Debate: Increase Co-investment Limit on WOO (from 500k BNT)
The WOOBNT pool has undoubtedly been a success for the protocol. The synergy between the projects and the community is one we should aim to have with more projects in the future.
The WOO community has been asking about a co-investment increase on the WOOBNT pool to open up space. Regardless of my personal opinion, I thought it would be a good idea to debate it here for permanence and to understand whether a proposal should be made. Some points to consider:
The WOOBNT pool has the #2 highest volume on Bancor, right after the ETHBNT one (Figure 1).
The pool has the #2 highest APR and #14 highest liquidity in the protocol.
The pool can cover trades of around 100k WOO with price impact <1%.
Pool liquidity is the deepest in any DEX right now.
The co-investment limit was increased to 500k last month [1].
LM rewards are a fixed amount/week for the pool, so increasing liquidity will dilute the APY (currently at 9.25% for WOO side and 59.09% for BNT side).
Increasing liquidity in the pool decreases price impact on larger trades but also dilutes the APR from swap fees if no extra volume is brought due to it (currently at 22.63%).
We can also experiment increasing swap fees APR by increasing the swap fee %, currently at 0.2% (will need some analysis on what fees other DExes have right now so aggregator volume is still routed through this pool).
The swap revenue is pretty good, and the pool could certainly continue to perform at a greater depth. Similar to the ICHI proposal, I would like to see a swap fee increase at the same time, IF we decide to take this through to a full proposal.
My concern is that WOO is moonshot material, and we need to be careful to limit the upside exposure of the protocol. With an increased pool fee, the situation is slightly improved. Moreover, with the increased depth, the APY is going to start getting stretched. If the pool fee increases, the APY for WOO liquidity providers is liekly to maintain a healthier margin, while the slippage improvements counteract the negative effects for traders.
TL;DR
It’s probably a good idea to increase the size of the WOO pool.
We should consider an increase in the pool fee at the same time, probably to 0.5%.
Ben here from Wootrade. Continually impressed by the synergies here, would love to see an increase as there are a ton of people in the Wootrade community with HAL alerts set to watch for space. Will support this fully, and continue to support Bancor regardless of the success of this proposal.
I am in favor of increasing the co-investment immediately! The volume is there to support it and I don’t believe the APR will suffer all that much. I am not in favor of increasing swap fees. It will be the first thing competition will point to when comparing DEX’s. Let’s put it to a vote!
The pool definitely needs expansion lots of people on an alert list just waiting to get in. Lower fees, because it’s what $woo is all about, but add more APY rewards from Wootrade treasury to supplement low fees.
I’m in favor of increasing co-investment limit. I also think we should increase the swap fee from 0.2% to 0.24% it’s a very slight increase keeping the fee low enough so that we will continue to be the best DEX to swap by far but also capturing more value for the LP’s.
The volume that the pool is bringing right now is great especially considering the low VBNT/BNT ratio, 1 VBNT= 0.34 BNT. So we’re locking BNT in the protocol forever for only 1/3 of the price since we’re burning VBNT that’s a huge discount.
I agree with this statement and think overall an increase is warranted. The WOO community has been constantly increasing the size of the pool without us and been trading consistently on Bancor. IMO this is the next MATIC pool for us. I think we should :
Increase Co-Investment by an addtional 500K BNT
Increase Fee to .25% (to keep it nice and round @spyda5556 )
increasing the fee assuming we keep the same amount of volume should theoretically see a 25% increase in income from fees and increasing the pool by 500K BNT should add around 2M USD worth of woo to the pool which is also around a 20-25%~ increase in depth. these two changes should balance each other out
Pool Fee Up = 25% more income
Liquidity Depth UP = 25% dilution of fees
The trick here is that we have no idea how the volume will respond. It could be that the pool is the “correct” depth as it is. It is also worth acknowledging the LM on the pool will likely cause it to grow organically, assuming that some of the WOO and BNT LPs already in the pool decide to restake there. So we can expect a gradual increase in its size, even if we don’t raise the limit. Taking this point under consideration, I want to propose a more sober co-investment increase of 250K BNT (to 750K BNT).
No point in guessing - I got the quants for Wootrade to run some calculations. Based on the current liquidity, a fee increase would have a negative effect on the amount of volume that arrives from routers like 1inch or 0x. Would not be a wise decision to increase the fees at this stage.
With this new info on the table probably leave the fee alone then. 250K Seems reasonable unless someone has a different number they’d like to throw out.
I will go back to my original post and again agree that opening space an additional 250k with no increase to the fee would be the best decision. We can renew LM rewards at a later time if deemed reasonable. Let’s do it!
Clearly Wootrade is an enthusiastic and active community, and they’re really energized about us. Their volume is nothing to sneeze at, the APY looks good and the pool supports up to ~21.9k BNT in a swap before reaching 1% slippage. (That’s roughly $85,000 at time of writing; I consider this adequate. I will prefer to use BNT denominations for relative consistency, as BNT is our reserve currency.)
I’d certainly consider supporting a proposal to increase the co-investment on this pool should one arise, provided the volume remains consistent; however I think it should be no more than +20% of the current limit, as we don’t want to grow too much empty space too quickly.
I think it’s still worth increasing the fee, maybe delaying the vote another week or until the WOO pool gains more liquidity to the point where a fee increase would not cause it to lose volume via routing on DEX aggregators, I think as @mbr said the depth of the pool should continue to grow naturally via LM re-stakes, swap fees, and more deposits from WOO community
Here are the top pools for the WOO token at the moment on other DEXes:
This compares to our pool which has 17.6M in depth:
a 250K increase in BNT would put us at 2.68M BNT and open up space for roughly ~1M WOO tokens. At current prices, this would put us at ~20M in liquidity for this pool. I think this is good size for this pool and any further increases can be evaluated based on average APR over the last X days (15, 30, 60, etc…). This data is currently missing in Dune at the moment and I am hoping that it will be added soon.
With that said, I see that WOO is incentivizing pools in Uniswap/Sushiswap:
We are by far larger than both these pools combined and I am wondering if the WOO community/team would be interested in incentivizing the Bancor pool in the future?
I agree with keeping the swap fee the same for this proposal and only increasing the co-investment. Possibly, and perhaps paradoxically, lowering the swap fee might increase the apy by routing more traffic through Bancor. There is clearly a lot of volume out there on WOO that is not going through Bancor. A new proposal I posted today seeks to run an experiment to see if lowering the swap fee on a big pool can route more trade volume through Bancor. If this proposal is successful, and if the experiment runs it will help inform the swap fee dilemma for medium pools like WOO.
