NuBits

[Chronos]

But lets assume for second that NuBits remains pegged to the dollar... and the dollar dies in hyperinflation... opps.   I don't want NuBits for the same reason I don't really want dollars.   

If the dollar dies in hyperinflation, most of the world will be badly damaged, and especially the USA. We saw what happened in the housing crisis of 2008. We are already exposed to the risk of USD failure.

[bytemaster]

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.

I think if their is no collateral their is no value to maintain.

Agreed - but also the nubits system produces no value... 

Unlike Btsx, which is an exchange with revenues (value creation) as well as a 200% collateralized bank.


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To be fair.. .NuBits does create value from transaction fees and if there was a large network effect going on and people started using it as payment then it could last for quite a while.   The problem is the supply of NuBits is constantly growing with no way to reduce it... the only thing the system allows is to "kick the can" down the road of people looking to exit.   If it ever became globally used in trade then the peg to the dollar would no longer matter, everything would be priced in NuBits...

But lets assume for second that NuBits remains pegged to the dollar... and the dollar dies in hyperinflation... opps.   I don't want NuBits for the same reason I don't really want dollars.     

[nedscott]

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.

I think if their is no collateral their is no value to maintain.

Agreed - but also the nubits system produces no value... 

Unlike Btsx, which is an exchange with revenues (value creation) as well as a 200% collateralized bank.


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[GaltReport]

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.

I think if their is no collateral their is no value to maintain.

[oldman]

I'm not sure the goal of crypto systems should be to recreate the fiat systems that have gone before.

If NuBits recreates what the Federal Reserve has done since its founding in 1913, it will be a smashing success. An entire country (plus many others, via pegged currencies) have had relative stability under the US dollar. Of course, there are valid criticisms to fractional reserve, but the Fed's dollar has lasted over 100 years now. That's a pretty good run for anything crypto.

Why is a nation's currency considered a success if lasts one or two generations (~ 100 years)?

Most fiat currencies are dangerously close to a Ponzi scheme... I hate to use the Ponzi analogy but all good Ponzi's do very well initially and then implode.

Every fiat reserve currency in human history has done well and then imploded.

In this case, due to the lack of democratic controls, the decay may be much more rapid.

I can see what NuShares/NuBits is trying to be... just don't think it will end well based on the history of the protocol they are implementing.

[vegolino]

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.

I appreciate you two duking it out publicly, but schedule a closed door session, both parties will benefit


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I disagree with that. This conversation may one day be in history books. This is education that money can not buy.
My deep respect to all who are part of this discussion. We are all learning here.
aloha 

[JordanLee]

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.

[nedscott]

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.

I appreciate you two duking it out publicly, but schedule a closed door session, both parties will benefit


Sent from my iPhone using Tapatalk

[JordanLee]

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.

[Chronos]

I'm not sure the goal of crypto systems should be to recreate the fiat systems that have gone before.

If NuBits recreates what the Federal Reserve has done since its founding in 1913, it will be a smashing success. An entire country (plus many others, via pegged currencies) have had relative stability under the US dollar. Of course, there are valid criticisms to fractional reserve, but the Fed's dollar has lasted over 100 years now. That's a pretty good run for anything crypto.

For most of that 100 year history a FRN was a promise to pay Gold or Silver....  demand for it is created by LENDING it into existence backed by collateral.   The collateral was originally Gold, now it is Mortgage Backed Securities... as the value of the collateral falls to 0 the value of the dollar will fall as well.   It is further backed by taxation which creates demand for it.

Good point. Dollars were backed by gold until Nixon did his thing in 1971, so I guess the Fed's actual magical hand-waving has only been going on for a little over 40 years.

Dollars are now backed by nothing, not mortgages. The US government has no explicit obligation to sell MBS for dollars to curtail inflation. Backing by taxation also means nothing: See Zimbabwe's hyperinflation, or Germany's from 1921 to 1924.
 
In the end, USD value is called faith. In that sense, NuBits isn't that much different. 

[bytemaster]

I'm not sure the goal of crypto systems should be to recreate the fiat systems that have gone before.

If NuBits recreates what the Federal Reserve has done since its founding in 1913, it will be a smashing success. An entire country (plus many others, via pegged currencies) have had relative stability under the US dollar. Of course, there are valid criticisms to fractional reserve, but the Fed's dollar has lasted over 100 years now. That's a pretty good run for anything crypto.

For most of that 100 year history a FRN was a promise to pay Gold or Silver....  demand for it is created by LENDING it into existence backed by collateral.   The collateral was originally Gold, now it is Mortgage Backed Securities... as the value of the collateral falls to 0 the value of the dollar will fall as well.   It is further backed by taxation which creates demand for it.   

[JordanLee]

... 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.

[bytemaster]

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.

NuShares are in control... but NuBits holders are not.... see the problem?   

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.   

As a NuBits holder if I were to "vote" on an interest rate I would vote "infinity".   
As a NuShare holder.... why the hell do I care?  I got the benefit of printing NuBits to fund what ever projects I wanted funded and have no further obligation.... NuShare holders presumably make money by "making the market" but that is pennies... they shove the complete liability on to NuBit holders who play a game of musical chairs (where there are no chairs) of who is willing to hold the longest with out blinking.  You then bribe people to hold longer by promising them more chairs that never show up.   

[Chronos]

I'm not sure the goal of crypto systems should be to recreate the fiat systems that have gone before.

If NuBits recreates what the Federal Reserve has done since its founding in 1913, it will be a smashing success. An entire country (plus many others, via pegged currencies) have had relative stability under the US dollar. Of course, there are valid criticisms to fractional reserve, but the Fed's dollar has lasted over 100 years now. That's a pretty good run for anything crypto.

[oldman]

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.

This particular mechanism has failed rather spectacularly more often than not.

Rome, Spain, France... perhaps now the USA.

I'm not sure the goal of crypto systems should be to recreate the fiat systems that have gone before.