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Cassius

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BTCD market-maker asset
« on: May 15, 2015, 07:55:53 am »

BTCD market-maker (MM-BTCD) proposal

Updates will now me made at https://nxtforum.org/assets-board/btcd-mutual-fund-and-market-making-asset-mmbtcd/

BTCD is a strong ‘sleeper’ coin, with groundbreaking tech in the pipeline: Teleport, Telepathy, Ramchains and Transparent Forging, as well as acting as InstantDEX’s reference currency. However, in the medium term the market has punished BTCD for several reasons. These include the long BTC bear market, which compounds a downturn in the alts. Crypto investors tend to have short-term timeframes, and several large holders from the proof-of-work phase have dumped thousands of coins on the market. Combined with BTCD’s otherwise low volumes, these factors have pushed the price from a high of 0.015 BTC down to 0.003, and from over $6 down to under $1.

BTCD will be integral to SuperNET and likely its #1 use case, but BTCD’s tech has wider appeal, with a broad range of potential applications. We would like to see a thriving BTCD ecosystem on its own terms to complement and facilitate its role in SuperNET.

Purpose
The aims of MM-BTCD are:
  • To reward long-term holders of BTCD
  • To incentivise stakers and strengthen the network
  • To add liquidity to the markets
  • To reduce volatility
  • To encourage developers and entrepreneurs to build further apps on top of BTCD

Form
MM-BTCD will take the form of a Nxt asset. The reasons for this over a centralised solution are to enable transparency and security, and to facilitate payouts and a secondary market for shares. Most BTCD users are already familiar with Nxt via the SuperNET client.

A market-making and arbitrage bot will be used to generate revenues from price differences across several exchanges, including Poloniex, Bittrex and the Nxt Asset Exchange (where BTCD trades as mgwBTCD and superBTCD). These are low-risk activities. Further higher-risk, higher-reward activities such as swing trading in BTCD and other key alts may gradually be phased in depending on initial revenues and risk tolerances.

Coinomat
The bot has been coded by Coinomat and is already operating with limited capitalisation. This is a natural choice because Coinomat is known in the BTCD/Nxt communities and already operates the MMNXT bot/asset, which raises revenues from the NXT markets. (Revenues are currently in the region of 3% per month.) Coinomat will also be involved in the new BTCD wallet, offering an integrated instant exchange function, as in the SuperNET client, and the ability to cash out to an anon card. Care will need to be taken to avoid a conflict of interests with MMNXT’s activities.

Funding and revenues
Initial capitalisation of 1 million NXT is estimated to be sufficient. Raising money in BTCD and BTC was considered, but these cannot be used to buy assets on the Nxt Asset Exchange.

A total of 1 million MM-BTCD assets will be created. Asset id: 8122396658538927693.
  • 200,000 will be sold at 5 NXT each = 1,000,000 NXT.
  • 200,000 will be retained by the asset issuers in return for BTCD capitalisation, development, marketing, maintenance and admin.
  • A further 600,000 will be reserved for later sale if additional capitalisation is required.
No issuer-owned assets will be sold below 10 NXT. No further assets for additional capitalisation will be sold below 10 NXT.

Payout will be in mgwBTCD/superBTCD, weekly on Wednesdays. Revenues will be distributed as follows:
  • 90% to assetholders
  • 10% to BTCD stakers (this may be as simple as making regular transfers with large tx fees)

Given that BTCD has around 10% of Nxt’s market cap and 5% of the volume, revenues are likely to be low at first. However, the constant buy-pressure will also make a greater difference to the market.

Coinomat, Azeh and Cassius
« Last Edit: May 23, 2015, 09:07:13 am by Cassius »
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coinomat

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Re: BTCD market-maker asset
« Reply #1 on: May 17, 2015, 08:29:54 am »

I'd like to add some info on revenue streams:
Market making bot and buy walls will be set on NXT AE, Poloniex, and Bittrex
We plan to provide constant buy pressure, on top of usual market making, which should help the price grow.
So the purpose of the fund is twofold - bots are making profits through MM and at the same time gently push the price higher.
So you profit both from dividends and BTCD appreciation if you're a BTCD holder. To kick start dividend payments it is possible to hold some dividend paying asset, such as MMNXT. It will be decided on after the IPO phase is over.
Also I'd like to note that no further assets will be sold until the asset price doubles, outstanding shares will be sent to an escrow after IPO phase is over.
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Cassius

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Re: BTCD market-maker asset
« Reply #2 on: May 18, 2015, 02:42:51 pm »

The BTCD asset MMBTCD (8122396658538927693) has sold out in a little under three days. 1,000,000 NXT were raised from the sale of 200,000 assets at 5 NXT each. Thank you to all investors. You can read the original asset description here. 600,000 remaining assets have been sent to whale for escrow (tx 6380943481629195485). These may be used to raise further funds, as necessary, but only if the price reaches 10 NXT. None of the 200,000 assets retained by the issuers - Coinomat, Azeh, Cassius - will be sold below 10 NXT either.

Asset update: mutual fund strategy
The aim of the asset is to reward BTCD holders and stakers by bringing liquidity to what is a very thin market. Payouts will be in mgwBTCD / superBTCD, weekly on Wednesdays, starting 27 May, putting gentle upward pressure on the market.

Asset holders will be aware that BTCD has low volumes and the price has suffered in recent months, for reasons explored here. Unlike NXT arbitrage and market-making assets, there is very little volume to work with, limiting profits and the potential for dividends/growth/BTCD price increase. It is therefore MMBTCD's intention to inject liquidity into the market as well as work with what there is, hopefully bringing about a virtuous cycle.

This will be achieved by investing a proportion of the ICO funds in a portfolio of revenue-generating assets. The aim is to create a balanced portfolio, chiefly low-risk and highly reliable assets, with some higher-potential elements such as forex/PAMM. We appreciate that the nature of this asset has evolved and is continuing to evolve with feedback from investors (particular thanks to whale), though its aims remain the same. The purchase of revenue-generating assets as well as bot activity makes it more like a mutual fund than a pure market-maker like MMNXT, which was the initial model. To our knowledge this is the first asset of its kind, similar to a multipool or mining assets in principle (which we do not plan to include), but without the risks inherent in these. We believe this gives the asset a much stronger outlook.

The proposed division of funds is:
  • Market-making and arbitrage (AE, Poloniex, Bittrex): 500,000 NXT equivalent
  • Revenue-generating portfolio/cash reserves: 500,000 NXT
  • BTCD capitalisation is covered by the asset issuers

Coinomat is converting a proportion of the NXT to BTC to trade on regular exchanges. (He can use his own bots to gain a price 2-3% below market for this.)

For the asset portfolio 100,000 MMNXT has been purchased (txs 3243262207740160278 and 5783558449155573656). This will provide a solid baseline of revenue to convert to BTCD. In the coming days and weeks we will be making strategic purchases of other assets. Investors will appreciate that we cannot discuss these openly before purchase because that is likely to lead to opportunistic traders driving the price up.

We'll aim to keep you updated regularly. Please ask any questions here or on Slack.
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Cassius

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Re: BTCD market-maker asset
« Reply #3 on: May 23, 2015, 09:07:54 am »

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