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Offline bytemaster

NuBits backed by NuShares
« on: January 14, 2015, 08:57:14 PM »

I have seen a proposal for NuBits to be backed by NuShareholders but would like to delegate some research on the topic:

1) I believe NuShareholders can vote to issue new NuShares to buy NuBits and burn them.
2) How does value accrue to NuShares?   


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Offline Chronos

Re: NuBits backed by NuShares
« Reply #1 on: January 14, 2015, 09:16:55 PM »
Point (1) is an ongoing discussion in the NuBits forums. The "NBT burn" feature is in the proposal stage. See https://discuss.nubits.com/t/burning-a-specific-amount-of-currency/1049

On point (2), at a high level, value exists when there is a willing buyer.

Offline davidpbrown

Re: NuBits backed by NuShares
« Reply #2 on: January 14, 2015, 09:21:47 PM »
I took a quick look and really can't make much sense of it. Not liking their forum design either.

It seems that NuShares holders get the benefit of the price trying to rise above $1. They provide guarantee of liquidity on the sell side and the buy side is guaranteed by shareholders signalling to raise interest rates.

https://nubits.com/sites/default/files/assets/nu-whitepaper-23_sept_2014-en.pdf page 9 Buy Side Liquidity and Liquidity Pool Tracking.

Looks like a big money trap that would work for a while only because everyone is stuck in it. :-\
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Offline Ander

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Re: NuBits backed by NuShares
« Reply #3 on: January 14, 2015, 09:34:07 PM »
How it works is that they can burn NuBits by issuing new NuShares in their place.  Essentially, if it begins to fail, they can lose some of their equity instead of letting the thing completely collapse. 


In Bitshares terms, it is as if the 'cover bitUSD short' created BTS and gave it to the former bitUSD owner.  (Instead of unlocking BTS that was tied up in collateral and giving it to the former bitUSD owner). 

This action would have to be voted on by NuShares holders.


The way that NuShares gets value is because they get dividends in Peercoins, but I'm not certain how this works exactly.
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Offline vlight

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Re: NuBits backed by NuShares
« Reply #4 on: January 14, 2015, 09:41:24 PM »
Any possibility the money for sold NuBits are being used to drive NuShares price up ? Just wondering

Offline bytemaster

Re: NuBits backed by NuShares
« Reply #5 on: January 14, 2015, 09:41:27 PM »
Ok.. lets get this cleared up...

NuShareholders must VOTE on whether or not to default on NuBits.... 

If they default on Nubits then they declare bankruptcy and the game is over.

NuShares have value because they are a license to PRINT Nubits and do what ever they want with the money.

Thus NuShares is essentially a company and Nubits are an uncollateralized corporate bond.   

*IF* NuShares can use the funds raised by its bond issuance to produce enough value to pay off the loan then it can continue. 

Got it.  Easy to explain in non-ponzi terms. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bytemaster

Re: NuBits backed by NuShares
« Reply #6 on: January 14, 2015, 09:42:06 PM »
Any possibility the money for sold NuBits are being used to drive NuShares price up ? Just wondering

It is possible, they only have 100K volume.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Ander

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Re: NuBits backed by NuShares
« Reply #7 on: January 14, 2015, 10:04:59 PM »
Ok.. lets get this cleared up...


If they default on Nubits then they declare bankruptcy and the game is over.

No, they create some NuShares and burn some Nubits, not all of them.  This allows the supply to contract so that it is no longer greater than demand, so that the price can stay at $1. 

It is similar to how the bitUSD supply can contract.   When a short covers and bitUSD ceases to exist, the game isnt "over".
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zerosum

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Re: NuBits backed by NuShares
« Reply #8 on: January 14, 2015, 10:31:14 PM »
Ok.. lets get this cleared up...


If they default on Nubits then they declare bankruptcy and the game is over.

No, [1]they create some NuShares and burn some Nubits, not all of them.  This allows the supply to contract so that it is no longer greater than demand, so that the price can stay at $1. 

[2]It is similar to how the bitUSD supply can contract.   When a short covers and bitUSD ceases to exist, the game isnt "over".


[1] typical with the rest of the stuff how NuBits work - total nonsense in other words.
[2] Ander I will kindly ask you to stop making generalizations of this kind... "burning fuel is kind of the way sun is heating the planet"...well in both cases some forms of energy released so yes...but NO!!!!

Ok.. lets get this cleared up...

NuShareholders must VOTE on whether or not to default on NuBits.... 

If they default on Nubits then they declare bankruptcy and the game is over.

NuShares have value because they are a license to PRINT Nubits and do what ever they want with the money.

Thus NuShares is essentially a company and Nubits are an uncollateralized corporate bond.   

*IF* NuShares can use the funds raised by its bond issuance to produce enough value to pay off the loan then it can continue. 

Got it.  Easy to explain in non-ponzi terms.

I am kind of hard pressed to explain this in not Ponzi terms... but leaving the word Ponzi behind...
nushares holders will vote to exchange Nubits for nushares...cause having a piece of the voting chairs in the Fed has intrinsic value...
There is of course novel proposals those  Nushares used for repurchasing the excess Nubits to be newly issued one of course [cause it will be nicer]  :), but even without this  the reminder of their 'burning' ideas are ridiculously stupid enough....

Offline Ander

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Re: NuBits backed by NuShares
« Reply #9 on: January 14, 2015, 10:38:21 PM »

[2] Ander I will kindly ask you to stop making generalizations of this kind... "burning fuel is kind of the way sun is heating the planet"...well in both cases some forms of energy released so yes...but NO!!!!

What I meant is: Burning NuBits serves an analogous function in their system as covering a bitUSD short does in ours.  But the mechanism is different.
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zerosum

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Re: NuBits backed by NuShares
« Reply #10 on: January 14, 2015, 11:04:53 PM »

[2] Ander I will kindly ask you to stop making generalizations of this kind... "burning fuel is kind of the way sun is heating the planet"...well in both cases some forms of energy released so yes...but NO!!!!

What I meant is: Burning NuBits serves an analogous function in their system as covering a bitUSD short does in ours.  But the mechanism is different.

They are trying to achieve a similar result but their mechanism does not work...is the correct statement.


There is of course novel proposals those  Nushares used for repurchasing the excess Nubits to be newly issued one of course [cause it will be nicer] 

Reading this again...well I do no think they have other mechanism but to exchange excess NuBits for newly issued Nushare! [or use voluntaries willing to burn their NuShares]
Burning/Destroying proportionate part of everybody's NuShares holdings is the solution, but I do not think there is a working solution to do this on a blockchain...
« Last Edit: January 14, 2015, 11:06:44 PM by HRickover »

Offline sschechter

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Re: NuBits backed by NuShares
« Reply #11 on: January 14, 2015, 11:42:55 PM »
And yet no one ever says NuShares is centralized and run by a network of insiders.....shows how hypocritical crypto nerds really are.  We say we want one thing.....until theres money involved.
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Offline Ander

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Re: NuBits backed by NuShares
« Reply #12 on: January 14, 2015, 11:51:59 PM »
The NuShares method allows the equity of NuShares to be burned to eliminate the NuBits.  This is essentially backing NuBits with NuShares as collateral.  Intuitively, I think that you could consider that NuBits is backed by 100% of the market cap of NuShares, but I am not sure how this would hold up in a panic scenario.

This leaves us with two advantages over the Nubits/Nushares system:

1) Our bitAssets are backed with 200-300% collateral worth of BTS, wheeras NuBits is only 100% of its value in NuShares, I think.  (I am really unsure about this point, however it seem clear to me that we have more collateral)

2) It is impossible to create "too many" bitAssets, exceeding the value of BTS collateral that backs them, because the system wont let you.  However, if NuShares voters were not careful, it would be possible for the supply of NuBits to exceed the market cap of NuShares, and thus the NuShares 'collateral' would be insufficient to cover it. 

Perhaps it is more correct to say that the %age collateralization in Nubits is equal to the current ratio between the market cap of Nubits and Nushares?

So if there is $4M of Nubits, and $8M of Nushares, it has 200% collateral.  But if there became $16M Nubits, and still only $8M shares value, the collateralizaiton would drop to 50%.


Looked at in this way, the Nubits burning system does provide some safety, but not as much as there is in bitAssets.  The system could still fall apart if the market cap of NuShares was not sufficient to support the number of NuBits that needed to be burned away in a failure scenario.


bitAssets are not completely safe either, if the value of BTS was to absolutely collapse to zero very fast, they would similarly become valueless, (they are like far in the money derivatives of BTS).  However, they are much more safe than Nubits/Nushares.  The Nushares system with burning is safer than the initial version without burning.
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Offline davidpbrown

Re: NuBits backed by NuShares
« Reply #13 on: January 14, 2015, 11:58:44 PM »
This leaves us with two advantages over the Nubits/Nushares system:

Long time since I looked at anything PPC related but I suspect a third advantage is the quality*quantity of devs. The one core dev behind PPC/Primecoin was sound but was only one - I don't know if that has changed substantially.
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Offline sschechter

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Re: NuBits backed by NuShares
« Reply #14 on: January 14, 2015, 11:59:20 PM »
How are shares burned? Who does the burning? Do they just disappear from your wallet?

Please don't tell me that the plan is that shareholders will do this voluntarily....

And also, claiming that this unimplemented share burning proposal makes this not a Ponzi would be like Madoff telling regulators he had a proposal to buy real assets some day....
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