I won’t be supporting this proposal. TKN can go up in price and also down in price. If TKN goes up against BNT then deficit is created, if TKN goes down in price against BNT then surplus gets created. Pausing trading will prevent either option from occurring in addition to any fee collection. TKN LPs like myself and others understand the risk that is involved with being an LP in the protocol. Some of us have decided to stay behind knowing that a recovery is possible and hence this would be counter productive to that as this will prevent recovery efforts from happening (they all involve fee generation in one form or another).
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The Risk for TKN LP’s was promised to be minimized because it was backed by BNT.
I really don’t think you’re speaking on the behalf of ‘OTHERS’ by saying they would like to keep selling their tokens while protection has been backed out of.
BNT couldn’t keep this promise because we continued to sell the LP’s Token beyond what we could insure. If we ever want to be able to keep this promise of ILP, it starts by not allowing the risk to grow so large that we can’t insure them anymore. (We’re way past this point now) The protocol is broke and it should become more selective about any action that can incur more damage to the TKN LP’s that we promised to protect.
The fee’s we’re collecting have never been outpacing IL. Lets not keep trying to win it all back with the same methodology that got us here.
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Could you implement one sided trading during the pause? Such as selling LINK into the pool but not being able to purchase LINK from the pool.
So deficit can only decrease after pause and keeps the prices current. I could be misunderstanding but would that address the concern?
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This is DeFi, a place with high risks and high rewards (there are no promises). At any point in time a project can lose 100% of their TVL via a smart contract vulnerability. We are all aware of the risks in this space when we choose to interact with any DAPP. The Bancor risks were detailed as far back as version 2.1 in the economic paper:
TopazeBlue Bancor v2.1 Economic Analysis.pdf
Google Drive file.
everyone has to do their own DYOR as this is the how we all operate.
I don’t, I speak for myself as a BNT/vBNT holder that is a TKN and BNT LP in the protocol.
This isn’t a discussion about smart contract risk or the inherit nature of Defi.
This is about creating a healthy way to manage the deficit by altering trading practices.
That’s OK if you think there should be unlimited risk to TKN LP’s, you’re entitled to your opinion. Selling into a huge deficit is why we failed to keep up with the key points in the article you posted below which is obviously outdated and irrelevant to this discussion because :
Paragraph 1 : We failed to pay its debts via minting of new BNT.
Paragraph 3.a This isn’t about unlimited minting into pools to generate liquidity.
3.b There is no longer an option to exercise the liquidity protection option.
Lastly I wasn’t putting words in your mouth.
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This is a brilliant idea. We’d only be exposing ourselves to the upside of TKN collapsing and BNT mooning without exposing ourselves to the risk of TKN pumping and BNT stagnating. Should set a limit for each pool giving Bancor a bit of runway. For example: the link deficit is currently ~45% so the deficit limit should be 50% or 55% before selling link is automatically shut off. Then Bancor can leave the pool frozen in that state until BNT outperforms link and thus the deficit would decrease below the limit. This will reassure the link LPers that we’ll at least have 50% of our link, even if Bancor fails. Thus, we’ll be more willing to stay compared to right now where we’re risking 99% of our link in the event of a link pump.
Should be possible - but, if a token is moving rapidly, the trades are usually in that direction
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Which means we’d miss out on some fees but avoid a potentially insurmountable deficit… Easy tradeoff unless TKN holders are intended to be potentially left out to dry.
I don’t agree.
We would miss out on fees, but if the TKN ever gets back to the point where it can be un-paused, we would have been better off not pausing in the first place.
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Hey,
Please accept my apologies for the late reply.
It’s an interesting question for us, and for all AMMs. A dichotomy exists between deploying capital to support liquidity for the exchange pairs on the protocol, and doing nothing. Having liquidity available is super important - for market participants, and for LPs who are trying to earn something. The gambit is that in the long run the fee accrual will outpace the directional risk.
I am personally convinced that having 100% of the liquidity available for trading is risky, and having zero liquidity available for trading is achieving nothing. The idea behind the infinity pool design was to refuse to accept that ultimatum; if x tokens are available in the vault, then x/n can be used to create liquid markets and the rest can be held in reserve. This need not be constant, either. The two portions can be dynamically readjusted against each other to regulate the divergence costs.
Of course, we can simply disallow the protocol to sell TKN after some threshold. This is not a terrible idea from a risk management perspective, and is very much aligned with the design and reasoning of the infinity pool technology. When TVL is thin, and there are no off-curve tokens in the vault, it might make sense to either reduce the size of the pools (i.e. force some tokens off-curve), or simply prohibit the sale of TKN after the staked and vault balances deviate by some predetermined amount.
For clarity - this would mean trades where TKN is the target would revert.
It’s extreme, but certainly well-justified.
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I will digress from the topic at hand If I have to explained why BNT minting was disabled in the first place. Instead I will link to the article that explained why it occurred:
TKN LPs like myself and others understand the risk
At this point, anyone that is in the protocol should know the risks at hand. The door has and is still open for all to withdraw from the protocol.
The door is only open to withdraw if I’m willing to accept a 45% loss. That loss has already happened, nothing to do but move on. HOWEVER, why should I and other LPers be asked to risk the other 55% of our TKNs when we can instead risk only 5% or 10%? Especially in the context of staking for Eth/Link coming up which will cause the deficit to spiral out of control.
ETH or LINK staking isn’t a guaranteed that your tokens will go up. Plenty of tokens in the market have this already yet they all nuked when everything else went down (you can already run an ETH 2 node for 32 eth). A lot of dilution happens as new token go into the market as well to reward individuals that are staking (selling pressure in addition to token illiquidity if more people are staking as compared to providing liquidity). At the end of the day, all of this is market speculation and I still stand behind my statement that pausing trading is a bad idea in general.