LM rewards extension ETH, WBTC, LINK, USDT, USDC, DAI

Extension of LM rewards plan

Stake vBNT for voting on this proposal before Wednesday 31st March, 2021 (UTC)

TL;DR

  1. The LM Rewards program will be extended on ETH, LINK, WBTC.
  2. The LM Rewards will be extended on USDC, DAI, USDT.
  3. The current award rates for each pool will be unaffected.
  4. Proposal has been made based on data available publicly via the Bancor Dune analytics page: Dune Analytics

Extension of Liquidity Mining on Current Pools

The LM rewards schedule for ETH, INK, WBTC, USDC, DAI and USDT is due to end in less than 2 weeks. To maintain liquidity in the near term, and to sustain incentives for new LPs to become involved in the Bancor ecosystem while Bancor prepares new products and upgrades, herein it is proposed to extend the LM rewards program on these pools for a further 8 weeks.

  1. ETH, LINK, and WBTC will continue to receive emissions of 100-200K BNT per week, for an additional 8 weeks.
  2. USDC, DAI, and USDT will continue to receive 50-100K BNT per week, for an additional 8 weeks.
  3. The liquidity mining program for USDC, DAI, and USDT can be ended prior to the completion of the 8 week extension if the alternative shadow tokens pool redesign is deployed.
  4. Upon release of the shadow pools, a new LM incentives program may be considered by the DAO. It is a reasonable expectation that DAO will choose to incentivise these pools; however, it is under no obligation to do so.

Discussion

  1. Around 79% of tokens have been restaked back into the pools; therefore, the LM rewards have increased the space for single-sided TKN deposits, resulting in growth of the network, rather than creating a sell pressure.

  1. LM brought a significant increase in the TVL bringing Bancor ecosystem size to above $1.5B, immediately prior to a market-wide correction.

  1. The 6 mentioned above pools drive most of the volume on the ecosystem, therefore constant curation of these pools is essential. Below chart presents the volume share of the 6 main pools.

  1. For comparison, the below chart presents overall network volume, as we can see, the majority of volume is driven by 6 big pools.

  1. Situation looks the same in regards to the network fees. Majority of fees are driven by these six pools as we can see on the chart below.

  1. For comparison, below chart with fees from all the active pools.

  1. Thanks to achieving the position of market leader for the LINK liquidity, Bancor currently has 40% of the daily volume of this token and continues to grow.

  1. Until the protocol achieves a similar penetration on pools such as ETH and WBTC and others, LM rewards should be considered to stay to maintain the momentum and protocol growth.

Summary

  1. At this stage, current protocol growth requires LM to maintain the momentum and stay competitive in the space (the DAO seems aware of this).
  2. After achieving the position of market leader in both TVL and volume, LM extension will no longer be necessary, and the voting for LM extensions may be concluded.
  3. The new shadow tokens pool design will significantly reduce the pressure resulting from insurance on stable assets, and should help to create a more sustainable system for long-term stablecoin liquidity.
  4. A large majority of the LM rewards are re-staked to the protocol, increasing the TVL and the space available for TKN deposits with single sided exposure. If this trend continues, the LM program is more of an asset than a liability, and can be managed more assertively.
  5. In the long term, Bancor is aiming towards sustainable annual inflation of 4%, in order to achieve that, Bancor requires significant volume and Vortex to be applied.
  6. Extension of LM rewards on ETH, WBTC and LINK for 8 weeks will provide 800,000 - 1,600,000 BNTs as rewards, (depends on the multiplier).
  7. Extension of LM rewards on USDT, USDC and DAI for 8 weeks will provide 400,000 - 800,000 BNTs as rewards, (depends on the multiplier).
13 Likes

Looks good to me. Do you know if we will have shadow pools in the second quarter of this year or is this something that will be rolling out in the latter half of the year?

4 Likes

looks great to me aswell, glad to see we aren’t ditching stables even though they incur big amounts of IL.

1 Like

Second-quarter sounds reasonable, but please don’t take a screenshot of this message and post it on twitter on the 30th of June haha ;P.

The solution is really novel, and requires tons of testing and a new code base, therefore, like with every other R&D approach, it is hard to setup a fixed deadline.

4 Likes

Great writeup and thanks for putting this together. Will be voting to continue the LM rewards for the above pools.

2 Likes

I agree, great summary. Thank you!

Reducing rewards, to any significant degree, would most likely be a mistake. With the BNT retention rate so high, i am in favor of continuing to grow TKN side liquidity, at the expense of inflation. In the end, value accrual may lead to a greater Vortex burn rate.

2 Likes

Are we really not considering good LIQUIDITY to VOLUME ratio pools for this liquidity mining program?

Although I understand extending LINK and WBTC pairs LM programs, it doesn’t make sense to not extend tokens such as YFI which has a 3x performance in L-to-V terms compared to WBTC & LINK

I will vote a hard NO (and recommend other BNT holders to do the same) on this proposal unless there is a good background analysis for this kind of insane minting.

1 Like

These six pools ( Large-Caps: ETH, WBTC, USDT, USDC, DAI, LINK) launched as part of our original LM program back in November 2020. We have typically renewed them together sine they are core to the platform. As for the YFI pool, no one from the YFI community has created a proposal as far as I am aware (they can certainly do so for an extension and we can discuss the merits of extending LM). I am of the opinion that we should take a similar approach to the REN proposal and OCEAN proposal for the YFI pool as well.

1 Like

gotta remember that extensions aren’t mutually exclusive, we can certainly extend the YFI pool as well if you’d like to draw up a proposition and i’d be on board. that doesn’t take away the need to extend these pools though, they are the primary income for the platform i believe they make up a good 70-80% of all the fees.

Also, really well structured proposal @MichalHerzyk I’ll try to structure my own in the same style/format in the future.

2 Likes

So since the vote only reached 34% quorum the liquidity rewards for the major pools will end once the current rewards cycle is over right?

Only 20% was needed for this vote, so it passed. I believe 40% is needed for whitelisting a token

2 Likes

That’s correct. For whitelisting proposals, 40% and 2/3 majority is required. For everything else, only 20% quorum and 2/3rd majority is required.

2 Likes