Create extra space for TKN deposits.
Enable a limit change from 1 million BNT, up to 20 million BNT minting limits on 2 pools:
Vote “for” to enable this change, or vote “against” not to enable it.
With the acceptance of BIP5 by Governance and the recent contract upgrade, the DAO can now set hard limits for BNT co-investments by the protocol on a per-pool basis. This proposal seeks to exercise this new feature by significantly increasing the co-investment limits on ETH and LINK, from 1,000,000 BNT, to a maximum of 20,000,000 BNT. The passing of this proposal by governance will allow for adjustment of the minting limit within this range, contingent on prudent monitoring of its effects on the system.
The flexible insurance tiers proposal (Insurance Tiers ) was accepted by the BancorDAO on 1st November 2020. The flexible insurance schedule was to allow for improved management of insurance liability associated with assets in the network. Liquidity pools that generate high amounts of trade revenue relative to their arbitrage activity can be boosted with additional protocol co-investment through an increase in minted BNT limits. Conversely, pools that are underperforming may have restrictions imposed on their protocol co-investment. This gives the BancorDAO the flexibility required to manage the health of the system.
This proposal seeks to increase the BNT minting limits on two key pools – ETHBNT and LINKBNT.
The anticipated positive effects are:
1. An immediate increase in TVL.
Increased co-investment limits allow for additional single-sided token staking by both ETH and LINK holders. The pools currently have little space available to accommodate additional single-sided deposits at present. The newfound capacity should attract a commensurate level of single-sided staking, resulting in growth of the total locked value.
2. An increased rate of token burning.
The ETH and LINK pools have thus far proven themselves a minimal insurance liability during the initial phase of V2.1. Trade revenue on these pools has eclipsed arbitrage activity, and the trend is overall deflationary. Providing these pools with additional resources to support continued fee-burning is a convenient option to offsetting the cost of impermanent loss elsewhere in the network.
3. Migration of Uniswap LPs.
The most prevalent base token on Uniswap is ETH. Liquidity providers wishing to migrate their liquidity at Uniswap, to take advantage of Bancor’s IL insurance, face severe capacity limitations for the ETH component of their capital, owing to a lack of space in the pool. This is a pervasive problem that inhibits a large amount of potential erc20 liquidity from pouring into the Bancor protocol. Catering to the needs of Uniswap defectors is expected to have positive flow-on effects throughout the Bancor network.
This proposal asks for dynamic adjustments to the BNT minting amounts between 1,000,000 and 20,000,000 BNT; this proposal is not insisting on an exact figure. Rather, there should be an explicit understanding that there exists a margin for experimentation, whereby an optimal BNT minting limit can be determined. However, these experiments are strictly limited to within the stipulated range. Moreover, it is expected that a reasonable effort should be made to keep the community updated regarding where the minting limits are set, and the observed effects. For example, a dedicated channel on Discord, and the Bancor Announcements via Telegram could be used to provide weekly protocol health reports for these two pools, including token burn rates, increases in TVL, swap volume, and new user addresses.