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- bnTKN can’t be withdrawn as long as the lottery competition is active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- Staked BNT can’t be withdrawn during lottery competition period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.