Liquidity Pool Discussion

[abit]

I'd recommend consult the ones who are in market maker business (with bots). @clayop @alt @maqifrnswa @iHashFury and who else?

//Update: in regards to Nubits, I suggest that make some research on their real costs of liquidity bots. Might not be so good as it looks like. Many hidden/under-water costs.

[Empirical1.2]

Below is an example of a liquidity pool implementation. I imagine if we created millions of BitUSD via yield harvesting and we lowered forced settlement to $0.95 & attempted a similar implementation with a wider peg say $0.99 - $.1.01, that we'd be able to achieve a similar result for a similar cost?

My concern is that there will be excess BitUSD demand initially at $1.01 but the below implementation attempts to raise interest rates when that is the case. If anyone with experience in market making or liquidity pools, could give their input on the following

Questions/Input Required

1. Is this a cost-effective way of achieving liquidity and a tighter peg for BitUSD?
2. Would having a lot of BitUSD created via yield harvesting make it easier/more BitUSD available to be attracted to the pool.

Pool A:

Participants

1. Pool A will accept deposit in BTC and NBT. The BTC deposit address is: xxxxx, and NBT deposit address is: yyyyy. Deposit transactions will be published.

2. The send-from address of every deposit transaction will be the address to receive fund withdraw in future.

6. The number of shares of participants will be: Amount of NBT deposit / NAV in effective day or Amount of BTC deposit * BTC price at 10:00am in effective day / NAV in effective day.

7. The asset of participants will be The number of shares * NAV

8. If participants withdraw fund, they will get The number of shares * NAV in NBT or The number of shares * NAV / BTC price in BTC


Fee and Calculation

1. When the pool begin operate, I will propose a motion to let Nu shareholders approve the daily custodian fee rate of 0.34%. 0.07% will be manage fee rate, 0.27% will be participant expected return rate.

2. When the total liquidity in buy side of Nu network is greater than 110% of the total liquidity in sell side for 7 consecutive days, the daily custodian fee rate will be decreased by 10% at next accounting period, and the manage fee rate and participant expected return rate will be decreased accordingly.

3. When the total liquidity in buy side of Nu network is not greater than 90 of the total liquidity in sell side for 7 consecutive days, the daily custodian fee rate will be increased by 10% until it reaches 0.34%, the maximum of daily custodian fee rate, at next accounting period.

4. NAV of the pool will be calculated in the following formulas:

Total asset = Holding of NBT + Holding of BTC * BTC price at 10:00 AM - Total asset in previous accounting day * manage fee rate

Custodian Fee wait to be granted = Custodian Fee to be granted in previous accounting day + Total Asset * custodian fee rate * days

NAV = (total asset + custodian fee wait to be granted) / total number of shares

https://discuss.nubits.com/t/passed-motion-to-create-the-first-liquidity-pool-the-nu-lagoon/1616

Here is the performance of that implementation over time. http://nulagoon.com/charts.html

* I don't think we should confuse the way Nubits are created/backed, (which most of us don't agree with) with the way they provide liquidity which is something that we might be able to learn from.