Proposal: Burn vBNT from BNT collected in pendingNetworkFeeAmount

This proposal is expected to appear on Snapshot on Aug 13th 2023, after the required 4 day discussion phase has completed. If you want to participate in this decision, make certain that your vBNT is staked for voting prior to the commencement of the voting period.

TL;DR

  • Buy back and Burn vBNT using a subset of BNT fees in v3 (100,000 BNT of the current 680k 1.016M BNT)

Intent and prior discussion

This proposal seeks to trigger a buy back and burn of vBNT using 100,000 BNT collected in pendingNetworkFeeAmount Bancor Network v3 . At the time of writing, there is approximately 685k 1.016M BNT that has been collected so far.
There have been multiple governance discussions around this topic in addition to a community call dedicated specifically to BNT vs. vBNT burning:
Vortex burn or wait
Trial burning BNT

Motivation

This proposal represents the desire to make efficient use of the Vortex while vBNT is still actively a part of the Bancor ecosystem. Using 100k BNT to buy back and burn vBNT at the current ratio will result in approximately 20% higher efficiency due to the current low vBNT : BNT ratio brought on by a recent capitulation of a long-standing large vBNT accumulator. :fire:

Current BNT/vBNT ratio:
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Current vBNT/BNT ratio:
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After 100k Swap:
image

This will result in 119.866k effective vBNT being acquired and then subsequently burned removing nearly 20% more BNT from circulation than direct BNT burning.

Voting Instructions

For: Perform a one time buy back and burn of vBNT using 100,000 BNT
Against: Do nothing

2 Likes

Its funny I was looking at the contract today. I like the idea here, seems like a good way to take advantage of the spread and do a more effective burn.

I believe there were some issues with not burning the full amount one time when we discussed so would like @yudi feedback on viable or just not as gas effective
Currently, I dont believe the vBNT pool could take the entire 685k BNT sell so have selected an amount to capture a large range of ratio without pushing too high

I am personally not in favor of this proposal.

  • I would prefer to reduce the supply by those 700,000 BNT
  • I think the main goals in the short term should be to reduce the deficits and close pools when they reach surplus.
  • This proposal, in the short term, would have the opposite impact
2 Likes

How is burning a larger portion of vbnt not reducing the deficit at an accelerated rate?

It’s not vBNT that is in all the liquidity pools it’s BNT. So converting the BNT to vBNT would increase the deficit in the short term.

1 Like

Yes, but aren’t we voting on burning all of that liquidity pooled bnt in phases anyway?

1 Like

I’m with foxsteven here, I think that the only metric within the native Bancor tokenomics that really matters until the deficit is fixed is seeing the amount of BNT on a circulating supply graph go down. No matter what the warp magic shenanigans and efficiencies of burning vBNT vs BNT, it’s something that only those deep into the Bancor ecosystem are even aware of and concerned about. “Here, look at this graph of BNT supply going down through constant burns” is an easy and compelling story to tell and sell; the relative vBNT/BNT ratio/locking thing really isn’t.

Existing Bancor loyalists haven’t had the purchasing power or appetite to solve the deficit thus far, so we gotta assume the whole vBNT-actually-makes-BNT-inaccessible-while-not-actually-burning-it-from-supply mechanic is a moot point for recovery. To someone who’s an LP, but not a dyed-in-the-wool protocol fan, it’s really just a convoluted and overcomplicated way for true Bancor loyalists to feel like they’re smarter than everyone else, rather than an appealing or impactful function for everyone else.

1 Like

It’s not about “feelings” it’s about Math. The Vortex was created as a 2nd order effect to more efficiently use BNT fees. Voting against using the 2nd order effect is short-sighted when the argument is etherscan doesn’t show the Vortex effect by default. A graph could be created easily that uses etherscan supply - vBNT vortexed to show effective supply.
It’s not that complicated and something that thought and time went into creating and I will continue to use it so long as it’s at my disposal.
I’d like to start phasing out vBNT in the near future so see this as one of the last times that we will be able to use the Vortex and it’s increased efficiency

1 Like

image
The (now) 761k BNT are effectively already bought back and burnt. Not using the Vortex for 2nd order efficiency is short-sighted. I can create a Prop to setup a Dashboard with etherscan supply - vBNT vortexed if it’s really about seeing true supply for the right-curves

The vBNT pool has been in surplus numerous times in the past few months. If LPs are paying any attention to their position then they’ve had plenty of time to withdraw and lock in their position out of deficit. The fact that they have not indicated either: They are not “live” and have abandoned the position or they are aware and feel that fees are worth leaving the position in. Either way I’ll use the pool for the increased burn efficiency.
I will be bringing forward a prop to reduce the vBNT pool TL to basically only leave the PoL Surplus exposed to IL but would like one more efficient burn before then.

This is over-stated and yes, short-term as stated above. This is a single illiquid pool and has the opportunity to create some additional fast-lane arbs during the process for 3rd order effects toward the deficit.

1 Like

I’ll be taking a look at whether 300k BNT buy on the pool is still viable before moving to Level 1 tomorrow morning. I don’t see any objections that haven’t been brought up before and are all based on “perception” vs what the Vortex was designed mathematically to do.

I appreciate the discussion and look forward to see how voters signal on Snapshot.

1 Like

My comment is not about perceptions or about a single pool.

It is about every active pool on the protocol being further away from surplus with the conversion from BNT to vBNT.

This is a result of BNT being in all V3 pool. I think you have misunderstood my post - it is not about the specific vBNT pool.

Yes, but perception is reality in crypto and math doesn’t matter as much if only a small subset of potential BNT buyers are aware of it. “It’s not that complicated” is still significantly more complicated than “BNT supply go down”. If the audience of potential BNT buyers were just robots bound entirely by cold logic, then perhaps “it’s about Math” would be an unassailable argument, but we need to appeal to people too; and those people have literally hundreds of tokens constantly vying for their attention with easy value propositions.

It’s nice to think of making a graph of etherscan supply minus vBNT vortexed, but you also need those figures live on Etherscan, CMC, Coingecko etc… There’s a lot more complexity to communicating this than making one graph saying “this number but also actually minus this number” and all of a sudden everybody considering BNT purchase realises and appreciates the increased efficiencies of vBNT burns.

1 Like

300k BNT is $168k USD even now after the recent run up.

That is 0.612% of the $27,471,790 Liquidity on v3 in the remaining open pools.

Please correct me if I’m wrong in any of this… my understanding of the protocol is pretty limited.

Since staked BNT (in v3 at least) is burned on deposit and minted on redemption of vBNT + bnBNT, the BNT associated with vBNT is already out of the circulating supply.
As I understand it vBNT can only be used to unstake by someone who has already staked it; it can’t be bought from the market and redeemed. Therefore any BNT associated with abandoned positions will never be minted, making the burning of that vBNT a pointless act.
For that reason, I’d argue that the buying and burning of vBNT is actually more inefficient than directly burning BNT.

1 Like

This pool is literally vBNT that can be bought and used to redeem bnBNT for BNT. bnBNT is also an ERC-20 and can be setup in an LP and sold/bought as desired. You could technically buy bnBNT and vBNT and redeem BNT that you never staked from said wallet.

BNT is sent to v3 and “burned”, correct, but there are Trading Limits on each pool of “minted” BNT that isn’t directly a 1:1 of the BNT you sent to be burned in return for bnBNT, but it is a representation and important to think of it as actually existing as it can be leaked from the AMM pool as BNT is outpaced by TKN

The key here is that it’s a greater than 1:1 ratio of BNT that will never be minted. It’s 1/vBNT ratio which while under 1vBNT:1BNT is MORE efficient.

1 Like

Moving to L1 and re-evaluating amount of buyback. 300k BNT buyback appears to sent ratio back to 1:1 at current liquidity and prices:
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so adjustment to 200k seems like a decent bump without losing most of the efficiency:
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I agree with the comments from Steven and I also would prefer to reduce the supply of BNT by the quantity that is now in the v3 wallet which is closed to 900k BNT. Furthermore, the vBNT pool is now in a state of deficit and the DAO should not contribute to making the deficit in this pool worse for those TKN LPs. So in essence, this proposal will have the opposite effect of deficit reduction by making the deficit in the vBNT pool worse for those LPs.

3 Likes

The price impact of swapping that amount of BNT is nearly 20%

When the ratio between vBNT and BNT is lower (closer to 0.5) and the slippage for such a trade is lower (say less than 5%) then such a proposal is more than just ‘sensible’ and is much closer to “objectively corect.”

But that’s not where we are. I think the value from burning that BNT, lowering the supply of BNT, and pushing that narrative that BNT has a deflationary model THAT ACTUALLY WORKS is the better choice.

I would instead be in favor of waiting until 1M BNT has accumulated and then burning that.

1 Like