Topic: NuBits are operating as a fractional reserve. - page 2. (Read 6737 times)

Deja vu. Again we go back to the reserves. I'm almost tempted to let you prove the existence, location and custodians of the "300% decentralized collateral backing BitUSD" but I really don't care since this topic is not about BitUSD (whatever that is).

And what the hell has mtgox to do here with anything?

It is clear that much of the confusion arises from the definitions of the terms such as:

• reserves
• decentralized reserves
• decentralized vault of reserves
• decentralized proof of reserves
• decentralized systems of control

So when you prepare your next reply, please take time to provide me with a rigorous definition of those terms. I would also like to remind you that in the context of NuBits the conventional notion of reserves is irrelevant and there's a good reason for that.

The so called reserves are paralyzed wealth --- they just sit somewhere safe (hopefully), doing nothing. The clever concept of NuBits, however, uses those reserves to provide liquidity. If at some point audit is needed, it can easily be arranged. By cryptographically signing a message with the private keys that store the wealth held by liquidity providers their individual solvency can be verified.

Having said that, we see why the term reserves is not appropriate in the context of NuBits. Thus, an attentive reader could easily conclude that the term fractional reserves doesn't really apply to NuBits either.

Your entire argument that you are not able to provide a decentralized vault of reserves is untrue.

BitShares has an average of 300% decentralized collateral backing BitUSD. That's collateral without centralized counterparty risk.

I'm also well aware of examples like e-gold. No central point of failure is an advantage but is not an excuse for not having decentralized reserves too. Ironically the majority of cases, where centralized funds are lost, like Gox, are not a validation for NuBits but rather a warning as to why you shouldn't buy NuBits.

Any system without decentralized proof of reserves requires you to trust audits/incentives/good intentions. Blockchains with their decentralized ledgers and decentralized systems of control solve this and allow you to verify your funds & collateral are accounted for and secure.

As I said earlier, without decentralized proof of reserves, NuBits has used decentralization & the fantastic invention of the blockchain not to better protect customer funds than say a Bank/Mt. Gox but has instead used it to decentralize the role of the owners of those fractional reserve systems who will be unable to reimburse customers in the event of large redemptions.

Wrong, NuBits has assets available to allow a large percentage of people to redeem their nubits for 1$.

Without new money coming in, nothing will collapse. Assuming such a collapse is as ignorant as saying that without BTC's price increasing the development of the open-source protocol of Bitcoin will stop and network stops confirming transactions.

The blockchain indeed cannot allow verification of a lot of things. That's the reason why NuBits was built the way it was. If it was possible for the blockchain to verify exchange rate of BTC/USD then the volatility issue could be solved on the protocol level. Because a mathematical protocol cannot track the exchange rate of its units of value by itself we need to choose between 2 options:

• Fight volatility with the means of centralized human intervention
• Fight volatility with the means of decentralized human intervention

Which of these two do you think is the lesser evil?

Correct! Decentralization is the future.

Perhaps I am just a random internet's folk with a clear agenda to defend NuBits so my arguments are somehow less plausible? No problem, I can link you some objective scientific material that favours the approach NuBits has taken:
http://www.coindesk.com/japanese-scholars-draft-proposal-better-bitcoin/

So, if we want a cryptocurrency that is not volatile, NuBits is exactly the only and most reasonable way to achieve it. Fact is that there is clear demand for volatility-free cryptocurrencies. Wherever there is demand there will eventually be supply. Don't hate the player, hate the game.

NuBits is essentially the best of both worlds for anyone holding NuBits because:

• Currency board's decision-making is fully transparent.
• Anyone who holds nushares can participate in voting.
• The software is open source.
• The system is fully decentralized.

If NuBits had a central vault of reserves I wouldn't be in their community. I have seen peg failing due to the centralized reserves before (paycoin promised 20$ floor but failed miserably). The reason such centralization is impending doom is that it's a central point of failure and those reserves have a legal owner. The legal owner can go rogue or some other disaster could destroy the reservs, bringing down the whole concept. I think I don't need to remind you e-gold and Liberty Dollar.

Of course not. This person does not even understand what "true" means. It is also a huge turn off seeing all this FUD coming out of Bitshares. Some of their holders are acting like a second rate anoncoin, unprofessional, childish, and unappealing for serious investors.

Just to let you guys know , we are from www.Bitcoin.co.id currently open Nubits/BTC market with 0% trading fee We really need supply of Nubits in our exchange. The price of nubits in our exchange is higher than 20% than other exchanger.

Thank you

is there proof that they are insolvent tho?

Vaults work on a re-occuring storage cost model, they are sustainable without new gold coming in. They have security systems in place, abide by stringent laws and submit to regular audits. In the event that a vault is unprofitable and needs to close, everybody can in theory recover their gold. However they, like exchanges, still carry large centralized risks and the custodians often do take the money and run or engage in risky trading/other practices that result in the loss of customer funds.

Blockchains with their decentralized ledgers and decentralized systems of control allow you to verify your funds or collateral are accounted for and secure, so are arguably an improvement over even a centralized gold vault.

NuBits however, unlike a gold vault doesn't have the assets available to allow a large percentage of people to redeem their NuBits for $1 & without new money coming in, their current system will collapse. Their blockchain doesn't transparently allow you to verify the collateral/assets are there or secure either. NuBits is essentially the worst of both worlds for anyone holding NuBits but the best of both for the people you buy NuBits from as the majority have a great level of anonymity unlike centralized counterparts running similar systems.

Absolutley not. All shareholder discussion is available publicly on our discussion forum...

https://discuss.nubits.com/

There is nothing secret going on behind closed doors. In fact, this is the beauty of NuShares. Anyone around the world can participate freely and openly and help make decisions on behalf of the network through their voting power. What you can trust, is that if NuShareholders mess up in any way that causes the failure of the peg, they will lose their investment. This ensures that shareholders are very careful when making decisions about the network and voting.

Thanks for the answer. I'm surprised to hear that "trust us we're good guys" is considered the right strategy for a crypto.

Was MtGox going under in the interest of Mark Karpeles?

If it wasn't, then how it could it possibly have happened? Could it be... Because he was incompetent and became insolvent, like the "trusted" custodians?

So what you are saying is that in the end, we have have to trust some secret guys behind closed doors to do the right thing. Sounds like another system I heard of, the FED. Luckily everyone trust the FED to do the right thing?!?

Very interesting input from both sides (except Shuai, who didn't provide anything good to this thread except creating it). I think if both systems survived the last BTC crash then this is already a good sign that both teams are on the right track. In my very personal opinion, a working dynamic liquidation processor sounds like a more elegant solution than having locked/dead money. Elegance of course doesn't justify vulnerabilities ...

The particular tier levels of liquidity in NuBits in fact seem to show some effect - however, as nice as it is that tier 5/6 were never required, it also means that there is no large scale field test of those levels as of yet.

There are too many errors in the OP to take the time to correct individually. It is obviously an attempt to create FUD with the intent of increasing the market cap of a competitor.

If you are actually interested in understanding the situation please take a look at what I posted here about reserves and fractional reserves:

https://discuss.nubits.com/t/regarding-reserves-and-fractional-reserve/1126


I respect toast for his attempt to be accurate and fair, but what he says here is misinformed. The Nu network provides six tiers of liquidity, with redundant liquidity provider custodians ensuring there is no failure, even temporarily. What toast is referring to is our sixth tier of liquidity, our last line of defense. When tier 1 liquidity is exhausted for a particular redundant liquidity provider custodian, tier 2 liquidity is promoted to tier 1. Similarly, if tier 2 becomes exhausted for a specific liquidity provider, it is replenished from tier 3, and so on. There has never been a need to use our fifth tier of liquidity (interest rates) or six tier (NuBit burning). Our liquidity operations have shown no signs of stress at all in recent days. As far as I know, there has not even been any need to replenish any subset of tier 1 liquidity with tier 2 liquidity. Here is an outline of our liquidity operations:

https://discuss.nubits.com/t/finalized-evolution-of-liquidity-operations/618

As toast implies, tier 6 has not been implemented yet but is expected in the next release that includes a protocol change (0.6.0). The post linked to above is a recently passed motion and is not all implemented yet. Still, the bottom line is out network currently provides five tiers of liquidity (soon to be six) , but in recent days the first tier is all that has been utilized.

The OP is free to try to induce a panic to sell NuBits if he wishes. If he succeeds it will just be an opportunity to demonstrate the deep buy support that we can bring to market.

Yes, it is brilliant. No, it's not like gold vault telling you what you just said. About your hint, you just destroyed your own argument with it. It's in the interest of any shareholder to keep new money coming in, that's the point. That's why the shareholders won't run away with the money. Your line of logic assumes that a treasurer would run away with the money they look after. So why aren't all the security guards and treasurers running away with the money they guard? Answer that question and you will see the problem in your statement.


How are you guaranteed that you will live till tomorrow to spend your USD? You're not guaranteed because no one can guarantee it. Even the companies that "guarantee" you stuff are not guaranteed to actually guarantee you what they promise.

So, you are not guaranteed anything, anyway. NuBits at least has the promise to work as long as the majority of shareholders agree to keep that promise. NuShareholders aren't just some random internet trolls who speculatively bought into nushares early on. They are trustworthy people who have shown skills and intent to develop and maintain NuNet. The beauty of this is that NuNet really is an autonomous (anonymous) decentralized global organisation (and it pays dividends, yay!).

How am I then guaranteed that I get my USD back when things go bad? Just hope that someone feels like and is capable of upholding the promise?

Bitshares at least has the promise to work as long as their currency doesn't drop more than 60% quickly (and not too many people bought into it).

The argument they're selling you that there is no central point of failure because there is no vault of assets backing the whole thing up is brilliant!

That's like a gold vault telling you they've removed centralized risk because when you give them your gold they spend it on hookers and blow and then say 'Look! There's no gold in the vault! No centralized risk!'

Don't worry. We'll maintain the value of your deposit by agreeing what it's worth and maintaining a buy and sell wall because it's in our interest to do so   (Hint: It's only in their interest to do so while new money is coming in.)

(Their argument of not being able to provide reserves without centralized risk is also more balderdash because BitShares is able to provide an average of 300% collateral without centralised counterparty risk/central point of failure.)

Me too. But you must understand that nubits are not hard pegged. The shareholders can decide what buy/sell walls they maintain. The voting is decentralized and you can do that with the private keys of your nushares. Should USD collapse, the nushareholders would probably set some other (more reliable) peg.

The mere function of the peg is to reduce volatility by mutually agreeing on what the price should be. The term "fractional reserve" in the context of nubits does not make any sense. NuBits does its best to maintain the price of 1 NBT at the desired value in a decentralized manner. There is no central point of failure since there is no giant vault of assets backing the whole thing up.

The whole idea behind NuBits was to separate store of value function from the currency function. Currency should not be volatile and nushareholders do their best to keep volatility away from nubits. It is for their interest to fulfill the promise because if nubits succeeds there will be more dividends paid to the shareholders.

I never really got the concept i guess tho I see a lot of their posts on r/cryptocurrency. I kind of want to *break away* from fractional reserve and pegged currencies.

Indeed, I did not understand that Jordan and co did not consider liquidity providers' funds as reserves. I think OP's point still tands if you replace the term "reserves" with the appropriate word. I wish OP was less inflammatory though.