This proposal is expected to appear on Snapshot for voting on Monday, 31st May at 7:00 PM EST (11:00 PM UTC). Voting will last until: Thursday, 3rd June 7:00 PM EST (11:00 PM UTC).
(BIP) Increase Vortex Burner to 20% - Active Immediately.
TLDR: Increase the vortex burn to 20% while LM rewards are active. Reduce it when they expire.
A quorum of 20% and a 66% majority will decide the results. Be aware of the above dates and lock your vBNT in time if you wish to participate.
A brief timeline of the vortex.
The initial proposal BIP9-proposing-the-bancor-vortex proposed a Vortex burn with dynamic fees. See chart below.
Upon code design of the initial Vortex - Bancor devs made it clear to the community that a dynamic burn would take significant amount of dev resources - an easier alternative would be to create a fixed burn instead. (BIP9-Flat-Fee)
The new proposal was initiated to switch to a flat burn, mandating a 5% initial burn with increases every 6 months for 18 months - quoted directly from the article “The fee is increased every 6 months in 5% increments for 18 months”
An increase of 5% at the 6th, 12th, and 18th month would lead to a burn of 20% at the end of 18 months. It’s unclear why the writer’s math calculated 3 increases of 5% to result in an ending 15% burn.
Since inception of the Vortex - the vBNT/BNT ratio has steadily plummeted. This could be due to a variety of reasons - although the specific reason doesn’t matter - very small pool size, a wave of leveraged demand that was previously unsatisfied, and high liquidity mining rewards attracts users to heavily leverage their positions repetitively through the Vortex are a few.
After 4 months since the inception - the Vortex vBNT price has steadily found it’s home around the 0.2-0.3 range.
Referencing Table 1 from above - The Vortex with a price at 0.2-0.3 should be burning in the range 20-30% if under the dynamic burn structure.
Given the fact that the majority of Bancor Liquidity Pools are distributing 70-80% annualized LM rewards, plus swap fees - Burning 5% of fees is just simply too low. The Liquidity mining rewards are 15x as lucrative on their own.
The market just saw a significant downturn over recent weeks - many tokens saw dips of over 75% in a two week period. The strength of the Bancor ecosystem relies on permanent liquidity locked within it’s pools. As the network generates significant inflationary BNT rewards to attract liquidity providers - we must focus our efforts NOW to ensure long run success by locking up as much liquidity as possible.
Increasing the burn rate will have a natural upward push on the price of vBNT - which ALL owners of BNT will benefit from. The higher the rate of the burn>>higher vBNT price >> cheaper leverage for users that want to leverage their vBNT. This in conjunction with the increase in amounts burned - entices more users to participate in the vortex and increases the total TVL significantly.
It is important to consider the two main selling points of Bancor:
Impermanent loss insurance - no other protocol allows users to provide liquidity with 100% protection against impermanent loss.
Single sided liquidity - no other protocol allows users to remain exposed entirely to their favorite crypto asset while earning trade fees at the same time.
These two points are significant steps in democratizing AMM services and are the true highlights of Bancor. As members of the Bancor community we all need to do a better job of highlighting these two key aspects of the network. As it stands, there’s just simply no way a liquidity provider could complain about the vortex fee given the benefits that Bancor offers them.
Increases in the vortex fee to this extent will go unnoticed as power users continue to be rewarded by the DAO with significant liquidity mining rewards and/or benefit from Bancor’s unique and world class design. The increased fee will also create a pathway to an eventual increase in size of the vBNT pool - allowing more users to be able to earn yield on their vBNT.
Implementation of the new fees can be done in a matter of minutes.
Screenshot of Yudi Confirming this
Vote FOR to:
- Increase the Vortex Burner to 20% for all pools- effective immediately.
2 . Reduce the Vortex Burner to 15% - effective when the 72 week liquidity mining reward phase is retired around January 2022.
Vote AGAINST to:
- Continue with the plan for the Vortex outlined in [(BIP9 ADDENDUM) The Bancor Vortex vBNT Burner: Proposal to Switch to a Flat Burn Rate
The fee is increased every 6 months in 5% increments from the time of the original Vortex Launch.