Proposal: Extend LM Rewards on Stable Coin Pools (USDT, USDC, DAI) For 8 Weeks

[glenn]

This proposal is expected to appear on Snapshot for voting on 2021-05-27T16:00:00Z.

TL DR

1. The LM Rewards will be extended on USDC, DAI, USDT.
2. The current reward rates for each pool will be unaffected.
3. The LM rewards on USDC, DAI, and USDT pools can be ended prior to the completion of the 8 week extension if the alternative shadow tokens pool redesign is deployed.

Extension of Liquidity Mining on Current Pools

The LM rewards schedule for USDC, DAI and USDT is due to end in less than 2 weeks. To maintain liquidity in the near term, and to sustain incentives for new LPs to become involved in the Bancor ecosystem while Bancor prepares new products and upgrades, herein it is proposed to extend the LM rewards program on these pools for a further 8 weeks.

1. USDC, DAI, and USDT will continue to receive the current 50-100K BNT emission per week, for an additional 8 weeks.
2. The liquidity mining program for USDC, DAI, and USDT can be ended prior to the completion of the 8 week extension if the alternative shadow tokens pool redesign is deployed.
3. Upon release of the shadow pools, a new LM incentives program may be considered by the DAO. It is a reasonable expectation that DAO will choose to incentivize these pools; however, it is under no obligation to do so.

Discussion

Weekly fees by pool:

USDT

USDC

DAI

Weekly volume by pool:

USDT

USDC

DAI

Weekly Fees and Volume Side by Side:

Daily APR(Last 60 days):

Total Fees:

Last ~60 days:

symbol	total_fees
DAI	$992,679.67
USDT	$1,029,306.74
USDC	$1,506,418.28

Last ~30 days:

symbol	total_fees
DAI	$627,435.88
USDT	$643,455.51
USDC	$954,086.67

Summary

1. At this stage, current protocol growth requires LM to maintain the momentum and stay competitive in the space (the DAO seems aware of this).
2. After achieving the position of market leader in both TVL and volume, LM extension will no longer be necessary, and the voting for LM extensions may be concluded.
3. The new shadow tokens pool design will significantly reduce the pressure resulting from insurance on stable assets, and should help to create a more sustainable system for long-term stablecoin liquidity.
4. A large majority of the LM rewards are re-staked to the protocol, increasing the TVL and the space available for TKN deposits with single sided exposure. If this trend continues, the LM program is more of an asset than a liability, and can be managed more assertively.
5. In the long term, Bancor is aiming towards sustainable annual inflation of 4%, in order to achieve that, Bancor requires significant volume and Vortex to be applied.

Full Data:

symbol	time	Conversion Fees in USD	Volume in USD
DAI	12/28/2020 0:00	$7,074.82	$7,067,747.35
DAI	1/4/2021 0:00	$12,759.25	$12,746,487.93
DAI	1/11/2021 0:00	$14,649.66	$14,635,005.61
DAI	1/18/2021 0:00	$11,503.08	$11,491,579.16
DAI	1/25/2021 0:00	$12,962.02	$12,949,057.25
DAI	2/1/2021 0:00	$11,498.89	$11,487,387.72
DAI	2/8/2021 0:00	$16,365.75	$16,349,381.42
DAI	2/15/2021 0:00	$68,741.92	$37,586,007.12
DAI	2/22/2021 0:00	$146,094.65	$72,901,230.26
DAI	3/1/2021 0:00	$112,967.64	$56,370,852.86
DAI	3/8/2021 0:00	$71,595.30	$35,726,052.24
DAI	3/15/2021 0:00	$51,375.24	$25,636,243.28
DAI	3/22/2021 0:00	$57,702.08	$28,793,339.06
DAI	3/29/2021 0:00	$45,961.04	$22,934,557.75
DAI	4/5/2021 0:00	$54,025.06	$26,958,502.97
DAI	4/12/2021 0:00	$86,993.63	$43,409,821.91
DAI	4/19/2021 0:00	$120,662.36	$60,210,519.29
DAI	4/26/2021 0:00	$52,555.43	$26,225,159.81
DAI	5/3/2021 0:00	$94,838.90	$47,324,608.78
DAI	5/10/2021 0:00	$133,769.74	$66,751,100.12
DAI	5/17/2021 0:00	$308,786.91	$154,084,669.94
DAI	5/24/2021 0:00	$35,834.16	$17,881,244.18

symbol	time	Conversion Fees in USD	Volume in USD
USDC	12/28/2020 0:00	$12,244.53	$4,069,266.98
USDC	1/4/2021 0:00	$27,763.32	$9,226,675.26
USDC	1/11/2021 0:00	$25,608.24	$16,352,000.41
USDC	1/18/2021 0:00	$16,271.01	$16,254,739.94
USDC	1/25/2021 0:00	$16,068.45	$16,052,378.10
USDC	2/1/2021 0:00	$20,270.05	$15,965,781.94
USDC	2/8/2021 0:00	$35,735.03	$17,831,780.20
USDC	2/15/2021 0:00	$93,991.95	$46,901,985.30
USDC	2/22/2021 0:00	$186,040.31	$92,834,114.74
USDC	3/1/2021 0:00	$159,562.25	$79,621,563.30
USDC	3/8/2021 0:00	$113,489.57	$56,631,296.57
USDC	3/15/2021 0:00	$81,547.26	$40,692,082.85
USDC	3/22/2021 0:00	$88,149.59	$43,986,643.13
USDC	3/29/2021 0:00	$69,210.47	$34,536,025.35
USDC	4/5/2021 0:00	$74,449.78	$37,150,442.58
USDC	4/12/2021 0:00	$128,770.46	$64,256,458.85
USDC	4/19/2021 0:00	$191,751.34	$95,683,916.70
USDC	4/26/2021 0:00	$95,776.11	$47,792,280.81
USDC	5/3/2021 0:00	$124,488.17	$62,119,598.98
USDC	5/10/2021 0:00	$205,433.33	$102,511,230.41
USDC	5/17/2021 0:00	$458,031.91	$228,557,923.01
USDC	5/24/2021 0:00	$68,047.15	$33,955,526.75

symbol	time	Conversion Fees in USD	Volume in USD
USDT	12/28/2020 0:00	$15,993.36	$7,980,678.42
USDT	1/4/2021 0:00	$25,941.16	$13,647,198.85
USDT	1/11/2021 0:00	$18,452.64	$18,434,189.16
USDT	1/18/2021 0:00	$13,224.93	$13,211,700.39
USDT	1/25/2021 0:00	$15,304.31	$15,289,002.29
USDT	2/1/2021 0:00	$20,473.93	$18,421,618.80
USDT	2/8/2021 0:00	$38,772.50	$19,347,477.28
USDT	2/15/2021 0:00	$87,568.11	$43,696,485.58
USDT	2/22/2021 0:00	$156,177.59	$77,932,728.32
USDT	3/1/2021 0:00	$125,008.04	$62,379,010.88
USDT	3/8/2021 0:00	$74,776.50	$37,313,474.41
USDT	3/15/2021 0:00	$53,134.39	$26,514,062.66
USDT	3/22/2021 0:00	$57,737.12	$28,810,823.51
USDT	3/29/2021 0:00	$49,774.60	$24,837,527.01
USDT	4/5/2021 0:00	$59,297.16	$29,589,281.67
USDT	4/12/2021 0:00	$97,469.90	$48,637,478.63
USDT	4/19/2021 0:00	$121,578.89	$60,667,868.47
USDT	4/26/2021 0:00	$66,870.73	$33,368,492.82
USDT	5/3/2021 0:00	$91,582.08	$45,699,456.58
USDT	5/10/2021 0:00	$130,808.17	$65,273,278.05
USDT	5/17/2021 0:00	$313,620.17	$156,496,467.45
USDT	5/24/2021 0:00	$38,891.55	$19,406,884.57

[atosm]

LM rewards are too high on the TKN side. Should consider changing the 70/30 ratio or reduce the LM reward 50%.

[AnimaDunk]

Absolutely support this proposal.
The stable and wbt/eth/link pools are the core pools of Bancor.
They drive our biggest volume and thus the biggest revenue.

[glenn]

When these pools came up for renewal two cycles ago, we had cut the rewards in half for the stable coin pools. The thread where this was discussed is the following:

UPDATED: BIP 14 Stablepools LM rewards reduction and extension:

TL;DR The LM rewards on stablecoin pools (DAI, USDC, USDT) are extended from 9th of March until the 6th April (another 4 weeks), and can continue being extended by the DAO. The LM rewards structure on the stablecoin pools is proposed to be changed. The rewards emissions are halved, from 100k to 50k BNT per week The distribution of the rewards remains the same (70% to the BNT side, 30% to TKN side) The change is being made in anticipation of a new stable pool design. Discussion Due to Bancor …

After that renewal, we also had another follow up renewal as part of:

LM rewards extension ETH, WBTC, LINK, USDT, USDC, DAI

Extension of LM rewards plan Stake vBNT for voting on this proposal before Wednesday 31st March, 2021 (UTC) TL;DR The LM Rewards program will be extended on ETH, LINK, WBTC. The LM Rewards will be extended on USDC, DAI, USDT. The current award rates for each pool will be unaffected. Proposal has been made based on data available publicly via the Bancor Dune analytics page: Dune Analytics Extension of Liquidity Mining on Current Pools The LM rewards schedule for ETH, INK, WBTC, USDC, DAI a…

Neither @MichalHerzyk or @mbr had any comments regarding the emissions on the stable coin pools in the most recent renewal and I think we have largely curtailed the unsustainability levels that we had originally. I will let them chime in here in case they have any thoughts (and would be happy to modify this proposal with any of their feedback) about the emissions on these pools.

While this proposal is seeking an 8 week extension, there is a caveat that it can be ended at any time. This is in the spirit of the previous proposals should shadow pools come along and replace these pools completely. I get the sense that this is very close to completion and also why I opted for a shorter duration (8 weeks) as was done previously.

With that said, we don’t have much time at the moment to get this renewal done. We have 2 days after submission before it goes on snapshot and then it is another ~4 days of voting. That’s cutting it very close to this proposal not passing before the timer expires. If it does expire, then rewards for these pools will most likely not be turned back on until the current development backlog gets cleared. My understanding is that once an LM campaign expires, that it is a lot more difficult to renew and requires a contract migration essentially.

With that said, I think if the community does want to have a discussion about the emissions on the stable coin pools then that should start to happen now so that for the upcoming renewal we get feedback from individuals about how we want to approach future renewals. This might all be moot should shadow pools be released before then.

[tfns]

@AnimaDunk

Absolutely support this proposal.
The stable and wbt/eth/link pools are the core pools of Bancor.
They drive our biggest volume and thus the biggest revenue.

My thoughts exactly, will vote FOR.

[phadzhiev]

It’s an absolute no-brainer to extend the LM rewards for the stable coin pools. They are way more efficient with their liquidity in terms of volume. Rewards, dedicated to growing the stable coin pools are way more effective in growing the overall volume of Bancor.

The only thing that could be changed imo is the ratio, currently the stable coin side pays out ridiculously big rewards and it’s very far off from having any free space in, resulting in just a number of early LPs leeching the rewards on the stable coin side. Reducing the rewards for the stable coin side should normalise things a bit. However, I would leave that for now, in order to get this proposal voted FOR ASAP.

[tenzent]

I don’t see a problem with passing this as it is. As I see it, tweaking rewards slightly now should not be the main focus but rather retaining the momentum they give us while we prepare for shadow pools.

[bias]

Agree. We definitely need LM rewards on these pools, and we want them to be uninterrupted. I personally think we should reduce emissions on stables but we could argue that point for weeks and get nowhere. Just vote to extend now and save the headache.

[glenn]

Quick update here, the APR data pull from dune doesn’t appear to be correct and is wrong (at least when calculations where ran a few days ago). I am looking at the raw data right now to double check and will append with more details soon.

[glenn]

New charts reflecting correct APRs should be up soon. In the meantime I am sharing the full raw data that came from mbr:

google docs
easyupload
ufile

[glenn]

The original proposal has been updated with the correct APR data. This can be verified against the raw data that I have linked to in my previous comment.

For the sake of transparency, the following chart is wrong: