Important Auction Update

An important new update to the neutrino algorithmic stablecoin protocol has been released. Please read this article to find out the details.

Neutrino system base tokens (NSBT) are a tool that secures the backing of the smart contract and the released Neutrino tokens in case the collateral capitalization becomes insufficient to cover the entire Neutrino supply.

NSBT are issued automatically in the event of a collateral deficit and anyone can participate in an open auction to purchase NSBTs. One of the reasons to participate in the auction is the potential profit in Neutrino stablecoin that is paid at NSBT liquidation (which is carried out according to the first-in-first-out rule). Purchased NSBTs can be placed in a queue for liquidation via the smart contract (1 NSBT : 1 USDN) or traded on a secondary market.

How has the auction worked in the past?

The initial implementation of the auction implied an open selling of NSBTs that would allow for the replenishment of collateral reserves, or in other words, a market of NSBT/WAVES. For the convenience of users, this scheme worked automatically and consisted of two stages:

1. Instant conversion of Waves to USD-N/Waves;

2. Issuing an order to buy NSBT for USD-N with a certain discount calculated according the formula below:

discount = (nsbt — usdn)/nsbt

That is, when buying 200 NSBT for 100 neutrinos, the discount was 50%, which in turn corresponds to 100% ROI for the NSBT owner attained at NSBT liquidation.

Note: 100% ROI is the maximum allowed when placing an order in an auction.

However, this scheme of buying NSBTs for Waves was found to be unsafe after an attack named “Lucky trader” was detected as a result of the bugbounty contest. Only the 2nd stage of the scheme was left in the beta release: placing an order for NSBT using usd-n with a certain discount. This solution was originally designed as a temporary solution.

Why is the scheme with direct reserve replenishment via NSBT/WAVES more useful than the scheme with NSBT/USDN?

1. Liquidity and supply of USD-N is much smaller than the turnover and liquidity of Waves. This is a very important factor both for beginners in NSBT speculation and for large market makers in the Waves ecosystem.

2. Neutrino is designed to be a significant deflationary factor for the native token of the Waves platform. Issuing orders for NSBT directly in Waves leads to the withdrawal of Waves from circulation, as opposed to the withdrawal of USD-Ns from circulation during the current auction implementation.

3. Liquidity and safety for Neutrino stablecoin holders on the smart contract is ensured by the amount of reserves held in the WAVES token. The execution of NSBT/WAVES orders directly replenishes the smart contract with collateral, increasing its economic stability.

How does the auction work now?

For placing an order in the auction of NSBT, a user should only specify how many NSBTs for how many Waves they are ready to buy. The price and the potential ROI are calculated automatically in the dApp user interface.

For reference, there has been an addition of price calculations and “inverted price” of usd-n/waves as well, which is convenient to navigate both when placing orders and trading NSBTs on secondary markets.

Attention: the price in orders on a smart contract is fixed in Waves tokens, hence the ROI may vary significantly depending on the Waves/USD price. Even if the maximum allowable ROI for buying NSBTs is 100%, when the price changes with an order already placed, the ROI may increase by more than 100% or become negative (which is expected to lead to cancelling and re-placing of orders).

Disclaimer:

Please make sure that you read the Terms of Use before using the Neutrino dApp. The Neutrino development team does not engage in the marketmaking or the promotion of the Neutrino protocol, and this article should be taken solely as a reference material without guidance or incentive to invest in or trade in any crypto assets. All risks associated with the operation of cryptocurrencies and Neutrino smart contracts lie solely with you.