Users who withdrew from a pool in deficit after the emergency action was taken until the end of the vote on this proposal are eligible to restore their position.
4-week window to restore your position
Deposit the number of tokens you received when withdrawing, receive the same number of LP tokens you previously had
Overview
This proposal is intended to provide a way for liquidity providers who withdrew from Bancor without receiving compensation in BNT to come back and, hopefully, eventually be made whole. To accomplish this, we would allow LPs to redeposit the exact amount of tokens they received when they withdrew, and receive the same number of bnTokens that they withdrew.
For example:
If Bob withdrew 1000 bnLINK tokens and received 550 LINK, Bob would have a chance to deposit 550 LINK tokens and receive 1000 bnLink tokens.
Pros:
This gives us the opportunity to give people a bridge back to Bancor, and hopefully win back their trust inch by inch.
This provides a unique way to bring back some of our liquidity, while it seems we are in a situation where users will not be able to consider depositing for a while.
Cons:
This will increase our deficit & the protocolâs liabilities.
This will likely result in a longer road to reestablishing a healthy protocol.
Specifications
Snapshot: The snapshot will determine eligible addresses and their withdrawals for this program. The snapshot will include withdrawals from the moment the emergency action was taken, until the end of the voting period for this proposal. Users who withdraw after the snapshot will not be eligible. Users will only be able to restore their positions using the same address that withdrew the tokens.
Redeposit window: Users would have a 4-week window in which they can redeposit. Longer than this could create some unforeseen issues. The window should begin upon the launch of a new system.
Redeposit page: Users will have a page in which they would be able to see eligible positions that they withdrew, with the option to redeposit. Something like the following:
Such an idea I agree has great merit. However, it would need to only apply to those who have already left up to the date that this passes,
Without liquidity there is no means from which to make anyone whole, so to have those who left thinking the protocol was going to fail, this gives an excellent opportunity to return liquidity so that positions can be potentially be withdrawn in full at whatever point in the future that would be possible after adjustments are made.
I think there needs to be some stipulations for the repatriated. They fled in the face of uncertainty and to allow them to return and be on equal footing with those that stayed is unfair. It promotes a âmercenary capitalâ type mentality that is already pervasive throughout Defi. We should look to reward loyalty and faith in the protocol/team.
I would like to see a stipulation where they only receive a percentage (i.e. 80%) of their lost TKNs or they must hold for an extended period of time.
We cannot reinforce a mindset that one can bail and still be made whole.
I believe these were extenuating circumstances that justify allowing a 100% return to the protocol. The key is that only those that left after the emergency action was taken can return, and that they would still be subject to the new strategy/process put in place to resolve the current issue and to move the protocol forward. it is a win/win IMO, as it brings necessary liquidity back into the protocol and could even convert doubters back into long term believers in Bancor.
On that same note, I donât believe those that are sour on Bancor will elect to return their funds, and this significantly reduces the mercenary capital fear that might be on peopleâs minds. Only those that have faith in Bancorâs ability to move forward would returnâŚand that also has value IMO.
I like this proposal in principal. I think many who have exited in a time of panic and chaos will opt to be made whole again. Also this approach is not a âfree lunchâ approach of airdropping tokens to people who left.
With that said I would like to see some changes to timelines:
The window to redeposit should be 3 months and not 1 month. Many people travel and may not have access to this information so quickly. Also it allows people to spread out the deposit so they are not causing a huge deficit at once.
there should be a time period (100 days) from the time of redeposit to the time of 100% whole. This will prevent a hit and run scenario and also gives the time for the protocol to heal.
@CanuckLink You make a great point on the timing, but Iâm hesitant to extend it to 3 months. The longer the window is open, the larger a risk it poses to current LPs.
I really like your second suggestion regarding a minimum lock period. Using this, we might be able to play more with the window.
What do you think of a variable lock period that increases significantly over time?
For example, something like:
Week 1: no lockup
Week 2: 1 month
Week 3: 2 months
Week 4: 3 months
Using something like this, it might be easier to offer a longer window.
i see your point about the 3 months. I am a little be hesitant about no lock up. ILP builds up overtime with trading fees. we need the protocol to heal. but yes we could have a variable period that you suggested.
I think the overall idea of this is excellent. If we, as community, agree that people who left and come back will be treated the same as those who stay, I think we could simplify this from a development perspective. Even if we decide they should be treated differently, this could be achieved by:
Launch all new V3 pools and issue vested ILP (calculated by deficit) to all those who migrate/deposit by a certain date.
I think we could get incredibly creative with the vesting term/mechanics that gives extreme upside to long-term LPs. IMO this is one of the only ways to drive interest to the BNT token.
Strongly in favour of this proposal, its key to win back the trust of people that still believe in the longer-term vision and bancor protocol. And think many (incl myself) werenât aware of the loss theyâd have if they withdrew prematurely.
Iâm not a fan of any solution that doesnât allow LPs to at least potentially be made whole. I think people would be much more likely to return & stay if they donât receive a forced haircut.
What youâre trying to achieve is to create favorable conditions for LPs who deposit early. I agree with this approach, but the problem is, we donât know if time necessarily makes anything better, and to what extent.
I think it makes sense to issue vested ILP based on deficit. The vesting mechanism should payout ILP based on time and protocol health. Currently, we canât pay any ILP.
Hereâs a very basic example:
User A has a 100 ETH. If they withdraw they get only 50ETH due to deficit. In this scenario user A will receive 50ETH equivalent of vested BNT (which is tokenized, so it can also be monetized) upon depositing into a new ETH pool.
Now the users can actually exchange their vested BNT for BNT on day one if they choose. However, the vesting mechanism is based on time and protocol health. So exchanging vested BNT for BNT on day one would yield almost not BNT.
Lets say this user does exchange their vested BNT for BNT immediately for a VERY small amount of BNT. What happens to that VEST? User A gets the small amount of BNT. The contract could then burn a large portion of the vested BNT that wasnât able to be redeemed (due to time and protocol health), while depositing some back into a new pool that is claimable by ETH LPs who are still LPing in the pool. We would need to need to study the math around the numbers.
Overall this could give current LPs and LPs who exited (and return within a given time frame) immediate access to their ILP.
The vesting mechanics would provide for tremendous flexibility.
Redistributing a portion vested ILP from early exiting users to those who stay provides tremendous long-term upside to LPing with Bancor.
New LPs are able to enter the protocol without being affected by the current deficit.
Tokenizing vested ILP creates a new way to invest in BNT longterm at a discount. Monetizing vested ILP creates fees for the protocol.
I think it could be combined with vested ILP so that you get 100% (vested ILP) if you redeposit (or migrate) immediately. Then it could be tiered based on time. This would encourage people to come back quickly and reward those who stayed. Good way to force those who left into a decision.
I want to clarify - this is not only to create favorable conditions to early depositors - itâs also to protect existing LPs from being âarbitragedâ.
At this point, I think providing any BNT for ILP (even a derivative that takes time to become BNT) shouldnât be considered. We canât afford to do anything that can increase IL.
By the way, my original thinking in the compensation department was to issue a debt token, similar to what youâre suggesting here, but potentially vesting into a stablecoin instead of BNT.
Iâve moved away from this kind of model because I think the main considerations are: does this provide more value for existing LPs, will this attract more TVL, and does this generate more fees?
Existing LPs: This is a mixed bag for existing users. On the one hand, it gives them a way to exit with a path to potentially being made whole. On the other hand, this creates additional drag on the protocol - we will be constantly shelling out our hard-earned fees to users who have left, leaving less for the users who are still here, which hurts our overall IL problem.
TVL: This does give us a mediocre proposition to attract some TVL, as I believe some users could consider depositing into a deficit if they knew there was a way back out with their money. Itâs still not an ideal situation, and Iâm not sure how much TVL it might attract, but it has its merits.
Fees: This might slightly increase our fees if we have another pool where you could buy/sell Bancor debt. This is actually my favorite part of the idea since we could potentially back buy some of our debt at a discount.
LPs who left: This is a nice option for LPs who left. It gives them a clear path to being restored.
Based on these criteria, I donât think the debt token is overly attractive. It definitely has merits, but it will ultimately result in a constant drag on protocol fees.
