i think this comment i made on another thread on this topic directly answers your question as to how selling the BNT for vBNT then burning the vBNT purchased does not dump the BNT price against all other TKN pairs
Proposal are typically pushed on Sundays. I suggest you change the date to Aug 7th.
Posting all the proposals to snapshot on Sundays allows DAO voters to know when to expect new proposals and helps hit quorum.
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you wrote a very lengthy explanation there on the mechanics
but I would like a team member to verify
normal mechanics of a typical AMM do not apply with the selling of bnt for vbnt. The selling of bnt for vbnt does in NO ABSOLUTE WAY affect the $ price of BNT. The vortex daily selling pressure from bnt and buying vBNT does IN ABSOLUTE 0% way affect the price of BNT. @mbr can you comment on this? please keep the answer simple so stupid people like myself can understand it.
^^ if a team member can verify this, then I will change my stance on the topic. However if it does in some way affect the price of BNT, which is should, then I hope the DAO will give this idea a shot and simply burn the bnt rather than vbnt.
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i donāt agree with āiām too stupid to understand but iām pushing a proposal anywayā
when you put up something to vote you are acting as an agent of the DAO and so you are responsible for understanding and explaining the consequences of your proposal
letās make sure you feel confident in what you are proposing before the rest of us vote on it either way
the team spent 4 months researching and delivering a whitepaper that shows fees alone (i.e. directly BNT burning) cannot outpace IL on a constant product AMM, so why should the DAO consider adopting an approach that the team spent nearly half a year researching and discarding already?
the short version of my explanation on the v3 vortex is that the only way that vortexed BNT can re-enter the TKN market is by existing vBNT holders dumping their vBNT for TKN
if you want a % we can calculate it
say you hold 1% of all the vBNT that exists today
then the vortex moves 100k BNT to the vBNT curve and burns the vBNT it buys
as you own 1% of the vBNT you now can release 1% of that 100k BNT if you sell all of your vBNT with 0% slippage
if you sell all of your vBNT with 0% slippage then you will release 1k BNT (1%) back to the TKN market (in reality thatās impossible as the vBNT pool is small so slippage would be huge)
you can see on the analytics page that the vBNT ratio is trending up so the idea of mass vBNT dumping is not supported by the current data, therefore BNT is being trapped by vBNT burning
we can also see that efforts to ramp up the vBNT burner have already burned more in the last 1 month than the entire year before
i agree that if we just dump 300k BNT in one transaction to the vBNT pool that would cause problems, but mostly iām concerned about that slippage on the tiny vBNT pool i mentionedā¦ we probably have to drip feed the BNT into the vortex according to slippage on each trade
I already understand that the only way this BNT can re-enter the market is if the vBNT dump their position.
and if you read my main arguementā¦ once againā¦ you will read that these are the specific users who are LESS likely to dump their position, therefor the vortex should NOT be targeting these specific users. LPs of vBNT are more likely long term users of bancor and probably care more for the welfare of bancor than those who simply keep bnt or vbnt directly in their hot wallet.
regarding my " im too stoopid comment" ā¦ donāt pretend to be dull here.
alsoā¦ when you sell bnt for vbnt , I am pretty confident that it does push the price of bnt down and vbnt up. my argument is that a rising price of bnt will help the deficits recover faster, therefor the vortex should not be selling bnt for vbnt during this period of time
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A quick and simple recap for those reading the thread: it seems that Dave, Jindo, and I all agree on this point: a mass market sell of BNT right now is not the right move. Jindo thinks we should only burn BNT while Dave and I think we should take mixed method approach of burn the BNT hoard we have and burn vBNT in the future.
Why is this?
The BNT collected by Bancor 3 would be market dumped when sold for vBNT. It would be a sale of several hundred thousand BNT that would be used to increase the deficit in a pool already slightly in deficit (vBNT) AND be significant sell of BNT.
The Bancor 3 vortex isnāt on right now; thatās why we have this BNT just sitting around. Right now the process is like this
- Traders pay fees
- Fees buy BNT
- BNT sits around collecting dust
- Sell massive amounts of BNT all at once exacerbating our problems
When the vortex goes live it will be like this
- Traders pay fees
- Fees buy BNT
- BNT sold for vBNT in a semi-immediate fashion
- Net 0 price movement on BNT with extra BNT locked away
The timing matters. When the vortex is triggered on the day, or following day, of trade fees collected the price impact is, essentially, totally irrelevant.
Totally correct and I 100% agree.
In my posts I advocate for the following: advertise the mass burn of the BNT the protocol has collected (set a date, tell everyone, see how the market reacts) and when the vortex is live on Bancor 3 all BNT should be swapped to vBNT for max efficiency (until vBNT gets too pricey and then it should just be burning BNT but there are other threads about the exact nature of the stipulations).
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I dont feel that only bnt should ALWAYS be burnt. there are times where vBNT should be burnt
but my concern lies with the current situation.
Zeno, does selling bnt for vbnt, affect the price of bnt?
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Yes; normal amm mechanics still apply.
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okay, so the vortex selling bnt for vbnt pushes down the price of bntā¦ or prevents the price of bnt from risingā¦
which does not immediately help our current situation. can we agree on this? ( I agree that there are future positive effects down the road from burning vbnt )
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I think you are looking for simple answers to complicated questions. The nature of the vortex, the burns of BNT vs vBNT, and how the AMM math works should be looked at in a holistic fashion.
I answered your explicit questions regarding BNT sold for vBNT because it was very simple in nature, but when you say something like
okay, so the vortex selling bnt for vbnt pushes down the price of bntā¦ or prevents the price of bnt from risingā¦which does not immediately help our current situation.
This is not a simple binary. I think it is worthwhile to narrow the scope of the discussion to specific points - with measurable outcomes - but when looking at something like āthe health of the protocolā or āour current situationā that is something that, necessarily, should not be measured using one variable.
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I completely agree with you. There is not a simple binary answer or solution to what we are currently facing.
What I was trying to achieve with this proposal was for this change to be one of the specific points in a multi pronged approach towards a healthier protocol.
Do you think that this could be part of the solution that could help bancor in the near term future?
my main points are
- elevate selling pressure from bnt to vbnt
- target and remove bnt from the open market ( short term users of the protocol ) instead of targeting vbnt ( removes future supply of bnt when vbnt chooses to unload their position - long term users of bancor and less likely to add selling pressure to bnt )
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its effects will not be seen until the LPs of vBNT withdraw and try to sell off their BNT position
in v3, if you burn the bnt you donāt get additional short term benefit, you just guarantee there being no long term benefits
alsoā¦ when you sell bnt for vbnt , I am pretty confident that it does push the price of bnt down and vbnt up. my argument is that a rising price of bnt will help the deficits recover faster, therefor the vortex should not be selling bnt for vbnt during this period of time
a āpriceā is a ratio between two tokens, so āthe priceā is what? USDC price? ETH price? LINK price?
in this quoted text i donāt know which price you are talking about:
when you sell bnt for vbnt , I am pretty confident that it does push the price of bnt down and vbnt up
sounds like youāre talking about the vbnt ratio, we want that price to go down, that means bnt is being put on the vbnt curve
my argument is that a rising price of bnt will help the deficits recover faster
sounds like youāre talking about every TKN in deficit except vbnt.
those prices are NOT impacted by the votex because:
I already understand that the only way this BNT can re-enter the market is if the vBNT dump their position.
all the vBNT holders need to dump all their positions, because they already could have dumped the BNT that was there before the vortex, all that is relevant to the vortex is how much of the newly deposited BNT could be released, which is spread evenly between every vBNT, e.g. 10% of all vBNT needs to be dumped with 0 slippage to release 10% of newly vortexed BNT
if you understand that BNT cannot leave the vBNT curve, then you should understand that the vortex can pump vBNT without dumping any other TKN curve
my argument is that a rising price of bnt will help the deficits recover faster
i think this might be the core of the conversation here
the BNT price is only a proxy for what needs to happen, itās an oversimplification for people who wonāt take the time to go deep.
what we really need is people to deposit TKN equal to the deficit via trading which, all else equal, manifests as BNT numba go up, but it is NOT the same thing.
this is āmistaking the map for the terrainā.
itās super easy to increase the BNT price, we just burn half of all the BNT on every curve, as this is an AMM the prices will double because x*y=k
if you think about why this wonāt help anything, youāll realize that the reason BNT price going up heals deficits is because normally (e.g. when we donāt mass burn on a whim) the only way to get BNT number to go up is to deposit TKN on the curve to buy BNT.
pumping BNT price doesnāt heal deficits, itās healing deficits that pumps BNT, hereās a bunch of things we could do to pump BNT that wouldnāt do much for the deficit:
- burning BNT that is already on curves: no TKN deposited = no deficit healed
- making tiny liquidity on curve then doing a buyback: small liquidity = big slippage + not much TKN deposited to move BNT = small deficit heal
- changing the price curve weights (e.g. balancer) to make BNT āheavierā: no TKN deposited = no deficit healed
so the vortex has two components designed to heal the deficit:
- it puts the TKN fees from each trade back on the TKN curve when it uses them to buy BNT: TKN deposited = deficit healed from the current trade
- it buys vBNT and burns it: takes additional BNT out of circulation due to the leverage on the vBNT = TKN deficits from past vBNT dumps (vBNT leverage) healed
if we burn BNT we keep component 1 and disable component 2
we also know from @mbr 's extensive research that component 1 is insufficient to heal the deficit enough for the protocol to run sustainably
we also know that a lot of people already dumped their vBNT over a year ago so vortexing them isnāt some far off future thing, itās healing the deficit they already created when they sold vBNT for TKN in the past
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we should either stagger vBNT buy and burns to match the pool liqudity over time or give the BNT to the DAO treasury
as we know from data that fees < IL industry wide, the only way to survive is to get more than $1 of value out of every $1 fee we take
that can be either by buying back the leverage that was put into the system from previous vBNT/TKN dumps, or by investing in future R&D that gives us new levers to pull, or better managing the liquidity that we have on-curve so that IL is reduced per unit fee taken
burning BNT as-is gives us exactly $1 of value for each $1 of fee we take so itās a slow grind to an ever-growing deficit due to the āsocializationā of IL in b3
i canāt see any data or math that justifies a BNT burn until at least vBNT ratio meets bnBNT ratio, so iām generally against it
iām also OK with having the 300k BNT just sitting off-curve until we have a good use for it that gives us more than 300k BNT value, as long as it is off-curve itās effectively burned anyway, so thereās no urgency to ādo somethingā with it
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thanks for taking your time to write that explanation.
I have always been under the assumption that selling bnt for vbnt will not only bring an equilibrium price between the two, but will also bring down the dollar value of bnt as well. Thats why Iāve been so gung-ho on wanting to give this idea a trial.
I agree that while the funds are simply sitting there, they are effectively burned, so perhaps we should re-visit the idea of burning these at a later date. No sense of urgency for action here.
the only way for the $ value of BNT to go down would be for more BNT to end up in USD stable curves
this is because the USDC et al curves also use constant product x*y=k against BNT
so the question would be āhow does the BNT get from the vBNT curve to the USDC curve after it is vortexted?ā
this means someone outside the vortex has to sell vBNT for USDC, which moves BNT from the vBNT curve to the USDC curve
it can happen in 2+ steps, e.g. someone sells vBNT for ETH, then someone else sells ETH for USDC, but the end result is the same, that BNT ends up on the USDC curve, which is the only way to bring the BNT/USDC price down
I do not understand why arbitrage does not result in āTKN deposited on curve to buy BNTā if we āmass burn on a whimā. And why would Bancor itself not perform this arbitrage to gain even more?
mmm so say we look at all the BNT on curves right now and realise all the deficits would be minimised if BNT was moved up in price by 2x
if you just burn half the BNT then the price will instantly be 2x, but the deficit wonāt be fixed in that moment because the TKN balances in the master vault vs. the staking ledger obligations did not change via. the BNT burn
so itās already not true to say that BNT price going up fixes the deficit
letās go the next step and discuss arbitrage anyway
letās say starting pool has 1000 TKN and 1000 BNT in it, so 1 TKN = 1 BNT
then we burn 500 BNT out of the pool, now bancor has 1000 TKN and 500 BNT so says 2 TKN = 1 BNT
but 1 TKN = 1 BNT on binance stillā¦
this means that it is profitable to spend 1 TKN on binance, gain 1 BNT then dump that 1 BNT on bancor to receive 2 TKN
if people are depositing 1 TKN on binance to take 2 TKN out of bancor, this makes the deficit worse, not better
eventually the price on binance will increase and the price on bancor will decrease until there is no more arbitrage, and the BNT price will be higher than it started but lower than the 2xā¦ and we will also have increased the deficit despite the higher BNT price
God help me, I might be starting to understand. Burning BNT seems like a good thing to do: you reduce the supply and the demand goes up. The key is recognizing that burning BNT in the pools works against you. What you want is to burn BNT (or vBNT, whatever) outside the pool. This causes the value of BNT to go up in the right placeāin the marketplace, causing arbitrage and trading to work to your advantage at the AMM.
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yup, exactly, donāt mess with the curves unless you really know what youāre doing 
burning stuff after you buy it is much safer in terms of TKN deposits
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So rather than this long whole debate on burning vbnt or bnt, should we more so focus on organic ways of creating buy pressure on the BNT token? ( difficult to do in a bear market )
Then if so the DAO should be focused on
- revenue generation
- something that incentivises purchasing BNTā¦
What about the idea where ILP is granted to the LP but the ILP insurance coverage is dependant on different variables such as 1) how long theyāve lpād & how much bnt theyre staking ( incentivises buying bnt )
but in addition to buying the ILP insurance w/ bnt, staking the BNT will also give additional benefits such as * blah blah blah fee accrual from trades, fees from withdraws etc.