BIP15: Proposing Bancor 3

[mbr]

@Guido

to me, this text suggests the multiplier is still present in V3.

You asked me what I think: I think removing the multiplier is a good thing, it was a “complicated part” to explain to a user so it should ease onboarding. I hope the new rules (0,25% withdrawel fee and 7 day unstaking wait time) are CLEARLY communicated in the UI before people stake to avoid a lot of people with the same questions in social channels.

I’ll change the vocabulary to make it more precise.

And absolutely - the exit fee and the cool down time will not be hidden. Maybe we should display these as messages in the UI during add and remove liquidity events.

[Guido]

@mbr

Hi Guido! This is a trade like any other, and it does not change the fees distribution.

I was referring to the vortex. It burns vBNT while keeping BNT and bnBNT “alive” and in control of the protocol.
That means that while trades occur the total nr of BNT and bnBNT owned by the protocol kees growing.
That means that the “value” of BNT taken as a trading fee and put in the staking ledger is shared with my LP bnBNT AND the protocols bnBNT.
So in effect the value of my bnBNT increases less (is diluted) because the protocol keeps holding on to their bnBNT. Or in other words, when I want to withdraw and exchange my bnBNT for BNT I will receive less BNT because my total share of the bnBNT will be smaller.
If the vortex is triggered and the protocol would also burn its BNT and bnBNT that would make more sense to me (only possible of course if the protocols earnings from it’s BNT/bnBNT coinvestment would generate enough rewards for IL protection).

Sorry if I’m not getting the gist here.

[mbr]

@Guido

That means that while trades occur the total nr of BNT and bnBNT owned by the protocol kees growing.

This is not how bnBNT works. Maybe we should get on a call?

There is no dilution event associated with this.

[mbr]

Your BNT share is determined by the staking ledger, not by the vault balance. This is the nature of the insured positions. So let’s break this down with a simple scenario:

1. You have 10 BNT staked and 10 bnBNT
2. The protocol has 10 BNT staked, and 10 bnBNT.
3. The BNT staking ledger reports 20 BNT is staked.
4. Someone trades 1 TKN for 1 BNT, and a fee of 0.01 BNT is collected.
5. The fee is added directly to the BNT staking ledger, which now reports 20.01 BNT are staked.
6. Since there are a total of 20 bnBNT, and you have 10 of them, your share of the staking ledger is 10/20*20.01 = 10.005 BNT
7. Since there are a total of 20 bnBNT, and the protocol has 10 of them, its share of the staking ledger is 10/20*20.01 = 10.005 BNT.

[Guido]

@mbr

Maybe we should get on a call?

Thanks for taking the time to have a call Mark!

[tenzent]

So Incredibly excited.

@mbr

As a final circumspection against bad behavior, exit fees are introduced into the Bancor ecosystem for the first time. The exit fee is designed to temper the profit motive of the imagined exploit vector. Fortuitously, the severity of the speculative attack is fairly minor, and a 0.25% exit fee is sufficient to render it void. The exit fee is treated as a relief mechanism, and allows the pools from which a withdrawal is processed to retain a small amount of residual value, which alleviates the insurance burden by the same amount. It also serves a financial purpose in defining a geometric surface, beneath which users can withdraw their stake entirely in its own denomination, regardless of the relative surplus or deficit state of the network. This point is discussed in detail while addressing the behavior of the withdrawal algorithm.

Can this fee be bypassed by say waiting 100 days? or does the new fungibility of pool tokens perhaps remove this as an option?

@mbr

The logic contained within the functions of Bancor 3 assumes the price quoted by each of its pools is reliable. As pools become illiquid, this assumption is no longer valid. Therefore, to prevent abuse, pools with fewer than 1,000 BNT (adjustable by the DAO) tokens in their reserve following a liquidity add/remove event are automatically dismantled. During a shutdown, all TKN trading liquidity is returned to the superfluid component, and all BNT trading liquidity is removed and burned by the protocol.

Really great feature, this in my opinion is a huge step from simply being able to pause deposits.

Also on infinity pools does the protocol earn a fee on the rewards or does this exit fee apply to the earned tkn aswell and is therefore the ‘cut’ bancor gets?

[mbr]

@tenzent

Can this fee be bypassed by say waiting 100 days? or does the new fungibility of pool tokens perhaps remove this as an option?

The fungible nature of the new system essentially means this 0.25% is baked-in; the protocol has no way to determine if a user has waited 100 days or not, as you rightfully point out.

[tfns]

@tenzent

So Incredibly excited.

Can’t begin to express how excited I am as well!

[yXaH4uK]

Hi! Some questions:

• UI will have button “Burn” to vortex burning?
• If I’ll create pool BNT/bnTKH, I’ll get bnbnTKN tokens?

[mbr]

Hey!

No - there won’t be a UI version of the Vortex burner. The contract is available to anyone who wants to use it, and we are also collaborating with Chainlink Keepers to keep it running well.

To create a BNT/bnTKN pool, you would need to get it whitelisted on V3. This is very unlikely (I hope). However, if you managed to convince the DAO to whitelist it, in theory it would generate bnbnTKN pool tokens.

[DarkKnight]

All the comments here so far are a great starting point to discuss the merits of the Bancor3 proposal.

But, now allow me to play the devils advocate for a bit.

The following is coming mostly from the perspective of a BNT holder, who may or may not stake more $ in TKN than $ in BNT on Bancor3.

Under the Bancor v2.1 system, most BNT holders bought BNT for 3 things

1. They thought the token price would appreciate above their entry
2. They thought the dividend income from LM or organic APRs would be worth the opportunity cost of buying BNT vs other tokens
3. They had to buy BNT in order to stake it into a pool where there was no room for the TKN in order to make room.

Under Bancor3, 1 & 2 remain the same, but #3 goes away.

Are there new economic forces under Bancor3 which require users to buy more BNT, thus putting a buy pressure on the token price?

Additionally, with TKN->TKN swaps bypassing BNT as a swap, is “token not needed?”

Is BNT under Bancor3 serving only as a backstop in the event that the protocol must mint something of value in order to compensate LPs in the event of impermanent loss being more than fees collected (which based on v2 metrics, happens quite a bit)?

If this is the case, unless APRs massively increase (and not from LM), then BNT doesn’t seem like the best investment for a prospective BNT holder.

I am worried that the ‘upgrade’ from v2.1 to v3 does not improve BNT’s stature as an investment vehicle.

That being said, from a TKN perspective, Bancor3 seems like a great deal, even better than v2.1. But v2.1 was already a great deal for TKN LPs, one of the best (thus why the single staked TKN room ran out on many pools with LM). With the introduction of infinity pools, doesn’t this mean that since users can stake unlimited amounts of TKN and BNT, organic yields will be even lower than they are with v2.1?

Additionally, one could argue that Bancor v2.1 did not suffer from a liquidity issue - we had more liquidity than we needed in most pools that were properly co-invested or incentivized with LM. Bancor v2.1 however lagged greatly vs competitors in fees/liquidity income (which maps to non-LM APR), and I don’t see Bancor3 addressing this core issue at all (a 20% 2 hop swap gas reduction isn’t going to cut it since it will still be more than Uniswappy v2 protocols which Bancor3 will be competing against on sidechains and other L1s).

Thanks!

[sylentz]

@DarkKnight

Bancor v2.1 however lagged greatly vs competitors in fees/liquidity income (which maps to non-LM APR)

Where’s your data on this statement? Fees w/o accounting for IL means nothing.

[DarkKnight]

Here’s some data -

Our flagship pool, LINK, has an 80% liquidity share but only 24% trade volume share. Turnover (far right) is trade volume / liquidity. As you can see, Bancor trails every major dex in almost every token.

Dune Analytics

I admit this is volume data and not fees, but it’s hard to get fees from all protocols at any point in time and I don’t have time to do it. That being said, until recently, fees were either at or below Uniswappy v2 protocols, so using volume as a proxy for fees is probably pretty fair to do.

[sylentz]

Old FUD. Get new material.

BNT is now the ultimate set/forget index token. Taxable events are basically non-existent as well.
BNT is used as the sole numeraire for all swaps, cross-pool (cross-chain?) with only a single hop required ever.
bn{wrapped} collat will be the ultimate money lego going forward as they are essentially up-only.
Quit playing at Devil’s Adv and do some work

[tenzent]

@DarkKnight

With the introduction of infinity pools, doesn’t this mean that since users can stake unlimited amounts of TKN and BNT, organic yields will be even lower than they are with v2.1?

No, it doesn’t necessarily mean that. think the FARM pair. FARMs native yield is something like 30-40%, liquidity provision is much lower than that clocking in a below 10%. if we have say a 50/50 split between that would put the apy dead between 10 and 45 at 25%~, as the superfluid liquidity increases the APY gets higher. It’s really dependant on the applications of superfluid liquidity although the team has expressed they wish to intergrate native token staking. It will be a balancing act, the example you give is only true if Bancors trading liquidity yields > Superfluid Yield.

@DarkKnight

Bancor v2.1 however lagged greatly vs competitors in fees/liquidity income (which maps to non-LM APR)

This is debatable, the only reason univ3 appears to have more fees is because they’ve increased their Impermanent Loss greatly. V3 on UNI is completely unprofitable as was seen by the study Mark put together.

@DarkKnight

Additionally, with TKN->TKN swaps bypassing BNT as a swap, is “token not needed?”

Is BNT under Bancor3 serving only as a backstop in the event that the protocol must mint something of value in order to compensate LPs in the event of impermanent loss being more than fees collected (which based on v2 metrics, happens quite a bit)?

I believe you answered your own question here but you miss the key element that as liquidity in the network grows so does BNTs value from the liquidity depth gained. Also about the, happens quite a bit, part If you compare us to basically any emmisions based protocol we are way winning.

[hahaaaa]

A simple question, what is the yield for staking BNT in V3? Now my BNT is staking in the USDT/BNT trading pair with about 40% yield.

[OverAnalyser]

Simple question, but I don’t think there is a simple answer.

There was a proposal (passed ?) to fix a BNT emission schedule going forward. So you could assume x% staked and work out the yield.

However, that misses:

• all the BNT LP fee from swaps (I’m assuming all fees effectively goto the staked BNT, so we we issue more POL $BNT, we should get more fee income for staked BNT).
• BNT reserved for IL protection uses.
• What multichain implementation we develop.
• effect of the vortex.
• Some BNT added to non rewarded pools will migrate and so dilute the rewards.
• As the $BNT price increases, the liquidity pools will effectively sell BNT onto the open market, so that results in more BNT circulating, which could be staked (and so lower yields…).
• …

So, I think the answer is “it depends”.

Personally, I’m guessing 15% to 40% APY for $BNT in B3 within the first 6 months of being live. Lower if the BNT price pumps, lower also if AUM doesn’t migrate / grow.

[Funky]

@DarkKnight

They had to buy BNT in order to stake it into a pool where there was no room for the TKN in order to make room.

at no point you were able to unlock space with BNT directly (you had to be lucky). buy pressure comes from the fact that bnt recieves 50% of trading fees. my hope is that volume will greatly go up and generate a nice income. people then will buy bnt to get some of the fees.

[mbr]

As you suspected, there are no simple answers.

@OverAnalyser

There was a proposal (passed ?) to fix a BNT emission schedule going forward. So you could assume x% staked and work out the yield.

I have just recently made this proposal available. There is indeed a fixed BNT emission schedule proposed. I have also provided a formula there that can help with calculating the BNT/BNT rewards rates over time.

[DFV]

Under the infinity pool is says the following. So it sounds like to external users there may still be “funding limit” set by the DAO, such that while it is technically unlimited, it is restricted(by the “BNT funding limit”)?

• The BancorDAO determines the available liquidity for trading, through adjustment of the “BNT funding limit” parameter.