This proposal is expected to appear on Snapshot for voting on Monday 7th June 2021 at 12:00 pm UTC.
TL;DR
Proposal to increase ICHI co-investment to 350k BNT
Proposal to increase ICHI trading fee to 1%
Background
ICHI was whitelisted on April 26th, 2021 with an overwhelming response of 51% quorum and 97.41% for votes. On May 27th, 2021, ICHI announced ICHI V2, featuring a Decentralized Monetary Authority with audits by Quantstamp and Solidified. ICHI V2 will launch mid-June. ICHI plans to create and bootstrap a oneBNT (stablecoin minted with BNT) for the Bancor community as soon as Bancor announces the availability of shadow tokens.
Justification
ICHI coinvestment started at 20k BNT. This was filled on the same day and resulted in a 5X increase in Bancor liquidity. However, the ICHI pools on Sushiswap, 1INCH, and Balancer are still 5-10X larger than the pool on Bancor. The difference in TVL means that most trading volume still routes through these other exchanges. The following two actions will improve the profitability and trading volume of the Bancor pool:
Increasing ICHI co-investment to 350k BNT. More ICHI will be added and the TVL will increase to be on par with the other exchanges.
Increasing the trading fee to 1%. Other smaller cap pools are getting great APYs with fees closer to 1%.
This actions should result in most ICHI liquidity being on Bancor. The math: (350k * 4.8 BNT)/.5 = $3.3M in liquidity versus ~$7M on other AMMs ($3.9M Sushiswap). The increase in ICHI incentives: the increase in Bancor liquidity will result in ~1/3 of ICHI liquidity incentives routing to dual-sided Bancor LPs (and single-sided once supported) with the next ICHI weekly adjustment. This is expected to provide an additional boost that brings 50+% of ICHI liquidity to Bancor.
Governance Participation Reward
40 xICHI (staked ICHI eligible for Ichipowah voting and ICHI governance rewards) will be granted to each ‘Yes’ or ‘No’ voter who meets either of the following eligibility criteria:
All voters who voted on ICHI’s last proposal and have not un-staked the 20 xICHI reward for voting on that proposal. These voters represent ~98% of the vBNT that voted on the last proposal.
The top 50 (vBNT descending) voters who did not vote on ICHI’s last proposal and vote on this proposal with at least 50 vBNT
@tfns - don’t like to speak for others but you are welcome (everyone is welcome) to join the discussion between ICHI devs and the Bancor team in this Telegram channel: Telegram: Join Group Chat
I agree that we could probably do with increasing the co-investment on this pool; however, I don’t think such a drastic fee hike is necessary. We’re talking about 500% the current fee; I’d be more okay with a fee of between 0.30% and 0.50% (150-250% the current fee), if we really need to increase the fee. We know that lower fees tend to attract more volume, and higher fees tend to attract more depth. Considering how quickly this one filled, I don’t think we really have a problem attracting depth to this pool. But if you look at the 24h utilization (the 24h volume over the depth), it’s a low ~1.82%. Compared to:
DAI: ~5.51%
ENJ: ~2.52%
ROOK: ~4.63%
wNXM: ~0.08%
BAT: ~1.11%
To me this indicates that we need to attract more trading volume.
@ccc The thought was that we could see what happens and then change it back or do something in between if we don’t like it. What do you think of that plan?
This isn’t necessarily true. I believe that the Bancor team has experimented with different fees before and it’s not such a simple linear relationship. Price impact is another factor to consider.
I’d actually argue that the current pool does not attract volume mostly due to price impact. The pool only supports trades of up to $1100 with a price impact of <1%.
I don’t mind experimenting with the fees in the ICHI pool, it’s not one of the biggest ones so why not. I do understand the concern that adding co-investment and rising the fee at the same time might put voters off and make the proposal harder to pass. @Masa any info on why 1% was decided? What is the fee on other protocols?
It was proposed by a member of the Bancor team and I thought it was an interesting idea because there is significant arbitrage between the ICHI-1INCH (1INCH), ICHI-ETH (Sushi), ICHI-BNT (Bancor), and ICHI-USDC (Uniswap) pools. A large fee could cause Bancor to profit the most from this arbitrage and that could attract additional LPs. Once the pool is much larger than on other exchanges, the fees could be lowered to improved trading experience for non-arbitrage traders. But I can see your points as well. So maybe just do it and see if the scenario above plays out in the coming month. It seems fees get lowered in the future either way.
I hadn’t considered this, that’s an important factor. So it seems like there must be a minimum of depth in order to maintain a minimum of slippage.
I’d give it a quarter, personally. That’s a long enough period to get monthly results to compare to each other, without committing us for the long term.
@tfns I think this addressed your Q as well … basic idea, step 1) gather liquidity with more co-investment and higher fees, 2) traders start following liquidity, 3) lower fees to accelerate process
I have been a big fan of the ICHI-BNT pool and would love to see more liquidity there as it will drive larger ICHI rewards to LP farmers. Plus this seems like a win-win for both communities since hopefully this co-investment will drive more interest/trades with lower slippage. You definitely have my vote
I am a big fan of ICHI, and I think its stablecoin product serves a clear purpose.
As always, I am in support of increased co-investments on pools where there is a sound justification. Growing the pool to be at a competitive depth to the rest of the ecosystem is a good idea.
The increase in the pool fee to 1% might be a little steep, but I am interested to try it. As @Masa has pointed out, it can be a temporary change. Pools such as wNXM, STAKE, CEL and DXD have been coasting along just fine with a 1% fee; however, 0.5% might be a good fallback, see: ENJ, MKR, BAT, ROOK, AMP, RPL, NMR, RGT, BOR.
I am not against the 1% trading fee increase on the ICHI-BNT trading pair since I see it as a secondary pool which would be good for us to experiment with. The only other pool with a high trading fee (1%), good liquidity, and decent volume on our DEX is the wNXM pool. I think there are a few reasons why that formula has been successful and can potentially apply in this case:
We cornered the market on wNXM and we are the DEX with the deepest pool. This has worked great for us on the wNXM pool and has been a good performer pool for us:
symbol
total_fees
OCEAN
$48,130.10
REN
$57,177.28
GRT
$58,570.82
BAT
$59,210.62
UNI
$96,454.83
ROOK
$99,797.06
ALPHA
$189,352.55
AAVE
$189,649.29
SNX
$190,236.23
MKR
$242,532.14
YFI
$260,905.56
ENJ
$331,283.72
wNXM
$370,208.45
MATIC
$1,146,671.58
Total Fees Past 30 Days
If we can achieve a similar outcome with the ICHI pool then I think it will be successful as well.
Part of the reason why people staked on Bancor is because the rewards for staking wNXM on the native platform come with risk (slashing if there are claims and also 30 day lockup period). What I am getting at is that there aren’t that many other places with good incentives which leads me to the point of ICHI offering LM rewards for other DEXes (1inch, Sushi, Balancer, Uni). I don’t think attracting liquidity to Bancor will be as successful while these other LM campaigns are on going. If Bancor provides liquidity for ICHI by passing this proposal then will the ICHI community look to sunset these rewards?
It should be very successful because ICHI’s reward mechanism and Bancor’s method of co-investment are highly compatible with each other - let me explain…
ICHI rewards are given out according to proportional ICHI liquidity. The rates adjust weekly with a maximum reward decline of -10% per week for any specific pool. This means that the ICHI reward rate on ICHI-BNT should go up 10X+ once this proposal is passed. The reward rates on Sushi, Balancer, and Loopring will decline the maximum -10% per week until things reach the fair balance. The rewards with 1INCH include a contractual minimum for another 2 months and then begin adjusting with the rest.
Yes, I think ideally that should happen since the bulk of LPs on this pool going forward will be single sided now that the pool has been whitelisted. This feature has also been requested by other projects and I am hopeful that a V3 release might implement TKN side liquidity mining for whitelisted pools. Thanks for explaining the dynamics with regards to your current LM campaigns (it cleared up some questions that I had).
I agree - we have a script the bancor team gave us to report on this but we lack the bandwidth to develop it until the ICHI V2 UI is out in a couple of weeks. But the good news is that the reward rate is based on total liquidity so the single-sided liquidity will cause the reward rate on dual-sided to spike before then.
