Feedback request: Deficit Resolution: Community-Driven Recovery with Lottery

Recent period I’ve been sharing thoughts with some LPs on new ways to get out of deficit. Many of us would settle for a 10% loss of our liquidity and getting 90% out. This made me think out of the box to set up a separate project to voluntarily create 3 pools with 10% of bnTKN from the LINK, ETH and WBTC pools and create a lottery where people can buy tickets and only pay by staking BNT.

The Idea
I propose a new decentralized protocol to resolve Bancor liquidity pool deficits (wBTC, ETH, LINK) through Liquidity Providers community participation. Three new pools will be created on a third-party platform where LPs deposit 10% of their bnTKN. These bnTKN will create a three prize pool that stakers of BNT can win via a lottery. Each prize pool will only unlock when a liquidity pool gets out of deficit and trading for that pool is halted.

Edit: Added for clarity - LPs won’t make any new investments. They already hold bnTKN (bnLINK, bnETH, bnWBTC) and these are transferable tokens. They will deposit 10% of these tokens into a new Smart Contract to create prize pools and will keep 90% in their wallet. Once a pool gets out of deficit they can claim 90% of their original liquidity of TKN via Bancor.

How would this work?

For Liquidity Providers

  • Every LP deposits 10% bnTKN into the smart contract on the new platform
  • If pool gets out of deficit, the deposited bnTKN can be claimed by lottery winners
  • bnTKN can’t be withdrawn as long as the lottery competition is active
  • If no recovery after X days then bnTKN can be reclaimed by LPs and the competition ends
  • No cure, no pay. If successful then recovery of 90% of your bnTKN.
  • Open for debate: deposit more bnTKN during competition to increase incentive for stakers

For BNT Stakers

  • Stake BNT to buy lottery tickets at $10 per ticket. Early-bird price 25% discount if bought within 72 hours.
  • Snapshot automatically taken when a pool gets out of deficit and is closed for trading
  • BNT can be added multiple times, but it needs to be staked at the time a snapshot is taken
  • Lottery winners selected via Chainlink VRF based on snapshot
  • Lottery winners can claim bnTKN and use bnTKN to claim TKN via Bancor Protocol
  • Staked BNT can’t be withdrawn during lottery competition period
  • Withdraw BNT if no recovery within 30 days or when all pools are out of deficit

Third-Party Development

  • Independent team develops the protocol
  • Creates user-friendly dashboard for tracking and staking
  • Takes care of setting up smart contracts & audit with external party
  • Implements secure and transparent lottery mechanism via Chainlink VRF
  • Regular updates to the community and helps moderating Telegram channel / X
  • Receives 10% of bnTKN rewards as incentive from the pools
  • No cure, no pay

Timeline

  • Build protocol, platform, smart contracts, audit, etc. (12 weeks)
  • Open for LPs deposit bnTKN (2 weeks)
  • BNT staking opens once 3 pools minimum threshold has been met (8%?)

Notes

Liquidity providers can’t be forced to participate. This is 100% voluntarily. But to make it work I need to know if there’s enough interest from the LPs to set this up. I believe we should aim for 10% bnTKN to put inside a pool to make it interesting for BNT holders to participate. See image below what this would mean based on recent figures and prices.

Discussion

I feel this is a unique opportunity to bring BNT holders and Liquidity Providers together. BNT holders can stake their BNT to help us to get the pools out of deficit. As a ‘thank you’ they participate in a lottery which gives them a chance to win a few hundred thousand dollars per pool (40% to winner nr 1). With 10% bnTKN staked per pool this could go up to 1 million USD for first prize per pool.

This has to be a community effort set up by Liquidity Providers. I’m in contact with a team who has shown interest to help, but one of the big questions is how many LPs are active and willing to participate. Nobody can’t be forced, but without a big majority putting in their 5 – 10% it won’t work.

Everything is up for debate. First plan was to distribute the pools fairly over all stakers, but I doubt that this will generate a lot of interest. The interesting part here is a lottery with a big prize to win. Payout will only happen when a pool is out of deficit and closes.

The screenshots attached are from a testnet environment I’ve set up myself with the help of AI.

All feedback is welcome and I encourage everyone to at least respond with their thoughts. Thank you.

5 Likes

This is a novel idea that I hope people will actively discuss. It attacks the deficit in a unique way without much risk. I’d happily put up 10% of my bnTKN at the chance of receiving 90%. And if the deficit doesn’t get solved in the allotted time the bnTKNs are returned.

The lottery has the potential to offer 3 respective pools one for LINK, ETH, WBTC respectively each with a $1Million Dollar plus prize for 1st and additional winners. If we could get the memes going again and spread the word I think this could potentially go viral. I hope others actively engage in this idea whether with critical feedback or in support.

3 Likes

I’d be down for this as well. We could use a show of hands to get a sense of what we could be potentially working with. Honestly I’d be down to offer up 20% of my Link at this point if it helped move the needle. I’m not the biggest fish in the pool but that would be 2K Link on my end.

Who else want’s to show their hand?

4 Likes

I’d be willing to put up 10% of my bnLINK if we can get enough commitment.

4 Likes

I appreciate the initiative here and the creative thinking.

Also, as you indicated, if this is done by a third party and paid for by the pool itself - it means this would not need to divert dev resources from things like the ArbFastLane, Bridges, new deployments etc…

:muscle::muscle:

3 Likes

I appreciate your response Steven. But to be clear the third party seems to be necessary, because Bancor doesn’t want to be involved. Personally this disappoints me. If the majority of LPs are behind this then I would rather see Bancor taking the lead on this.

4 Likes

This is a very elegant idea imho but participation is key.
LPs need to be informed. Could it be mentioned on app.bancor ? or perhaps an onchain message to all bnTKN holders.

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I would be extra happy if I lose even 20% of my 4 ETH and 100 Link to be able to get the rest. For 3 years their are stuck :frowning:

1 Like

What if instead of using the bn tokens we make this more of an open platform for everyone in the crypto community to utilise. If we build something just for those with funds lost in the deficit then our audience is limited however, we could think a little bigger and build something with a much larger target audience.

As such, I’ve been toying with a giveaway style idea recently and was thinking about making it with the LINK token as the primary asset required for purchasing but using BNT and fixing the deficits is a much better option if It can help get us all out of this mess without a haircut.

So my idea goes something like this.

Theres a standalone ‘prize giveaway’ protocol that accepts deposits into a pool of funds.

Upon making a deposit the depositor is granted access to a private membership only group chat. This is required to ensure we are not building some sort of dodgy lottery system. We’re not selling tickets to a lottery, we’re selling access to the group chat, and users get an onchain entry into a giveaway draw as a membership benefit.

To determine the winners of the prize, we use chainlink VRF to randomly select the winner/s.

The major giveaway is held once forntightly and is fully decentralised. Perhaps we also select random weekly winners for smaller prizes.

or perhaps a smartcontract is triggered when the prie pool reaches $100k.

Now here’s the key to reducing the deficits: We could set this protocol up so that any liquid token can be used to purchase the membership however, upon the user making their deposit, a smart contract converts 25% of the deposited tokens to BNT immediately and then burns them, with the remaining 75% converted to USDT and deposited into the prize pool.

This creates demand for BNT, helping to drive the BNT price higher to the point where we might be able to balance out all of the pools currently sitting with a deficit. It’s not a solve it all in one hit effort, more of an effort that will play out over time, gradually creating more and more demand for BNT.

So we’d end up with a pool of USDT that we could then give to one lucky member, or we could split among like 40-60% of the entrants. I’m not sold on the idea of one winner as we want to entice people to enter into each consecutive draw. I’m open to discuss ways to optimise this to encourage return users.

We could also spice it up a little more by having the prize given to the winner in a token of their choice, with the winner having the option to select from a list when redeeming their prize.

Or we could use Chainlink VRF once again to randomise the reward and distribute some random coins to the winners.

My proposal achieves a few things:

  • broadens the # of potential participants by removing the need to use BNT tokens;
  • increases the rate that we are burning BNT tokens;
  • helps increase demand for BNT as traders & investors like to speculate on tokens with burn functions;
  • potentially leads to us clearing the deficits without taking a hair cut.

Thoughts?

1 Like

Also sorry to hijack the original thread. I however wouldn’t deposit into the originally proposed protocol as I don’t feel it would make any major impact on the deficits.

The original proposal would be open to everyone in the crypto community. All you need to enter is by purchasing and staking BNT .

And if we get enough liquidity providers to offer 10% of their TKN the lottery pool for WBTC, ETH, LINK would be over a $1,000,000 each. I believe this would garner attention. I don’t think forming a lottery in another way would work well but then again I like hearing new ideas.

Thanks for taking the time to respond to this proposal and maybe others have a different opinion than myself.

4 Likes