I think the difference here is not wether we should up it to 20% but when. The DAO issued a schedule and it should be honored unless there is a pressing reason to change it. vBNT speculators also kept or should have kept this schedule in mind when they speculated or even when it changed to a flat model. It’s interesting to see what might be possible surrounding a dynamic burn once we are on L2 though.
At this point the only reason really given for raising the Fee is that it will be raised in the future anyway. This reason works both ways guys, its going to 20 anyway so what reason do you have to accelerate the process. Mental math is great but quadrupling our cut based on arbitrary info makes no sense to me.
Trying to methodically and impartially analyse a proposal to increase the current vBNT burn.
Projected volume
vBNT burnt is directly proportional to the protocol volume. I’ve calculated the projected protocol volume from April 2021 vs May 2021, using monthly volume data since December 2021, when it started rising fairly linearly. With this data, we can assess how close we are to the “goal volume” when the vBNT burn rate would be increased to 10% and interpolate from the 5% burn in April to obtain a “fair” burn rate. The vortex was activated on the 4th of April so that date would fall in the beginning of October.
Figure 1 - Projected volume from April 2021 and May 2021.
Assuming a linear growth in volume, we’re around two months ahead of the projections. If the vBNT burn rate were to linearly scale with volume, a fair value for it would be 7.90%.
Average APR
One could instead debate that vBNT burn should be analysed against average protocol APR, as to keep it at least steady or slightly increasing. Liquidity-weighted average of the weekly APR of top pools (54% of liquidity on the last day of the week) one week after the vBNT burn started was 4.68%, at a 5% vBNT burn rate. Current liquidity-weighted average of the weekly APR of top pools (41% of liquidity) is 13.58%. If the vBNT burn rate was 10%, this value would be 12.86%; at 15% it would be 12.15%; and at 20% it would be 11.44%.
Figure 2 - Liquidity-weighted average APRs for the top pools with data available on Dune Analytics.
Dynamic fee structure
Based on the variable swap fee table presented, at a vBNT price of 0.2-0.3 BNT, the average swap fee to burn vBNT should be between 21.1% to 32.2%.
However, since this discussion was started, the price of vBNT has risen to 0.509 BNT, at which the average swap fee should be 10.7%.
The recent increase in vBNT price demonstrates how volatile it can be given enough speculation. vBNT liquidity in the vBNT/BNT pool is only at 1,952,634 vBNT, 3.13% of total vBNT supply.
The initially proposed variable fee structure is dynamic and would adjust the burn fees automatically and autonomously. Unfortunately, with a fixed burn schedule, we don’t benefit from such advantages. The burn fees should be set based on the current and expected vBNT price before the next adjustment. However, such a prediction is impossible to make. Hence, we should tread lightly, and increase the vBNT burn rate in a controlled way.
Comments
We experienced substantial volatility in the month of May, which may not be observed in the coming months. Therefore, any analysis or conclusions on the increase of the vBNT burn shouldn’t take for granted that volume and especially APRs will keep rising at this month’s pace.
Bancor v3 with increased capital efficiency has been announced and should influence the APRs of all pools positively.
A low vBNT price isn’t necessarily bad for the protocol as the swap fees accrued will purchase more vBNT and therefore burn it faster.
The vBNT burn has only started 1.5 months ago, so we don’t have enough data to make better assessments.
vBNT burn was individually activated for all pools, hence data was taken one week after it started. Some pools might not have had the vBNT burn started then. This shouldn’t affect the results, as one can still draw comparisons from the APRs observed for that week vs last week’s.
LM reward emission shouldn’t be taken into account when deciding vBNT burn. This is because not all pools benefit from it and the protocol should aim to optimise APRs with the current AMM model.
Top pool APRs have risen in the past week to values that would allow a significant increase in the vBNT burn without compromising swap fee earnings.
However, an increase in the vBNT burn rate to ultimately increase vBNT price and BNT locked forever in the protocol is too simple of a solution for a non-trivial problem.
A variable fee structure benefits from advantages that a fixed one doesn’t - the protocol cannot autonomously adjust the vBNT burn based on the vBNT price feedback.
The analysis of the projected volume shows that a fair vBNT burn rate for the current volume would be 7.90%, assuming an increase to 10% on the 4th of October.
The community sentiment is that a 20% increase is too drastic of a change.
At the current rate of 0.509 BNT, the vBNT burn rate should be 10.7% according to the dynamic fee structure initially delineated.
Bancor v3 is expected to increase pool APRs. A higher vBNT burn rate can be discussed after observing the effects of the coming AMM model.
With this data, comments, and conclusions, I’d like to welcome discussion and propose a poll vote to assess DAO’s opinion on the matter.
Maintain 5% vBNT burn rate.
8% vBNT burn as per projected volume.
10% vBNT burn as per dynamic fee structure for 0.509 VBNT/BNT and other reasons.
From the numbers given here an increase to 8%/10% makes the most sense to me. Personally I opted for 10% as the dynamic model makes the most financial sense to me.
First - “The vortex was launched on April 4th” is inaccurate and untrue. Citing a Bancor tweet that mentions the vortex is insufficient and misleading.
The pool was seeded with liquidity 107 days ago
here is the tx: 0x6a476e789dab0e3a2b27130d4ca0f7ff4acffc7a4cd376e46094ed2ad561c35a
The initial vote to approve launch of the vortex was over 150 days ago.
We are just 15 days shy of 4 months of the vortex.
If the DAO’s flat fee vote BIP9 is to be honored - the increase to 10% would occur near the end of July.
Second - Your data is very well thought out and you took quite a bit of time crafting it up in pristine fashion - but, in my humble opinion, is entirely manipulative and misleading with key data omitted.
Liquidity providers have historically earned between 50-250% apy over the past 8 months in liquidity mining rewards. To ignore these and their impact on the health of Bancor network is nothing more than a gold medal in mental gymnastics. Without considering the impact of LM on the peg, the data you’ve provided is worth practically 0.
Well thought out reply,
Thank you.
I’ve been unable to post for the past 24 hours as moderators have limited my abilities. This forum is for fair and open discussion and I have followed every rule put forth.
Reminder: vBNT votes are what matter. The loudest participants are not always the ones who carry the most vote. In fact, most of the significant voters prefer to craft their own opinions from afar.
I urge the readers to form their own opinions and be sure to cast their vote!
See you on voting day!
Will a moderator please advance this to Level 2.
This proposal is expected to appear on Snapshot for voting on: Monday, 31st May at 7:00 PM EST.
Voting will last until: Thursday, 3rd June 7:00 PM EST.
The argument against LM doesn’t necessarily warrant a change to the vortex. If the peg rises the burn slows anyway so higher burn does not have to equal a higher amount of BNT locked up.
Before publishing this thread, I reached out to multiple “agents” of Bancor: several amazix workers, MBR, Nate Hindman, Yudi to name a few. I was unable to post a thread with more than 2 hyper links and 1 image. The DAO states that anyone wishing to post can ask for these permissions to be removed. After 36 hours and no action taken - I watered down my post to be able to fit it on this board.
After replying - per the DAO rules - to the comments - I was met with this error.
I requested on multiple occasions to the same parties to have these permissions fixed - my messages were responded to - and no action was taken.
Luckily the 24 hour window has expired. It seems quite clear that there are gate keepers not happy with my participation in the “DAO.”
I am excited to have the post moved to Level 2 and to proceed with the vote.
This proposal is expected to appear on Snapshot for voting on: Monday, 31st May at 7:00 PM EST.
Voting will last until: Thursday, 3rd June 7:00 PM EST.
It is only then that we will see if the DAO votes are truly honored.
The system must have flagged you for spam since you had replied so quickly to the same topic. I went ahead and fixed your status. Should not have a problem now.
When I mentioned that the vortex was launched on 4th of April, that is in fact the data at which the vBNT burn started (or at least the date for which data is available on Dune Analytics). You can nit-pick certain details if they’re not accurate and I can fix the analysis given enough time if they are indeed correct. I’ve conceded on some points and drawn what I believe to be an impartial-as-can-be analysis.
The option to ignore liquidity mining rewards stems from:
The health of the protocol is ultimately measured in regards to its earnings from swap fees.
Sufficient data on Liquidity mining rewards is unavailable on the Dune Analytics page to properly analyse it. I could gather it by other means but just don’t have the time to do it.
Not all pools benefit from the rewards and the impact that an increase in the vBNT burn rate would have on pools without them shouldn’t be overlooked.
I didn’t agree or disagree with the proposal, simply provided more data. I’m of the opinion that an increase to 10% is adequate, and the data justifies it.
Trade fees ARE NOT the only benefit of using Bancor.
Liquidity providers enjoy risk free access to yield via impermanent loss insurance and retain 100% exposure to their preferred token.
Lower APY is a non argument - the increase in burner fees will still lead to a small fraction of the total APY that liquidity providers earn by placing their capital in Bancor.Network due to liquidity mining rewards - the proposal accounts for this with a reduction in the burn when LM rewards finally sunset.
“Unfair to people who used the vortex” - This type of logic has not ever been considered when LM rewards are denied or extended, or when fees for pool swapping fees are changed. Why do they matter now? (in my opinion - they don’t)
The vote reads 6 months from the time of the vortex launch - not the time of the burn start - and certainly not the time of the Bancor twitter post that was done 3 weeks after the initial burn started.
Keep in mind the Vortex was launched several months before the burn took effect because of coding deficiencies - accelerated burn is certainly required to backfill the high demand for leverage.
The lack of data regarding the protocol health seems to be a big theme. I’ve been requesting such data and API’s for months. I hear they are coming forth “soon.” Not exactly a satisfying answer when the printing press continues to BRRR
20% of swap fees is nothing.
Users have been getting 50-250% apy historically from liquidity mining rewards
Increased burner fee is just BNT users taking some tax on the liquidity mining rewards in the form of permanently locked BNT. Taking from our left pocket and putting it in our right pocket so to speak.
The increased fee - whilst LM is live - is healthy, sustainable - and the best way to build and ensure long term liquidity within Bancor Network.
Think of it as a -15% reduction on all LM and instead put into permanent liquidity within bancor (jump from 5 to 20 is 15%)
This allows for more space on the token side of the pools - which have been PERMANENTLY FULL - for god knows how long.
Anyone against this proposal is ludicrous. “Against” voters hold nothing more than a personal vendetta that goes against all logic - and worse - the health of Bancor.
Around 81% of the capital provided on Bancor is receiving LM rewards. However, that is the case because the pools with them have very high liquidity, as expected. All the pools that don’t have LM rewards should be considered when a vBNT burn rate increase is being suggested. That’s why APR reduction was debated. I’ve done so, but not in a qualitative way, but by comparing the available APR data from two different weeks where the vBNT burn was in full (or almost) effect.
Won’t debate this, not my comment and isn’t useful for discussion.
Was unaware of the fact. If that’s correct, here’s a recalculation of the projected volume values:
Puts a fair vBNT burn of 10.11% if projected volume is to be taken into account solely.
As you may understand if you’re familiar with SW development, defining deadlines for features to arrive is complicated an inherently inaccurate.
Why do you disagree with a 10% vBNT burn rate, and a reassessment after more data is gathered? A low vBNT price also means that more vBNT is bought and hence burnt. We don’t have too much data to analyse since the burn started, only around two months worth.
Again, you shouldn’t base the 20% on the dynamic fee structure table - that feature was automatic and handled by the protocol. Going through the DAO to update it involves a much longer process.
When drafting my proposal I did take this into account. Yudi informed me that there was no way to charge different burn rates on pools with LM vs Pools without LM.
Thus: My proposal was to increase the fees on all.
Pools without LM are being given impermanent loss insurance and single sided deposits - and for this , along with the possibility of being voted into LM rewards - there is plenty of reason to charge them an insurance premium - a la “Vortex fee”
Happy to consider your statistics if you remove the disingenuous “projected” metrics. Use a geometric mean - the last 10 days of volume are entirely irrelevant and growth will not sustain.
Side note: your data design + presentation would be a great addition to a startup looking to pick up some prime VC capital at unrealistic and elevated valuations. Consider that career switch
There are a couple of things I want to bring attention to.
The timing is highly suspicious. The vBNT rate has recently increased quite dramatically, under the influence of a single user. However,
that does not mean the proposal is void. A 20% burn rate is commensurate with other industry standards.
Having looked over the discussion, I want to bring attention to the fact that we already have DAO consent to increase the burn rate from here, somewhere between 5%-15%. While I think we can consider going above that in the near future, the jump from 5% to 20% is pretty aggressive.
I am interested to hear from everyone in this thread - maybe it is a good time to increase the burn rate to 10% (still a 2×, which is significant). I want to draw attention to the wonderful analysis by @tfns that strongly suggests something in this ballpark is certainly warranted.
My concern regarding the jump to 20% is that it is very sudden, and could make Bancor less attractive for LPs in the interim before V3 is released - remember, it impacts the APY directly.
Short version: we can increase the burn rate to 10% right away, without a vote. Maybe we should exercise that option before we get carried away with a further increase.
This proposal is expected to appear on Snapshot for voting on: Monday, 31st May at 7:00 PM EST.
Voting will last until: Thursday, 3rd June 7:00 PM EST.
Excited to see 20% next week upon passing of the vote.
