Bolstering DEX Liquidity (previously my rant/opinion on Bitshares' DEX)

[Akado]

we need to use the reserve pool as collateral to create a bunch of smartcoin to help liquidity.

Isn't that similar to what @monsterer suggested in the past? Making the blockchain a market maker? We could have a worker proposal where X BTS from the pool would be locked in as collateral to create bitAssets. Could this make OpenLedger and others start using bitAssets instead of UIA? That way we would have shared order books which would be so much better than each exchange having their own UIA

[Nagalim]

What do you think of Market Maker Incentivization Worker Proposal? Could that provide useful incentives for liquidity?

I don't believe bitusd will ever have liquidity on real exchanges if all market making happens on the virtual exchange.  What I propose is fundamentally different from all the market maker approaches this community has put up because it will create real liquidity instead of just more inbred trading on the virtual exchange amongst bitasset holders.  Bitasset holders are not your target group, merchants and general adoption is.  You want people using bitusd that don't even really know what bitassets are.

Yes, make a bunch of smartcoins.  Then give them to Nu and let us provide liquidity for you.

[JonnyB]

we need to use the reserve pool as collateral to create a bunch of smartcoin to help liquidity.

[Samupaha]

What do you think of Market Maker Incentivization Worker Proposal? Could that provide useful incentives for liquidity?

[Randomaniac]

Ya'll will learn sooner or later that liquidity provision is about opportunity cost and you need to reward liquidity providers with a portion of your marketcap if you want a tight peg.

Liquidity provision is an investment and any investment should have a positive ROI.
If the investment in liquidity provision pans out, it will rather increase the market cap than cost a share of it - at least long-term.
This investment is what increases the value of the product and hence the value of the corporation producing it.

edit: one might say that you can't afford not spending that money ;-)

[Nagalim]

@Randomaniac Thanks for that... it was a very informative post. I am starting to wrap my head around Nushares. This was also very helpful: https://docs.nubits.com/history/

So I made this proposal the last time y'all started getting friendly and I was told you have no product to sell and I should come back after 2.0 comes out when you'll have a 'real product'.  So do you have a real product now?  Wanna hear the offer?

So we get an exchange to put up an nbt/bitUSD pair.  Then, bitAssets hands Nu bitUSD evaluated at $1 each.  Nu then puts up a fixed cost ALP operation on only the nbt buy side for that pair (we can pocket the costs for bot development).  Then, we share the fixed cost between the projects, such that bitAssets pays $0.5 bitUSD for every NBT that we hand out in that liquidity operation.

The real trick is finding the price feed.  It's probably going to be something like $1.1, which is still overpriced, but at least you'll start getting liquidity on the books.  As BitUSD becomes a more stable product, y'all will have a wonderful lesson in liquidity provision as you try to figure out what spread and price feed to use for real-time live-market tracking.

This isn't a proposal to add virtual liquidity, like all the market maker proposals going around in this community.  This will generate real liquidity on a real exchange for BitUSD sell side and NBT buy side, both will benefit.

I like this idea, but I see it as being a risky proposal for whoever fronts the bitUSD for the proposal. First of all, we would need to find someone willing to front a decent amount of bitUSD with no incentive. Technically, there is a little incentive in that if he also owned BTS tokens, then the bitUSD SmartCoin would be more liquid, and thus the BTS tokens more valuable. In this scenario all stakeholders profit off of the risk one person took. This doesn't really seem fair to the person(s) (ideally it would be more than one, but in the example I use one person) fronting the bitUSD.

I like where you're going, but unless I am missing something there is a benefit for Nushares/Nubits/BitUSD/BTS shareholders and all of the risk lies upon the shoulders of the person frontign the bitUSD. bitUSD need to be shorted into existence and bought on the market, so it's not like we can print them and "freeroll" the liquidity operation. How could we tweak your business proposition to make it worth the risk for someone to front the bitUSD (specifically a benefit to the person(s) that front the bitUSD. Raising the money would not be a problem- I see a UIA or a FBA doing that easily, but it seems risky for the party fronting the bitUSD with little incentive specifically for them.

I am still of the opinion it would be better for Bitshares to make its own version of Nubits/Nushares directly on the Bitshares chain. However, it seems your proposal would be much easier to implement and will bring benefits to all communities of shareholders (Nubits/Nushares/bitUSD/Bitshares) from their pegged assets being more liquid. That would at least be a good starting point until enough consensus can be reached (if that is indeed possible...) in the community to integrate these features on chain.

EDIT: One way to provide incentive to the person(s) fronting the bitUSD is to widen the peg, so instead of $1.10 the peg would be set at $1.13, and then instead of giving $0.50 bitUSD back to the person that fronted the bitUSD, you give back $0.53. What do you think about that? I think if there was a decent incentive the bitUSD could be raised easily.. and very quickly.

You say it's risky for the bts holders fronting the bitUSD and say nothing about the shareholders fronting nbt.  You need to understand that liquidity costs money.  You try to 'solve' the cost of liquidity by widening the peg and you end up right back where you started.  If your network can't put up a couple dollars a day for a working product, what good is you whatever a million marketcap?

Ya'll will learn sooner or later that liquidity provision is about opportunity cost and you need to reward liquidity providers with a portion of your marketcap if you want a tight peg.

[Randomaniac]

@Randomaniac Thanks for that... it was a very informative post. I am starting to wrap my head around Nushares. This was also very helpful: https://docs.nubits.com/history/

I'm glad you found the post helpful. I was trying to focus on liquidity providing and even that would have required so much more text. https://docs.nubits.com/history/ is indeed a valuable pool of information, but hasn't been updated for some time.
If you have any specific questions about Nu, please ask or dig in the nubits forum.

Combining strengths of BitShares and Nu would be great. @Nagalim's proposal seems to lead in a good direction. Would be valuable to follow that road and find a scheme that benefits BitShares and Nu!

[CoinHoarder]

I organized your post so it is easier to respond to. 

This is the most flattering thread I've seen for Nu on this forum, One year ago Nu was a ponzi scheme, horrible economics, disaster waiting to happen... on and on. (I mean it could be a disaster waiting to happen... who knows.) Now I arrive at this thread. I mean it's literally at the point where someone is suggesting to merge the design of Nu and B&C into the project and the responses are like "great idea!". We haven't really had to market Nu. I think we put out our first paid ads for NuBits on The Daily Decrypt just a couple weeks ago. That's it for paid marketing as far as I'm aware and it took us a year to get there. The project focuses mainly on results. I can promise you though if you guys decided to start following the implementation of Nu and B&C it will be the best free marketing we could ever ask for. I'm giddy just thinking about it.

First of all, not many people in the community have responded to this thread. There is probably little supports for merging Nushares/Nubits' design into Bitshares. I think a deal such that Nagalim is proposing is more realistic. Bitshares is not a complete failure, it has many benefits Nushares/Nubits/Peercoin do not have. Although Nubits has more liquidity than bitUSD, SmartCoins have other advantages such as leveraged trading, collateral, and it is much easier to trade different types of assets (BTC, GOLD, etc.) Furthermore, SmartCoins are only a small subset of what gives Bitshares its value. I'm not going to elaborate, but read through the pages here and you will understand what I mean: https://bitshares.org/technology/

It may be good marketing for Nushares/B&C if their features were implemented in Bitshares, but I still see Bitshares winning that war because it would have the features from both SmartCoins and Nushares/Nubits. I think the technologies combined are much better than them existing on their own. Thus, I see it being better for Bitshares in the long run unless Nushares/Nubits also integrates SmartCoin-like assets.

How does anyone expect investors to have any faith in BitShares if you guys have to pivot every nine months? What has this project consistently done well with since launch?  That's genuinely an honest question. I would like to know. My impression is the project tries to do everything, and because of that nothing gets done well. When is BitShares going to decide to focus on doing one thing really well?  I don't have a deep understanding of the project but I like to come by here and catch up on happenings. There's no real product focus. There will be no community or vision to stand on if the project doesn't have legs. I think the future of BitShares would be brighter by finding a real identity. Not through the community but through the product. I'm not really sure what this project is trying to do, and I don't think i'm alone there.

Bitshares is inherently chaotic by nature. At first we tried separate chains like you guys, but we found that there were benefits to combining the chains (something I supported since the beginning). Bitshares embraces innovation of all types and is not focused on a single industry, thus there are many opinions of what direction the project should and shouldn't go. The chaos is interesting because there's always something new to talk about. Some people see this as a weakness as you can see in the latest DEX vs MAS debate, but I see this as Bitshares' strength.... If it had not innovated in many different areas, IMO it would not be at where it is today (a top 10 market cap coin). The DEX, although functional, has not been a wild success due to low volume and liquidity, and thus Bitshares is really relying on the existence of those other innovations to support its value. The value of the BTS token would be much worse off if Bitshares was only simply a DEX. You are certainly right though as you said. As evidenced by recent debates you are not alone in thinking Bitshares needs to become a master in something or else it risks being average at everything.

Just wanted to leave some thoughts since this is a very strange thread to see on here. The BitShares community is much larger than Nu, and it has some really great members. It's why I like to come lurk.

I only have a small percentage of my cryptofolio invested in Bitshares, and thus I feel like I am more objective than some of the forum users that are heavily invested in Bitshares on here.  All of my ALT investments (of which I own many different coins/securities... mainly only innovative projects) are pretty evenly split to hedge the risks with most of my portfolio in Bitcoin/Litecoin because of network effects. Maybe I am just stupid/delusional/crazy... OK, I know I am at least a little crazy because I prefer studying cryptocurrencies than talking to human beings. 

I like to come here too even though I am not a large Bitshares investor, because there are a lot of smart people around these forums and there are usually interesting threads going on. Bitcointalk is just spam, shills, and trolls nowadays. I like to come here to vent, post ideas, and share my opinion on different things. I'm not sure anyone ever reads what I write, but I enjoy doing it nonetheless!   

[CoinHoarder]

@Randomaniac Thanks for that... it was a very informative post. I am starting to wrap my head around Nushares. This was also very helpful: https://docs.nubits.com/history/

So I made this proposal the last time y'all started getting friendly and I was told you have no product to sell and I should come back after 2.0 comes out when you'll have a 'real product'.  So do you have a real product now?  Wanna hear the offer?

So we get an exchange to put up an nbt/bitUSD pair.  Then, bitAssets hands Nu bitUSD evaluated at $1 each.  Nu then puts up a fixed cost ALP operation on only the nbt buy side for that pair (we can pocket the costs for bot development).  Then, we share the fixed cost between the projects, such that bitAssets pays $0.5 bitUSD for every NBT that we hand out in that liquidity operation.

The real trick is finding the price feed.  It's probably going to be something like $1.1, which is still overpriced, but at least you'll start getting liquidity on the books.  As BitUSD becomes a more stable product, y'all will have a wonderful lesson in liquidity provision as you try to figure out what spread and price feed to use for real-time live-market tracking.

This isn't a proposal to add virtual liquidity, like all the market maker proposals going around in this community.  This will generate real liquidity on a real exchange for BitUSD sell side and NBT buy side, both will benefit.

I like this idea, but I see it as being a risky proposal for whoever fronts the bitUSD for the proposal. First of all, we would need to find someone willing to front a decent amount of bitUSD with no incentive. Technically, there is a little incentive in that if he also owned BTS tokens, then the bitUSD SmartCoin would be more liquid, and thus the BTS tokens more valuable. In this scenario all stakeholders profit off of the risk one person took. This doesn't really seem fair to the person(s) (ideally it would be more than one, but in the example I use one person) fronting the bitUSD.

I like where you're going, but unless I am missing something there is a benefit for Nushares/Nubits/BitUSD/BTS shareholders and all of the risk lies upon the shoulders of the person frontign the bitUSD. bitUSD need to be shorted into existence and bought on the market, so it's not like we can print them and "freeroll" the liquidity operation. How could we tweak your business proposition to make it worth the risk for someone to front the bitUSD (specifically a benefit to the person(s) that front the bitUSD. Raising the money would not be a problem- I see a UIA or a FBA doing that easily, but it seems risky for the party fronting the bitUSD with little incentive specifically for them.

I am still of the opinion it would be better for Bitshares to make its own version of Nubits/Nushares directly on the Bitshares chain. However, it seems your proposal would be much easier to implement and will bring benefits to all communities of shareholders (Nubits/Nushares/bitUSD/Bitshares) from their pegged assets being more liquid. That would at least be a good starting point until enough consensus can be reached (if that is indeed possible...) in the community to integrate these features on chain.

EDIT: One way to provide incentive to the person(s) fronting the bitUSD is to widen the peg, so instead of $1.10 the peg would be set at $1.13, and then instead of giving $0.50 bitUSD back to the person that fronted the bitUSD, you give back $0.53. What do you think about that? I think if there was a decent incentive the bitUSD could be raised easily.. and very quickly.

[Nagalim]

Nu has the liquidity bots, the operators (with branding), the liquidity providers, the reliable grant mechanism, and the widespread market on real exchanges.  BitUSD has the >100% decentralized collateralization that Nu wants to use for T4 operations.  BitAssets needs sell liquidity, Nu needs buy liquidity.  Together we both are getting double the liquidity than we would on a pairing with btc or the like.

[kenCode]

So I made this proposal the last time y'all started getting friendly and I was told you have no product to sell and I should come back after 2.0 comes out when you'll have a 'real product'.  So do you have a real product now?  Wanna hear the offer?

So we get an exchange to put up an nbt/bitUSD pair.  Then, bitAssets hands Nu bitUSD evaluated at $1 each.  Nu then puts up a fixed cost ALP operation on only the nbt buy side for that pair (we can pocket the costs for bot development).  Then, we share the fixed cost between the projects, such that bitAssets pays $0.5 bitUSD for every NBT that we hand out in that liquidity operation.

The real trick is finding the price feed.  It's probably going to be something like $1.1, which is still overpriced, but at least you'll start getting liquidity on the books.  As BitUSD becomes a more stable product, y'all will have a wonderful lesson in liquidity provision as you try to figure out what spread and price feed to use for real-time live-market tracking.

This isn't a proposal to add virtual liquidity, like all the market maker proposals going around in this community.  This will generate real liquidity on a real exchange for BitUSD sell side and NBT buy side, both will benefit.

This sounds very interesting indeed. One of my major concerns has been the mass adoption of smartcoins so this might just be an avenue. Hmmm

[Nagalim]

So I made this proposal the last time y'all started getting friendly and I was told you have no product to sell and I should come back after 2.0 comes out when you'll have a 'real product'.  So do you have a real product now?  Wanna hear the offer?

So we get an exchange to put up an nbt/bitUSD pair.  Then, bitAssets hands Nu bitUSD evaluated at $1 each.  Nu then puts up a fixed cost ALP operation on only the nbt buy side for that pair (we can pocket the costs for bot development).  Then, we share the fixed cost between the projects, such that bitAssets pays $0.5 bitUSD for every NBT that we hand out in that liquidity operation.

The real trick is finding the price feed.  It's probably going to be something like $1.1, which is still overpriced, but at least you'll start getting liquidity on the books.  As BitUSD becomes a more stable product, y'all will have a wonderful lesson in liquidity provision as you try to figure out what spread and price feed to use for real-time live-market tracking.

This isn't a proposal to add virtual liquidity, like all the market maker proposals going around in this community.  This will generate real liquidity on a real exchange for BitUSD sell side and NBT buy side, both will benefit.

[Randomaniac]

I was also not a fan of NuBits and think it will at some time come unstuck but the volume is pretty good and I was impressed that they paid out over $400 000 in dividends to shareholders over the last year representing a 25% yield to NuShares shareholders.
[...]
Do any people who follow NuBits more know how much the market makers need to be subsidized?

So far the track record of Nu is ok for the first year. February 2015 and the months after that were bad because Nu lost a lot of money due to exchange defaults. Back then the liquidity providing was done with funds that Nu owned and handed over to custodians to provide the market with liquidity.

This model has been reworked and now Nu pays for market makers who provide liquidity with their own funds.
The average monthly revenue for market makers is approximately 7%. That seems big, but apart from the exchange default risk it needs to compensate BTC volatility (the main trading pair is still NBT/BTC, although USD/NBT and CNY/NBT are available as well).
These 7% are paid by Nu up to a maximum volume (some tens of thousands USD value each side all exchanges combined, Poloniex has the biggest volume: https://alix.coinerella.com/walls/?).
A dutch auction model kicks in if the liquidity volume is above that threshold and reduces the effective interest.

This is speaking of the so-called ALP (automated liquidity pool) where a custodian operates a server software and liquidity providers provide funds with ALP clients. They stay in full control over the funds as the ALP client puts orders via exchange API and reports them to the ALP server, which credits them each minute. The money never leaves the exchange account of the liquidity provider (unless stolen, etc.; it might just get converted of the orders get filled)

A second way to provide liquidity is via MLP (managed liquidity pool). In this version a liquidity provider uses NuBot to place orders. The funds are under direct control of the NuBot operator.

For more information on liquidity providing have a look here: http://docs.nubits.com/liquidity-pools/

There are a lot of changes on the road map.
The ALP and MLP software are currently being merged and will in the future be based on NuBot (https://bitbucket.org/JordanLeePeershares/nubottrading/src/master/docs/SETUP.md).
The reward scheme will be changed to a fixed compensation scheme where x NBT are paid per side and liquidity providers fight over the compensation. That is expected to have some advantages over the dutch auction model as it makes providing liquidity especially attractive (in terms of interest) if the order sizes on the book are small for whatever reason.
This is expected to help the money flow between the different tiers (of Nu's tiered liquidity model), different exchanges, because it incentivizes tracking wall sizes to put orders preferred at exchanges with low order volume.
The motion regarding the tiered liquidity model: https://discuss.nubits.com/t/finalized-evolution-of-liquidity-operations/618
An interpretation of it: https://discuss.nubits.com/t/interpretation-of-the-liquidity-tiers-a-waterfall-model-triggers-metrics-and-actions/2914
The begining of the ALP: https://discuss.nubits.com/t/trust-less-liquidity-pool/1686 (back then called "trustless liquidity pool")

This might sound confusing, has a lot of links and I bet I used some words that are not really self-explanatory. Sorry for that. But the liquidity providing is a quite complex area if you are interested in the inner workings and one of Nu's important functions.
If you just want to make some money providing liquidity, it can be as easy as sending funds to the major MLP "Nulagoon" (http://nulagoon.com/lqpools.html) or downloading and configuring an ALP client.
If you have questions that are not answered here (because I think not too many from the Nu community are frequently here), feel free to ask at https://discuss.nubits.com/!

[Sentinelrv]

That's because BitShares is a platform where anyone can do whatever they want.

This seems to be the main difference. Our communities seem to have completely opposite development philosophies. It seems that NXT, Ethereum, BitShares, etc... are all trying to do too many things in an effort to be everything to everyone. The Peercoin/Nu/B&C communities have a more modular based development philosophy. I'm reminded of 2 quotes by Nu's founder Jordan Lee...

"Ethereum is based on the notion that one blockchain can rule them all, or that a cleverly built blockchain can serve a wide variety of business models simultaneously. My guess is that it will not optimally serve any business model. The Peershare philosophy is quite different. It employs separate blockchains with diverse protocols for diverse business models. Each Peershare doesn't do everything, but each one does something very well. As a group, they can serve a wide variety of business models."

"Consensus is difficult to maintain in blockchain implementations. Accidental forks happen and can be devastating in terms of double spends. Combining multiple business models into a single blockchain makes accidental forks more likely. Having a dev who supports one business model among several and is ignorant of the inner workings of the other business models is dangerous. Blockchain solutions also have scalability issues and combining multiple use cases into a single blockchain accentuates this weakness."

We see this in the form of Nu acting as a decentralized corporation for stable pegs and B&C acting as a decentralized exchange. Each Peershares implementation is a separate blockchain with a different purpose and business model. This allows the owners of each network to solely focus on the things that are important to their business without having to worry about other business models on the network that may not be important to them. NuShareholders can focus on keeping the peg and increasing adoption. BlockShareholders can focus on increasing trading and building exchange specific features. The two won't get in each others way by building both on the same blockchain and complicating matters. In the future I foresee an entire ecosystem of different Peershares implementations with various business models all working together in unison. Peercoin, Nu and B&C are only the beginning.

[Empirical1.2]

@CoinGame I'm really surprised, too. This community's tone towards NuBits has made a complete reversal in the past year.

I miss @tonyk hating on me because my first post was in a NuBits thread.

Good times.

I was also not a fan of NuBits and think it will at some time come unstuck but the volume is pretty good and I was impressed that they paid out over $400 000 in dividends to shareholders over the last year representing a 25% yield to NuShares shareholders.

$409,811 have been distributed as dividends2 over the last year, most of which was as BlockShares. Given the current NuShare market cap of $1,628,335, that is a stunning 25.17% dividend yield.

No one can say for sure whether there will be dividends in the future, but shareholders will make that decision directly. It depends on whether there are additional distributions for new Peershares like B&C Exchange, whether Nu is successful, and whether shareholders choose to use excess funds for development, share buyback or dividends. Right now they are being used for development and there is a new motion currently being voted on that would conduct share buybacks. It is unclear at the moment whether that will pass, but I suspect it will.
It is unclear whether shareholders will choose to have future excess funds used only for share buybacks or a combination of buybacks and dividends.

https://discuss.nubits.com/t/how-many-dividend-distributions-has-nushares-had-will-there-be-any-more/2739/3


Do any people who follow NuBits more know how much the market makers need to be subsidized?