A proposal from the OCEAN community to the BancorDAO
DUE TO THE DELAY IN IMPLEMENTING SNAPSHOT, THE DEADLINE ON THIS PROPOSAL HAS BEEN EXTENDED BY ONE MONTH; THE OVERALL AMBITION, AND TARGETS HAVE REMAIN UNCHANGED
TL;DR
- The OCEAN community acknowledges that the pool has fallen short of the Bancor community expectations, and wishes to rectify the situation.
- We propose a new kind of incentivised solution to liquidity mining rewards, and one which is potentially generalizable to other token communities.
- Herein, we wish to set a defined performance metric for the pool in terms of market volume share, whereupon the LM program for OCEAN is reactivated for a period of 4 weeks.
- Thus, the OCEAN liquidity providers become further incentivized to actively promote the Bancor DEX as the default home for OCEAN trading in DeFi.
- If the goal is not met, the BancorDAO has no obligation to renew the LM rewards.
Voting Instructions
To allow LM activation on the OCEAN pool following a boost in its productivity, vote FOR.
To deny LM activation on the OCEAN pool regardless of its performance, vote AGAINST.
The Case Against OCEAN
The Bancor Network has obtained an overwhelming majority of the OCEAN liquidity in DeFi.
Figure 1 | Per DEX share of OCEAN liquidity over time. Since inception, the Bancor OCEAN pool has been the most competitive in all of DeFi. Blue = Uniswap, Red = Sushiswap, Green = Bancor.
To the OCEAN community, the reasons for this are self-evident; freedom from impermanent loss and a generous contribution in BNT from the BancorDAO during a long (already extended once) liquidity mining program have made the platform a haven for OCEAN stakers. Bancor now has 82.7% of the total OCEAN liquidity. The pool is so deep, that DEX aggregators such as 1inch often route 100% of OCEAN trades through the Bancor pool, upto single-transaction values of $100,000.
Figure 2 | Bancor OCEAN performance. At the time of writing, 1inch routes trades below $75,000 exclusively through the Bancor pool.
From the perspective of the BancorDAO, their gambit to capture the lion’s share of OCEAN liquidity provision has been a success. However, there is a systemic problem within the OCEAN economy. Token traders appear either unaware, or unwilling to use the resource Bancor has created for its primary intended function - trading. All market forces considered, the Bancor OCEAN pool should be capturing a minimum of 80% of the total OCEAN traffic; however, it has only captured about half of that.
Figure 3 | DEX Share of USD Volume for OCEAN. Despite having the deepest pool, lowest slippage and best rates, the OCEAN token traders community is largely ignoring the Bancor pool. Blue = Uniswap, Red = Sushiswap, Green = Bancor.
The source of the discrepancy is demonstrably the OCEAN community itself. On-chain analysis reveals, as expected, that DEX aggregators direct the expected amount of OCEAN trades directly to Bancor.
Figure 4 | 1inch Exported Volume Share by DEX. Aggregators, which find the most cost-efficient trade routes, direct the overwhelming majority of OCEAN trade traffic to Bancor. Blue = Uniswap, Red = Sushiswap, Green = Bancor.
The volume on Uniswap paints an interesting picture. Because their pool is relatively poor, they receive only a minority of aggregator traffic, equal to approximately 4% of the total volume. Approximately half (51%) of the volume is from market makers (e.g. arbitrage), and the remainder (45%) is from regular OCEAN holders.
Figure 5 | Uniswap OCEAN Trading Volume by Source. Uniswap has a healthy balance of organic trader activity. Blue = aggregators, Red = market makers, Green = organic traders.
The situation at Bancor is dramatically different. Aggregators and market makers comprise 96% of all traffic; the OCEAN community accounts for only 4% of the volume on the Bancor pool.
Figure 6 | Bancor OCEAN Trading Volume by Source. Bancor has almost zero organic trader activity, and its entire volume share is essentially dominated by market makers and aggregators. Blue = aggregators, Red = market makers, Green = organic traders.
In summary, despite creating the best, most competitive pool for OCEAN traders in DeFi, the offering has not attracted any interest whatsoever from revenue-earning demographics. Despite significant LM investment from BancorDAO, OCEAN trading share performance has lagged behind other pools;; similar efforts spent on other pools, such as LINK, have borne fruit with a clear trend towards increased community adoption. This is due largely to the superb ability of LINK marines to communicate the utility of Bancor’s offering within their community, and build a stable LINK trading demographic to support their pool.
Figure 7 | DEX Share of USD Volume for LINK. As the LINK pool gains competitiveness, a clear trend towards increased traction with organic LINK traders is plainly apparent. Blue = Uniswap, Red = Sushiswap, Green = Bancor.
The OCEAN Community Reply
The OCEAN community recognizes that the arguments presented above make it fairly difficult to justify continued support of the pool, including and especially with liquidity mining incentives. However, having the scope of the issue presented to us, our resolve to contribute back to the Bancor platform and its community is only further galvanized. Therefore, we take it on ourselves to help bring awareness to our brothers and sisters in DeFi, and help bring the trading demographics that the OCEAN pool clearly deserves.
A Wager, Of Sorts
This proposal seeks to establish a basis on which the OCEAN pool may again qualify for extension of its liquidity mining program, as follows:
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We concede that the current LM rewards program will not be renewed.
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Our community will rally together to bring awareness to the OCEAN pool on Bancor, to drive the organic trade revenue over the coming month.
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Our target was developed with the assistance of the Bancor team:
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The OCEAN pool must achieve a reasonable level of traction with its target demographic.
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Traction is measured as a function of the liquidity and volume share on the OCEAN pool, as follows:
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The quotient of the total DEX volume share and the total DEX liquidity share for OCEAN on Bancor bust be at least 70%.
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This goal must have been sustained for a minimum of 24 hours, and remain true on midnight (GMT+0) 3rd May, 2021.
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For example, if Bancor owns 82.7% of the OCEAN liquidity at that time, our wager is to increase its volume share to at least 57.9% (57.9/82.7=70%). As demonstrated above, this is achievable entirely through educating our fellow OCEAN token holders as to the advantages of buying OCEAN directly on Bancor, as opposed to other DEXes, or centralized exchanges.
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If we achieve this goal, the liquidity mining program is extended on the OCEAN pool for a further 4 weeks.
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If the target is not met, we concede the LM program.
