Proposal: Efficient Utilization of POL Proceeds for Pool Closure and BNT Burning

Community Chatroom (DISCUSSION) Snapshot Discussion Board
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Proposal: Use of POL Proceeds
I propose to use the gathered POL proceeds as of the time of this post (~$2,894,093.11) to do the following:

Step 1: Close the following four pools in the following order (in the event POL funds are insufficient to close all four pools):

A. LINK (deficit ~30.7% as of time of this post based on last update to dashboard in an amount of -$2,985,000)
B. VBNT (deficit ~ 8% as of time of this post based on last update to dashboard and in an amount of -$58,850)
C. WOO (deficit ~20.3% as of time of this post based on last update to dashboard and in an amount of -$182,782)
D. CHZ (deficit ~13.9% as of time of this post based on last update to dashboard and in an amount of $1,877)

The LINK pool is being prioritized because of among TKNS in its size group (ETH, WBTC, LINK), it has the least deficit percentage. ETH has a 57.6% deficit and WBTC has a 56.8% deficit.

Closing pools should be our greatest priority because this would significantly reduce the amount of total BNT supply by burning the protocol owned BNT on the other side while also preventing risk of the deficit amount associated with each of these 4 pools from growing, which offsets a considerable amount of risk.

At the time of writing this proposal, LINK now has a 30% deficit, up from 24.9% only 24 hours ago. This is because LINK had a 20% price movement over night on 10/21, and if this pool had been closed before then then the deficit amount would not have increased. It may be that by the time this proposal is implemented, the deficit pool for LINK will have reduced, thus allowing pools 2-4 to also be closed and for this to be solely a cautionary tale.

Closing pools is also a far more efficient way at burning BNT than simply buying BNT. If we close the LINK pool, as an example, we would be able to burn 11,400,000 million BNT from this pool alone.

If we were to instead spend the gathered POL funds on buying BNT, we would only be able to buy 5,100,000 BNT.

As a result, we can burn much more BNT by targeting pools rather than buying and burning BNT and this makes much more sense as a result.

Step 2: Use any remaining POL funds to be generally dispersed amongst all pools (in the event POL funds remain after closing the 4 pools above)

As stated in the title, any remaining POL funds would be used on a pool neutral basis.

Implementation

How will POL be sold and these pools be closed? That I will leave to the devs, the only thing that’s important is that it happens safe manner.

Conclusion

We believe that this proposal is in line with our DAO’s vision and values. By closing these four pools, we can address the deficit in a targeted approach.

We hope that this proposal will receive your support and approval. Thank you for your attention and consideration

For:

Use POL funds in the order described in Steps 1 and 2 for the purpose of closing the LINK, VBNT, WOO and CHZ pools in this order and to the extent possible. This would be followed by a general pool approach.

Against:

Do nothing.

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Thank you for submitting this proposal. I agree with it - how can we move this to level one for formal review as a submission?

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I agree with the logic at play here; closing the LINK pool would create a BNT burn in excess of what the POL can manage via a straight basic buy-burn, and that’s a good thing for BNT supply dynamics (and thus the future closure of more pools).

I would however argue that inclusion of ENJ in priority over WOO would be preferable, for several reasons;

  1. Closing the ENJ pool would burn a similar amount of BNT to WOO (albeit at a higher cost) but ENJ has been part of Bancor for far longer (one of the very first projects to support Bancor in the v1 days), so it provides better optics in that sense
  2. PR-wise it would definitely be better since ENJ has around 50x the social following of WOO (514k on Twitter vs 10.4k), and it’s more impressive to publicise closing of a bigger percentage deficit
  3. Due to the aforementioned relative deficits, the WOO deficit could far more easily be resolved by itself in the near future with a decent BNT pump (which would in turn be easier after a BNT supply burn via LINK pool closing), but that’s far less likely to be the case for ENJ deficit even after an 8% or so supply burn if the LINK pool closes. Closing ENJ pool burns BNT that would take much longer to get burned via positive market movements than closing WOO pool does.
  4. WOO as a project runs CEX and DEX services, which it boasts include “the most capital-efficient DEX” and “single-sided yields”, so it’s actively working against Bancor and its deficit recovery efforts and thus shouldn’t be prioritised for recovery

The main issue with the above is that if LINK doesn’t dip (vs BNT), then the POL wouldn’t cover LINK, or LINK + WOO, let alone LINK + ENJ. If however BNT outperforms LINK and ENJ again in the near future, it should enable a full clearing of both pools. Whilst burning similar amounts of BNT, I do believe that ENJ would make more sense for prioritisation than WOO for all the above reasons.

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Can we get some dev input on this @foxsteven @mbr @yudi @nhindman? Can we put this proposal to a vote? Thanks

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I support this proposal. It would be a great way to burn significant amounts of BNT and permanently reduce deficits.

Side note, I think it’s crazy that you can’t vote in governance if you live in the USA. So much for decentralization and giving power to the community if we have our tokens stuck in V3 and can’t even vote on proposals.

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I’d really like to hear the Dev input regarding the greater efficiency of burning the pooled BNT vs buying from the market. If this really is the case this has to be considered.

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If this had been enabled when I proposed this 4 days ago in the other thread BNT holders and the deficit would not have suffered a HUGE increase in the deficit due to a thirty percent price increase of LINK. The idea that we should close pools neutrally now is a complete farce and cannot be taken seriously. We need to pray that the price retraces a bit and get this done before it gets even worse.

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vBNT - For a long time, the vortex has literally bought and burned vBNT. and now you want to replenish this pool? Would that essentually just completely negate all of the positive effects of the vortex buying and burning the vBNT ?? vBNT stakers… as much as it sucks to take a hit… this pool… if any pool were to ever get additional treatment… this pool would be the very last to get a handout

I am not in favor of this whatsoever. I hear people stuck in specific pools wishing for an early exit.

I understand that this will reduce the BNT supply by a greater amount than simply buying and burning BNT. Removing BNT from circulation is a bi-product of repairing the deficit, but it does not actually improve the deficit itself.

The deficit will improve when the price of BNT rises against all TKN pairings. Replenishing all of those pools does not improve the price of BNT… it just simply gives you an exit out.

Voting against it.

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Just a few thoughts on this Jindo. I can’t speak to the vBNT question but I’d like to hear others weigh in on it. But I’m left with this question. I understand the argument of “fairness” regarding closing down specific pools, picking winners etc. etc. But fairness is a fickle thing.

As it stands currently there isn’t a compelling argument for BNT itself right now. The increases we’ve seen in its value recently seem to be exchanges playing exchange games with us. Which isn’t an ideal situation to be in either. I think we all can agree the mental scars from when this blew up are still fresh in everyone’s mind which was exacerbated by their ilk.

We have 1, $3 million (roughly) dollar bullet to fire. Buying and burning BNT off the open market isn’t going to move the needle price wise. We have less than 10% of what this last pump with upbit was over the couple days they sent it on a run.

Alpha’s trading concept is looking at earning 5% staking ETH, a roll of the dice on the trading returns and hoping ETH out performs everything else that’s in deficit. Which let’s be realistic is going to be a multi year at best answer. And if we’re being honest, is hardly “fair” either to just bank on ETH.

Carbon, while being a fantastic product by the team hasn’t gotten traction while this market was crabbing which would have been the ideal timing. As we go into a bull it’s going to be harder to have to actively manage for regular users. And I don’t know how you can use the POL to even drive people to it.

Removing tokens from the supply seems as valid as anything else with the upside of permanently stopping the bleeding in whatever pools are closed.

If deficit reduction or elimination is the goal this needs to be considered.

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We can replace VBNT if that is a dumb idea. The main thing is closing a top 3 pool with the lowest deficit percentage. We all just saw what happens if you don’t - a huge increase to a pool deficit that negatively impacts all holders. By closing pools you permanently limit your risk and remove tokens from the supply.

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How exactly are you suggesting this be done?

But what does it achieve? It does not impact the deficit unless the token is first purchased.

I think there needs to be a method outlined for how you would like to do this before moving towards a vote.

Saying, let’s use the POL the close pools A, B, C is not exactly something that can actually be implemented without further detail.

This is the exact reason I opposed choosing favored pools - everyone will find reasons the pools they are in are the most logical to close.

No, it is not at all clear what is being proposed. This is not a simple parameter change, it requires a method of how to even do this.

Personally, I will not be voting in favor of a proposal that plays favorites.

I agree with @alphavalion on this.

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I agree with @foxsteven that choosing a favored pool will be hard or almost impossible to do.

IDEA:
The only solution to this proposed idea (in my opinion) would be creating a formula that is correlated to the risk of a specific pool.
This formula could contain different variables like the market cap of a coin, because higher market cap usually comes with a lower volatility or risk of outperforming the market.
Historic market performance or volatility could be a variable too.
If the formula is set up and the risk factor of every pool is calculcated, we could check different combinations of pools that are fully closeable with the current POL.

If we use the POL to buy and burn BNT, how would this be implemented? @foxsteven any insights? It probably would make the arb bot ripping again, but wouldn’t this be vulnerable to getting frontran?

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Most likely a modified POL contract - not too different from the TKN to ETH conversions.

I’m spending some time looking into this.

Not sure who saw the long discussion about this in the public telegrams. But generally, my preference would be to first outline the goal.

  • deficit reduction?
  • BNT supply management by targeting certain pools to close?
  • bootstrapping carbon?

And once we agree a goal, start discussion the mechanism.

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By bootstrapping carbon do you expect any revenue from certain strategies or just for marketing purposes which could potentially bring value back to the protocol?

Choosing a certain pool would create chaos in here.

I would choose deficit reduction by buying and burning BNT,but no sure if it’s possible to do it safely.How about we create a buy wall strategy on Carbon and raise the price if price pumps?That way we can also capture some fee using the arb bot.

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I don’t agree with this idea at all and there is already LPs arguing about which pools should be closed because they want preferential treatment for their own positions. This is extremely selfish as everyone is looking out for their own interest instead of the Bancor protocol and ALL LPs.

To that extent, I am proposing continuing the BNT buy and burn approach which has led to 50+ pools being closed already.

I have mentioned this before and will mention it again. The sentiment of any group or community should be the least of any Bancorian concern. Bancorians at this point should not be faced by any of these individuals and instead I trust will do what’s right for the Bancor protocol and ALL LPs as they have done before.

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