Is my Dividend Calculation Correct?

Projects
1

I just wanted to post a record of what I said in chat…

Sentinelrv: Let me see if I understand this, or if I have something wrong. If demand for NuBits starts going up, NuShareholders will vote to create more NuBits to sell on the market to meet the increased demand and to keep the price from rising above $1. Let’s say that over time shareholders end up creating 100,000 NuBits to satisfy demand. Selling those 100,000 NuBits at $1 each would generate $100,000 profit, which would then get converted into Peercoin and distributed between shareholders. The amount of dividends you get depends on how many NuShares you hold and how many NuShares are in existence.

Sentinelrv: There are currently 1 billion NuShares in existence. Let’s say I hold 5 million NuShares. If the profit from selling the 100,000 NuBits gets distributed between shareholders, then I would receive $500 worth in Peercoin dividends. If there were 1 million NuBits sold, then I’d receive $5,000 in Peercoin. This is the reward for shareholders to do their job correctly. Abuse of money creation is limited through voting and shareholders knowing that if they create too many NuBits, the peg might fail, destroying the reputation of NuBits and their money making machine along with it. Did I get anything wrong here?

Sentinelrv: I think I’ll make this into a thread.

Chronos: Sentinelrv, that looks correct to me, and I’ve been studying this carefully. Good analysis.

Sentinelrv: There should be a fee taken out for the custodian I think, so it shouldn’t be the full $100,000.

David: And that assumes a 100% dividend rate. The network might decide 50% of sales should go to funding development projects.

David: Completely up to Shareholders how network revenues are spent, just like a physical company

thExit: 50% dividend would mean that if 50% of users knock at your door to get their USD back, they would leave empty-handed.

thExit: But I do understand that there might be other sources of revenue, like mentioned in the whitepaper, e.g. Custodians creating lending services.

thExit: This is where the Nu network should put a lot of emphasis, not just to print money, but to generate profits from their branches of operation.

Sentinelrv: Yes, definitely

thExit: At the beginning, the dividends should be rather small, to build trust, to let people know that their money/value is safe with this system.

thExit: If Nu can mimick what central banks do, and mimick it in a more reasonable way, then there might be a bright future for Nu.

thExit: It’s all up to the people creating the network, people pulling the strings, people voting.

thExit: As mentioned by David, it’s like a physical company, the shareholders need to take care of the needs of the clients, and the clients will return the favor.

2

Do you mean that only 50% of shareholders would receive their dividends? I don’t think this is true. If only 50% of dividends were paid to shareholders while 50% were allocated to another project, all shareholders would still receive dividends. It would just be 50% less than they would have received if the money hadn’t been allocated to something else.

3

I believe since the first dividend payment has not been made, it may be a good idea to start the tradition of putting XX% of the dividends into development. Maybe send it to a Peer4commit forked site with development projects voted on by motions.

4

Do you mean that only 50% of shareholders would receive their dividends?[/quote]

I think by user thExit meant the NuBits users – those who paid USD to buy NuBits. A simplified scenario for example: on Sept 20th a company bought 100,000 NBT to pay salary of 100 global workers. On Oct 1st all worker got their 1000 NBT salary and 50 of them want to exchange NBT back to USD to pay bills. It just so happened that the 100,000 USD “profit” has all been sent to the shareholders as dividends on Sept 26th. Those works now wants 50,000 USD with their NBT. They will come back empty handed.

The point is to avoid this to happen revenue from other than selling NuBits has to be generated to pay the shareholders (and to pay parking interest for that matter)

5

The tradition can be started, if the shareholders agree, but it will not be with the custodial grant that is in operation right now. The grant proposal had very clear language about how it would be operated, so Kiara is bound to keep to that plan as closely as possible.

I have a couple of other ideas for continued self-financing for development and your post gave me a couple of new facets to consider. I’ll put a post up on discuss.nubits.com as soon as I have them fully-formed. Thank you.

6

Sentinelrv,

I could be wrong but I think when the shareholders vote in a custodian, the custodian agrees to pay a specific return over a specific period on the use of the nubits.

If a custodian is permitted 100,000 nubits and agrees to a 10% return over 1 year, that is 10,000 nubits worth of peercoin to divided by the shareholders (permitted 100% of RIO goes to shareholder). The creation of nubits does not instantly create a profit. The shareholders must be very diligent with their choice of custodians.

7

Do you mean that only 50% of shareholders would receive their dividends?[/quote]

I think by user thExit meant the NuBits users – those who paid USD to buy NuBits. A simplified scenario for example: on Sept 20th a company bought 100,000 NBT to pay salary of 100 global workers. On Oct 1st all worker got their 1000 NBT salary and 50 of them want to exchange NBT back to USD to pay bills. It just so happened that the 100,000 USD “profit” has all been sent to the shareholders as dividends on Sept 26th. Those works now wants 50,000 USD with their NBT. They will come back empty handed.

The point is to avoid this to happen revenue from other than selling NuBits has to be generated to pay the shareholders (and to pay parking interest for that matter)[/quote]

It is my opinion that those who hold nubits understand the dynamics of the system. Perhaps their reason for cashing out would be finding an investment which yields higher than the rate of return offered by the nushare holders, however the situation you mentioned would be unlikely to have a big effect on the system other than perhaps raising interest rates. Based on your example, it seems they will get paid in nubits the next month anyways creating a similar demand as the month before.

8

I think it has a big effect on people’s perception of how trust worthy the whole system is. It’s not only for the small guys. If the Nu system is able to show 100% reserve (the USD to match every Nubits in circulation is automatically ready to be bought back) then one could move in billions of USD (say the sell wall is that high) and move out any time with no worry. It will put Nubits on the radar of world’s financial industry.

I understand that fractional reserve is a more efficient use of fund. But to convince people Nu is going to survive its capital-hunger initial period and will last when it grows bigger, I see a need to to establish a rule that Nu will not spend more than xx% of what it has, and to figure out a way to destroy nubits (so after that 10 billion has left, the Nubits created for it won’t park there idling and creating endless interest (inflation).

9

I think it has a big effect on people’s perception of how trust worthy the whole system is. It’s not only for the small guys. If the Nu system is able to show 100% reserve (the USD to match every Nubits in circulation is automatically ready to be bought back) then one could move in billions of USD (say the sell wall is that high) and move out any time with no worry. It will put Nubits on the radar of world’s financial industry.

I understand that fractional reserve is a more efficient use of fund. But to convince people Nu is going to survive its capital-hunger initial period and will last when it grows bigger, I see a need to to establish a rule that Nu will not spend more than xx% of what it has, and to figure out a way to destroy nubits (so after that 10 billion has left, the Nubits created for it won’t park there idling and creating endless interest (inflation).[/quote]

I agree with you and I don’t doubt that Nu will undergo some artificial stress tests. It should be interesting.

I don’t see NuBit as being staved of capital, NuShares might need some more funds but the foundation is there and the rest is superficial. I appreciate the fact Nubits didn’t come out of the gate with 10 custodians at 50,000,000 in Nubits Capital. A gradual, organic growth will serve the coin best.

Spending rules shall be determined by the shareholders. They have the opportunity to make mistakes.

10

Well I have a scenario,for example, there is a great demand for nubits, so 10k nubits are created so price stay at $1, but what will happen when demand is lowered and price of nubits go down, you start and "destroy "nubits so price go back to $1?

11

Do you mean that only 50% of shareholders would receive their dividends?[/quote]

I think by user thExit meant the NuBits users – those who paid USD to buy NuBits. A simplified scenario for example: on Sept 20th a company bought 100,000 NBT to pay salary of 100 global workers. On Oct 1st all worker got their 1000 NBT salary and 50 of them want to exchange NBT back to USD to pay bills. It just so happened that the 100,000 USD “profit” has all been sent to the shareholders as dividends on Sept 26th. Those works now wants 50,000 USD with their NBT. They will come back empty handed.

The point is to avoid this to happen revenue from other than selling NuBits has to be generated to pay the shareholders (and to pay parking interest for that matter)[/quote]

Hey,

I missed the whole thread, thanks @mhps for your comment, this is exactly what I meant. I’ll give this topic a read tomorrow as I was just on my way to get some sleep.

Kind regards,
Piotr