You buy NuBits for $1.00 and you can sell them back to them for $0.995   0.4% goes to the exchange, .1% goes to the market makers.   You are exposed to counter party risk and paying them for the privilege.  This might be their whole plan, to disguise a user issued asset as a decentralized trust-free crypto currency.   

Liquidity provider custodians use software called NuBot, which offers NuBits at $1.00 with a spread to cover the cost of transaction fees. On an exchange that has a 0.2% transaction fee, NuBits are sold for 1.002 and purchased at 0.998. Market makers do not profit from these trades, but they are offered separate compensation by shareholders. Purchasers of NuBits have no counterparty risk once they withdraw their NuBits from the exchange they purchase them at.

What if they take the real USD *off of the exchange* and spend it on something (to fund infrastructure).... now the "market makers" have to increase their spread to cover transaction costs *AND* NuBits has just gone fractional reserve.  It is the same old fractional reserve ponzi scheme... build confidence by maintaining redeem-ability for a long enough period of time to earn "trust" then slowly remove the backing.    My conclusion here is that NuBits will continue to hold with a much tighter spread simply because of how they were issued... "sold for USD" rather than "sold for crypto" the backers of NuBits will not spend much of the USD they received by selling NuBits. 

99% of NuBits have been sold for Bitcoin and Peercoin, while there is a trickle of volume on a USD trading pair. I can't see any circumstance where liquidity provider custodians would increase the spread on the liquidity they provide.

I struggled with the issue of backing assets when initially designing Nu. No one has figured out how to back assets without introducing counterparty risk. This is why Bitcoin is not backed by gold, like the failed E-Gold network. Even if backing consists of decentralized assets, the backing can fail if the backing assets lose value. Nu prioritizes reliability and the elimination of counterparty risk over backing.

So NuBits can be viewed as a "basket of USD" held on multiple different exchanges where the issuers reserve the right to spend the depositors money and not redeem it.   As a NuBits holder you are now subject to the combined risk of all USD exchanges that the market makers are participating in PLUS the risk of NuShare holders spending the deposited funds.   There is never anything that returns value to NuBits except market maker spreads... only things that can suck value of of it.   It is a one way valve.   

I have no doubt that at some point a liquidity provider custodian will lose some quantity of funds as a result of an exchange default. While initial liquidity has been provided by shareholder creation of NuBits, the quantity of LPCs that have provided their own funds already exceeds the number that received their funds from shareholders and I expect we will complete this transition soon. If one of these LPCs experiences an exchange default, they bear the loss themselves and it has no systemic implications.

Indigoman proposed a protocol modification that permits shrinking the supply of NuBits down to zero if necessary by burning NuBits in exchange for NuShares. This change has broad shareholder support and its inclusion in the protocol is all but certain. I will be posting the contents of a motion to implement this shortly.

While my initial design provided no way to substantially reduce the supply of NuBits, the design has been improved to allow the elimination of as many NuBits as necessary, making them the liability of shareholders.

[zerosum]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

[bytemaster]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

I doubt that will last long.  If you placed a large sell wall at 95% people would chip away at it.

[bitmeat]

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

[bytemaster]

using the reserve funds to pay the unbacked bitUSD was one proposal to mitigate .. i think BM proposed it himself already somewhere

I'm not trying to be negative in such a positive thread, but I feel this subject could use some thought and brainstorming from the community.

A reserve fund that generates about 1.5% APY doesn't seem like it would generate sufficient collateral as 1.5% APY is small compared to the possibly large percentage (50%+ ??) that would be needed to cover bitassets in the event of a black swan. I understand that the yield is dynamic and could change, but it is what it is currently and without mass adoption or changing the way it works it won't increase significantly. I understand shorts will soon be able to compete as to this, so that should help, but is it enough to cover? Disregarding the fact that 1.5% is rather large compared to what you can get with banks, it would not be enough to cover them... or is my understanding wrong of how it would work?

I suppose the "minimum price feed" should be  ALL USD / (ALL COLLATERAL) and that if the price feed is below this point then all shorts are immediately called and all BitUSD becomes redeemable at at this price ratio and a new BitUSD market is created.   

In other words, no amount of insurance fund is able to protect against all black swans.   The best we can do is give all BitUSD holders and all shorts a fair settlement.  The value of BitUSD is always <= the value of the collateral.       

[biophil]

I predict a reasonable rise in NuBit interest rates will actually lead to panic selling not parking.

This would make for an interesting Best Response analysis!

Let's say I hold NuBits, and I believe that the interest rate is positively correlated to the likelihood that NuBits is about to collapse. In other words, I believe there is a function t(r) that describes how many days before the NuBits collapse as a function of the interest rate r (to make the math easy, assume r is in %/day). Then if I have N NuBits, for any interest rate r, I have two options:

1) sell now and profit N.
2) park for a little less than t(r) days, sell right before the collapse, and make over N*(1+t(r)*r). (I'm not compounding interest; this is a lower bound)

Well look at that! Unless t(r)=0, option (2) always gives me a higher payoff than option (1)! So we should expect that even when the NuBits collapse is imminent, there will probably always be some risk-seeking individual(s) out there who are going to park for one more day in the hopes of making away with one more dollar. Of course, at some point the risk-averse people, who have been selling all along, will reach some critical mass of selling volume that the market-makers can't keep up with and the peg will break and the risk-seekers will lose all their money.

Interestingly, the custodians (aka the fat cats who make NuBits possible) will also have a choice to make:

1) Keep buying excess NuBits, trying to maintain the peg
2) Abandon their responsibility to buy excess NuBits because the collapse is imminent and the longer they wait the more they lose.

Clearly, some custodians will abandon earlier than others; the ones who hold out longer will lose more money. So notice here that in a collapse scenario, the custodians have a strong incentive to abandon the holders of NuBits!

[CoinHoarder]

Does anyone know how much Nushares are selling for?

It looks like it's currently $0.002 per share, which would give a market cap of $2 million if all shares were worth this amount. However, they still appear to be screening applicants to buy shares. See http://discuss.nubits.com/t/undistributed-nushares/125 and see also http://discuss.nubits.com/t/nushare-price-increase/334

I just find it hard to believe they are doing $100,000 plus in volume per 24 hours on a consistent basis like coinmarketcap reports.

Based on my analysis, I think the recent 24-hour volume is due to the fact that they are putting buy/sell walls on NuBits-to-BTC currency pairs. See https://bter.com/trade/NBT_BTC. When their walls get a little off due to a jump in BTC price, I suspect that arbitrage traders are stepping in with huge orders to take advantage of this, creating a lot of volume. That's not necessarily long-term demand, but it is volume. Also, because of these walls, if traders expect a crash in BTC, they might be dumping high volume into NuBits (and out again) as a temporary hedge.

Yeah there is probably a more reasonable explanation for it and what you describe could be plausible, but what I stated is a possibility... truth is no one really knows for sure. Conspiracy theories are more fun than your explanation. :p

[CoinHoarder]

using the reserve funds to pay the unbacked bitUSD was one proposal to mitigate .. i think BM proposed it himself already somewhere

I'm not trying to be negative in such a positive thread, but I feel this subject could use some thought and brainstorming from the community.

A reserve fund that generates about 1.5% APY doesn't seem like it would generate sufficient collateral as 1.5% APY is small compared to the possibly large percentage (50%+ ??) that would be needed to cover bitassets in the event of a black swan. I understand that the yield is dynamic and could change, but it is what it is currently and without mass adoption or changing the way it works it won't increase significantly. I understand shorts will soon be able to compete as to this, so that should help, but is it enough to cover? Disregarding the fact that 1.5% is rather large compared to what you can get with banks, it would not be enough to cover them... or is my understanding wrong of how it would work?

[Chronos]

Does anyone know how much Nushares are selling for?

It looks like it's currently $0.002 per share, which would give a market cap of $2 million if all shares were worth this amount. However, they still appear to be screening applicants to buy shares. See http://discuss.nubits.com/t/undistributed-nushares/125 and see also http://discuss.nubits.com/t/nushare-price-increase/334

I just find it hard to believe they are doing $100,000 plus in volume per 24 hours on a consistent basis like coinmarketcap reports.

Based on my analysis, I think the recent 24-hour volume is due to the fact that they are putting buy/sell walls on NuBits-to-BTC currency pairs. See https://bter.com/trade/NBT_BTC. When their walls get a little off due to a jump in BTC price, I suspect that arbitrage traders are stepping in with huge orders to take advantage of this, creating a lot of volume. That's not necessarily long-term demand, but it is volume. Also, because of these walls, if traders expect a crash in BTC, they might be dumping high volume into NuBits (and out again) as a temporary hedge.

[xeroc]

using the reserve funds to pay the unbacked bitUSD was one proposal to mitigate .. i think BM proposed it himself already somewhere

[CoinHoarder]

You don't need to convince the Nubits guys simply because -----They think they are practicing Heyek theory of "Denationalization of Money",everything they're doing is in the name of Heyek .

Heyek was an economist who supports competition of private currencies,use a good control method to print good money to maintain stable purchasing power. Heyek claims that if someone can print money and make the money have stable purchasing power,then this money will become good money and win the market competition .

Yeah,well,the idea of printing stable good money is actually kinda cool ----as long as you can keep it good and stable and not fail over time.

This all comes down to the definition of "stable"...

well,Heyek did solved the stable purchasing power issue by market operations like Nubits,but he did't tell people how to make it last forever.
He said that winner comes from competition----meaning a lot private printing money has to fail until a good one can be found.

Probably because there is no good solution to making it last forever.

To play devil's advocate, what are the risks of bitUSD? A "black swan" crash is the only plausible downfall I have heard thus far. I have been thinking of ways to mitigate it.

One possible solution is to develop an infrastructure for bitUSD such so that there is no benefit of holding real USD in its place.. in terms of things you can do with it. Once that statement is true (or even mostly true), a community awareness campaign can be marketed that if someone feels like a BTSX bubble is approaching that they should diversify into bitUSD or Bitassets instead of cashing out into FIAT or other cryptos. That way no money ever leaves the BTSX economy and therefore no bubble could occur as Bitassets are backed by BTSX. It relies on a large portion of the community realizing this and putting it into practice, but it is the only solution I can come up with thus far.

[Empirical1.1]

You don't need to convince the Nubits guys simply because -----They think they are practicing Heyek theory of "Denationalization of Money",everything they're doing is in the name of Heyek .

Heyek was an economist who supports competition of private currencies,use a good control method to print good money to maintain stable purchasing power. Heyek claims that if someone can print money and make the money have stable purchasing power,then this money will become good money and win the market competition .

Yeah,well,the idea of printing stable good money is actually kinda cool ----as long as you can keep it good and stable and not fail over time.

I predict a reasonable rise in NuBit interest rates will actually lead to panic selling not parking.

At the moment the market doesn't worry about what is backing NuBits because the absence of a meaningful interest rate implies there is enough new NuBit demand.

Only when the interest rate starts rising does the market know demand is less than supply and then at that point they have to question how much decentralised backing NuBits have, how much interest they can afford to pay and how long the custodians will pay it before giving up.

As none of that is transparent as far as I know then the optimal decision will be to panic sell while NuBits still have value because at some point the custodians will also throw in the towel (take the remaining money and run) once the market starts to get too far away from them.

So NuBits will be short lived or not be able to compete with BitUSD + good yield anyway.

Edit: Shareholders not Custodians. Maybe I should read the thing properly first. I guess the same cycle still applies if the interest is backed by NuShares? As once demand for NuBits drops then NuShares will drop in value too. Anyway I probably got to read this more.
- Ok yeah 'think' I understand it better. Same thing as soon as interest rate gets too high (5-7%?) or if net demand is absent for a little too long (1 month?) then confidence is rapidly lost and market collapses.

[CoinHoarder]

Good point as to counterparty risk regarding market makers and centralized exchanges.

In a hypothetical situation where an exchange went insolvent for some reason, it could leave all Nubits owners holding the bag. If the original market makers lose all (or most) of their money due to exchange insolvency, they could decide not to be market makers anymore. At that point after the original market makers losing a lot of money, who would sign up for that job to be their successors? You would have to be crazy... and thus the "market peg" could be broken just like that. It would take a long time for a market maker to make enough money to where exchange insolvency would not put them in the red considering the amount of money they have on the exchanges.

That added to the risk of fractional reserve lending and quasi ponzi-like schemes that could be done by market makers without anyone knowing about it, Nubits looks like quite a risky alternative to bitUSD. Not to mention all the other hypotheticals..

Does anyone know how much Nushares are selling for? They have been using Nubits volume as a selling point, but I think this could be easily manipulated at very little cost by the developers. Assuming they had a lot of capital, and I am assuming they do seeing as though there were at least $2 million Nubits printed and the potential to sell 1 Billion Nushares for this purpose, $100,000 in volume could be bought with only $400.

It would be a sneaky/slimy marketing scheme to give confidence to Nubits buyers under the guise of actual volume. There would be no way anyone could prove this isn't happening.. I just find it hard to believe they are doing $100,000 plus in volume per 24 hours on a consistent basis like coinmarketcap reports. I have seen it higher than $200,000 at times and it just seems suspicious considering how new the technology is. Suspicious in that people are blindly trusting it for large sums of money right after its release without it being extensively tested in the real world and the solution proven to work consistently over a certain amount of time to trust that it will function properly.

[bytemaster]

You don't need to convince the Nubits guys simply because -----They think they are practicing Heyek theory of "Denationalization of Money",everything they're doing is in the name of Heyek .

Heyek was an economist who supports competition of private currencies,use a good control method to print good money to maintain stable purchasing power. Heyek claims that if someone can print money and make the money have stable purchasing power,then this money will become good money and win the market competition .

Yeah,well,the idea of printing stable good money is actually kinda cool ----as long as you can keep it good and stable and not fail over time.

This all comes down to the definition of "stable"...

[Bitcoinfan]

This is essentially what ETF's called Tracking Error.  You could just adopt this measure.

http://www.investopedia.com/articles/exchangetradedfunds/09/etf-tracking-errors.asp

[xeroc]

I only bring up NuBits because it serves as a great point of contrast to BitUSD and helps us others understand our own system better.

First smash them .. then play nice .. lol

anyway .. makes totally sense to me!
every read having  nubits and NOT selling the instant he finished reading this chould be a ..... (place random stupid word here)

[happybit]

Thank you for this great post!

I understand BitUSD much better now.. though still not fully.  I would love to see the NuBits community's reaction to this post.  Do they linger here, or can I post it there to see what they say?

[bytemaster]

I have been attempting to quantify the PEG and compare it to NuBits or other "IOU" based assets and define what success looks like and what a "market peg" really means. 

We have proven in another thread that BitUSD will always be sellable at the PRICE FEED within the 30 day forced covering period.  In this sense we have incontrovertible proof that BitUSD can be sold for about $1 worth of BTSX within a small percent at all times.   But this begs the question: "what is a dollars worth of BTSX"?    This value is constantly changing and never exactly defined because the BTSX/USD spread and volume is subject to the BTC/USD spread/volume and the BTC/BTSX spread/volume.   In other words the markets ability to value BTSX is only accurate within say 5% and everything else is noise until the system matures. 

So I think that viewing the peg on an "instantaneous basis" by looking at the spread between BitUSD on chain and USD off chain is about as accurate as claiming that the USD on two different exchanges (Bitstamp, Coinbase, etc) has broken the peg because they are not trading at the exact same BTC price.   We should instead focus the peg over time:

1) Assume USD per BTSX is $1.00
2) Assume BitUSD per BTSX is at 1.05  (ie: BitUSD is worth 95% of a real USD)
3) Assume USD per BTSX fell from $1.00 to $0.80?
4) Did BitUSD per BTSX fall to 0.84 BitUSD per BTSX?  YES    Did the spread widen... NO

If so then we can claim the PEG is 100% perfect because a 20% fall in USD price == a 20% fall in BitUSD price.

Everything else is nothing but spreads associated with transaction costs:

Bank->USD->BTC->BTSX->BitUSD
BitUSD->BTSX->BTC->USD->Bank

Anyone holding BitUSD isn't worried about losing their relative purchasing power (it cannot happen). 

So when someone from NuBits enters the picture and claims they have a 1:1 instant peg at all times then it means that all NuBits were sold for USD and the USD was held and could be sold back.  It is only possible because the "market makers" are not taking any risk *AT ALL* and they have real USD on deposit with an exchange.   In fact, they are so clever they hide the interest they charge you for using their NuBits in the spread...  100% guaranteed profit.  You buy NuBits for $1.00 and you can sell them back to them for $0.995   0.4% goes to the exchange, .1% goes to the market makers.   You are exposed to counter party risk and paying them for the privilege.  This might be their whole plan, to disguise a user issued asset as a decentralized trust-free crypto currency.   

What if they take the real USD *off of the exchange* and spend it on something (to fund infrastructure).... now the "market makers" have to increase their spread to cover transaction costs *AND* NuBits has just gone fractional reserve.  It is the same old fractional reserve ponzi scheme... build confidence by maintaining redeem-ability for a long enough period of time to earn "trust" then slowly remove the backing.    My conclusion here is that NuBits will continue to hold with a much tighter spread simply because of how they were issued... "sold for USD" rather than "sold for crypto" the backers of NuBits will not spend much of the USD they received by selling NuBits.  So NuBits can be viewed as a "basket of USD" held on multiple different exchanges where the issuers reserve the right to spend the depositors money and not redeem it.   As a NuBits holder you are now subject to the combined risk of all USD exchanges that the market makers are participating in PLUS the risk of NuShare holders spending the deposited funds.   There is never anything that returns value to NuBits except market maker spreads... only things that can suck value of of it.   It is a one way valve.   

I would contend that the spread we see on BitUSD is actually a badge of honor and proves we are the real deal.  Their "perfect peg" is proof that it is just another uncollateralized "user issued asset" that will pay interest proportional to the credit worthiness of the issuer.  At least with other USD coins the issuer is committed to 100% reserve and can hold the funds in a separate account from the exchanges.

Don't want to leave your money on an exchange... don't buy NuBits... it has the combined risk of all exchanges + issuer risk. 

I only bring up NuBits because it serves as a great point of contrast to BitUSD and helps us others understand our own system better.