Consolidating recent proposals by @alphavalion

Bootstrap Carbon with POL from Bancor 3


This proposal is a continued discussion of the proposals created by alphavalion [here, and here]. In brief, there are two key aspects that should be consolidated:

Winding down of Bancor V3 and cementing the lossless state of tokens in surplus

The Bancor V3 contracts allow the DAO to determine the trading liquidity value of any pool. If the trading liquidity is set to zero, that pool can no longer trade. For pools with tokens currently in surplus, stopping trading will ensure that all LPs will forever be able to withdraw their tokens without incurring a loss. This point was elaborated in a comment on alphavalion’s original proposal; these mechanics are described in the Comprehensive Description of Bancor 3 section of BIP 15, and can be scrutinized in detail via the Bancor V3 simulation resources.

Importantly, the single-sided pool tokens of Bancor V3 represent a pro-rata share of the Staking Ledger, which is distinct from the Master Vault balances. The Bancor V3 withdrawal algorithm was designed to handle these situations, where a withdrawal from a pool in a state of surplus would trigger an adjustment in the pool’s marginal rate so as to effectively reduce its asking price and encourage the return of BNT tokens back into its reserves. In essence, the protocol would use surplus TKN to re-purchase BNT tokens from the market sporadically as users withdraw from these pools. Then, the recaptured BNT is destroyed as LPs withdraw in the future.

The source of surplus tokens is the rebalancing nature of the AMM. For illustrative purposes, consider the DRC token, which was among those that had their trading liquidity set to zero in a recent collection of similar decisions submitted for a vote via Snapshot.

The proposal to whitelist DRC appeared in the governance forums in July 2021, and was approved by the BancorDAO via Snapshot shortly thereafter. This was during the V2.1 paradigm, where protocol contributed BNT (aka the “co-investment” using the vernacular of the time) was an inflexible part of the system. Essentially, the protocol would provide BNT to complete the trading pair, from which the single-sided liquidity provisioning paradigm emerged. In V2.1, once the protocol exhausted its DAO-permitted BNT contribution to the pair, no additional liquidity contribution was possible. That is, unless the protocol BNT contribution limits were increased via a DAO vote. The DRC token was approved with an initial protocol BNT contribution capacity of 30k BNT, which was quickly exhausted. After approximately 1 month of the pool’s operation, a proposal to increase the protocol BNT contribution for DRC liquidity to 50k was published to the governance forums, which was also approved by the BancorDAO shortly thereafter.

Much has happened in the time since these proposals were approved. The BNT token significantly out-performed DRC in terms of price action during the first 12-months of the pool’s existence, and continued to out-perform DRC up to and including the present day. While this helps to illuminate the origin of the surplus, it is a worthy exercise to inspect precisely how these tokens arrived on Bancor V3.

In July 2022 a discussion began surrounding the re-equilibration of token balances on Bancor V3 by migrating protocol-owned tokens from V2.1 (i.e. tokens that cannot be ascribed to user-owned balances). In September 2022 a full analysis of the aggregate states of V2.1 and V3 was posted to the forums, including a google sheets document which itemizes the data by token. These discussions culminated in a proposal, posted to the forums in October 2022, which was subsequently approved by the BancorDAO via Snapshot vote the same month. In the google sheets document, DRC appears on row 64 (index 62), and columns F and G (current_poolTokenSupply and current_POL_poolTokens, respectively) reveal the surplus existed on V2.1 at least that long ago. Column I (current_POL_total_perc) lists the protocol ownership of DRC at 63%, which translates to a 237% surplus (column W, ‘current_surplus_perc’). The calculated amount of DRC to migrate at that time was 22,307,903.72 (column AB, ‘migrate_amount_tkn’). As the vote concluded Oct 19, 2022, 4:43 PM UTC, after a brief rally in DRC, I expect that the token amount that could be migrated was slightly reduced, which may explain why V3 has a balance of 16,348,845 DRC, not 22,307,903.72 as detailed in the original report.

Moving surplus tokens to Carbon and creating a protocol-owned strategy

The proposals by alphavalion generalise the purpose of this protocol-owned liquidity (POL) by introducing an intermediate step; the surplus tokens are first moved to Carbon and destined for inclusion in a “protocol-owned strategy”, which through fee generation also directly translates to BNT recapture and destruction. As an aside, the increased liquidity levels in Carbon ought to help maintain persistent volumes and assist with the adoption of the new product.

However, several issues have been raised that represent an insurmountable obstacle to implementing the protocol-owned strategies as initially envisioned by alphavalion. While a rebuttal was provided, it suggests a fundamental misunderstanding by the original author regarding the feasibility of what is being proposed. The only satisfactory process must be one where there are a set of functions that can be called by literally anyone, which facilitate the exchange of tokens into the desired pair, and the creation of a strategy with unambiguous settings. This is the decentralization requirement which, for example, would prohibit the use of a generic token tracker and entrusting an individual with correctly interpreting it, and maintaining the strategy on chain in accordance with the DAO’s guidelines, as suggested in the proposal. To create a system of smart contracts to achieve what is proposed, in terms of regularly updating the strategy conditions in accordance with a TWAP, is similarly untenable.


As ongoing strategy management is untenable, this proposal suggests that a generic stablecoin strategy be adopted which can exist in perpetuity without changing its parameters.

Strategy Details

Suggested Tokens

A low maintenance token pair that can meet the restrictions and enforced criteria would be between two “like” tokens preferrable stable. Since there are many options for stable tokens, it would be preferred to select the two tokens which are most popular and trade with the largest volumes. Therefore, USDC/USDT is an obvious candidate.

Competition for Volume

Carbon’s smart contracts are sufficiently gas-efficient to hold their own against industry giants, including Uniswap V3 and Curve Finance, with respect to the most competitive of liquid pairs: stable coins. Uniswap V3 is superbly efficient on a liquidity unit basis, commanding ~45% of all USDC/USDT volume ($1.8 billion last month), predominantly via its 1 bp liquidity pool despite having only ~$50 million in liquidity. It’s a simple calculus; with the vast majority of liquidity concentrated within only a 2-tick range, and median and mean gas on swaps of 134k and 137k, respectively, Uniswap V3 offers attractive stable coin exchange rates at low overhead cost.

Carbon should be able to offer competitive rates, and lower overheads than even Uniswap’s shining example. On Carbon, the average gas overhead is comfortably at the 45th percentile of Uniswap’s gas distribution, meaning it is poised to be an immediate contender for a compelling share of volume.

There is one caveat - Carbon’s contracts apply a network-wide taker fee of 20 bps. However, it is possible to create a single, protocol-owned stable coin strategy with price settings that compensate for the difference and effectively emulate a 1 bp swap fee.

Competition for Price (Emulation of a sub 20 basis-point USDC/USDT Liquidity Pool)

To compensate for the network-wide 20 bp augmentation of exchange rates, the strategy will deliberately bid high on both USDT and USDC sides of the pair, sufficient only to compensate for swap fee. Therefore, with each trade, a maximum of 20 bps worth of the swap value is transferred from the strategy itself to the feeBurner. For perspective, this would allow a protocol-owned strategy containing $2 million in stablecoin liquidity to process $1 billion in swap volume before the last penny is transferred from the strategy to the feeBurner. The transfer of value from the strategy to the feeBurner is over-unity; whatever stablecoin value the strategy begins with, will eventually be transferred to the feeBurner together with the yields garnered on the taker volumes.

Strategy Settings

1 basis point USDC/USDT spread

Both order’s y-intercepts (y_{int}) are be forced to an arbitrarily high number, and the high, low, and marginal rates are held constant (i.e. S = \sqrt{P_{a}} - \sqrt{P_{b}} = 0). The precise bidding and asking prices are held at precisely 1.0019 and 0.9981, respectively. The precise strategy configuration, before it has received any tokens, is:

    'y' : 0
    'Z' : 5192296858534827628530496329220096
    'A' : 0
    'B' : 422346370619417 (compressed), 281742787817522 (decompressed); {mantissa: 140871393908761, exponent: 1}

    'y' : 0
    'Z' : 5192296858534827628530496329220096
    'A' : 0
    'B' : 422346370619417 (compressed), 281742787817522 (decompressed); {mantissa: 140871393908761, exponent: 1}

# Example trades on the proposed 1 basis-point USDC/USDT strategy


   Trader sends:  1000000.000000 USDC
Trader receives:  999900.009998 USDT
   Gas overhead:  133681

   Trader sends:  1000000.000000 USDT
Trader receives:  999900.009998 USDC
   Gas overhead:  132975


   Trader sends: 1000100.000002 USDC
Trader receives: 1000000.000000 USDT
   Gas overhead: 134132  

   Trader sends: 1000100.000002 USDT
Trader receives: 1000000.000000 USDC
   Gas overhead: 133426

Work to be done

  1. Expose a public function on Bancor V3 to handle the transfer:
    a. The caller chooses a token on Bancor V3. If the pool for that token has its trading liquidity set to zero, and the token is in surplus, then the function call is permitted.
    b. This function will transfer the precise surplus amount from the Bancor V3 master Vault, to a dedicated contract on Carbon.
    c. The caller receives a small incentive to call the function, proposed to be 0.2% of the total amount being transferred.

For example, assume that there is a token TKN, which has balances of 200 and 100 in the Staking Ledger, and Master Vault, respectively. Further, assume the DAO has recently set its trading liquidity to zero. Therefore, all LPs in TKN can withdraw at any time, and without incurring a loss, at any point in the future. The surplus 100 TKN is available for transfer to the dedicated contract on Carbon for the purpose of growing the protocol-owned strategy. Alice calls the function and receives 0.2 TKN to her wallet. The remaining 99.8 TKN are transferred from the Bancor V3 Master Vault to the dedicated contract on Carbon.

  1. Expose a public function on the carbonPOL contract to exchange the tokens received from Bancor V3 for USDC:
    a. The caller chooses a token from the available balances on the carbonPOL contract, to perform a swap into USDC.
    b. A minReturn value in the target stablecoin is obtained via a price oracle, and is not decided by the caller; minReturn is protecting the function from being abused. The proposed minReturn value is the oracle price - 0.5%:

    • The user inputs a certain value needed by the oracle (e.g. the hourly TWAP).
    • That value is then verified on-chain.
    • The minReturn is a fixed proportion of the verified value.

    c. This function will perform the swap via an input trade route, provided by the caller. If the minimum return value is not met, the transaction reverts.
    d. The caller receives a small incentive to call the function, proposed to be 0.2% of the USDC received by the contract following a successful swap.

For example, assume that the 99.8 TKN from the previous function call are chosen by the caller. The Uniswap V2 price oracle indicates that these tokens have an approximate value of 1000 USDC. Bob calls the function with a specific trade route, and the swap successfully returns exactly 1000 USDC. Bob is rewarded with 2 USDC, and the remaining 998 USDC are returned to the contract.

  1. Expose a public function that allows USDC to be transferred from the contract, to the protocol-owned strategy:

    a. The caller does not need to make any choices, except when to call the function, which is predicated on there being sufficient USDC to make the reward offset the gas cost of the interaction.
    b. This function transfers the total balance of USDC from the contract, to the protocol-owned strategy.
    c. The caller receives a small incentive to call the function, proposed to be 0.2% of the target USDC received by the contract following a successful swap.

For example, assume that the 998 USDC from the previous function call are chosen by the caller. Charlie calls the function and receives 1.996 USDC as a reward. The remaining 996.004 USDC are transferred from the contract to the protocol-owned strategy.

DAO Decisions:

  1. Proposed stablecoin strategy and settings.

Vote FOR to support the creation of a protocol-owned USDC/USDT strategy on Carbon, which emulates a 1 basis point concentrated liquidity pool, via the setting detailed above.

Vote AGAINST to defeat this part of the proposal

  1. Function to transfer surplus tokens from Bancor V3 to Carbon with a 0.2% caller incentive.

Vote FOR to support the creation of the proposed public function that moves surplus tokens from Bancor V3 to Carbon for the explicit purpose of being swapped for USDC, and where the function’s caller receives 0.2% of the surplus token amount as an incentive.

Vote AGAINST to defeat this part of the proposal.

  1. Function to swap surplus tokens for USDC with a 0.2% caller incentive and an oracle price - 0.5% minReturn (contingent on decision # 2).

Vote FOR to support the creation of the proposed function that allows anyone to provide a trade route whereby the tokens received by the contract are exchanged for USDC, with a minimum return value provided by an external price oracle, and where the function’s caller receives 0.2% of the received USDC amount, after the swap, as an incentive.

Vote AGAINST to defeat this part of the proposal.

  1. Function to move USDC to the protocol-owned strategy with a 0.2% caller incentive (contingent on decision # 3).

Vote FOR to support the creation of the proposed function that allows anyone to move the protocol-owned USDC received by the contract into the protocol-owned USDC/USDT strategy, and where the function’s caller receives 0.2% of the received USDC amount, after the swap, as an incentive.

Vote AGAINST to defeat this part of the proposal.


Thank you for putting up this proposal. I have some ideas and comments on this thread that I would like to share with the community.

First these three things

  1. c. The caller receives a small incentive to call the function, proposed to be 0.2% of the total amount being transferred.

  2. d. The caller receives a small incentive to call the function, proposed to be 0.2% of the USDC received by the contract following a successful swap.

  3. c. The caller receives a small incentive to call the function, proposed to be 0.2% of the target USDC received by the contract following a successful swap.

I had a spreadsheet that I exported some weeks ago from analytics and it has a dollar value for the tokens in surplus which I have put at the bottom. At this point it is outdated and there are also certain tokens without a corresponding dollar amount as well. I am going to use it for my example but I also think that the team should provide a recent dollar value snapshot for tokens in surplus.

Going by this spreadsheet, there is about $5 million in surplus if all these tokens are sold. I am going to assume that if we sell these tokens that we would get something around 4 million dollars due to slippage and other factors. If we follow the three steps for swapping the tokens to a stablecoin then the fees that the Bancor DAO has to pay is .6% in total. The .6% of 4 million comes out to be $24,000 if these steps are taken.

I can NOT in any good faith support a proposal that is looking to extract value from the Bancor DAO in light of the current situation that we are in. There is already a precedent for selling surplus tokens from v3 that this DAO has voted for in the past

and for which I have already described in detail the set of steps that was taken

without incurring ANY of the costs that is being proposed here. If this means that we as DAO or I have to put up individual proposals to sell of the surplus for each token then so be it. I estimate that it will take 1 hour of my time to copy and paste 50 proposals to sell off the token surplus in a similar manner.

How did I get 50 proposals?

I count a total of 131 pools in v3 which means a maximum of 131 swap transactions that need to be made if ALL pools are in surplus. There is only about 50 pools in surplus right now that require a token swap. I estimate that it takes 10 minutes of developers time to do each swap based on the TX data from the renBTC proposal. For the initial batch of pools once the DAO is done voting to disable them, I estimate that it will take 1 work day to perform these operations and SAVE the DAO $24,000 in the process

There is no reason for the Bancor DAO to have jaredfromsubway syphon $24,000 knowing that this can be done and HAS been done in the past after the DAO has voted for this operation to be performed.

I understand that this is a manual process but there is a clearly defined maximum number of times that this has to be performed which is equal to the number of pools in v3. After this initial batch I don’t think we will have multiple token pools going into surplus at once so it will most likely be a small trickle of pools here and there that we will need to perform the same set of steps to convert. Yes this is a repetitive task for a developer to do but I think as a community we are owed this much. Do NOT ask the DAO to give up $24,000 in value for something that is not needed.

A benefit if we follow the renBTC example for swapping surplus token is that we are not going to waste developers time to write public functions to perform one time operations that will syphon value from the DAO.

Second Stable Coin Strategy

Vote FOR to support the creation of a protocol-owned USDC/USDT strategy on Carbon, which emulates a 1 basis point concentrated liquidity pool, via the setting detailed above.

My biggest problem with this proposal is that it calls to sell ALL of the surplus for a stablecoin to create a stablecoin strategy. This in my opinion would be the biggest blunder that we as a DAO will make if we decide to move forward with a stablecoin strategy. I am not bullish on ANY fiat backed stablecoin less so USD and for obvious reasons. I am more bullish on Ethereum and the value that this blockchain provides as we and countless of other protocols, projects, investors, companies, individuals have decided to store their assets here.

For this reason, I can’t support any proposals that is requesting to sell off the surplus for a stablecoin. I will 100% support a proposal that will sell the surplus for ETH and to have a strategy created around ETH and a liquid staking derivative or between two liquid staking derivates for which there are plenty to choose including lido, rocketpool, frax, coinbase, ankr, stakewise, and the countless of others LSDs. All of these at a minimum yield 5%-10% from Ethereum emissions which means that unwrapping back to ETH tokens in year would result in 5-10% more ETH than initial quantity. A carbon strategy around ETH will be netting the Carbon protocol .2% any time there is a trade in this strategy that goes directly to the protocol and to burn BNT.

This does not take into account any upside that Ethereum has when the market recovers as it could easily 2x-3x and even surpass its previous all time high.

Based on the most enthusiastic estimates for a protocol owned stablecoin strategy which is 100% of UNI volume goes through Carbon this strategy will still NOT yield in a year the value of holding ETH and it doubling in price.

To recap my ideas:

  1. Sell the surplus to ETH using a similar set of actions that were taken in the renBTC proposal and save the DAO and estimated $24,000 in the process
  2. Create an ETH strategy in Carbon around an ETH/ETH_LSD or an ETH_LSD/LSD
Symbol Surplus/Deficit Surplus/Deficit (TKN) Surplus/Deficit
DRC $0.00 16,348,844 1634884400.00%
FODL $0.00 10,174,547 27498777.03%
DAO $0.00 3,375 5532887.17%
AUC $11,814.70 6,338,693 2314129.96%
DDX $0.00 6,116 1568203.17%
KTN $11,932.33 37,332 1146435.51%
SHEESHA $4,966.44 789 961819.66%
APW $25,326.66 73,701 825906.01%
IDLE $8,575.84 32,069 642844.61%
HEGIC $20,414.18 1,640,917 358118.13%
MTA $0.00 247,768 49164.89%
NDX $19,879.32 1,101,310 24621.74%
ARMOR $17,990.89 3,006,623 17941.93%
OMG $0.00 49,445 9725.31%
COMP $145,653.19 3,532 7330.14%
YFI $587,212.72 72 6978.28%
ALPHA $336,664.58 2,371,897 6974.07%
ROOK $485,724.03 9,388 5688.14%
PHTR $21,362.60 789,706 5173.99%
ERSDL $69,534.61 22,333,712 3589.29%
OPIUM $15,402.14 111,943 3101.45%
MPH $133,790.79 61,224 3081.31%
UMA $13,672.43 5,872 2878.65%
OCEAN $1,046,413.60 2,817,380 2355.00%
EDEN $277,703.24 4,446,458 1488.05%
GRT $238,730.08 1,752,122 1391.49%
SNX $747,267.02 304,481 870.97%
EWTB $0.00 3,014 755.97%
BMI $0.00 120,225 722.92%
LQTY $0.00 8,932 681.98%
ARCONA $145,181.80 2,041,016 599.31%
RARI $5,806.69 3,186 374.61%
SATA $4,950.44 365,245 361.65%
RNB $11,377.78 717,538 226.63%
FARM $0.00 2 209.73%
REN $347,885.63 4,142,386 171.15%
LPL $15,747.63 76,382 134.72%
DAPP $60,357.84 86,303,656 104.74%
GTC $0.00 170 103.81%
ACRE $13,106.57 14,664,926 102.16%
MFG $44,165.55 25,609,151 63.28%
INDEX $1,851.52 1,145 63.24%
COT $0.00 13,871,939 34.43%
SHIBGF $2,047.79 3,887,647,095,665 34.19%
PERP $0.00 86 30.68%
XSUSHI $1,426.45 1,080 21.46%
CROWN $22,358.38 1,955,962 7.64%
1INCH $0.00 28 1.38%
BORING $1,157.09 346,943 0.79%
VITA $0.00 0 0.50%
1ONE $0.00 0 0.00%
ALEPH $0.00 17,645 0.00%
BDIGG $0.00 25 0.00%
CRV $0.00 0 0.00%
CTSI $0.00 0 0.00%
DUSK $0.00 0 0.00%
DYDX $0.00 0 0.00%
FOX $0.00 0 0.00%
FRM $0.00 830 0.00%
FXS $0.00 1 0.00%
JRT $0.00 1,078,785 0.00%
LYRA $0.00 3,731 0.00%
MFI $0.00 150,954 0.00%
OPTHALES $0.00 1,086 0.00%
PLR $0.00 47,298 0.00%
SAO $0.00 503,451 0.00%
SFI $0.00 10 0.00%
SRM $0.00 2,343 0.00%
STAKE $0.00 4,388 0.00%
VISION $0.00 3,884 0.00%
VLX $0.00 0 0.00%

@alphavalion regarding the “manual” approach, if the DAO were to decide that way then who is the developer executing all those actions?

Additionally, we’re in favour of a stablecoin strategy. We don’t see any risks like you mentioned but do agree it’s interesting to have an ETH related strategy as well with LSDs.

We would like to pose the idea of creating 3 or 4 protocol-owned strategy that are compiled by USDC/USDT, ETH/USDT or/and ETH/USDC and ETH-LSD. Are there any challenges of doing that on the developer side?

Would this diversification be easier to handle by doing it manually or with the way @mbr proposed?


Substituting USDC/USDT for ETH/LST or even LST/LST is feasible.

Let’s break this down a bit. Let’s use Lido’s non-rebasing wstETH and Rocket Pool’s rETH as examples - we can always consider other options later as we converge on a solution.

Lido wrapped staked ETH versus ETH

This would be a difficult pair to manage. As you can see, wstETH has a persistent trend to the upside; to keep the range bounds consistent with the market would require constant interaction with the strategy.

Rocketpool ETH versus ETH

I want to learn more about this pair. My understanding was that rETH behaves similarly to wstETH in the sense that it should gain versus ETH at a rate commensurate with the block rewards. However, we can see that rETH has in fact begun to stabilize around 1.07.

If we only look at the period of time from December 2022 until now, it actually looks like it could be a great candidate for a pair versus ETH. Setting up ranges around 1.07 +/- 0.01 looks feasible - but again, I would like to understand why rETH exhibits this stable behavior.

Did rETH move to a rebasing model?

Rocketpool ETH versus Lido wrapped staked ETH

Hard to say anything with conviction, but let’s assume that the period beginning from April is representative of the new paradigm for these staking derivatives versus each other.

To my eye, ranges either side of 0.955 +/- 0.005 doesn’t look terrible. However, this pair is a little on the exotic side. It is worth considering the market that is being created. Since both wstETH and rETH cannot be immediately redeemed for their underlying (i.e. the “unstaking arbitrage” is inhibited), the most likely use case is to allow for the exchange of these two tokens as a kind of interest rate swap. Of course, if rETH and wstETH are relatively liquid elsewhere, we could rely on arbitrage versus the pricing algorithms of other DEXes, which is the same as saying that we are relying on disproportionate volumes across Ethereum for these two tokens. I have no way of evaluating the merit of this idea, but I lean towards skepticism.

First impressions

If we can get some insight on the rETH/ETH price chart behavior since December, and expect more of the same, it seems like an rETH/ETH strategy could be a relatively accessible alternative to the stablecoin strategy I discussed above.


Thanks for the insights @mbr!

rETH is not rebased. Not sure where you got that price feed but on rocket pool’s website it shows a steady increase over time.


Is it safe to say that the primary aim here is to maintain decentralization? Whereby selecting a strategy with the least “maintenance”, i.e. a generally consistent and steady range, such that the fewest interactions is the optimal route? In other words, a strategy that could be implemented in a decentralized manner, initiated by anyone, and run in perpetuity without changes to the parameters sounds like it meets the criteria.

It sounds like the disagreement in the thread is a misunderstanding of a decentralization requirement of operating as a DAO, so we may be talking past each other until that point is clarified.

Also sounds like a stablecoin strategy is the best match, while and LSD-LSD (any that exhibit the same very tight deviations as a stablecoin pair) strategy could be a fair compromise. To that end, If I’m understanding the decentralization requirement correctly, I see how an ETH strategy would require complicated mechanics to maintain the strategy in a decentralized manner.


There is always someone that executes proposals when the DAO votes on it. This is usually the “Bancor network deployer” from what I have seen via the blockchain transactions. I am not sure who this is, but probably a developer or a group internally at Bancor making the changes on the DAO behalf.

I tend to take the practical approach in general and my point is that the DAO voting on a proposal is enough to meet a decentralization requirement. There is precedent and previous proposals that the Bancor DAO has passed for performing operations such as market selling tokens. I have provided enough transactions that show this in the past. If it comes down to the protocol

  1. Wasting development time to create some 1 time use functions
  2. That then pay .6% in fees to jaredfromsubway to syphon +20k in fees away from the DAO

I would much rather vote to have the Bancor network deployer perform the swaps via an aggregator on behalf of the DAO as has been done in the past. This saves us fees and let’s the developer focus on building out the protocol further.

Bancor is a decentralized protocol and all decisions/actions are voted by the DAO. There is fine line that needs to be drawn between being practical and extreme when it comes to what is consider “decentralized” enough. These one time market sell operations can quickly be done in a day by the bancor network deployer.

I am not really impressed by this stablecoin strategy. I am more bullish on ETH for the upside it provides. The fees generated in the most optimistic scenario for the stablecoin strategy with 100% of volume going to Carbon would not be better than being on ETH and the price doubling in 1 year from now. There is also a guaranteed 5%-10% yield on LSDs because of Ethereum emissions.

I am fully in support of RETH/WSTETH or even using FRXETH as these tokens grow at the same rate because of Ethereum emissions. They should all trade at relative parity with one another so building a strategy that doesn’t require any maintenance should be simple.

Here is a poll to any Bancorian reading this thread. Do you want to use the surplus to be all in on USD backed stablecoins or an Ethereum liquid staking derivative?

  • USD Stablecoin
  • ETH Liquid Staking Derivative

0 voters

To be 100% clear, I personally support a strategy around ETH. Even if this means putting on a theater operation and having developers create the functions as described in post #1 to sell these tokens for ETH. For whom is this decentralized theater operation being performed? Certainly not for the Bancor DAO that will get SHREKT by jaredfromsubway and co for $20K or more.


All of the charts above are obtained via the CoinGecko API. It is the same chart as what appears on the website. If you want to reproduce the results, go to the historical data tab for rETH and ETH on the CoinGecko website, and export the data as csv. From there, if you take price of rETH (USD per rETH) and divide by the price of ETH (USD per ETH), you can generate a new chart which represents the price of rETH (ETH per rETH).


The data from CoinMarketCap is similar; while the wicks are more dramatic, you can clearly see a local top in December.

CoinMarketCap has also detected much greater variance in general. The wstETH chart, for example, reports a 2× wick up to 2.25 ETH per wstETH in October.

The detection of these additional events makes the rETH/wstETH chart from CoinMarketCap difficult to make sense of.

However, as before, we can choose to look at just the data from April onwards. Still, compared to the data from CoinGecko, it suggests a suspiciously high relative volatility.

In any case, CoinMarketCap corroborates CoinGecko; the rETH/ETH pair has been in decline since December.


CoinGecko frxETH/ETH

CoinMarketCap frxETH/ETH

Note: The GoinGecko API has data for frxETH going back to November of last year, whereas the hisotrical data from CoinMarketCap starts about 2 months later. However, both show a slight negative trend versus ETH.

1 Like

What would it be paired with and what would the ranges be?


Honestly fully in agreement with @alphavalion.
We should be full in ETH LSDs. The time to be in stables was spring 2022, now that we are well into the bear market we should be aiming to have a fat ETH treasury that will yield us Easy gains and strengthen our BNT Value.

With a stable strategy we would just be beating inflation at optimal gains, but we aren’t in the luxury to be in such a position. We have so much BNT yet to take off the market, waiting several years for that to happen just isn’t optimal.


Focus on the top three LSD and get a strategy around that. These pairs are ok


take the last 30 days and get the average price. If you want to have two limit orders add 2% to the average price and make that the sell high limit order. Subtract 2% from the average price and make that the buy low limit order.

If you want to have range orders then have the sell high limit order be 2%-4% above the average price and the buy low limit order be 2%-4% below the average price.


I am unfamiliar with the proposal and current context with Bancor so I will refrain from commenting on other aspects discussed here, however thought I could clarify some confusion around rETH price.

I can confirm it is not rebasing, and does indeed operate similar to wstETH, in that it continually appreciates in value vs ETH.

There are two ways to acquire rETH - from the Rocket Pool protocol itself, which has its own rETH oracle price (the “true”, or “correct” rETH price), or on secondary markets.

Of course, on secondary markets, as with any token, the rETH price can fluctuate with usual market forces, and at times may have a discount or a premium to it’s true price. I believe the Coin Gecko data is looking at secondary markets.

Currently, there is room for 21k ETH to be deposited for rETH directly via the protocol deposit pool, and realistically much more, as there is large RP node operators still spinning up more nodes to meet the rETH demand as it comes.

As an aside, which I hadn’t seen mentioned in this discussion, rETH is also far and away the most decentralised LST.


I support the use of a stable:stable strategy rather than than an ETH-based one. In terms of affecting demonstrable, ongoing deficit relief, a pair with high volume and predictable fluctuations seems more likely to regularly execute trades and thus generate fees to buy/burn BNT with. Stable:Stable pairs seem the best fit for this, with minimal maintenance required vs other suggested pairs which either seem to trend in one direction over time (more adjustments required, less decentralisation, fewer trades and fees generated), or are rather more exotic (as Mark said later on) and less likely to capture the same volume as the established industry practice of stable:stable arbitrage.


Hey Everyone,

So I’m been doing some research here to further understand what the options are.

In my eyes, we have three main approaches that fit the decentralized requirement (public functions anyone can call).

Option 1: The Stable to Stable Strategy outlined by @mbr

Description: Scroll up for main proposal


  • Stable to stable typically generates among the highest volumes in the ecosystem
  • This can really bring some eyes, attention and integrations to the protocol. 1 BP stable trades with very low gas are appealing to arbs, protocols, traders, aggregators etc.


  • I have no idea if the market will go up or down from here - but if it goes up, it might not have been a great time to buy stables.
  • We are exposed to the token in the pair. - a hack/bug/malfunction could make the strategy worthless.

Option 2: ETH/LSD, LSD/LSD, or similar protocol owned strategy mentioned by @alphavalion , @AnimaDunk , @PaperStreetCapital and @0xkeyrock.eth

Description: Very similar to main proposed but with ETH/LSDs and different ranges (yet to be determined what the precise ranges would be)


  • ETH/LSD or LSD/LSD as opposed to stables means we will not lose value in a bull market


  • We are exposed to the token in the pair, and these are newer than stables - a hack/bug/malfunction could make the strategy worthless.
  • LSD volumes onchain are VERY low compared to stables which means likely far less fees gnereated and volume from these pairs.
  • If prices go out of range, there is no existing decentralized method to change the strategy parameters and one would need to be developed as a public function - but this will take time and comes with opportunity cost and caller incentive costs.

Option 3: Disposable maker orders of TKN on Carbon - closest to @alphavalion’s original idea

Description: Take the POL in its TKN form, and using an oracle (with some safeguard in place) create a disposable limit order on Carbon selling it for BNT. In a future proposal, we can create a function to take these BNT acquired and destroy them.


  • Brings a variety of TKN to Carbon and pairs them with BNT (only the TKN side is funded with the POL).
  • Of these options, most likely to reduce the deficits in the near term (in my personal opinion - not something that can be proven).


  • Less likely to create a long term protocol owned strategy that is active for long periods of time.
  • If prices go out of range, there is no existing decentralized method to change the strategy parameters and one would need to be developed as a public function - but this will take time and comes with opportunity cost and caller incentive costs.

I put this in the telegram group chat and wanted to add it here as a reference. LSTs have had enough TVL and been around for a while which means that any major vulnerabilities at the token contract level would have been abused by now IMHO.

These would be quite profitable for a malicious attacker. The data came from CoinGecko:

Lido STETH: $13,483,031,169 about $13 Billion
Rocketpool RETH: $900,743,383 about $900 million
FRAX FRETH: $420,868,577 about $420 million
FRAX SFRETH: $266,975,477 about $266 million
Lido WSTETH: $131,756,394 about $131 million


Great summary, and thanks for putting it together. To be honest I’m in the stablecoin camp, and well said by @ImshermanentLoss above. My previous comment was trying to bridge a disagreement, but I’m fully for a stable:stable strategy.


It is mentioned that uni generates 1.8b in volume for the usdc/usdt 1bp liquidity pool. I will use that number for some napkin math. Take 1.8b and multiply by 12 to get the volume in 1 year and that comes out to 21.6 billion. I am making assumptions for my example. 1bp in fees on the 21.6 billion results in $2,160,000 fees yearly.

This usdc/usdt 1bp pool has 82m in TVL at the moment on uniswap. We will barely have $5m in TVL in this strategy. I would have to be DELUSIONAL to think that we would capture 100% of uni v3 volume share with 5m in TVL. This is NOT happening. To be optimistic my example will capture 50% of the volume which means 1m in fees for the year.

This proposal was put online 4 days ago. The price of ETH was 1730 or so. If we purchased ETH with $5m four days ago we would acquire 2890 ETH. The price of ETH right now is about $1918 and selling all of it would yield $5,543,020. In 4 days we would have already made more than half of the supposed fees that the stable strategy generates in 1 year. Selling the surplus for stables is trading the upside of ETH for pennies on the dollar. Even if we capture $2,160,000 in fees yearly by getting 100% of the volume, this will NOT yield as much as ETH doing a 2x-3x.

The upside for the LSD/LSD strategy and which I suggest a combo of lido, frax, or rocketpool gives us the upside of ETH going up in price. The DAO also receives a minimum 5% yield from ETH staking which results in more ETH when we unwrap the LSD for ETH. Any trades will result in 20 bps of fees in carbon that go to the vortex. I am not worried about the volume of these tokens as compared to stable coins which is NOT “VERY low” as foxsteven wants you to think

snapped_at price market_cap total_volume
2023-05-22 00:00:00 UTC 2032.364471 0 10210765.55
2023-05-23 00:00:00 UTC 2045.658212 0 12515089.44
2023-05-24 00:00:00 UTC 2086.356479 0 6665880.403
2023-05-25 00:00:00 UTC 2027.019488 0 14175515.4
2023-05-26 00:00:00 UTC 2032.533703 0 3591047.921
2023-05-27 00:00:00 UTC 2057.82958 0 3743296.13
2023-05-28 00:00:00 UTC 2059.799229 0 909418.2212
2023-05-29 00:00:00 UTC 2153.614214 0 9179416.616
2023-05-30 00:00:00 UTC 2131.326228 0 5906672.826
2023-05-31 00:00:00 UTC 2140.640124 0 13567538.01
2023-06-01 00:00:00 UTC 2109.535282 0 102475254
2023-06-02 00:00:00 UTC 2097.357077 0 16987857.01
2023-06-03 00:00:00 UTC 2148.299185 0 12814402.24
2023-06-04 00:00:00 UTC 2130.688356 0 6177889.385
2023-06-05 00:00:00 UTC 2131.01534 0 3200203.943
2023-06-06 00:00:00 UTC 2039.871354 0 6322751.959
2023-06-07 00:00:00 UTC 2123.583488 0 8318674.576
2023-06-08 00:00:00 UTC 2064.353203 0 8816882.964
2023-06-09 00:00:00 UTC 2081.912694 0 5571083.924
2023-06-10 00:00:00 UTC 2071.656617 0 9066355.191
2023-06-11 00:00:00 UTC 1976.099449 0 55437387.39
2023-06-12 00:00:00 UTC 1975.151329 0 8019808.988
2023-06-13 00:00:00 UTC 1964.726377 0 34448950.01
2023-06-14 00:00:00 UTC 1958.281246 0 33807424.61
2023-06-15 00:00:00 UTC 1860.454238 0 38119131.8
2023-06-16 00:00:00 UTC 1878.523046 0 67392235.57
2023-06-17 00:00:00 UTC 1936.981271 0 38818549.85
2023-06-18 00:00:00 UTC 1948.625532 0 23498287.27
2023-06-19 00:00:00 UTC 1940.235861 0 8961500.834
2023-06-20 00:00:00 UTC 1956.552876 0 46123328.01
2023-06-21 00:00:00 UTC 2022.397 0 28380773.29
2023-06-22 00:00:00 UTC 2136.517635 0 34397020.58

The last 30 days for wsteth has seen 677m in volume which is 1/3rd of the 1.8b monthly volume for the usdc/usdt uniswap pair.

LSDs are relatively new and have all seen explosive growth. This growth will continue as tradfi comes to DeFi to look for reliable yields. Bancorians can vote for converting the surplus to ETH and also choose to be on the right side of the bell curve



Just ran a quick check on CMC for 24hr volumes:

ETH - $11,795,507,037
USDT - $40,839,189,320
USDC - $6,397,968,870
rETH -$8,591,943
wstETH - $14,442,469
frxETH - $4,212,638

If you think this is not accurate, please let me know (I just copy/pasted from CMC)

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I think the crux of my disagreement on the path forward needs to be made more clear. What you’re arguing for, which is generally true, is will Eth outperform stablecoins? And why not buy an asset that will outperform?

My argument is from a regulatory risk framework, especially as its known throughout the US that the SEC’s next stop is defi. My approach is from a healthy respect for long-tail risks.

So we are not arguing the same points, which is why is must feel like the stablecoin crowd are all idiots for not seeing a massive profit potential right in front of us, its because (for me at least) we’re not arguing the same thing.

My sense is we potentially introduce massive risks by pursuing the Eth strategy, especially risks that may not be apparent today. I’m by no means well versed in DAO legal structures, but it seems like this ventures into some gray areas given the non-profit DAO structure, without a treasury set up.

Clearly I could be wrong and maybe oversensitive to regulatory and legal threats, but I’m saying lets respect the environment we’re in.

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