Proposal: 14 day Trial Period of Burning BNT instead of VBNT

Community Chatroom (DISCUSSION)
1

If this proposal passes, the vortex will burn BNT instead of vBNT for a trial period of 14 - X _ ? # of days on both v2 & v3

FOR: The Vortex will burn BNT instead of vBNT for a trial period of 14 - X _ ? # of days on both v2 & v3
AGAINST: Keep the existing system in place

TL;DR

  • Proposal to activate burning of BNT instead of vBNT for a trial period of 14 days.
  • Burning BNT instead of vBNT may net more immediate positive effects, and it is in our best interest to implement this simple, easy and quick to code change, and track its results before the data gets skewed from the addition of other agreed upon proposals and changes to the protocol.

*As trades take place, as a part of the trade fee, the protocol buys bnt to help facilitate the TKN trade ( positive effect of buying BNT already takes place ) however afterwards when the protocol swaps the BNT into vBNT, this then contributes towards lowering the price of BNT and raising the price of vBNT. Locking away vBNT locks up an even greater amount of BNT while $vBNT is less than the price of BNT…

HERES THE POTENTIAL PROBLEM… I am claiming that the LPs of vBNT are long term users of the protocol and do not contribute to the same degree as the short term sellers of BNT. Therefor the vortex albeit is doing a greater good for the long term health of the project, its effects will not be seen until the LPs of vBNT withdraw and try to sell off their BNT position. I am making the claim that we should not target the long term users of Bancor but rather the short term users / those who are actually the ones selling BNT

Justification

The Bancor community as a whole have the general understanding that while the price of vBNT remains below the price of BNT that it becomes more cost effective for the vortex to buy and burn vBNT.

This notion however may have played out in theory, however the sole purpose and desired end result of this was for the price of BNT to rise, not for the supply of accessible BNT from LPs to decrease. Since the inception of v2.1, I cannot confirm a period of time where the price of BNT had a sustained market rally due to the effects burning of vBNT. All sustained market rallies were due to organic buying of BNT via new users to the platform and investors.

The burning of vBNT has already had sufficient time since ILP & BNT minting was turned off to showcase its positive effects, yet the price of BNT has remained stable at or near 0.50.

As Albert Einstein once said, the definition of insanity is doing the same thing over and over again and expecting a different result .

I do not doubt the long term positive effects of burning vBNT, however I am suggesting that in this specific period of time, we should seek another alternative to see if it may or may not result in the positive effects of increasing the price of BNT & reducing the deficit.

I have written a lengthy post in the following thread that explains the reasons why targeting BNT may be more beneficial in the immediate short term than targeting vBNT, so rather than crowding this post, I respectfully request that you visit for more details Discussion: Stop Burning vBNT - burn BNT - #26 by Jindo

If you have comments, please leave them below here on this thread. After sufficient discussion, I will create the proposal and we can vote on it this weekend.

Burn BNT instead of vBNT on both v2.1 + v3
  • for
  • against

0 voters

1 Like
2

I would very much like to avoid more code changes in v2.1 vortex mechanics and focus on v3 - these experiments are welcome but at the same time add risk to the system.
Maybe a better approach would be to wait for v3 vortex to be implemented (soon) and apply these changes there?
Also, just a technicality - the point of the vortex is to “lock” more liquidity in the protocol, to keep the liquidity higher and thus provide more utility for the tokens in the protocol.
It’s difficult to assess the impact of that mechanism while BNT distribution was very high in the past year since that in essence caused liquidity reduction, and the vortex had to compete with that. This isn’t the case anymore and thus the expectation is that the vortex is much more effective now (as it is).

Just my 2 cents.

3 Likes
3

the goal for the end result of the vortex = lock away liquidity only ? or lock away lucidity which fingers crossed leads to positive price action for the price of BNT ?

the bnt tokens utility remains the same… but the $ value and effect it has on the protocol changes

also

if this change has the potential effects to improve bancors current situation, then it should not be overlooked or dismissed. At this point, all changes that may lead to us getting out of this mess should be exercised

5

I agree that any additional code work on v2.1 that doesn’t have a very clear benefit is misdirecting resources. V3 could be an option to facilitate this on.

6

I think any implementation of the vortex should allow for the DAO to switch between burning BNT directly vs swapping it for vBNT and then burning vBNT. There is also a certain threshold where it no longer makes sense to burn vBNT and having this be dynamic in nature might also make sense. Maybe a switch can allow us to make that happen. Something like the following:

dynamicmode = TRUE
burnvbnt = TRUE

if (dynamicmode):

     future_vbnt_bnt_rate = """figure out the future vbnt-bnt rate in the pool 
          based on how much BNT is going to be swapped."""

     if (future_vbnt_bnt_rate  < arbitrage_value):
          swap $BNT for $vBNT
          burn $vBNT
     else:
          burn $BNT

else:
     if(burnvbnt):
          swap $BNT for $vBNT
          burn $vBNT
     else:
          burn $BNT
1 Like
7

There is no price impact difference between locking BNT in the vBNT pool forever and burning Bnt directly.

Nobody has even been able to provide any theoretical reasoning for why burning Bnt directly would be advantageous.

On the other side, burning vBNT locks Bnt liquidity into the protocol forever. Theoretically, the selloff that BNT just saw could’ve been significantly worse if 4 Million vBNT hadn’t been burned ahead of time. So no, the vortex doesn’t just impact things years from now, we likely saw savings very recently.

Finally, 2 weeks won’t prove a thing. BNT is up 10% since this proposal was put up. The performance of this “experiment” will most likely be at the mercy of the market movement during that time.

I suggest we practice patience and allow the team to focus on executing towards the recovery of the protocol.

2 Likes
8

The goal of the Vortex is Constant BNT buy pressure. Buying BNT with TKN fees, buying vbnt with that BNT, which in turn increases the vBNT ratio over BNT (now bnBNT), and opens an arb opportunity to swap vbnt for more BNT while locking BNT into the protocol and also locking vbnt into the Vortex pool as Surplus (proto-owned) Liquidity which will be required once/if Lp’ing vbnt is no longer highly profitable for LPs outside of forced protocol liquidity.
It’s a long term play and has been nuked by LMR the entire time it’s been active.
Burning BNT accomplishes nothing, except to lower the # of BNT in existence. I do see some value in this in general but would like to see vbnt actually being influenced by the Vortex for once now that LMR is disabled.

1 Like
9

can you or anyone else please tell me

when the vortex sells the bnt and buys vbnt… does this is any way shape or form have an effect on the price of BNT specifically?

does this cause the price of bnt to go up ? does it cause the $ price to go down? normally when you sell something… it should lead to the price going down… but thats just my assumption and I hope the community here can shed some light on this question

when the price $ of vbnt / bnt are = then burning bnt is = to burning vbnt … no difference… except burning the bnt removes supply thats immediate on the exchange ready to be traded… whereas burning vbnt will remove supply of bnt that could be sold at a later future date

also

no one is commenting on the 1 main arguement i have posted

that burning vbnt is targeting the funds from users who are long term users vs those who are more likely to sell in the short term

^^^^^ can I please get a discussion going on regarding this?

1 Like
10

Hi @Jindo, can you pls clarify a bit in the post exactly what should happen if this proposal passes?

11

just made the edit at the top of the post.

@foxsteven would you happen to know what happens to the price of bnt when the vortex sells it to vBNT? does it in any way have an effect on the price of bnt?

12

Can you further clarify?

Would this be for only V3?

For how many days?

Standard AMM math applies.

13

so then selling bnt for vbnt would make the price go down, while at the same time, locking up future bnt from being sold. is this correct?

because if so, I would argue that for the time being, in order to fix the deficit, we need $ number to go up, not future bnt being locked up.

14

I would support burning all the BNT collected in version 3 of the protocol (roughly ~300K BNT at the moment). The alternative would be to chunk (a large swap would open up an arbitrage opportunity for someone else to profit) this into small portions before swapping it for vBNT and then burning vBNT. The effort to do that might not be worth it if we burn the collected BNT as a one time operation and once the v3 vortex is implemented then we can follow the regular schedule as before (with the caveat that we should burn BNT directly once burning vBNT no longer makes sense economically).

3 Likes
15

@Jindo can you please edit the proposal to include:

  1. FOR
  2. AGAINST

Please state what voting for will accomplish so that vBNT holders are aware. The against would be to keep the status quo. Also, please specify whether this applies only to the BNT being collected in version 3 of the protocol or version 2.1. Note that making changes in version 2.1 are trickier due to it being an older code base and version 3 lends it self better to this.

Note that in version 3 of the protocol, the BNT is sitting at the moment since the vortex is not yet implemented. This BNT came from TKN being swap for BNT atomically as part of trades that have occurred.

1 Like
16

@glenn when the vortex sells bnt for vbnt … what happens to the price of bnt?

does the price $ of bnt go down while helping to push up the price of vbnt?

What I argue is that in order to help fix our current situation, bancor must burn bnt rather than vbnt.

the vbnt that gets burnt helps to remove FUTURE bnt from being sold on the open market because it got locked up. But now is the time to focus on the current price and not the what will happen in the future.

I am also in favor of simply burning the v3 bnt which has been collected. if selling this bnt for vbnt pushes down the price of bnt, then I am 100% not in favor of this. Also while this bnt is simply sitting there in the vortex… for the time being I treat it as bnt which is locked up and not bnt that will be sold onto the market. Dealing with these bnt funds should come after dealing with what I proposed.

While it may be trickier to work on v2.1, if burning bnt directly has more immediate effects and therefor will get us out of this problem faster, it is important that all resources bancor has goes towards making this happen, so v2.1 should be included.

Ill make the updates to the post as you requested above

17

Ok, a DAO switch is possible, I imagine it’s not a whole lot of work.

1 Like
18

I think the following should help answer some of your questions:

Price Appreciation

vBNT burning creates a deficit of vBNT, relative to all active BNT stakes. Since vBNT can be obtained from creating a new BNT stake, the only feasible avenue to retrieve older BNT deposits (which have appreciated in value), is to buy and stake more BNT. This creates a new type of economic demand for BNT, that should serve to drive its price up over time.

The market efficiency associated with vBNT swaps supports new and creative financial strategies. The availability of these options to participants on our platform, and their absence on rival exchanges also bolsters organic interest in Bancor, and increases the fundamental value proposition of owning BNT.

The most important function of the Bancor Vortex is to create a magnetic attraction between market BNT and the protocol. To investors, the consistent rise in TVL is of special interest, as this metric is a primary indicator for BNT price speculation. Faster, and more sustainable protocol growth inspires market confidence, and therefore improved price evaluation by spectators.

But I recommend reading BIP9: Proposing the Bancor Vortex in full to get an understanding.

Generally, when an asset is scarce in a pool then its value goes up and the opposite happens in the other direction. $vBNT has large liquidity in Uni v3 at the moment so anyone can arb the pool by adding vBNT removing BNT and selling BNT to bring it to equilibrium with the price of BNT every where else.

It is also good to note that vBNT burning does let us lock BNT tokens at cheap rates as folks that leverage help push the vbnt-bnt rate lower. This is beneficial since we do get more bang for our buck essentially and overtime I think does have an impact.

I went ahead and added for/against clauses to your proposal so that Bancor DAO participants know what each option will do.

19

This is the correct take. Regardless of what we do with the vortex in the coming days or weeks we should not be taking any action to market dump BNT at the moment.

2 Likes
20

you dodged my main critique … and attempted to answer my question WITHOUT answering it. This is quickly becoming one of my pet peeves, thanks to bancor Gov.

Selling BNT for vBNT will lower the price of BNT $
the vbnt that gets burnt helps to remove FUTURE bnt from being sold on the open market because it got locked up. But now is the time to focus on the current price and not the what will happen in the future

^^ I want your comments, SPECIFICALLY addressing this above.

Literally EVERY team member has been dodging this, which is in fact the ENTIRE main reason I have for burning BNT instead of vBNT … but there is more to my reason… that being that vBNT lp’s are long term users of Bancor and are less likely to contibute towards the short term price action ( they arent todays sellers ) therefor the vortex is targeting the wrong group of bnt holders.

@ZenoBNT thank you for commenting the way you did. while everyone simply states … burning vbnt locks away bnt ahhhhhh hooray … you are acknowledging that a mass dump of 300k bnt on the open market for vbnt … just might negatively impact the price of bnt and this just might have ripple effects on our current situation

I do understand for the long term why people want to lock up vbnt… but during the SHORT term… I don’t understand why people want to push down the price of bnt … sure you prop up the price of vbnt … but that aint helping us TODAY… and we need help NOW !

1 Like
21

the 300k doesn’t get “market dumped” it gets moved on to the vBNT curve and then burns the vBNT that it bought from that curve

it’s not future BNT that is locked by vBNT burning, it is the BNT that was just put on the vBNT curve that is locked

the v3 vBNT burning is a short term and long term benefit

that’s why it is better than the v2.1 vBNT burning which is only long term

you can read more about it in BIP15: Proposing Bancor 3

1 Like