I bid on a niche yesterday and was perusing around thinking if it would be a good idea to bid on one again today. I noticed that the price for an initial bid went up. I checked the NRVE rate and saw the price to USD had fallen almost 50%. Then I was reminded that the starting bid was set to be around 75$ USD. 

I find this platform fascinating from an economics perspective, and this got my mind wandering. 

There is an intrinsic volatility in Niche prices because of to factors. 

1. due to the user to niche ratio it seems unlikely that many people will be paying more than the initial bid value for a niche. 

2. the price of the initial bid on a niche is set to a different currency than the currency used to purchase that niche. 

A thought experiment

I bid on a niche for say 10K NRVE the price of which is set to .0075 USD )The price of the niche is set based on the ~75$ USD.) I got on niche along with 500 other people who all started bidding on niches day 1, I wait and start on say day 3. many other people's auctions finish before mine do, which shoots the price of NRVE up to say .03$ USD to NRVE (extreme perhaps but within the current market fluctuation.) I am not paying 4x what the expected price was for the niche, not based on competition for the niche itself, but on competition for the currency. As far as I can tell the NRVE currency is only really used for Narrative. 

In order to encourage more niche purchases I would suggest this intrinsic volatility needs to be remedied. which I can only see three ways to do, and really only two good ways. 

1. Set the minimum bid of a niche in the currency used to pay for it. If you want niches to be purchased via NRVE then say a niche's opening bid will be 5K NRVE, This would likely have a side affect of stabilizing the value of NRVE to some degree as well.  

2. set the opening bid amount for a niche lower, this will allow the market to truly define the value of a niche. at the point of an auction is to allow the market to set the price, but right now with the price so high there isn't much benefit of the auction mechanism anyway. Setting the opening bid value lower truly allows the market to define the price, and the currency volatility plays less of a role as speculators will consider that volatility while determining market prices. 

3. (the option i don't much care for but it is an option) allow bidders to lock in a NRVE to USD price at time of bid. This would avoid the volatility, but you might as well just have the bidding done in USD at that point really. 

This is what I have been thinking on. I wonder if I am missing something. Is NRVE used for other transactions regularly? or is there a part of the market I am overlooking?

Original Post

Here's how paying for a niche woks. I don't remember WHERE I read about it, but when you bid on a niche, the USD value is locked in to the price of NRVE at the time of your bid. So if you pay for it in fiat, like I do, and there was no competition in the auction, you will never pay more than $75 + the 15% convenience fee for not paying in NRVE.

However, if you DO pay in NRVE, there must be a way to strategically wait to place your bid so the NRVE will be as low as possible. (Bid when $75 = 5,000 NRVE as opposed to when $75 = 9,000 NRVE.) If you understand the crypto market, which I don't, you can figure out when to buy NRVE (before or after you place your bid) so that you, say, bought 5,000 NRVE when it only cost you $50. 

If you didn't do the buy low/sell high thing before placing your bid, the NRVE gamble might not work out by your deadline to pay for your niche, in which case it might make more sense to just pay in fiat. 

Ahh thank you for that explanation. Now I am Very curios about how that bid exchange rate lock in works. Depending on how it works you end up with an entirely different issue. 

I bid on a niche yesterday, i bid a little more than 5K NRVE. Today somebody bids 6K NRVE, now if they plan to pay with fiat they both outbid me and pay less fiat than I would have. This seems the worst of both options for both the consumer, and the provider. assuming neither of us plan to pay with fiat currency. which it seems is most likely, though I would love to see the statistics. 

I considered purchasing NRVE at time of bid, but it comes with even more risk as the currency is very volatile, and if I lost the bid I would be stuck with an essentially worthless currency. 

The only way out of this scenario is the price for NRVE to fiat is locked at the time of the first bid an maintained for every subsequent bid, which doesn't sound reasonable. 

It still seems to me that the best solution is to set the opening bid by the currency used for purchase. 

[This may be inaccurate, having read the response below.] Nope, the fiat price goes up incrementally when you are outbid according to the price of NRVE at the time of my ORIGINAL bid. (Source: I recently won an auction that had competition in the bidding, and my fiat price is ~$115, which translates properly in relation to my original bid when I did the math.) None of this is intuitive or made clear when you make a bid, but this is how the system currently operates.

I just wanted to jump in to clarify a couple of things:

1) The initial bid price is determined on the $75 USD equivalent of NRVE, based on the current market price.

2) If you choose to pay with fiat, the amount you pay is based on the price of NRVE at the time of payment. The price of NRVE when you are bidding doesn't have anything to do with the eventual fiat price you pay. There is no price lock-in.

Narrative uses a USD-pegged price for the minimum bid since the price of NRVE will surely fluctuate more than the US dollar. If we set a fixed NRVE price at 5,000 NRVE, for example, that may be acceptable at today's prices, but consider the future if the price of NRVE goes up dramatically. Then, the effective minimum price of a Niche would jump dramatically. Pegging to the US dollar promotes stability in the minimum price of a Niche.

Hope that helps!

No, the opposite. If you've already won the auction, the amount of NRVE is fixed. If the price of NRVE goes up, the price you will pay in fiat goes up. If the price of NRVE goes down, the price you will pay in fiat goes down (to the minimum of $86.25).

Make sense?

Brian Lenz posted:

No, the opposite. If you've already won the auction, the amount of NRVE is fixed. If the price of NRVE goes up, the price you will pay in fiat goes up. If the price of NRVE goes down, the price you will pay in fiat goes down (to the minimum of $86.25).

Make sense?

Oh yes, I get that. I just mean when my winning bid (8001 NRVE) goes from a "Pay with PayPal" fiat value of $115 to $86.25 (which it just did, so it's bought and paid for now!) that's because the exchange value of NRVE has either increased or decreased. Am I correct in thinking that my fiat price went down because the exchange value of NRVE went up? I'm just trying to understand how the market works. (I don't understand the stock market either.) This doesn't need to be answered by Narrative staff, just someone who understands crypto!

Brian Lenz posted:

I just wanted to jump in to clarify a couple of things:

1) The initial bid price is determined on the $75 USD equivalent of NRVE, based on the current market price.

 

I was actually going to ask a question about this, but this answers it. I noticed that as soon as one of my suggested Niches was approved the minimum bid price at auction was 5,000+ NRVE, but within a few hours it had risen to 8,000+ NRVE. So if it's pegged to the equivalent of $75 USD, that would explain it.

So this is even more risky than I thought. Here is the question I have. Why use crypto at all? The company wants USD. The company can process USD. The company is so weary of the volatility of the crypto used that it insulated itself from the volatility of the crypto not only by pegging the min bid to USD but also setting the min  fiat payment in USD regardless of the crypto price. 

Musing crypto alienated potential users, and seems to create needless barriers to use as well as extreme volatility at the bidding end. I don’t see the upside especially at the consumer end, I suppose the company may get an upside on the crypto end I am not sure what that business looks like.

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