NuBits! NOT a price stable currencies and B&C Exchange's NBT based Development fund

in crypto-news •  3 years ago  (edited)

A recent look at the current financial situation of Nubits and what it means for B&C Exchange


Intital Warning – 1st of June: https://steemit.com/bitshares/@steempower/warning-nubits--the-price-stable-currency-
Update - 12th June 2016 - NBT is trading at 34 US Cents per NBT

Recently I have been looking through the NuBits forums and learning more about their platform and why it has come to this. I’m am doing this for personal interest and potentially some exciting news for Steem that I cannot share at this point in time.
In this post I would like to shares some more intricate details of the current financials of NuBits and my concerns for the decentralised B&C Exchange. I will also compile a time lapse of sort to show the state of the markets as the last 2 weeks progressed.

Recap

So in the last post on the 1st of June https://steemit.com/bitshares/@steempower/warning-nubits--the-price-stable-currency- I warned that the liquidity of the nubits USD peg was dangerously low and their attempt to recoup BTC to support the peg by selling NuShares (Tier 6 – Lender of last resort) was in progress and had already caused quite a large drop ~ 50%.

  • Tier 1: Liquidity on the Markets order books seen as Buy and Sell Walls
  • Tier 2: Liquidity on Exchange but not in order books
  • Tier 3: Liquidity held in private wallets
  • Tier 4: liquidity can be provided by custodians not dedicated to liquidity operations.. ?
  • Tier 5: Manipulate interest rates for Liquidity providers to incentives individuals to support the peg (via proposals)
  • Tier 6: Create and/or Sell Nushares at market and uses the BTC received to support the NuBIT peg

B&CExchange

A new an interesting fact I have come to learn in my latest research is the decentralized exchange B&C Exchange which ICO'd BKS and BKC, have converted all development funds obtained from this coin sale into NBT; that is approximately $150,000 of funds that will rely on Nubits being able to support their peg.
Jordan Lee (affiliated with B&C) has also confirmed on the 28 of May - 118,000 NBT’s from B&C Exchange Development fund had been parked although he has not confirmed how long they are parked for.
B&C recently hired at least 1 full time C++ developer and were looking for another in early March 2016; these developers are being paid 50-100 NBT p/hour and proposed to work 40 hours p/week. Although in saying that B&C trading platform is down pending their new release but it seems from their github that no real commits have been submitted since the 24-april-2016. also only seems to be 1 developer active since 30-march-2016; their normal active twitter feed has also been silent since the end of May.
It seems like B&C will lose a lot of money and potential stop development if NBT does not recover its peg; the only other way they might pay developers is to sell their shares in the BKS and BKC tokens.

NuBit’s Current financial situation

NBT currently trades at: 53 US cents per NuBit and today has been as low as 46 cents
The figures below relate to NBT in circulation, there are currently 1,323,825 Total Nubits but only ~ half of them are in current circulation.
Total parked Nubits is 162,403 which could potentially be added to the circulation once there vesting period has ended (parking is like a term deposit for a fixed time frame)

Currently PoloniEX is their most liquid exchange with 99.5% of the trading volume for NBT; that Exchange as you can see in the charts at the bottom of this post; now has 20BTC selling under the pegged price; this was not the case in the last few days and show’s people are looking to get out; this will be even harder for NuBits to recover from because now they don’t just have to provide buys walls at the peg; they have to buy back 20 BTC worth of NBT just to reach the peg; for comparison the buy side orderbook only has 19.63 BTC with most ordered being a large percentage away from the current price point.

Summary

  • Total NBT in circulation is 685497 NBT
  • Total BTC in Tiered support system = 52.2 BTC
  • Total NBT vs BTC in USD = 685,497 USD (@1USD p/NBT) : 30,000 USD (1 BTC @ 575USD)
  • NBT : BTC Ratio 22:1 (Nubits can only afford to payback 4-5% of outstanding NBT at 1USD each)

With the funds at its disposal Nubit could afford to pay 0.0437 US cents per NBT giving it a price of 0.000076 BTC per NBT

Funds in various Tiers

Tier 1 Funds = 17.3 BTC

19.63 BTC of buy support on PoloniEX (Total - all the way to 1 satoshi)
2.2 BTC of buy support on Bittrex (Total - all the way to 1 satoshi)
0.10 BTC of buy support on Bter (Total - all the way to 1 satoshi)

Tier 2 Funds = 2.5 BTC

Tier 3 Funds = 0.1 BTC

Tier 4 Funds = 25.74 BTC

FLOT 5-of-8 multisig old 3QDWJ2yqJ5iTUg6cSpAwxx95ba3NG97hzG = 0 BTC
FLOT 5-of-8 multisig new 3HikFkS2Zinab1TJq7dqp6wSPyLu7i7bhe = 25.74036791 BTC
Tier 4 buy side funds controlled by JordanLee 0 BTC
NuSafe = 0 BTC
FLOT 3-of-5 multisig Peercoin pM68K72BBa2KX7Kj2qY5jgTB3AmCUKFQmV = 0 PPC

Tier 5 Parking Rate = 27% p/a

Tier 6 Potential funds = 6.58 BTC

5.54 BTC of buy support on PoloniEX (Total - all the way to 1 satoshi)
1.04 BTC of buy support on Bter (Total - all the way to 1 satoshi)

What caused this mess

From what I can derive the issues where caused by a few key events:

  • Rise in BTC price causeing sell side pressure on NBT
  • Successful motion (community vote) by Jordan Lee to initiate a buyback program for NSR from the higher level liquidity Tiers which left them under funded when the BTC rise occurred
  • Uncontested and unapproved decision by key FLOT team member MasterofDistruction(MoD) to widen the spread of NBT to 5% in an attempt to preserve capital in the higher Tiers

There is a rather heated debate in the last 5 days between Jordan and MoD in relation to the actions that triggered this event; MoD maintains that the buyback program for NSR left the FLOT team unequipped to deal with the sell side pressure and Jordan maintains that widening the spread of the peg to 5% meant Tier 5&6 became ineffective due to people losing faith in the system and therefore not wanting to park their capital for support or buy into NSR for the same reason.

This debate may have caused key member MoD to leave the project as he has been silent for the last 3 days with his final post ending with
“This is not economics, it's politics. Have fun with Jordan!”

Charts of NBT and NSR

1st June 2016

NBT USD:

NBT PoloniEX Depth

NSR BTC:

9th June 2016

NBT USD:

NBT PoloniEX Depth

NSR BTC:

11th June 2016

NBT USD:

NBT PoloniEX Depth

NSR BTC:

12th June 2016

NBT USD:

NBT PoloniEX Depth

TL;DR

Since my initial post 2 weeks ago, things have spiralled out of control and we maybe see a complete collapse of Nubits. Even if they do manager to secure some funding and re-establish their wall the faith and confidence of their customers will have taken heavy damage; these customers were un-served in a time of need and as such potentially missed out on the big percentage move that BTC has made recently on top of potentially selling their NBT for less than a desired amount, this confidence will not be easily recovered.
B&C Exchange’s development fund worth previously $150,000 USD at current market rates / liquidity could have an absolute maximum value of $30,000 USD and this is unrealistic as it would require that all Tiers of liquidity be available to achieve this level of return on their investment.

Steem Dollars to the rescue :) - USD pegged asset with a bonus of a 10% interest rate

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SBD for sure, and don't forget about bitSilver, bitUSD, bitGold, bitEuro, bitCNY and all the other market-pegged assets "Smartcoins" available for use and trading on the Bitshares DEX :) http://bitshares.org/download

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Hi Ken, Definitely Market Pegged Assets in Bitshares is a great contender to pick up this market; and i think we should actually look to do some marketing directed at Nubits share holders as they understand the desire to have pegged currencies and cut out the volatility. while reading through their forums the topic of BitUSD did come up a lot although generally they did not understand the mechanism's in place to allow it to work. it even got criticised for being to complex, more complex than it needed to be ; although given they don't understand the inner working i believe that is a throw away comment. also i would say their system relayed way to much on people; and people doing the right thing at the right time; from what i can see there was a lot of transparency issues and no accountability for some key stake holders who controlled a large portion of the funds out of circulation; the keys for which have still not been disclosed and cannot be publicly verified. my bet is those address are empty... but only time will tell

Still marketing SBD/SD and MPA (bitUSD and family) to these minds maybe a good marketing move

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Does it run on 32 bit Linux, yet?

I really hope to see more of this kind of insightful information here on Steem! You have put some effort into this. No-one has the time to dig into more than a few projects, and it's very nice to get a summary from someone who has done the work.
Please everybody up-vote this 😀

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Cheers Idealist, thank you very much for the positive feedback; this information did take many hours to compile but as i mentioned it wasn't solely for this post; i have a another motive as well which i hope to share with Steemit community next week ;).
if you like reading check out my last few post on security (wifi, upnp and webrtc) i think they can bring a lot of value to a lot of people who may not have considered some the implication of these technologies

Thanks again :)

Ok, this may sound a little crazy... but what about raising funds trough a post and absorbing nubits holders as fellow steemians?

More about this idea here

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i agree with samupaha; their system has failed, i don't think STEEM should try to help prop up their broken system; but i do think it is a great opportunity to reach out to some of their passionate community members and turn them into steemians; if we did a donation type post i worry that they funds would go to supporting a sinking ship; i would say a large number of Nubits holders are whales playing the market and know the risks. i feel sorry for the community members and would like to see them cut their losses and focus their passion on systems like Bitshares and Steem

What a mess, do you think they will recover from this?

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I personally do not feel they can recover from this; even if btc took a nose dive i think people would be very wary to buy back into NBT; also they have $12,000 worth of NBT now selling below the pegged price and only $30,000 USD of capital available to them(this would require selling NSR to all open buy orders or recover some fund - this would lead to an increased loss of faith in the system and would potentially drive more sellers to the NBT market). if speculators thought the they could make a profit they would be looking to buy NBT at a low price, which would compound the issue as when the price increased towards the peg they would be looking to take profits and therefore adding to the sell side pressure.

I used to be vey impressed by nubits' price staying so close to the USD. Now I see that the when faced with great sell pressure the incentives are not aligned properly.

The Argentine peso's peg to the USD lasted five years. Can bitUSD or tether do as good?