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Obviously you cannot use the market cap of NuShares as a basis of solvency because it is based on the spot price where there is relatively little depth.
I would be very interested to know how many NuBits are held by parties other than your market making custodians or NuShare insiders ready to support the peg?
So while technically you say there are no "reserves" that is only true legally but not true practically.
Saying that NuBits is like fractional reserve banking is a much better comparison than calling it a Ponzi.
Assuming you're one of the Custodians,would you consider withdrawing the buy wall after selling some Nubits a crime or fraud ?
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.
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.
That is true, BTER trades nubits for btc, but if someone wants to buy nushares(from Jordan Lee?) he can do it only with nubits, so he has to buy nubits and sell them for nushares. I don't know if there is something else happening.
This is not true. In fact, the team received the first request to pay for NuShares with NuBits on Wednesday. As of this moment, no NuShares have been purchased with NuBits.
Ah, but only those elites with $9,000 to burn can get in this game, right?
That is true, BTER trades nubits for btc, but if someone wants to buy nushares(from Jordan Lee?) he can do it only with nubits, so he has to buy nubits and sell them for nushares. I don't know if there is something else happening.
In 1980 when demand for the US dollar was in decline the Federal Reserve raised interest rates to the high teens. People were quite happy to buy dollars and treasury notes to receive these high interest payments. Far from being an unsustainable action, it saved the US dollar from hyperinflation at that time. 34 years later it remains viable.This is a fallacious comparison. Paul Volcker's action of raising the federal funds rate from 1979 to 1981 had the effect of decreasing the total money supply, because the USA operates on a fractional reserve system. If a bank loans money in the USA, money is created. When it is repaid, the money is destroyed. This is completely incomparable to the NuBits interest rate mechanism.
A high NuBits interest rate results in a higher total money supply, not a lower total supply.
If NuShares placed their Shares as collateral against NuBits then you would have BitShares assuming NuShares were a freely traded crypto and the interest rate voted on by NuShare holders was the interest rate PAID by the shorts to the longs.
... it all depends upon trust in a central authority to perform market intervention to buy back NuBits.....
This is not accurate.
There is no central authority and there is no need to buy back NuBits to support the price when demand is in decline. Instead, shareholders spread throughout the world can vote to provide incentives to hold NuBits by offering interest rates on parked NuBits.
Delayed inflation dependent upon continual growth to prevent losing all value.
Tell me this... If the dollar was loosing value and the us government decided they would prop it up by paying interest via inflation would you lock your savings away in a cd hoping that the interest earned would outpace the very inflation it creates?
Would you trust the fed to buy back dollars with their assets to stop inflation.
In 1980 when demand for the US dollar was in decline the Federal Reserve raised interest rates to the high teens. People were quite happy to buy dollars and treasury notes to receive these high interest payments. Far from being an unsustainable action, it saved the US dollar from hyperinflation at that time. 34 years later it remains viable.
The Nu network's mechanisms for handling booms and busts in the level of demand for currency are classic, having long been demonstrated to be effective in the management of other currencies.
What is revolutionary about Nu is the decentralized control of these proven currency management mechanisms. Shareholders dispersed throughout the world simply configure their vote in their client and mint. Their votes are recorded in the blockchain and the protocol changes supply and interest rates accordingly.
You're comparing Nubits to the almighty US of A with the most economic power on earth ? Shouldn't you consider that if North Korean made the same move ,it would be another outcome ?
If USA FED give me a note says 100 USD,I'll trade it no matter what the low value it'll be ,because I know that USA is a super power,and super power have great futures no matter what the status quo says . It's this kind of confidence that brings more people to hold the USD value not just the FED's interest rate or
whatever technical detail they use to regulate the currency.
You can copy the method,but you can't copy the faith in people,so same method does not always get same result,that goes your entire theory .
... it all depends upon trust in a central authority to perform market intervention to buy back NuBits.....
This is not accurate.
There is no central authority and there is no need to buy back NuBits to support the price when demand is in decline. Instead, shareholders spread throughout the world can vote to provide incentives to hold NuBits by offering interest rates on parked NuBits.
Delayed inflation dependent upon continual growth to prevent losing all value.
Tell me this... If the dollar was loosing value and the us government decided they would prop it up by paying interest via inflation would you lock your savings away in a cd hoping that the interest earned would outpace the very inflation it creates?
Would you trust the fed to buy back dollars with their assets to stop inflation.
... it all depends upon trust in a central authority to perform market intervention to buy back NuBits.....
