There have been several objections to my mention of Bitshares trading proxy assets. There has been a misunderstanding, so I apologize for my part in that. I'm not suggesting BitUSD is a proxy asset, because Bitshares is the native blockchain of BitUSD. I was referring to assets like BitBTC that are in fact proxies for assets native to foreign blockchains.

Quote from: bytemaster on January 16, 2015, 03:08:52 AM
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.

As I understand it, Nu and Bitshares are quite similar in this regard. In Bitshares, if a margin call is not met, it causes a liquidation, I presume, which due to limited liquidity would reduce the value of all collateral.

Quote from: bytemaster on January 16, 2015, 03:08:52 AM
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?

We are developing automated reporting to make this figure publicly available in real time. While I don't have access to real time figures, there are almost certainly between 500,000 and 1,000,000 NuBits out in the wild right now.

Quote from: bytemaster on January 16, 2015, 03:08:52 AM
So while technically you say there are no "reserves" that is only true legally but not true practically.

There are some reserves right now. My point is that because reserves equate to counterparty risk and are not necessarily useful in backing NuBits, we are aiming for 0% reserves,  not 100%.

I have an unrelated question about how Bitshares operates, if you will indulge my ignorance for a moment.  Let us suppose I purchase BitUSD, and then the value of BTS drops such that the party that went long BTS to create my BitUSD receives a margin call. The issuer does not meet the margin call, which I presume causes a liquidation. What happens to my BitUSD at that point?

Quote from: Ander on January 16, 2015, 01:55:07 AM
Saying that NuBits is like fractional reserve banking is a much better comparison than calling it a Ponzi. :)

I created a detailed post examining whether the notion of fractional reserve has any meaning within the Nu network eight hours ago. In short, because Nu is designed for zero counterparty risk and zero reserves, there can be no fractional reserve. There is, however, the related notion of a ratio of assets to liabilities:

https://discuss.nubits.com/t/regarding-reserves-and-fractional-reserve/1126

I hope you don't think it is inappropriate to post a link to our forum here, but where you are interested in fractional reserve in the context of NuBits right now, and where I just wrote about that, it seems appropriate to bring it to your attention.

Quote from: tbkmcjl on October 16, 2014, 07:04:23 AM
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.

Quote from: Empirical1.1 on October 15, 2014, 04:01:03 PM
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.

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.

Quote from: bytemaster on October 15, 2014, 02:44:11 PM
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.

Quote from: bytemaster on October 15, 2014, 02:44:11 PM
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.

Quote from: bytemaster on October 15, 2014, 02:44:11 PM
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.

Quote from: donkeypong on September 26, 2014, 07:07:43 PM

Quote from: JordanLee on September 26, 2014, 06:48:24 PM

Quote from: chryspano on September 26, 2014, 05:28:52 AM
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 not correct either. Anyone who has something to offer the network can get NuShares, in many cases without paying so much as a bitcent for them. I detailed this here:

http://discuss.nubits.com/t/undistributed-nushares/125/9

Quote from: chryspano on September 26, 2014, 05:28:52 AM
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.

Quote from: Chronos on September 24, 2014, 03:41:29 PM

Quote from: JordanLee on September 24, 2014, 02:50:06 PM
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.

Lending will certainly be an important part of the Nu ecosystem. Fractional reserve is simply the most efficient way to conduct lending. You are confusing what Nu is on day 2 with what will eventually be. Before too long it will indeed be comparable.

Quote from: bytemaster on September 24, 2014, 04:13:45 PM
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.   

What happens if the collateral loses value? This approach introduces a serious default risk. As it is, the viability of NuBits does not depend on maintaining the value of NuShares.

Quote from: tbkmcjl on September 24, 2014, 03:22:15 PM

Quote from: JordanLee on September 24, 2014, 02:50:06 PM

Quote from: bytemaster on September 24, 2014, 02:27:33 AM

Quote from: JordanLee on September 24, 2014, 02:19:45 AM

Quote from: bytemaster on September 23, 2014, 09:16:38 PM
... 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 .

This points to a question which is at the heart of the experiment that is the Nu network:

Do we need powerful centralized organizations using force to back currency?

Many people think so. I believe a system that has integrity and is reliable is sufficient. If time proves me correct, we will have demonstrated that force is unnecessary to provide the money people need to cooperate economically, and greater peace will result.

Quote from: bytemaster on September 24, 2014, 02:27:33 AM

Quote from: JordanLee on September 24, 2014, 02:19:45 AM

Quote from: bytemaster on September 23, 2014, 09:16:38 PM
... 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.

Quote from: bytemaster on September 23, 2014, 09:16:38 PM
... 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.