Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Julien Hamonic & Pascal Hamonic: Applying the Mechanisms of Thermoregulation to Cryptocurrencies

Episode Date: May 30, 2016

One of the problems often cited when talking about cryptocurrencies is their level of volatility compared to traditional fiat currencies. This makes most cryptocurrencies a poor instrument for storing value, and introduces complexities when making purchases in fiat amounts. Stable cryptocurrencies include mechanisms which allow them to stay pegged to fiat currencies like the US Dollar or Euro. They present a number of advantages, and, in addition to taking the headache out of making purchases, can be used by cryptocurrency traders who need a stable unit of account for hedging their assets. We talk to brothers Pascal and Julien Hamonic, Core Members of the Nu team about the NuBit stable cryptocurrency. Similarly to the mechanisms that keep our body temperature stable, NuBits relies upon the introduction of new coins into circulation when demand increases, and for coins to be taken out of circulation when demand drops. Shareholders (NuShareholder) vote on these measures as the network relies on custodians who bring liquidity into the market in exchange for dividends, and on speculators who “”park”” coins in exchange for potential returns when demand increases again. Topics covered in this episode: What is NuBits and what is the goal it is trying to achieve The different components of Nu (NuBits, NuShares) The economic mechanisms behind the $1.00 USD peg Who are the different participants in the network (NuBits users, NuShareholders, custodians) The important role of custodians in providing liquidity to the network The consensus model used in Nu The initial allocation of NuBits and NuShares The governance mechanisms in Nu Episode links: Nubits NuBits Whitepaper This episode is hosted by Meher Roy and Sébastien Couture. Show notes and listening options: epicenter.tv/133

This is Epicenter Bitcoin, episode 133 with guests Pascal and Julian Harmonic. This episode of Epicenter Bitcoin is brought you by hi.combe. Protect yourself against hackers and safeguard your identity online with a first-class VPN. Go to hi.combe slash epicenter and sign up for a free account today. Hi, welcome to Epicenter Bitcoin, the show it talks about the technologies, projects, and people driving decentralization and the global cryptocurrency revolution. My name is Debass Sinku, and I'm Mahoy. Today we are going to talk to Junior and and Pascal were 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 pegged to the US dollar. So one new bit is equal to one US dollar. And this peg has held through for the past one and a half years. So it's

sort of a long-running price-stabular cryptocurrency and we want to walk through how this works. Before we get started, let's have an introduction from Julian and Pascal. So this is Julian. I'm called it. member of babies and I've been involved in the new network for more than two years. Before that I have been interested in cryptocurrencies in general, particularly in the peer co-cerns and light-cold option. As a businessman, I'm an entrepreneur also in Japan, I've been living my own firm, for seven years and also helping ventures to get fun.

But I've always been interesting in finding all banks work and how to access money much fully. And I think Newy is well on the very efficient way. Right. So I wouldn't have much to add because, you know, I'll accept that the fact that my name is Pascal Hittigiegannock and I have been involved with Newbit, the same as Junior. And we are running the business together, so I wouldn't have much to add regarding that. Except my name is different. And also, you know, one of the big issues of Newb, because we have also issues, is that we don't have much many public evangelists. because most of the members are anonymous and we decided to come out to contribute as a

yeah exactly so the new network the new community basically came out of the Peercoin community right which was one of the early communities that kind of pioneered truth of state and there was they used to be founder of Peercoin and Sunny King used to be very influential in proof of stake circles at one point, right? So who is the founder of the new network? The founder is someone called Jordani and it's probably a person but we don't know for sure it could be a group of people too and he came out in 2014, but he also appeared on the on some forums, Bitcoin talk forums in 2013. And he originally wanted to create

templates to create, that enables people to raise funds and to create basically companies on the blockchain. So let's walk through kind of how Nubits, how the new network works so give us a brief overview of what the network aims to do and the basic core components of the network basically so new is one of the one of the first decentralized autonomous organizations so you have shares like hold the new shares when you hold those notions you can meet and by meeting you can contribute to the security of the network

And the products is called NUBITs. It's a stable cryptocurrency. Right now, peg to the US dollar, but we have plans to release all the banks like Yuan, Euro, SDR, and maybe all the products that are not necessarily related to stable cryptocurrencies. Yeah, right now, US dollar, peg. So in this, it's funny that you, well, it's interesting that you, that you call it a decentralized autonomous organization. I hadn't particularly looked at it that way. Can you explain to us how,

in your view, the new network is a DAO? Basically, shareholders are scattered around the world, and we don't know each other. And despite this fact, we can create a company and organize ourselves and manage the companies and making proposals and voting for this proposal. In a total, decentralized way because the consensus is you know everything is voting on the blockchain and so it's trustless decentralized totally we don't we don't have any year key we don't have any CEO we don't have any managers we just have shareholders and the inside motions and who to send money to pass it.

We're using the version to encode and embed. Okay. And so the, well, that's interesting. I mean, last week we had on Stefan Tuel, who talked to us about the DAO and how the DAO accepts proposals. Maybe we can come back to that later and talk about analogies between those two systems. So in the new network, we have, as you mentioned, a currency that is currently pegged to the US dollar.

We have new shares, which are the shares which allow for the network to either add liquidity or remove liquidity, and so therefore allow for the peg to stay stable and at one US dollar. And then there's peer coin. Can you also explain how pure coin, what role peer coin plays in? this in this system? Yeah, in the original white paper, Piercon is used as a way to distribute the dividends.

When you sell new bits, you have from proceeds in the form of Bitcoin and then you know, you would distribute dividends by buying Peercoins based on the Bitcoin that you have. So there is a mechanism to distribute the dividends inside the client.

You can get a list of, you know, Nusia's addresses and For each new share address, you can generate unique PureCon address, and you would distribute the dividends, the system would distribute dividends based on the quantity that you input and the number of shares that you have, the ownership that you have in the network.

So they say that there is 100,000 dividend to distribute. If you have a 1%, you would get 1% of the dividends in the form of PIRCoy. Okay. So let's go through the peg mechanism. Can you explain how the peg mechanism work, how it works, and maybe walk us through an example scenario of, you know, shares being sold? So one one interesting analogy that Mayerer brought up before the show when we're just discussing is the body temperature analogy, which I thought was really interesting and hadn't really looked at it that way when you're cold. while you shiver and then you get hot again and when you're hot, well, you sweat and you get your body temperature sort of stabilizes. So how to, let's walk through the PEC mechanism and how those different

components of the system interact. Okay, let me try to use this in comparison. Basically, you know, the PEC cannot be, you know, created inside the blockchain. It is created in the markets. So you have to provide liquidity in the market to maintain the spec. So basically you have to set up very big wall, I mean relatively big sell and buy walls in the markets. And so basically, you know, you could have a big wall of 50,000 Bitcoin's buying new bits and a wall of 50,000, you know,

Nubis being sold, right? So, and at a very, very tight peak, a very high, sorry, tight spread. So basically you have that on several markets, and those liquidity is, are provided by people that have an initiative to do so, they are called custodians. So those custodians need to have a contract with the shareholders to get reward if they do what they you know what if they provide if they maintain the peg at the tight spread so so the basic concept is one one one new bits is equal to one US dollar and 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 one US dollars so say let's say the price falls at 19 nine 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 form like a wall like in an exchange order book if you if you look at it there's lots of people wanting to buy at 98 cents and that kind of looks like a wall in the exchange order book so that's like a buy wall right and on the other side if the people price rises, price of new bits rises to say 1.01 or 1.02 cents, sorry, 102 cents,

right, 1.02 dollars. Then there's a lot of people that are willing to sell new bits to to a user, right? So if, so that's like a sell wall. Now because a lot of people are willing to buy at 98 cents and sell at, at sell at, at, at sell at, uh, at, uh, at sell at, uh, 102 cents the price kind of 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 at I mean to buy it to buy I sorry there is no meaning for example to sell at 1.2 because you would find no buyer there was there would be always someone that would be sending in one on one dollar

right? And on the opposite side, there is no meaning to try to, to buy at, try to buy at 98 cents because there will be, you will never find any seller at this price, because you can always sell at one dollar. So you don't have, you don't, you don't, there is no way that the thing can fluctuate. So the custodian buys and sells these new shares from new shareholders? No bit, new it. Okay. Then who are the shareholders?

Relative to the custodians, who are the shareholders? It can be the custodian themselves, but it can be anybody. even that has invested money into new and that things that in little bit would maintain its peg for certain a lot of time. So new has value for them and they all call the initial owners and they have their own illusions. Okay. And so you mentioned that custodians provide liquidity to the to the market. Yeah, because they're putting up, they're putting up large amounts of Bitcoin to provide liquidity to the market. 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 these markets organized by the new network? or on exchange exchange on exchanges okay like the main one will be Polonix right now but we have also BTR and also like yeah others or the ones okay so so in a sense the way we could think of it is like new 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 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.

Now, the job of the custodian is to provide liquidity and help maintain the peg of new bits inside different exchanges like Polonex, Beter, etc. So workers, how this employee custodian, why does he do this job, right? Like what motivates him to do this job? How does he make a profit out of this activity? Yeah, so at the beginning, you know, one year ago when we started,

the custodian were basically single individuals that, you know, got an approval from the shareholder. So he had or she had to write a contract. and 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 the case if it's later and Scherhaler would have to judge if the job would have been done or not so this person let's say that one is ready to provide you know

20,000 new bits of buy-site liquidity on Polonix for like 10% a month, or he would get, also would get 2,000 newbit for this job. He would go or she would go to the Polonix and maintain this and run the bots, which is called new bot, the trading boat, right, on the buy side of the NPT, BTC, right? And if the new boat would maintain the peg automatically, you can, you can, you can, you, you know, specify a lot of parameters. You can specify, for example, the spread. You can specify when do you, the limit, you know,

if you don't want to go over 5,000 a new bit, you can set up this kind of parameter. So, but the bot will make sure that the spread is very tight if the proposal contains, include this condition. Okay. So let's just walk through this one, right? So assume, assume like, let's play some rules, right? Let's say the two of you and Sebastian

are shareholders 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 going to be taking the role of a custodian. So when I'm the custodian, my job is to open an exchange account on Polon And then offer by buy side liquidity. So that means I need to put a lot of buy orders for 98 cents or 99 cents, right?

Yeah, 99 cents. So I'm going to go to the Polonex essentially and put a lot of buy orders at 99 cents. Who wants to sell at 99 cents can sell to me. Now, in order to put these buy orders, what I need is US dollars. is US dollars at Polynex or Bitcoin at Polonex. Yeah, exactly. Some other asset apart from new bits inside Polonyx, right? At the beginning it was US dollar but now it's Bitcoin.

So who gives me this Bitcoin? It's your, at the beginning, it was your own money. It could have your own, it could, I mean, two possibilities. Your own money or the money are from the company, the new, right? right okay so so then it could be my own money so let's let's work with the possibility that I put my own money so I let's say I have I don't know a hundred BTC I I put I put this to contribute by 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 hundred BTC and buying a lot of new bits right yeah you mean that there are a lot of sellers of new it's right okay yeah let's say let's say let's say tomorrow I start doing this job today for the new new Dow yeah and then tomorrow the price of 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 you say you have to keep yourself give it yourself it's in the contract if yours it's it's it's a

No, you can, you run, it's a dual side bolt. So whenever you sell, you have to, whenever you sell your limits, you have to put them in by side again. So it's a zigzag operation you have to do all the time. And that's what we call the dual side bolt. Ah, okay, okay. So what that means is, now I enter a lot of buy orders at say 99 cents, right? And then once I get new bits, I also enter sell orders at 1.1 new bits. Exactly, exactly. And the spread is your profit and you make money with that. Okay, so you make money for you and you can also own a bit of this money for shareholders as dividend but it's basically your money as a custodian.

Ah, okay, so basically my job would be to put my own money at risk, right? And then own a mixture of Bitcoin and new bits and enter a lot of buy orders at say 99 cents. a lot of sell orders at 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 business model yeah okay buy orders at one dollar minus the projection fee from the exchange and sell order at one dollar plus the trading fee okay 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.

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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 HaidotMe for their support of Epicenter Bitcoin. Let's come back to this idea that we were mentioning earlier, that the new is a DAO and that custodians make these proposals. So custodians propose to bring liquidity into the network and for shareholders to make dividends on revenues that they may generate from providing liquidity. Can you explain how a custodian would make a proposal? in the new network?

Yes. Yeah. Yeah. So, yeah, one thing, first of all, is that, you know, most of the liquidity now is provided by liquidity pools, because it's kind of like a tricky, time-consuming to make a proposal and make it pass when you have no trust inside the community. At the beginning, one year ago, it was like a single individual, but now it's full managers that provide liquidity.

and you can contribute to the pool by putting your money without any without you know insuring the same to the community so it's much better now we can have more for liquidity quickly more quickly but the principle would be the same you would have to make a proposal you would say 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 spread and and also for how much with what you want for that, right? Some people would ask for 5%,

10% depending on the pair. I used to be a custodian on NBT USAIDK, which is the Danish crypto exchange, and I think I remember I put 5,000 $5,000 of liquidity

or dual-side liquidity. I asked maybe for 10% at the time because it was kind of risky. But now it's not 10% maybe you would get like, I don't know, two, three, four, five percent, but not more. Okay, so the liquidity pools sort of act, because it's proof of stake, you know, rather than having proof of work, sort of, if you compare to mining pools, like mining pools, you have proof, you have computers generating hashes for this, this pool that sort of centralizes it into one place

and maximizes their chances of winning. on the stake side, you have a liquidity pool, which does the same thing by gathering all of this liquidity and having stronger proposals, I suppose. Let's focus on the proposals themselves. How does a custodian or liquidity pool, which is a consortium of custodians, submit a proposal to the new network and how do the shareholders vote? I'm asking you this question because we just had an episode

with Stefan 12 from the DO and from Slocket and we spoke about the DAO and how and how that system takes in proposals. I'm interested in seeing how the new network orchestrates this proposal

acceptance. Yeah, okay. So, but you can make any proposal, but you know, proposal for liquidity poor is one type, one instance, but the principle would the same. You would, as I said, put your conditions in a piece of text.

And you could ask for money upfront or later. If it's upfront, usually people would just indicate the new bit address and with the amount. And the people, this person would ask, please vote for this amount into this address. And if they get, or she gets more than 50%, then the blockchain will automatically

put the money inside the address. But if it's after doing the job, then he 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 text, which would be, and people would, I mean, voters, Cheryl would put this hash inside the client. And if it gets more than 50%, then people would regard that as past. And there would be a consensus that people would say, okay, now now it's past. to if the job is done then we'll have to give him or she her the money. Okay.

Before elaborating this motion or proposal for custodianship, the he or he will try to get the most consensus from everybody and will try to refine the text. the text, the proposal, before hashing. And it will depend on how much she will ask, on the conditions, if it's whiskey or not, how much it will bring to the new, et cetera, et cetera. And then once she has decided it's okay,

she hashes, and then put that to it. Yeah. So this kind of proposal is not enforced, cannot be enforced by the blockchain. There is other types of voting. You can vote for, as I said, like, a piece of text. It cannot be enforced by the blockchain. It would be just like, how do you call it? It would be just we have to keep the words, right?

Okay, so it's an owner's system? Yeah, for this kind of proposal, but we have also, we can vote for, you know, new bits issuance, interest rates and a transaction fee, all these kinds of is can be enforced by the blockchain. And so custodians are, but by definition, they can be, they can be anonymous. They can be synonymous. They can be totally identified. I suppose if you're a liquidity pool, like you, you know who you're, who custodians are because you're dealing with a liquidity pool. If you just have one person with a lot of Bitcoin that wants to provide liquidity in the network, they could choose to be anonymous.

How does that play in? Basically, are custodians usually anonymous or synonymous? I mean, if... Yeah, most of them are anonymous. They are all anonymous. Most of them. Yeah, pretty much. Yeah.

So, yeah, except me, maybe I used to. Yes, but yes. So where does the... Where does the trust come from then? I mean, if you're a custodian bringing in liquidity and these agreements can only be, they can't be enforced by the blockchain and can only be sort of built on this system. Exactly. Well, how does that work?

I mean, we don't trust. We don't have to put trust in a sense that we don't check the bad ground or affirmation. But yes. So, like you said, if the. not trust or do we enforce anything. They have their reputation as Sheffolder. They have their reputation as custodian. They don't want to harm that in any way.

So if a custodian receive money and get away with that, it will harm the reputation forever. And we didn't, no consultant ever did that because, you know, we have the notion of reputation. Yeah, it's part of the culture of the menu because, you know, the founder is anonymous. He created the new shares and distributed them. We don't know exactly how is the distribution, which is very important for proof of stake, right? Absolutely. it's a business it's not you know a scam or you know or anything like an

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 we are all business partners in the sense yeah okay okay so okay so that's that's one section of of the control mechanism right like So, so the way we could, we could kind of frame, frame this part of the discussion is like, like Sebastian said, you can think of the analogy of body temperature, right? Like you have something like a core body temperature, it's 37 degrees inside the core of the body. And then if the temperature goes up, then the body has two different control mechanism. When the temperature goes up, what the body does is it sends all of the blood from inside to the outside so that the blood can basically Convect 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 degrees from 41 So he said same way like in in new When once a price shoots about So one dollar there'll be like a sell side wall and that will bring it back to a dollar. Now but that's not the only mechanism right there are other kinds of mechanisms and 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 liquidity you have on the buy side and sell side.

They say that it's very imbalanced. We have like 100k US dollar on the sell side and 20K on the buy side. That means that people are selling a lot of new bits. And very soon, we will not have any more Bitcoins to buy these new bits. And the peg would be lost. In that case, we have to replenish the buy side. So we would just like basically unlock Bitcoin from the other tiers that are at the bottom. on the bottom yeah and we have like 60 years of like like this okay so once once

the once 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 of built again right balanced right balanced again right so who is this somebody and yeah yeah what we yeah good question so right now it's every there's nothing automatic right now which is very, you know, can be a problem. But so, so we have several tiers, like tier one, chair two, and tier one is the liquidity on the market. So if there is an imbalance, then people will try to get liquidity from the bottom tiers.

Like, maybe tier two. Tier two is the liquidity that is on the market, but not on order, right? So you can get liquid it from there, from there. If it's not enough, then he would try to, or she would try to get liquided from Tier 3. 3 is the liquidity, you could be Nubits or Bitcoin, sitting outside the exchange in addresses that are controlled by the custodian. If it's not enough, then he would have to access the Tier 4. The tier 4 is usually some fund that are used for,

development or it could be the dividend, you know, the dividend money, she or she could get money from there. If it's not enough, then we'd have to get to Tier 5. Tier 5 is the manipulation of interest rates, which is what we are doing right now. If it's really not enough, then we have like for three months, four months, we have like huge rate and liquidity, the buy side is not balanced,

then we'll have to go to get to tier 6. Tier 6 is the... Which is burning on the buy side or just issuing money on the sales side. Yeah, and burning meaning that you would have to issue new shares. New new shares. You have to sell that and get from the proceed, you would buy back the new bits and burn them, for example. Okay, so let's quickly review these two final ones,

T5 and T.R. 6 because they're different from the top. So the way I think of TF5, which is, 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 the new network, the new blockchain can create new units of new bits like just as Bitcoin creates new bitcon every 10 minutes they can create new units of new bits and then push these new units of new bits into into the market right yeah yeah right exactly and on the other side if the demand for new bits falls below one that goes to say let's say 90 cents the price goes to 90 cents per new bit then then what does the blockchain do yeah we would have

to in that case you forget if it's really, really catastrophic. We will have to issue new new shares. But let me just like point out that we cannot allow the peg to be lost. So we cannot see a 1.10 or no 0.90. If it's we will have lost the peg. So we will just see the imbalance of the liquidity. So we will see that like we have like 100k on the side and 10k on the buy side. Then we will 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 monitors in time. Yeah. But right now nothing is automatic, so shareholders will have to... Some shareholders will have to look at that and unlock liquidity like the flood team, for example. And the flood team manages some phone in BTC.

And when we see that in this, in Polonex, it's very embalanced, like by side is very low. then we will unlock liquidity by signing some transactions. And it would be very time consuming right now. Yeah, yeah, the floor team is paid to monitor in real time and to open the wallets to get funding, to get funding for on the walls. But they have to work only, you know, 30 or four hours a day for that. They'll pay for that. Yeah, a little bit, yeah.

so the key takeaway that i i the key message i hear is uh that 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 last the last result yeah like he said it's all about liquidity yeah the price has never fall yeah we're going to tolerate that if it would be regarded as a failure total failure of the business yeah absolutely okay so even even even even even if there's not enough liquidity on the buy side then the blockchain will create new new shares give it to a custodian right because then we sell these new shares on the market for bitcoin and then use that bit point to provide buy side liquidity right

and that is how the price stabilizes back yeah if you yeah okay okay and we never did that we we never had to do that so far okay we just used recently parking rates title 5 and yes that's that's it yeah up until this this level yes so right now it's like 60% one month two month three months yeah and you're when I'm talking about annual interest rate 60% if you park or move it yeah we have to do it we have to do that because we don't have enough reserves right now. Reserve, yeah. That's a difficult term, but yeah.

We have some reserves which is allocated in Tier 4. Usually we use that to replenish the buy side, but we don't have many right now, so we are using Tier 5. So we hope that we can sell new new bits. And with those proceeds, we will be able to replenish 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-Q-U-I-D-I-T-Y. Head over to let's-stock bitcoin.com to sign in, enter the magic word, and claim your part

of the listener award. Coming back to new bits, the currency, we've talked a lot about the system and how it maintains the peg. Let's come back to the currency. It is a cryptocurrency like Bitcoin. Obviously, there's many advantages to use to crypto currencies. And, well, my question is, so who are the new bits users? Are we talking about Bitcoin users or is there a different breed of people?

Like, are there any businesses accepting new bits, that kind of thing? I think it's, we don't know for sure statistically, but it's obviously, I think, traders, crypto traders that want to speculate on crypto assets. They use these Nubit for As a hedge token. They are the main ones. Yeah, and very recently we can see also people that start using Nubit to just get the interest interest rates. Ah, yes. They park them to get their interest rates just for that.

Yeah. I'm using also personally Nubits for... international transactions. Just pay some developers for my web stuff. I don't know if others do that. So what you're saying is that

new bits is used so yeah, because when you're trading you know, cryptocurrency on Polonex or something like that, you don't want to keep your you don't want to keep all of like your USD assets on an exchange

because they can be risky, so people will transfer it over to a new bits wallet so that they can keep their liquidity. And then when they want to start trading again, they buy Bitcoins or any other cryptocurrency. And they can sort of keep their money 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 in Bitcoin, people have, I've been talking about it, I guess, you know, before people started focusing more on blockchains and the whole of the ecosystem kind of shifted. But, you know, in 2013, people say, yeah, Bitcoin needs to be a payment network.

Like, you know, we need to encourage businesses to accept Bitcoin so we can use Bitcoin as a cryptocurrency to pay for things. And one of the major issues, and myself, and I'm sure Mayor and Brian as well, and a lot of people evangelizing here, 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. It seems like NewBits is solving that problem, like, pretty eloquently, elegantly, sorry, then why do you think it hasn't taken off as an alternative to Bitcoin as a payment system? It's liquidity. The pay has been kept for more than 20 months now perfectly.

I think we have a robust system to maintain fake. very decentralized, very distributed. We just have to, we just have an issue of liquidity. Right now we have 700,000 new bits in circulation, but only about 130,000 new bits as liquidity in exchange. And we want to scale, we want to have to get bigger than that because it's not enough

to be used as a as a tool for international projection system. So the issue is liquidity. We have to have liquidity walls much bigger than that

and as we scale the liquidity walls, we will be able to to have more nibble in circulation and the ratio between the nibble in circulation and liquidity will get smaller and smaller like like do for example the US dollar if we take the example of the US dollar the ratio between the US dollar in circulation and US dollar in exchange is like zero like it's less than 0.1%.

So we want to get into this level. Oh, that's a big dream, but we want just to have liquidity, much more liquidity than that. Okay. Yeah. And to that, for that, we think we have to develop more robust system, perhaps more automatic tools of liquidity. Yeah, maybe another reason is that I think that, you know,

so the most use of, the most use of cryptocurrency are not the red joe, right? So they are like, they are like people that have like some ideology or libertarian, right? So in those people, they hate the fiat money. They hate. So for them it's very difficult for use new bits. So we had to focus on the heads. the hedging, the hedger among those libertarians. Yeah, we have a lot of criticism from, you know, from Bitcoiners,

that supremacist, bitcoiners that believe that, you know, fiat money is, is disgusting, so Nubit is also disgusting. Yeah, because, yeah. But Nubits is not a Fiat money. Like, you peg it to a Fiat money, but only for practical purposes. Because they don't want to see that. They don't want to see that. So you're saying that, Julian, you were talking about liquidity.

So one of the barriers then is that the infrastructure is not, well, currently, I mean, especially you're working on that, but the infrastructure is not currently 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 thousand Bitcoin or maybe more of liquidity into the system, it wouldn't be able to sustain it? That's a good question. I think we would be able to handle it, but we need much more, you know, automatic processes to unlock liquidity when it's needed.

So we need to establish that before going to next level. And also we have also, you know, All our liquidity is stored in centralized exchange. Last year we had four hacks, or three four hacks at the same time. We were a very, very, it was a catastrophic situation because we lost a lot of liquidity. So now that's why we, the founder of Newbit is also now creating a decentralized exchange to start all this liquidity in a very secure way. We asked the holder, we also voted for that.

Oh, yeah, of course, yeah. Without our concessions, you didn't have the money for that. Yeah, this exchange is half of the shareholders or new shareholders. So it's a sister project. And we need that exchange to have low, I mean, low cost liquidity and a very secure way. We don't have that right now, so it's difficult for us 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, how would it unfold if, let's say, the US dollars exchange rate starts to act erratically. Like if we start seeing important fluctuations in the US dollars foreign exchange rate with, say, the euro or other first class, first tier currencies, how would new bits react to that? How would the peggy maintained or would there be some problems there? We will still be pegged to the, I mean, are you talking about a very descriptive change in the value of the US dollar against the euro? Yeah, for example. For example, we still, I think, we still be pegged, right?

We still be pegged. But, yeah, if the value of the dollar is decreased by 50%, we will have, like, lost 50%, right? So we all, although we think that this scenario is very unlikely, it could happen, it might happen, that's why we're looking, we are so interested in other pegs, as a euro, SDR, which could be even more stable. some people are also proposing some kind of like inflation-free U.S. dollar pay, for example. We are thinking about that. Some people are thinking about that. So basically, if the U.S. dollar is not working anymore, we'll have to peg to something else, and it would be relatively easy as long as we have some kind of data feed to get the price

of this instrument. So we can peg to anything. Okay. Okay. We just choose the US dollar because it is still the most used currency in the world or something. Okay. And so I think you're working on creating a peg for Euro, Great British Pound and some other currencies. Yuan, Yuan, yes, SDR and Euro. Okay. So walk us through how the initial new shares and new bits will be allocated then, for instance, when the euro peg is initiated?

Yeah, basically we'll have to find someone that would be ready to provide liquidity on this. So let's say that exactly the same mechanism as the new bit, what we call the US Newbit, which is the new bit called Peg to the Eurozone. So someone will make a proposal. I would be providing 100,000k of liquidity on this market for this amount and over like this amount of time. So he would get, she would get, let's say, 100,000 euro newbit,

and she or she would sell that, he would sell that on the market and brand a dual-side boat. Yeah, absolutely sell and immediately buy back the new bid with the proceeds. In dual side, so that we have two, to sell side and buy side.

Yeah. That's basically what we did with the USD. Yeah. It takes some portion of the proceed to distribute as dividends. So one of the big applications you mentioned for new new business as the first market is the market for hedgers, right? Yeah. Sebastian said, why not go for a consumer payment network? You said one of the first big markets was the market for hedgers.

So explain to the market for hedgers. us how it works like why do these hedgers need new bits and what are they trying to achieve with new bits well basically they when they speculate i mean i'm not a hedgeer so i don't know exactly what they think but if they think that the bitcoin price will will go up they i mean they say that they have they have some new bit because they just as a start right so now they think that the bitcoin price will go up they will start to sell this new new for bitcoin right and if they think that the price will go down, they will start to buy more. Yeah, I mean, another use case is, for instance, you know, this is the secret to no one,

but Epicenter doesn't have a bank account. We hedge some of our funds in gold with Voltoro. You know, another alternative would be also to hedge it in new bits. I can see how a Bitcoin-only company could protect themselves against volatility risk. Some people do that, yeah. So, yeah. Some people, yeah, some people, they ask for suddenly for 50,000. I want to buy 50,000 a new bit.

How do I do that? Some people do that. I mean, sometimes it happens. Especially last year when Bitcoin price started to fall down quickly. Yeah. Right now it's relatively stable, so we don't have some of that demand for a bit. So it's basically the problem. When Bitcoin is not volatile, we don't do so much business.

Okay. And do you think, so the block size having is coming up pretty soon and there's some mixed opinions about what would happen there. It may be that the price may drop significantly. Are you seeing some increased demand because of that or people coming to you and asking how they can purchase a lot of new bits to hedge their bets against Bitcoin? Right now we don't have, we don't, I haven't seen any people asking these kind of questions, but we, there are. there is a thread on the forum in which people are like thinking about what would happen with housing or we all we are trying to prepare for that as well but I'm not you know I'm not involved so much with that right now so I can't answer we also interested perhaps in the volume of Ethereum ethyr, ethyr, sorry, because of the volume

We want to offer new pairs, US, new B-TH. Yeah, there are some people, some traders on this pair that would be interested in new bits. Yeah, yeah. Yeah. Yeah. Are there any other interesting products you're working on? Like as a new community, any interesting consumer products that we might look forward to?

Yeah, so as he said, blocking chain exchange that is spawned from new. Basically, pretty much the same structure, except that we add some new features. So it's an exchange. We use the same template, but voting, versions, custodial. But we add new things like reputation voting, ask what kind of asset we want to have on it. And it has been very quite popular as a topic on Bitcoin and talk. But the relationship with Nubit is that we,

maybe it will be regarded as a synthetic dollar inside because it's a different exchange, so there is no possibility to handle Fiat money. so we think that it would create a very good demand for new bits and how the cost of liquid it because newbit would be the main the main the basis pair in this as inside this exchange so this is maybe the most you know promising project that we have but in a consumer project

I mean we have like the new droid which is the Android wallet for new bits this is the one maybe the most one of the most you know you know how do you call that the easiest way to access new bit for example and you have also new lagoon which is also you use you basically you put bitcoin it's kind of chef shift for new bit we have the also that okay so this decent pair exchange is based on a blockchain or exactly is in new blockchain itself with something running on top of new no no it's it's a foc it's a fog it's a fog of the new of new but i'm using new bits because new bit is kind of a marketing term but it should be

it should strictly speaking it should be new as a decentralized as a autonomous organization but people call it new bits yeah so yes this exchange would be running inside the blockchain so all the trades would be you know managed inside which is very innovative okay and when do we expect this decentralized exchange to From three to six months from now, I think. So where can people get more information about NewBits? NewBits.com, the forum, Discuss.newBits.com. Would be the main two.

Absolutely, yes. In particular, discus. Nubits. We are welcoming anybody that can have an interest in a new bit and just contribute even anonymously, of course. We don't have any problem with that. And, yeah. Okay, and we'll have links to all that, and of course, the white paper and the show notes.

So thanks, guys, for joining us today. It was a fascinating discussion. Thank you for your time, and I 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.

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