Author Topic: NuBits backed by NuShares  (Read 4248 times)

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Offline gamey

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I liked this article, it discussed technical details.

My negative reaction to the previous article was mostly that I felt the community at large would see us in a bad light because we were bashing a competitor.  This did occur.

I think this article does a good job of helping to temper that somewhat and seeming more reasonable.

I always question how people come to these conclusions.  You are taking a sample of people who are self-selecting (noisey/whiney) and then basing the overall effect.

Maybe those persuaded by the article will never say a word.
Maybe those who had no chance of being persuaded will just take their role in defense of nushares.
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Offline Ander

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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....

lol

NuBits are burned, not NuShares.   It happens by shareholder vote. 
Under the plan, they dilute their own equity in NuShares in order to make NuBits holders who they were not able to pay $1.00 to whole. 
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Offline liondani

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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....

lol

Offline Ander

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I liked this article, it discussed technical details.

My negative reaction to the previous article was mostly that I felt the community at large would see us in a bad light because we were bashing a competitor.  This did occur.

I think this article does a good job of helping to temper that somewhat and seeming more reasonable.
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Offline bytemaster


I'm not sure about your other reasoning, but you cannot use 'market cap' as collateral. Market cap is just a calculation of the spot price times the total supply. Market cap can be used as a 'best indicator' for ecosystem-value of a token, but it is not actually the true value of all the tokens combined. To calculate value, you first of all need to set a definition for what 'value' means. In this case, it seems to be 'the amount of $USD I can get by selling them', which is also useful for when comparing to BitUSD. So, the 'value' of all NuShares is going to be far, far less than the market cap of NuShares in a given instant, since this definition of value relies on market depth. You could even argue that calculating this 'value of all NuShares' is impossible and/or meaningless anyway, as there is no situation where anyone would sell all NuShares at once, or even over a small (or large!) time frame.

It is important to note that BitAssets also have this problem of not considering market depth into its pegging algorithm, but mitigate the risk of manipulation of this by utilizing an internal free market.

I agree.  In using the market cap of NuShares to measure the collateral, this assumes that you can gradually dilute the NuShares value over time to pay off the NuBits holders, and that you dont have to do it in a short time. 

The market cap is an estimate for how much value you can get in order to do this, but its certainly not exact, I was thinking of it as a ballpark figure.

http://bytemaster.bitshares.org/article/2015/01/14/A-New-Perspective-on-NuBits/

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Offline Ander

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I'm not sure about your other reasoning, but you cannot use 'market cap' as collateral. Market cap is just a calculation of the spot price times the total supply. Market cap can be used as a 'best indicator' for ecosystem-value of a token, but it is not actually the true value of all the tokens combined. To calculate value, you first of all need to set a definition for what 'value' means. In this case, it seems to be 'the amount of $USD I can get by selling them', which is also useful for when comparing to BitUSD. So, the 'value' of all NuShares is going to be far, far less than the market cap of NuShares in a given instant, since this definition of value relies on market depth. You could even argue that calculating this 'value of all NuShares' is impossible and/or meaningless anyway, as there is no situation where anyone would sell all NuShares at once, or even over a small (or large!) time frame.

It is important to note that BitAssets also have this problem of not considering market depth into its pegging algorithm, but mitigate the risk of manipulation of this by utilizing an internal free market.

I agree.  In using the market cap of NuShares to measure the collateral, this assumes that you can gradually dilute the NuShares value over time to pay off the NuBits holders, and that you dont have to do it in a short time. 

The market cap is an estimate for how much value you can get in order to do this, but its certainly not exact, I was thinking of it as a ballpark figure.
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Offline fluxer555

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...

I'm not sure about your other reasoning, but you cannot use 'market cap' as collateral. Market cap is just a calculation of the spot price times the total supply. Market cap can be used as a 'best indicator' for ecosystem-value of a token, but it is not actually the true value of all the tokens combined. To calculate value, you first of all need to set a definition for what 'value' means. In this case, it seems to be 'the amount of $USD I can get by selling them', which is also useful for when comparing to BitUSD. So, the 'value' of all NuShares is going to be far, far less than the market cap of NuShares in a given instant, since this definition of value relies on market depth. You could even argue that calculating this 'value of all NuShares' is impossible and/or meaningless anyway, as there is no situation where anyone would sell all NuShares at once, or even over a small (or large!) time frame.

It is important to note that BitAssets also have this problem of not considering market depth into its pegging algorithm, but mitigate the risk of manipulation of this by utilizing an internal free market.

Offline Ander

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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.

I was only talking about the mechanics of how bitAssets worked vs Nubits.

I agree we have multiple other advantages as well.  The ability of the blockchain to hire paid delegates, and a solid dev team.

(We also have weaknesses - they are better at PR than us.  Hopefully new community efforts are going to change this).
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Offline sschechter

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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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Offline davidpbrown

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 Ander

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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 sschechter

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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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zerosum

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[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 Ander

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[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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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....