I think there is an extreme amount of execution risk here, where the features literally have to work. We’re putting everything on the line on solutions that likely have a less than 50% chance of working. We’re trying to generate $35M+ of value from TKN liquidity of less than $50M. This is an insane and tall order by the team.
I’m sure the team is under a lot of pressure here to get this right. And the timing isn’t working in their favor as the deficit continues to get worse and will only get bigger until a viable road to recovery is realizable.
The protocol deficit is now at $36.5M, when just last week it was at $29M.
I think we need a solution here that will clear out the deficit in one go where all losses are socialized by BNT LPs and TKN LPs alike equivalently, and the team can work on a solution without the time constraints and pressure of losing even more money the longer this plays out.
My idea is this:
- We socialize the BNT surplus of $21M among all LPs (Both BNT and TKN LPs), and in doing so, all LPs take a smaller haircut and we wipe out the deficit, and no longer hold the protocol liable for any IL going forward. So no more deficit will accrue after this.
- To prevent inequity in recoveries, all the $21M of BNT surplus should be sold at the protocol-level by Bancor, and the proceeds should be distributed to all the LPs.
- One way to mitigate against the tremendous price impact of selling $21M of BNT is if the Foundation would be willing to buy in an OTC deal all of that BNT at current market prices. This would not be a bailout given that the Foundation isn’t simply just handing money over. They are buying the BNT in an OTC deal.
The benefits here are that (1) this is NOT a bailout as the Foundation would receive considerable BNT in return (2) the Foundation gives confidence that Bancor can survive as a going concern and also doesn’t crater the BNT price because it buys it in an OTC deal (3) the deficit is wiped completely clean and (4) most importantly, the devs and team can experiment and break things without the time pressure and financial pressures of losing even more money.