I propose we implement an auto pause feature to all TKN pools so if a certain IL threshold is met due to a TKN “mooning” the deficit doesn’t grow past a certain point. Once the IL meets a certain high-water mark trading can resume. This is based on Marks suggestion on July 10th community call.
Whether upcoming TKN milestones appreciate TKN prices remains to be seen but would eliminate a major concern for current LPs in the meantime.
This allows the team more time to flesh out plans for additional B3 fee generating avenues.
Yeah this needs to be implemented immediately. For example, Link deficit should not drop lower than -50%
GM @Saltoshi - Thank you for posting this.
I think is likely to produce the opposite result of what you hope.
If the pool is paused for trading, when you un-pause, there is a large arb (as the protocols price will not be up to date with the market) that takes value out of the protocol (and doesnt help LPs)
Additionally, there will have been no fees generated from the volatility.
@mbr are you able to expand on what you proposed during the July 10 call in regard possibly pausing pools at a certain deficit %?
You would just shrink the liquidity before unpausing, then re-add, still small lost, but not as much as making the whole pool tradable?
Its the loss to arbs that makes this a bad idea
if bancor wants to be considered as an AMM that provide liquidity for tokens and enable permission-less trading, wont this go against everything it stands for?
more, only when people “buy” a specific token, fees are collected.
which means, if the pool stops trading, it will also stop collecting fees.
But is the loss to Arbs, less than the potential IL deficit that would be accrued by keeping the same liquidity available on the curve? (of course if the goal of the protocol is to continue to exist without ILP, then makes sense to make this low priority) - In addition if that is the case, then we should probably start getting the ILP broken down into BNT insurance versus BNT for rebalancing for users - so we can start to offer some of either (and of course, another asset instead of BNT can be used if viable, sort of along the lines of other proposals).
I believe Mark stated pausing trading on one side of the pool- TKN in but no TKN out.
And, unless I’m mistaken, it sounded to me as if this feature would also coexist with a protocol arb strategy along with lending and borrowing- the 3 possibly be built and implemented together.
He also stated it was just an idea, hasn’t been designed, and would be difficult to create. Curious from the dev side if they have any thoughts on a possible design and how difficult and time consuming this set of features might be…
I think it’s crucial for the protocol to implement such a solution, as quickly as possible!
ETH merge has just been confirmed for mid september, LINK staking and CCIP will be released before end of the year (and probably unveiled during smart con 22 on september). All those events will certainly have positive impact on ETH/LINK prices, and deficit for those LPs are already very high. We can’t let the biggest protocol LPs deficit get even bigger!!!
Makes sense that it should be possible to pause trading in one direction if the deficit is above a certain threshold.
But as always, the devil is in the details, we need to understand the implications in different scenarios, so let’s explore that.
Are you able to simulate this situation to assess feasibility?
We unfortunately don’t have a huge amount of time.
We should assume that any change/feature can be simulated.
At the same time, we should keep in mind that simulations take time to create and should only be created if there is a strong interest in the feature.
if we allow trade disable option, it brings up few questions to mind which might need to be clarified and include in any future plan:
- if implemented single direction → create an incorrect rate against the market.
- who decided when it is time to disable trading? what qualify this trigger?
- who decide when it is time to turn it back on?
- how can we assure there isnt any random arb opportunity when trading is enabled again?
to me this sounds like a path to overly involved process which we might need to avoid.
Yup, it’s not an ideal solution but worths considering.
- Indeed it won’t have the market rate but the rate in the pool which will only be relevant once prices move back to where they were, no ideal
- We need to come up with the right constraints (e.g. if deficit % is above X)
- Assuming the constraints are defined and set in the contracts, trading will be turned back on automatically - might need to include a mechanism that prevents huge arbs as soon as it’s turned back on
- see #3
I do think it’s worth exploring.
once you define something like this in the contract, it is abusable.
users can see that trading will be locked when x conditions are met, swing the pool, and find ways to extract value.
We should definitely consider abuse vectors just as always, but I do believe there are ways to do it.
For example, there’s still the EMA the pools which can be taken into account when the contract needs to decide between pausing/unpausing.
I’m for moving forwarding with a small spec to figure out the feasibility of this option.
If theoretically the eth deficit is near 100% no meaningful swap fees are being generated for one of largest pools.
I can understand if core contributors feel they in time can turn this around but burned LPs are understandably wary.
Re-assurances need to be put in place that IL can’t grow past a certain % to keep the little liquidity we have. This should be considered of utmost importance.
Not sure the feasibility of pausing v3 pools to hedge deficits given the arbitrage risk present once a paused pool reopens, assuming external market price divergence in TKN and BNT relative to the prices when the pools are paused.
One “pause” mechanism that could be implemented is to pause the v2.1 pools in TKN surplus right now to lock in the TKN surplus and not have risk of losing those surpluses given future market pricing dynamics. This then gives the DAO ammo to use to help alleviate the deficits in v3.
The fees on the pool should change depending on what direction the trade is going in, and what the deficit in the pool are. Maintaining a single fee until a threshold is met and then stopping trading altogether is less finesse than a curve that eventually charges 100% fees for selling the TKN we can’t afford to lose.