Hey @Yousri
Thanks, can you clarify this a bit for me? I’m not sure I understand the point you are making.
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- Protection bucket is available to all LPs seeking to exit. This is not first come first serve, but based on the LPs stake as a percentage of total staked in the protocol.
Any LP can avail it depending on their stake of the total staked protocol amount not their position in their own pools or the generated fees per pool?
For instance Eth pool is receiving a small fees right now but someone might have a bigger stake in it compared to other stake in another pool generating more fees when divided by the protocol stake. So are they entitled for a better chunck if they wish to exit (not all people exit together) rather than having the calculation based on eth pool fees and their proportion to the specific pool they are staked into so they would wait much more. I mean are all the fees collected in centralized pool and distributed or it still depend on each pool fees generated?
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Ah, now I understand.
So I left some thing not clear on purpose as I want to hear opinion.
For exmaple, in the DAI model is the distribution based on the staking ledger or the vault? Or in the protection model, how exactly do we calculate the claim of one LP?
Would you preferred to be rewarded/protected based on the pool you staked or protocol results?
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apparently, the idea i had in mind is not one of the suggested 2.
i propose option 3.
Social Fee Treasury.
- high level - give a small portion of the fees to LP while use the vast majority for ILP.
- details:
- BNT side
- 95% of collected fees → burn and reduct BNT supply
- 5% used as value accumulation on LP position
- TKN side
- 95% of collected fees → saved in treasury and socialized to cover ILP in the pool (each pool helps its members, all for one, one for all type of deal)
- 5% used as value accumulation on LP position
- treasury distribution → every deposit/withdrawal will distribute the treasury into the pool and close the deficit benefiting all LPs identically.
why this solution should be the one?
easy to implement. quick to implement. allow to get some action moving and start opening up deposits and withdrawals in the network.
will allow us to get out of the current situation we are in and start designing and working on phase 2 of the solution which is GENERATE MORE FEES.
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What do you think about burning only BNT while in deficit, then moving back to vBNT?
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Hey @foxsteven ,
I think it’s much safer if we try a 5-0 / 50 solution like JM proposed.
It’s a pretty big shift to completely change the vortex.
We’ll also have a good balance in trying to analyze both effects as we aren’t very sure which one is truly better atm.
I know we need to decrease the deficits, but it’s gonna take a minimum of 6 - 12 months anyway imo, so better to take some decisions more safely.
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totally open to this if the community is behind it
My personal preference would be to burn BNT until the deficit is gone
But again, looking for feedback, nothing here is an set in stone
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The problem with vBNT burning is that the BNT stuck in the protocol is still user owned. Meaning: the protocol minted BNTs in pools that earn fees are decreasing over time (protocol owned BNT/user owned BNT ratio), thus the fees earned by the protocol are decreasing and the buyback amount is decreasing. (depends on total liquidity of course → more liquidity = more protocol owned BNT in pools)
What needs to be considered is the future earnings of protocol owned BNTs in pools. vBNT doesn’t earn fees, more protocol owned BNT in pools does.
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burning vBNT →
- force BNT LP to lose access to their funds.
- vBNT LPs benefit from trading fees.
- vBNT holders benefit from some attempt to maintain a price point.
burning BNT →
- reduce BNT supply.
based on the situation at hand, anything that is able to reduce BNT supply should get 100% attention.
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Therefore
- Assume the protocol generates $35,000 per day in fees (numbers used here are for ease of explanation - the math is simple enough anyone can test with their own assumptions - accurate 24 fees can be seen on the UI)
- I have seen that on some dune pages the fees displayed ignore the vortex/network fee
- Total fees would be about $1,000,000 for the month
- About $500,000 BNT gets burned
- About $450,000 of TKN gets moved outside the curve in the respective pool
- About $50,000 DAI gets added to DAI bucket and distributed to LPs
- It is very easy to allow LPs to claim any supported TKN which would also further increase trading fees
This to me is the most unrealistic part of this whole proposal. You can’t just make an assumption that $1M of fees will be generated per month without any quantifiable evidence or analysis. That is just crazy!
The fees are totally dependent on trade volumes and more liquidity coming through. This proposal doesn’t give any new incentives or reasons for LPs to put in more liquidity. I think liquidity is more likely to dry up than increase due to the lack of trust, unclear pathway for recovery, and the crypto/macro bear market.
If liquidity dries up, then volumes dry up. Volumes will likely dry up faster than other AMMs because Bancor is constant product which requires more liquidity than say Uniswap or Curve.
I don’t see how making $1,000,000 in fees per month is realistic. Even if it was, we’re $30M in the hole. It will take years to make up that deficit.
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Can I ask the question, what would make a person want to make this transaction on Bancor?
I may not understand this fully so please entertain my knowledge gap…
We seem to be changing the mindset from incentivizing LP’s to incentivizing BNT LP’s and generating fees from trading of all tokens into the LP’s.
So that’s great but what reason would a person have to make transactions on Bancor to make these two proposed changes growth based and sustainable?
Wouldn’t Bancor need to offer traders the lowest fees to encourage volume throughput (fees)?
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Feel free to plug in your own assumptions.
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Hi @skydancing8
This can either happen because a user makes this trade on the UI, via an aggregator, or an arb is putting the pools back into balance.
In all 3 cases, the outcome is the same.
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I like the framework of these, although I believe that the fee structure should not be so heavily dedicated to deficit or else it will not give incentive for liquidity to stay or attract liquidity. A better balance would be best IMO. 75/25 ratio for TKN and possibly 50/50 for BNT side would be better ratio for the fee delegation. This rewards those who remain long on the protocol, as well as offer some level of additional compensation who had to wait longer to get their positions back. This along with new fee generation initiatives would certainly make for a long term bullish case for the protocol.
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Bro! My point is that you cannot just make assumptions without rigorous financial modeling taking a bunch of factors into consideration.
It’s completely ludicrous to just say we’re going to make $1m in fees per month. HOW?? You’re the one making the proposal, so you’re the one that needs to bridge the gap to getting those fees.
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Lack of quantitative research and modeling about IL insurance is how we got here in the first place. We need actual quants and actuarial scientists modeling this out. We can’t just carelessly make these assumptions about protocol revenue. It’s completely irresponsible.
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This is in the community chatroom - if there is support, you should expect to see a way more in depth proposal, similar to the proposing V3 proposal n nature.
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When the protocol is in deficit is when you should be working the hardest to push the real deflationary measures, aka burning vBNT.
By not burning vBNT, you are missing out on getting rid of future BNT sell pressure since the BNT and fees being earned by BNT LPs that vortexed themselves are more easily accessible to those LPs to unvortex themselves.
I don’t see any version where only paying retail to burn 1 BNT instead of locking it in the vBNT pool and reducing future BNT sell pressure as well is a better decision.
But if Bancor really wants to burn BNT, do it at 50/50. Don’t get rid of the most deflationary mechanism in the protocol, especially when it has the deficits that it has today.
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How is it advantageous to reduce that BNT supply instead of locking it in the vBNT pool?
All I see it doing is reduce the BNT market cap.
What other advantages are there?
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