BIP7: LM rewards that match APR fees for top 3 tokens

OLD GOV (LEGACY)
1

BIP7: LM rewards to match APR fees for top 3 tokens (that need to be whitelisted first) up to some maximum

This would be separate LM rewards in addition to existing ones, to attract additional LD.

This would create volume competition to be in the top 3 tokens, which spurs additional earnings for LPs.

If a token like CoTrader earns #1 stop of 300% APR/week, another 300% in LM rewards would be given.

LMs would doubly benefit by BIP7, by earning the APR fees, without cost of extra BNT rewards.

Some small caps like CoTrader often see 300%+ APR on modest liquidity such as $10k.

As CEX liquidity options for small caps are often particularly limited, high fees such as 3% do not as often deter investors & traders of these tokens. We see this in practice.

Graded rewards for the top 1-10 tokens can create healthy competition for volume, which helps LPs.

Bancor especially benefits from LM since BNT sits in each pair.

( Additionally, Bancor may uniquely benefit from hosting yield farm launches, aka “farm drops”, because BNT benefits just as much as the token being farm dropped. More about that: https://twitter.com/cotrader_com/status/1329340381394178048?s=20

These farm launches often attract high, e.g. $3M LD and volume, even for new projects. )

All this volume and liquidity further benefits BNT & liquidity mining fund managers. More on LM fund management here: https://twitter.com/cotrader_com/status/1329355399313588224?s=20

Downside: potential wash trading:
Even if there’d be some wash trading, LM rewards + APR fees earned still attracts buying BNT to earn these sums. Wash traders would be paying the 3% fees, and if it’s a large pool, they’d be paying a lot. LMs/LPs would be the ones earning form the fees. If LMs/LPs think the token is too dangerous for for a drop in price, they would tend to avoid it.

Whitelisting is an additional protection against that.

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While the idea has merit, I think it is important that we draw attention to the purpose of the LM program. Essentially, there are pools that are extrememly important in DeFi - such as the stablecoins and ETH. These are given heavy incentives, because we trying to establish a sustainable foundation for the long-term. As you point out, tokens like COT can produce very impressive APRs - but why does it need additional incentives? From the COT holder view, the APR is already very attractive, and from the BNT view, COT is not a critical presence in DeFi. The LM rewards are designed to achieve growth - but the positive feedback mechanism you have proposed here would result in inflation issues, at the expense of supporting backbone assets.

If COT is whitelisted, I am happy to consider it for LM rewards when the time comes. But it is not sensible to propose changes to the LM structure that reward APR with additional APR. I suspect this would have a destabilizing effect on the protocol.

1 Like
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Agreed. Should I delete this post, especially as it’s numbered prematurely as BIP7, and I can’t edit it now.

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Don’t delete it - just change the title: add “WITHDRAWN” to the front.

5

Are we passed the time period for edits? I don’t see the edit option anymore “…”

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It’s ok - don’t worry about it. I’ll make sure we fix it later.