EB133 – Pascal and Julien Hamonic: Applying the Mechanisms of Thermoregulation to Cryptocurrencies

Transcript

[Music] this episode of epicenter Bitcoin is brought to you by highme protect yourself against hackers and Safeguard your identity online with a first class DPN go to high. me/ epicenter and sign up for a free account today hi welcome to epicenter Bitcoin the show at stocks of about the Technologies projects and people driving decentralization and the global cryptocurrency Revolution my name is seano and I'm M Roy today we are going to talk to Julia and pascar who are co-members of the new network for people

who have never heard of the new network they have a currency called new bits that is PC to the US dollar so one new bit is equal to1 Us doll and this Peg has held true for the past one and a half years so it's it's sort of a long running stable cryptocurrency and we want to walk through how this works before we get started let's have an introduction from Julia and Pascal so this is Jan a CO member of p and um I've been involved in the new network for more than two years and before that I have been interested in cryptocurrencies in general particularly in the PE coin peer shelles and Litecoin also um um as a as a businessman I'm an

entrepreneur also in Japan I've been rning my own firm for seven n years and also I'm helping uh Ventures to to to to get fun but uh uh I've always been interested in in um finding how Banks work and um how to uh to to to access money much fully and uh I think new is uh is well on the very efficient way and yeah all right so I we don't have much to add

because you know except that the fact that my name is pasc and I have been involved with new bit exactly the same as Junia and we are running the you know the business together so I wouldn't have much to add regarding that except my my name is different yeah also um you know one of the big issues of of new do they have also we have also issue is that we don't have much many public evangelists because like you said many most most of the MERS are Anonymous and we decided to to come out to contribute as a fais yeah exactly so uh the new network it the new

community B uh came out of the pcoin community right which was one of the early communities that kind of pioneered proof of stake and there was they used to be uh founder of pcoin Sun King used to be very influential in proof of stake circles at at at one point right so who's the founder of the new network um the founder is uh someone called and it's probably a person but we don't know for sure it could be a a group of of people too and um he uh he came out in 2014 14 uh officially but we he also appeared

on on some some forums Bitcoin do fors in in 2013 and he originally wanted to create um the templates to uh to um to create uh for that enables people to raise funds and to create basically companies on the blockchain so let's let's walk through kind of uh how how uh new bits uh how the new network works so uh give us a brief overview of uh what the network aims to do and uh the basic core components of of of the

network basically so new is uh one of the with one of the first decentralized autonomous organizations so you have shares like calls new shares and when you hold those NS you can meet and by meaning you can contribute to the security of the network and uh the products is called nbits uh it's a stable cryptocurrencies uh right now Peg to the US dollar but uh we have plans to release other bags like Yan Euro SDR and maybe other products that are not not necessarily related to St stable cryptocurrencies but yeah right now US dollar P so uh in in this uh it's it's it's

funny that you well it's interesting that you that you call it a decentralized or autonomous organization I I hadn't particularly looked at it that way can you explain to us how in your view uh the the new network is a Dao exact uh yeah uh but basically shareholders are you know scattered around the world and we don't know each other uh and despite this fact we can you know create a company and organize ourselves and manage the companies and and you know making proposal and voting for this proposal in a totally decentralized way because uh the consensus uh is uh is you know uh everything is voted on the

blockchain and so uh it's trustless decentralized totally yes we we don't we don't have anyy we don't have any CEO we don't have any managers we just have shareholders and the we decide motions and who to uh who to send money to that's that's it and be using the motion to encode embed this information okay and so the well that's interesting because last week we had on Stefan who talked to us about the Dao and how the Dao accepts proposals uh maybe we can come back to that later and

talk about analogies between those two systems um so in the new network we have uh as you mentioned a a currency that is currently pegged to the US dollar we have new shares which are uh the shares which um allow for the um Network to either uh add liquidity or remove liquidity and so therefore allow for the peg to stay stable and uh at $1 us um and then there's there's pure coin can you also explain how pure coin uh what role pure coin plays in this in this system yeah in the original white paper

Pon is used as a way to distribute the dividends when you sales nits you have from proceeds in form in the form of Bitcoins and then uh you know you would distribute dividends by buying P coins uh based on the Bitcoin that you have so there is a mechanism to distribute uh dividends inside the client uh you can get a list of uh you know new addresses and for for each new share address you have you can generate unique Pon address and uh you would you would distribute the dividends the system would distribute dividends based on the quantity that you input and uh the number of that you have the ownership

that you have in the network so let's say that there's one 100,000 dividend to to to distribute if you have 1% you will get 1% of the of the dividends in in the form of pcoin okay so let's let's go through the peg mechanism can you uh explain how the peg mechanism work how how it works and you know maybe walk us through an example scenario of uh you know shares being sold so what one one uh interesting analogy that mayher brought up before the show when we were just discussing is the body temperature analogy which I thought was really interesting and hadn't really looked at it that way when when you when when you're cold uh well you you shiver and

then you get hot again and when you're hot well you you sweat and you get you your body temperature sort of stabilizes so how do let let's let's walk through the peg mechanism and how those those different uh uh components of the system interact okay let me try to use this comparison basically you know the peg cannot be you know uh you know created inside the blockchain so it is created in the market so you have to provide liquidity in the market to maintain the spec and so basically you have to set up very big wall I mean relatively big sell and and buy walls in the markets and so basically you know you have like you

could have a a big wall of 50,000 uh Bitcoins buying uh nits and more 50,000 you know uh NIS being sold right so and at at a very very tight pick at very high sorry tight spread so basically we have that on several markets and those liquidity are pro are provided by uh people that have initiative to do so they are called custodians so those need to have a contract with the sh holers to get uh reward if they do what they you know what if they provide if they maintain

Peg at TI spread so so the basic concept is uh one one one nuits is equal to $1 us and uh the way the way the buy wall and sell Wall Works is there are a lot of people called custodians quote unquote that are ready to buy new bits if the price Falls below $1 us so say let's say the price Falls 99 Cents or 98 cents then you can sell your new bits to these custodians right and there are lots of them and they can spend a lot of Bitcoin to buy these new bits from you so that means it's like a they they form like a wall like in an exchange order book if

you if you look at it uh there's lot lots of people wanting to buy at 998 cents and that kind of look looks like a wall in the exchange order book so that's like a buy wall right and and on the other side if the price Rises price of new bits Rises to say 1.01 or 1.02 cents um sorry 102 cents right 1.02 then um then there's a lot of people that are willing to sell uh new bits to to a to a user right so if uh so that's like a cell wall now because a lot of people are willing to buy at 98 cents and sell at uh at sell at 102 cents the price kind of uh automatically

goes and stays between these two values and that is that is the peg right this is this is the major mechanism right there is no meaning to try to sell it uh I mean to buy it to buy a sorry there is no meaning for example to sell at uh 1.2 because you will find no buyer there was there will be always someone that will be selling in one or $1 right uh uh and on the opposite side there is no meaning to try to see uh to buy at uh try to buy at 98 cents because uh there will be you will never find any seller at this price because

you can always sell at $1 so you you don't you don't have you don't there is no no way that the thing can fluctuate so the the custodian buys and sells these new shares from new shers news new beats okay then who who are the shareholders as like relative to the custodians who are the shareholders it can be the C themselves but um holders or can be anybody anybody that has has invested uh money into new in that um

thinks that liit would would would maintain his SP for for certain amount of time so new has value for them and they they have decided to invest they all called Miss owners and they have the OWN misss okay and and so also and so you mentioned that uh that custodians provide liquidity to the to the to the market um where yeah so they're putting up they're putting up uh large large amounts of Bitcoin to provide liquidity to the market yeah yeah yeah because they have an incentive to do so right right and so

where are these markets are you talking about exchanges or are are these markets organized by by by the new Network or exchange on exchanges like the main one would be ponx right now but we have also BTR and also like yeah others other ones okay so so in in a sense uh the way we could think of it is like new uh new is like a distributed autonomous organization there are a bunch of shareholders that you can think of as the owner of this organization the main the main product of this organization is a price stable cryptocurrency that's new bits that's your product right now um

now for for for the product for the organization to work you start to need employees of different kinds one of the kinds of employees that you need is what is called a custodian right yeah you can see that in that way if you want yeah yeah now the job of the custodian is to provide liquidity and help maintain the peg of new bits inside uh different exchanges like poon X beter Etc right so walk us how this employee custodian why does he do this job right like U what motivates him to do this job how does he make a profit out of this activity uh yeah so at the beginning you

know one year ago when we started uh the cian were basically single individuals that you know got an approval from the shareholders so he had or she had to write a contract and she she would say or she would say I want this kind of this amount for this liquidity for this kind of duration and if he could or she could get the reward upfront or later after you know you know doing his job or her job and so and in that case if it's later and shareholder would have to judge if the job would have been done or not so this person let's say that is ready to provide you know 20 thou 20,00 nubits of buy side liquidity on ponx for like 10%

a month so he would get or she would get 2,000 nubit for this job he would go she would go to the poex and maintain this and run the bot which which is called New bot the trading bot right uh on on The Bu side of the PA NBT BTC right and if and the new bot would maintain the peg automatically you can uh uh you know specify a lot of parameters you can specify for example the the spread you can specify uh when you the limit you know if you don't want to go over 5,000 nbit you can set set up this kind of parameter so but the the B will make sure that the the spread is

very tight if if if if the proposal uh contains include this uh this uh uh this condition okay so let's let's just let's just walk walk through this one right so assume assume assume like let's play some roles right let's say um the two of you and Sebastian are shareholders of of the new network and the three of you are the only shareholders we're just making a thought experiment right and now I'm I'm going to be uh taking the role of a custodian right so um when I when I'm the custodian my job is to open an exchange account on poon X right and then uh offer buy buy side liquidity so

that means I need to put a lot of buy orders for um 98 cents or 99 Cents right yeah 99 yeah 99 Cents so I'm I'm I'm going go to poon ex essentially and put a lot of buy orders at 99 Cents right whoever wants to sell at 99 Cents can sell to me now um now to in order to put these buy orders what I need is US dollars at poon or Bitcoin at poonix or some some other asset apart from new bits inside at the it was it was us do but now it's Bitcoin so who gives me this Bitcoin uh it's your at the beginning uh

it was it was your own money it could have your own you could I mean two possibilities you your own money or the money from uh the company new right okay so so then it it could be my own money so let's let's walk with the possibility that I put my own money so I let's say I have I don't know 100 BTC I I I I put I put this to contribute buy side liquidity right yeah now now what what happens is let's say the price falls down one of these days and I end up selling my 100 BTC and buying a lot of new bits right uh yeah you mean that there are a lot of sellers of news right okay yeah let's say let's say let's say

tomorrow I I start doing this job today for the new new DA yeah and then tomorrow the price of um the price of new bits Falls and therefore all of my orders get filled like lots of people sell me new bits for 98 cents or 99 Cents and I now own a lot of new bits instead of Bitcoin who do I give these new bits to what do I do said you have to keep yourself keep it yourself it's in the contract if you're it's uh no you can you run uh it's Dual side Bo so whenever you uh you sell you have to uh whenever you sell your new bits you have to to put them uh in in

buy side again so it's um it's a zigzag uh operation you have to do uh all the time and that's we that's what we call the the Dual side uh B yeah uh okay okay so so what that means is um now I I enter a lot of buy orders at say 99 Cents right and um and then once I get new bits I also enter sell orders at 1 1.01 new bits right so exactly exactly and there is this the spread is your profit and uh and you make money with that okay you make money money for you

and uh you can also uh all a bit of this money for for shareholders as dividend but it's basically your your money as a custodian uh okay so so basically my my job would be to put my own money at risk right and then own a mixture of Bitcoin and uh new bits and enter a lot of buy orders at say 99 cents a lot of sell orders at uh 101 cents and then I and as new as as new bits fluctuates I make a profit on on this spread right that is my my business model yeah okay buy orders at $1 minus uh the uh transaction fee uh from The Exchange and uh sale

order at $1 plus uh plus the trading fee so it's zero yeah like you said let's take a short break to talk about high. me you know you need a VPN provider to protect yourself against those nasty hackers trying to steal your private information with high. me it could be easier you just install their application on all your devices iOS or Android log in and you have a cushiony cozy tunnel in which your data can move freely and unencumbered all the while protecting you from those meal hackers and that's boom to sign up for the free plan go to height. me/ epicenter the best thing is when you use that URL if you ever go premium later you're going

to get 35% off and premium comes unlimited bandwidth using up to five devices at the same time you can use all their servers worldwide you can pay with Bitcoin and best of all it comes with a feeling of peace and satisfaction like having tea with the Dalai Lama we would like to thank K me for their support of epicenter Bitcoin let's come back to this uh this this idea that we were mentioning earlier that that new is a Dao and that custodians make these proposals so so custodians propose to bring bring liquidity into the network and and as uh and and for shareholders to make dividends

on on revenues that they may generate from providing liquidity can you explain how a custodian would make a proposal in the new network and yes yeah uh yeah so yeah one one thing first of all is that you know most of the liquidity now is provided by uh liquidity pools because it's kind of like tricky to time consuming to make a proposal and make it pass when you have no trust inside the community by the beginning one year ago it was like single single individual but now it's pool managers that Pro provide liquidity and you can contribute to the pool by putting your money without any without you know introducing yourself to the

community so it's much better now we can have more liquidity quickly more quickly but the principle would be the same you would have to make a proposal you would say to you would have to say you know as I said earlier how much liquidity you are ready to provide for how much how many days and for what what spread and uh and also for how much reward you want for that right some people will ask for 5% 10% depending on the pair I used to be a custodian on the uh NBT USD pair on cced K which is Danish cryp exchange and uh I think I remember I put 5,000 uh 50 sorry $5,000 of liquidity or buy side I

mean Dual side liquidity and I asked maybe for 10% at the time because it was kind of risky and you know but now it's not 10% maybe we would get like uh I don't know uh 2 three four 5% but not more okay so the liquidity pools uh sort of act because it's proof of stake you know rather than having proof of work sort of uh uh if you compare to mining pools like mining pools you have proof you have you computers generating hashes for this this pool that sort of centralizes it into one place and and and maximizes their chances of winning uh on on the stake side you have a liquidity pool which does the same thing by gathering all of this liquidity and and and having

stronger proposals I suppose uh y abely let's let's focus in on on this on the proposals themselves how does a custodian or liquidity pool which is a Consortium of custodians uh submit a proposal to the new network and how to the shareholders vote um I'm I'm asking this question because we we just we just had an episode with uh with Stefan TW from the do and from slockett and we we spoke about the Dao and and how uh and how that system takes in proposals I'm interested in in seeing how the new network uh orchestrates this uh this uh proposal um acceptance yeah okay you so but you

can make any proposal but you know proposal for liquidity pool is one type one instance but uh the principle would be the same you would as I said put your conditions in a piece of text and you could ask for money up front or later if it's up front usually people would just uh indicate the new bit address and with the amount and and the people this person would ask please vote for this amount for into this address and if he gets or she gets 50 more than 50% then uh the blockchain will automatically uh put the money inside the address but if it's uh after doing the job then he would ask or she would ask for the money later on but so in this case he would just ask people to

vote for hash the hash of the of the text which would be in people would I mean voters sh would put this hash inside the client and if it gets or more than 50% then people would regard that as past and and there would be a consensus that people would say okay now now it's pass we have to uh if the job is done then we'll have to you know give him or she her the money yeah and before elaborating this uh this motion or proposal for custodianship the the she or he will will try to get the most consensus from the from

everybody and um and we'll try to refine the text The Proposal before hashing and uh it will depend on the how much she will ask on the conditions if it's risky or not how much it will bring to the to to new etc etc and then once she has decided it's okay she she she uh she hases and then uh put that to on for for vote and um yeah and if it's successful then she has the the money yeah or the the motion pass but uh so this kind of proposal is

not enforced cannot be enforced by the blockchain there is other types of voting you can vote for you know as I said like h a piece of text cannot be enforced by the blog it would be just like uh how do you call it would be just we have to keep the words right okay so it's an H system yeah for for this kind of proposal but we have also we can vote for you know new bits issues interest rates and transaction fee all these kind is can be enforced by the blockchain and so custodians are by by definition they can be they can be anonymous they can be synonymous they can be totally identified uh I

suppose if you're a liquidity pool like you you know who your who custodians are because you you're dealing with a liquidity pool if you just have like one person with a lot of Bitcoin that wants to provide liquidity in the um in the network they could choose to be anonymous uh how does that play in so basically what are are custodians usually uh Anonymous or synonymous I mean if if uh most of them are Anonymous they are all Anonymous most of them yeah pretty much yeah most yeah except me maybe I I used yes but yes so the where where does the trust come from then I mean if if you're custodian bring in liquidity and and these uh agreements can only be um they can't be enforced by

the blockchain and can only be sort of built on this other system exactly I mean we so we don't we don't trust we don't have to to put trust in the sense that we don't uh check back the background or affiliation but but yes um so like you said if they are not not trusted how do we enforce anything um they have their reputation as sholder they have their reputation as cian they want they don't want to Har that in any way um so if a custodian uh received money and get go away with with that it will will harm uh

the reputation for forever and um we it didn't no ever did that because you know uh we have the notion of reputation yeah it's part of the culture of the new because you know the p is anonymous he he the new shares and distributed them we don't know exactly how is the distribution which is ex very important for proof of stake right so absolutely we it's a business it's not uh you know um a scam or or you know um or anything like initial coin offering it's it's

really a business we don't we want to to provide value we want to make business as all we are all business partners in the says yeah okay okay so okay so so that's that's that's one section of uh of the control mechanism right like so um so the so the way the way we could we could kind of frame frame frame this part of the discussion is like like Sebastian said U you can think of the analogy of body temperature right like you have something like a body temperature it's 37° inside the core of the body and then if the temperature goes up then uh the body has has two different control

mechanisms when the when the temperature goes up what the body does is it it sends all of the blood from inside to the outside so that the blood can basically uh conve out heat out of the skin and then the other thing the body does it it sweats so it does two different things and these two things the combination of these two things brings back the body temperature core body temperature 37° from 41 so he said same way like in in in new uh once a price shoots above $1 there there'll be like a sell side wall and that will bring bring it back to uh uh to a dollar now but that's not the only mechanism right there are other kinds of

mechanisms and what what are these you want me to answer that yeah basically we have indicators but one of the biggest indicators the as I said I mean the liquidity the state of liquidity inside the client you would have in real time how much we have on the buy side and sell side let's say that it's very imbalanced we have like 100k us do on the S side and 20 20K on the buy side that means that people are selling a lot of new bits and very soon we we we will not have any more Bitcoins to buy those and the peg would be lost in that case we have to replenish the buy side so we would just like B basically unlock uh uh unlock uh Bitcoin from the other on the on from the other

the ti that are on the bottom yeah and we have like six TI of like like this okay so once once the once uh either of these two sides don't have enough liquidity somebody else is going to give money or assets so that the liquidity can be built again right balanced right balanced again right like so who is this somebody and uh yeah yeah what do they do yeah good question so right now it's there's nothing automatic right now which is very you know can be problem but so uh so we have several TI like tier one TI Two and T one is the liquidity on the market

so if uh so if if there is an imbalance then people will try to get liquidity from the bottom chairs like maybe chair two chair two is the liquidity that is on the market but uh not on on order right so you can get liquidity from that from there if it's not enough then he would try to or she would try to get liquidity from tier three tier three is the the liquidity it could be new bits or Bitcoin sitting outside the exchange in addresses that are controlled by the custodian if it's not enough then you would he he would have to access the tier 4 the tier 4 is the uh usually it's

some it's some fund that are used for development or it could be the dividend you know the divid money she or she could get money from there if it's not enough then we' have to get to tier five tier five is the manipulation of interest rates which is what we are doing right now if it's really not enough then we we have like like for three month four months we have like huge rate and and it does and you know liquidity the buy side is not balanced then we'll have to go to get to CH six T6 is the uh which is burning on the on the buy side or just issuing money on the S side yeah and burning meaning that

you would have to issue new shelles new new shelles you have to sell that and get from the proceed you would buy back the new bits and burn them for example okay so so uh let's let's quickly review like these two final ones tier five and tier six they're different from from from from the top so the the way the way I think of tf5 uh which is um it's it's the case that if say let's say the demand for new bits is a lot and the price shoots up to say 110 cents $1.1 then uh the new network the new blockchain can create new new units of new bits like just as Bitcoin creates new Bitcoin every 10

minutes they can create new units of new bits and then uh push these new units of new bits into into the market market right yeah yeah right exactly and on the other side if the demand for new bits Falls below one goes to say let's say 90 cents the price goes to 90 90 cents per new bit then uh then what does the blockchain do uh yeah we would have to uh in that case if it's really really catastrophic we will have to issue new new shes but let me just like point point out that we cannot allow uh the peg to be lost so we not see 1.10 or no 0.90 if it's uh we will have lost to Peg

so we will just see the imbalan of the imbalance of the liquidity so we will see that like we have like 100k on the Buy on the S side and 10K on the visad then we'll we'll have we'll start to really hurry a lot and we will and we have a monitoring tool for that yeah I say that which is called Alex yeah that yeah monitors and um eval time yeah so but right now nothing is automatic so shareholders will have to some shareholders will have to look at that and and and lock liquidity like the flood team for example the flood team manages some some some fun on BTC and when we see that in this in pox the it's very imbalanced like bu side is very low then we have we

will you know unlock uh liquidity by signing uh some transactions and we would be very timec consuming right now yeah the FL team is paid to monitor in real time and to open open wallets to to to to get to get funding uh new funding for for for on the walls but they have to work on Real uh every you know 24 hours a day for that and they'll pay for that yeah yeah so the key key takeaway that I I the key message I hear is U that if if if there's not enough people wanting to buy new bits while the price is falling then uh the blockchain will create new shares

eventually right yeah this is the the last the last result liquidity is so yeah like he said it's all about liquidity the price is has never F yeah we canot tolerate that if it would be regarded as a failure total failure of the business okay so even even if there's there's not enough liquidity on the buy side then the blockchain will create new new shares give it to a custodian right custodian will sell these new shares on the market for Bitcoin and then use that Bitcoin to to provide buy side liquidity right and that how exct the price stabilizes back yeah if you yeah okay okay and we never did that we uh we never had to do to do that so far uh okay we just used

recently parking rates t five and yes that's that's it up until this this level yes uh so right now it's like 16% one month two months three months when I'm talking about annual interest rate 60 60% if you pack pack your liit yeah we have to do we have to do that because we don't have enough reserves right now Reserve yeah that's that's a difficult ter but yeah we have some Reserve which is which is allocated in tier four usually we use that to replenish the buy

side but we don't have many right now so we are using t five so we hope that we can sell we can sell new news and with those proceeds we will need we will be able to replenish the tier four then we will be using the tier four to maintain the peg today's magic word is liquidity l i Qi di Ty head over to let bitcoin.com to sign in enter the magic word and claim your part of the listener [Music] reward coming back to new bits uh the currency we've talked a lot about the

system and and and and how it maintains the peg let's come back to the currency you know it is a cryptocurrency like Bitcoin it uh you obviously there's many uh advantages to useing cryp to cryptocurrencies um and and uh well my my question is so who who are the new bits users uh are we talking about you know Bitcoin users or or is it a different breed of people like are there any businesses accepting new bits that kind of thing no I think it's uh we don't know for sure statistically but it's obviously I think uh speak Traders Traders uh crypto traders that that want to speculate on on crypto assets and

they use they use nit for as a as a HED token they are the the main ones yeah and very recently we can see also people that start using nit to just get the interest interest rates yes they P them to get their interest ratees just for that yeah I'm using also personally new bits for uh uh International uh transactions just to pay some developers uh for for my web web stuff but I don't know if if others do that so what you're saying is that uh new bits is used as so yeah because when you're when you're trading uh you know cryptocurrencies on on ponx or something like that you don't

want to keep your um you don't want to keep all of like your USD assets on an exchange uh because that can be risky so people you know will transfer it over to uh a new bits wallet so that they can keep their liquidity and then when they want to start trading again they you know buy Bitcoins and and they can or any other cryptocurrency and they can um sort of keep their money in in the cryptocurrency world meanwhile protecting themselves against the volatility of most other cryptocurrencies okay but I mean it seems to me like there's an obvious use case here which like Al so in Bitcoin people have been talking about it I guess you know before uh before people started focusing more on blockchains and

the whole how the EOS kind of shifted but you know in 2013 people saying yeah Bitcoin needs to be a payment Network like you know we need to like encourage businesses to accept Bitcoin so we can we can use Bitcoin as a cryptocurrency to pay for things uh and one of the major issues and myself and I'm sure mayor and Brian as well and a lot of people evangelizing here uh when we go to businesses and say yeah you should set up a Bitcoin wallet well the first thing that they say to you is well there's the volatility um it seems like new bits is solving uh that that problem like pretty eloquently uh elegantly sorry uh then why do you think it hasn't taken off as an alternative to bitcoin as a payment system it's liquidity we it's the pay has been kept for more than

20 M hour perfectly uh we I think we have a robust system to maintain p uh very decentralized very distributed we we just have to we just have an issue of liquidity uh uh right now we have 700 about 700,000 new bits in circulation but only uh uh about 130,000 new bits um as Li put in in in exchange and um we want to scale we want to uh to have uh to be to get bigger than that because it's it's not enough to you know to to to get to be used as a

as a as a as a tool for international uh proection system so the the the issue is liquidity we have to to to to have liquidity walls much bigger than that and uh and as we scale the liquidity walls we we will be able to to have more nitin circulation and the ratio between the nib in circulation and liquidity will uh will um get smaller and smaller like like the for example the US the US US dollar uh if we take the example of the

US dollar um the ratio between US dollar in circulation and West Dollar in um in exchange is like zero like it's less than Z dot 1% so um we we want to to get into the this level oh that's that's a big dream but um we want just to have liquidity much more liquidity than that used yeah and uh to that for that we uh I think we we we have to develop more robust system perhaps more automatic tools of liquidity yeah maybe another reason is

that I think that uh you know uh so the most use of the most use of crypto cryptocurrencies are not are not the average Jo right so they are like there are like people that have like some ideology or liaran right so and those people they hate the fat money they hate so so for them it's very difficult for use nits so we had to focus on on the Hedge the head the hedging the hedger among those Libertarians yeah we have a a lot of criticism as you know from from Bitcoin as that super assist bitcoiners that believe that you know fety is is is disgusting so nit is also disgusting

yeah because yeah but but nubits is not a Fiat money like you you Peg it to a Fiat money but only for practical purposes um so they don't want to see that they don't want to see that so so you're you're saying that uh Jan you're talking about liquidity so one of the barriers then is that the the infrastructure is not uh well currently I mean especially working on that but the infrastructure is not currently um scalable enough to handle like if to handle that liquidity like if tomorrow someone came in and just brought like I don't know like you know a th000 Bitcoin or maybe more of liquidity into the system it it wouldn't

be able to sustain it that's a question uh I think we will be able to handle it but we need much more you know automat automatic processes to unlock liquidity when it's needed so we need to to to establish that before uh going to next level and also we have also you know all our liquidity is stor in centralized exchange we have last year we had four hacks or three four hacks at the same time we we are very very it was a catastrophic uh situation because we lost a lot of liquidity so now that's why we we we we the founder of uh nit is

also now create I mean creating an decentralized exchange to start all this liquidity in a very secure way we we as we also voted for that oh yeah of course yeah without our consens he wouldn't yeah yeah have the money for that yeah this exchange is half of the shareholders are new shareholders so it's it's a sister sister project and we need that exchange to have uh low I mean low cost liquidity and a very secret way we don't have that right now so it's difficult for us to to go to the next level okay but it would be released in six months or something like this and I'm curious what would what what what how would it unfold

if uh let's say the US Dollars um exchange rate starts to act erratically like if we start seeing important fluctuations in the US Dollars uh uh foreign exchange rate with say the Euro or you other first first class first tier currencies how would new bits um react to that how would would the peg be maintained or would there be some problems there we we will still be Peg to the uh I mean are you talking about uh CH a very descriptive change in the in in the value of the US dollar against

the the ruro yeah for example for example uh we still I think we still be pegged right we still be pegged uh but but but but yeah if the value of the dollar is decreased by 50% we will have like lost 50% right so we we all although we think that this uh you know scenario is very unlikely it could happen it might happen that's why we're looking we also interested in other pegs as un Euro SDR which is could be even more stable but some people are also proposing some kind of like inflation free US dollar P for example we're thinking about that some people

are thinking about that so basically if the US dollar is not working anymore we'll have to Peg to something else and it would be relatively easy as as long as we have some kind of data feed uh data feed to to get the price of this instrument we can p to anything basically but you we just we just choose the US do because it is still the most used currency in the world or something yeah okay and so you uh I think you're working on creating a peg for Euro Great British pound and some some other currencies us SDR and EUR okay so walk us through how the initial new shares and new bits will allocated then for

instance when the the Euro Peg uh is is initiated yeah basically will have to find someone that would would be ready to provide liquidity on this uh so let's say that exactly same mechanism as the US the NIT the what we call the US nit which is the NIT called P to so someone will make a proposal I will be providing 100,000k of liquidity on this market for this amount and for over like this amount of time so he would get she would get let's say 1,000 100,000 Euro nit and she or she would sell that he would sell that on

the market and and brand Dual side vot yeah they sell and immediately buy buy back the pro buy back beat with the proceed yeah uh in in dual site so that we have uh two TOS s sell side and buy side yeah that's what basically what we did with the WD yeah it takes some portion of the proceed uh for to distribute as dividend so one of the big applications you mentioned for new Nuit as as the First Market is the market for hedgers right said um why not go for a consumer payment Network you said one of the

first big markets was the market for hedgers so explain to us how it works like why why do these hedgers need new bits and what are what are they trying to achieve with new books well basically the when they speculate I mean I'm not a hedger so I not ex don't I don't know exactly what they think but if they think that the Bitcoin price will will go up I mean let's say that they have they have some new bit because they just as as a start right so now they think that the Bitcoin price will go up they will start to sell this new those new bit for Bitcoin right and if they think that the price will go down they will start to buy more example yeah I mean another use cases for for instance uh you know this is a secret to to no one

but epic cental doesn't have a bank account we hedge some of our funds in in Gold uh with voro you know another alternative would be also to hedge it in new bits I can see how a Bitcoin only company uh could protect themselves against volatility risk some people do that yeah so yeah some people some yeah some people they ask for suddenly for 50,000 I want to buy 50,000 ubit uh how do I can I do that so some people do that I mean sometimes it happens especially especially last year when bitcoin price uh started to fall down quickly yeah right now it's relatively stable so we don't have so much Demand on the bit so basically the problem when Bitcoin is not Vol volatile we we don't

do so much business okay and do you think so the block size having is is coming up uh pretty soon and there's some mixed opinions about what would happen there you it may be that the price you may drop uh significantly or are you seeing um some increased demand because of that or people coming to you and asking uh how they can purchase a lot of new bets to to hedge their bets against Bitcoin right now we don't have uh we don't I don't I haven't seen any people are asking these kind of questions but we there is a thread on the Forum that uh in which people were like thinking about what would happen with haling so we are we are trying to prepare for that

as well but uh I'm not you know I'm not uh involved with that right now so I can't answer um we also interested perhaps in the the volume of ethereum details e sorry because of the volume we want to open new new PA USD us new ETS for that just because of yeah there are some some Traders on this pair that would be interested init okay so uh are are there any are there any other interesting products

you're working on like as a as a new community any interesting consumer products that that we might look forward to yeah so like you said Block Chain exchange that that that is Spawn from new basically pretty much the same structure except that we we add some new features so it's an exchange we use the same template but voting motions costan um but we we add new things like um uh reputation voting uh like what what kind of asset we want to have on it and uh it has been very I

mean quite popular as a topic on the on bitcoin P yeah but we we the thing the relationship with nubit is that we we nubit will be regarded as a synthetic dollar inside because it's a exchange so there is no possibility to uh handle fat money so we think that it would create a very good demand for new bits and um and the cost now the cost of the of liquidity yeah because nit will be the main the main the basis pair the base pair in this inside this exchange so this is maybe the most uh you know promising project that we have but as a consumer project I mean we have like new Droid which is the Android wall wallet

for nbits this is the one maybe the most uh one of the most uh you know uh you know how do you call that uh the easiest way to to access new bit for example or you have also new lagon which is also you you basically you put bitco it's kind of Chef shift for new bit we have also that okay so this decent exchange is based on a blockchain or it's um exactly is new new blockchain itself it's something running on top of new Block No No it's it's a for it's a for of nit yes uh of new but I'm using nits because nbit is kind of a marketing term but it should be it should strictly speaking it

should be new new as a decentralized as autonomous organization but people call it new bits yeah okay yeah so yes this exchange will be running inside the blockchain so all the trades will be you know managed inside which is very in know Innovative okay and when do we expect this kind of decentralized exchange to from 3 to 6 months from now I think so where can people uh get more information about new bits news.com The Forum discuss.

news.com uh would be the main to uh absolutely yes and in particular the discit yes we are welcoming any anybody that can have an interest in new bit and just contribute uh even anonymously of course we don't have any problem with that and uh yeah okay and we'll have links to all that and of course the white paper in the show notes so thanks guys for joining us today uh it was a f disc for your time and hope that you have enjoyed the interview as we have right yes thank you you guys thank you very much and thank you to our listeners we release new episodes of epicenter Bitcoin every Monday where of course on

the LTB Network you can find lots of great shows and content about Bitcoin blockchain cryptocurrencies and decentralize all the stuff uh over at let's talk bitcoin.com uh you can also find us on iTunes SoundCloud YouTube or wherever you get your podcast uh and your favorite podcasting app and of course if you want to leave us a review uh you know leave us a review anywhere you like and send us an email at show at epicenter bitcoin.com and we will send you a T-shirt and some stickers so thank you so much and we look forward to being back next week [Music] no

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