2015/01/24 How NuBits are backed?
“The Nu network made a split between asset and currency.
NuShares (NSR) are the asset which have a fixed amount and a variable price level. They are the shares of that corporation.
NuBits (NBT) are the currency which have a fixed price level (1NBT=$1) and a variable amount.
In short the peg works like this:
custodians are elected by the NSR holders. The place buy and sell walls at exchanges to maintain the peg. Those walls are maintained by an open source programm called “NuBot” (which works so great it was copied by BitShares market makers).
If more money is needed due to rising demand, new NBT can be issued by the NSR holders.
Remark: NSR holders vote on custodians and other things in an ongoing voting process, but allow me to not go into further detail here.
If there are too many NBT in circulation, there are several approaches to reduce the supply. One of them is paying a park rate interest to remove NBT temporarily from the market, but the more important approach is to burn NBT and create NSR by doing that.
This inflates the amount of NSR and dilutes their value, but as the value of the whole Nu network highly depends on the stability of the peg it can be expected from the NSR holders to rather take a partial loss by diluting the NSR than a complete loss by a failing Nu network.
So NBT are ultimately backed by NSR.
If you see someone selling 1 NBT for less than 1 USD (only possible at exchanges which have no active custodian NuBots), I can only recommend to buy all you can get and sell it to a custodian sell wall at an exchange that has a NuBot running.
The latest example of that happening can be followed here: https://discuss.nubits.com/t/introducing-bitcoin-co-id-nubits-bitcoin-with-0-trading-fee/1140/28”