Proposal: Extend LM Rewards on wBTC Pool For 12 Weeks (Attempt #2)

Second Proposal to Extend LM Rewards on wBTC pool for 12 weeks

This proposal is expected to appear on Snapshot for voting on Monday 31th May 2021 at 4:00 pm UTC. Make sure to stake your vBNT for voting BEFORE this date and time to participate in the DAO decision.

For the proposal to pass, 20% of quorum and >67% FOR votes are needed.

TL;DR

  • The launch of Bancor V3 and maintaining pool competitiveness justify an extension on the LM rewards for the wBTC pool for the next 12 weeks. The proposal to extend them will most likely fail.

  • The community was largely surprised by the failure of this proposal (and other large LM extensions) and there is reason to believe that this proposal may pass if pushed again.

  • It is not feasible to change the duration or amount of LM rewards due to contract complexity. Further, if LM rewards end on a pool, it is very difficult to restart them.

  • If these pools are going to be renewed, it must happen immediately.

  • Bancor V3 has been announced and is likely to launch within the 12 week period that these LM rewards would be extended.

  • Cutting LM on these pools now is a huge change made without knowing the effects of V3.

  • It is bad business and user experience to make multiple large scale changes to the platform in a short period of time. It is smarter to wait for V3 then reassess.

  • The effects of LM rewards on inflation have been overstated and the protocol can clearly gain ground in TVL and volume while they are active.

Justification

Renewed Interest in Bancor Governance

The proposal to renew liquidity mining rewards for the wBTC/BNT pool is being resubmitted over concerns that the DAO’s voting power has become significantly centralised, with the top wallets holding a considerable % of the quorum, whilst more than two-thirds of the total vBNT is unstaked and could be voting on Snapshot.

  • Total Unstaked vBNT: 48,590,025

  • Unstaked vBNT not in Vortex: 46,634,361

  • Total vBNT staked for Governance: 13,827,950

  • Only 22.2% of total vBNT is staked for Governance.

Top two vBNT addresses own 15.9% and 11.2% of quorum, respectively, at a total of 27.1%.

We have seen, through massively increased activity on Twitter, Discord, and Telegram, that there is significant public concern about LINK/wBTC/stablecoin LM rewards failing to pass. The Bancor community was lax and the failure of these proposals caught them by surprise. We have seen a large amount (1.5m and counting) of vBNT stakes in governance since they failed. It is clear that the community wants to vote on this proposal again and there’s reason to believe this proposal might pass now.

Contract Complexity Means We Must Act Now

  • Due to the design of the liquidity mining contracts, it is very difficult, bordering on impossible, to change the amount or duration of LM rewards once they have been assigned to a pool.

  • For this reason, we have an all-or-nothing decision in front of us even though it may be more desirable to choose some middle ground.

  • Due to the design of the contracts, it is very difficult to reinstate LM rewards once they have lapsed. The YFI pool, for example, had LM rewards renewed a month ago which are still not active due to the heavy lifting required by the Bancor team.

  • This means that if we do not renew these LM rewards immediately, we will not get them back for weeks and perhaps ever once V3 launches.

  • This decision is urgent and requires an appropriate amount of our attention.

Bancor V3, Business Positioning and Pool Competitiveness

According to Bancor’s team recent announcement:

  • Bancor V3 will be Bancor’s largest and most significant upgrade to the protocol.

  • V3 incorporates community feedback in the past 8 months since v2.1 went live and leverages a brand new discovery in the core AMM design that will dramatically improve the protocol’s capital efficiency while reducing friction and costs for users.

  • V3 unlocks a new way for passive LPs to earn even higher yields on their staked capital while being fully protected against IL. Just set, forget and earn high APRs, with no risk of IL.

  • The new design will encourage more liquidity to flow into the protocol, and vastly more volume to be processed, driving sustainably high yields for Bancor LPs, and allowing the protocol to collect more revenue.

  • V3 lays the foundation for Bancor to capture a much larger share of total crypto liquidity and trading revenue.

Bancor is on the cusp of V3. Every indication that we have says that this new version will be a massive change to the ecosystem. Meanwhile, we have seen the protocol continue to build TVL, trading volume, and general momentum on the back of LM rewards.

Removing LM rewards at this time is highly disruptive and flies in the face of every principal of change management. It is a change made without understanding what V3 will bring and will put Bancor’s users through two significant disruptions in a short period of time. Total protocol changes like V3 should be made during periods of stability, not during the turmoil that would occur in this case.

Some comments:

  1. The protocol is still in a growth phase, both in TVL but especially in volume (Figure 1), since Bancor v2.1 was released.
  2. wBTC pool has seen an average APR of 1.56% (past 60 days, Figure 2) and gathered $795,582.75 worth of fees in the past 30 days. To remain competitive with other protocols, LM rewards are necessary to incentivize wBTC liquidity to remain staked before Bancor v3 arrives.

image
Figure 1. Bancor monthly volume. May 2021 data doesn’t not include the last 3 days of the month.


Figure 2. Bancor wBTC/BNT pool daily APR.

Liquidity Mining Rewards and their Impact on Inflation

  1. At this stage, LM rewards on these primary pools (ETH, wBTC, LINK, stablecoins) are allowing Bancor to stay competitive and exceed the yields offered by competitors. Swap APYs, as they exist now, are probably not enough to draw the depth of liquidity we need.

  2. 7,894,347 BNT LM rewards have been claimed from 2,557 unique addresses. Given a total current BNT supply of 204,096,941 (supply is elastic), these represent 3.87% of total supply.

  3. 20,909,923 BNT LM rewards have been re-staked from 2,095 unique addresses, far outweighing the claimed BNT.

  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. Inflation is a complex phenomenon and simply increasing the amount of BNT tokens does not necessarily lead to inflation. And, regardless of the amount of inflation that is occurring, we don’t have enough information to say that our increased TVL, decreased slippage, and attractiveness to aggregators is not worth that inflation.

Conclusions/Comments

  1. Stopping LM on these pools now may unnecessarily alienate communities who are staking on Bancor when a new solution will be released soon.

  2. The protocol is still in a growth phase, both in TVL and Volume.

  3. In response to the failure of these proposals and the concentration of voting power in a few large wallets, we’ve seen a huge increase in the amount of vBNT entering governance and discussion on social platforms. These facts alone warrant a resubmission of this proposal.

  4. We now call on all the communities that have a stake on Bancor to make their voices heard.

  5. Once V3 launches, there is nothing stopping the DAO from reexamining and even cancelling the LM rewards program in light of new information.

  6. Data taken from Dune Analytics.

Update

  • The consensus on the community call and the team’s opinion was that setting the duration for 12 weeks is sensible.
  • This duration would also allow the DAO to direct its focus to other proposals, such as whitelisting and coinvestment quorum and supermajority requirements update as well as setting the guidelines for a delegation system.
  • With a long enough duration, it is a guaranteed that we will have more information on Bancor V3 to make a better decision in the next round of extension votes.

Vote FOR to:

Extend LM rewards for the wBTC pool for 12 weeks.

Vote AGAINST to:

Do NOT extend LM rewards for the wBTC pool.

3 Likes

I’ll be voting no on this proposal.
The only change was a reduction from 12 to 8 weeks, and includes a blatant lie.
(Edit: every time I refresh the page the timeframe changes. The only thing the new proposal does is allow for negotiation on time frame of rewards. This was never the issue. The size of the rewards and lack of clear plan moving forward are the issue.
None of these new proposals are accompanied by any sort of plan to make LM sustainable moving forward and for this reason, I will be voting against.)

We have already had proposals with their rewards reduced pass voting and be implemented. This language is different than the stable coin proposal which says they outright cannot be changed. Inconsistent messaging on every post - a blatant lie is sniffed out.

There was no good faith effort made to create a sustainable LM plan moving forward. I cannot reasonably see minting this much $BNT as a wise decision.

The rules of voting are known to all. The proposals were left for the agreed upon time frames and the voting was not compromised in any fashion.

Serious implications here. Nothing abnormal occurring in the voting process. Votes are on chain and open to all. People are free to stake and participate whenever they want. 90% of the entire vBNT did not participate in the last vote. Voters simply do not care. We cannot “run it back turbo” any time people are upset with the results of a vote.

These proposals are attempting to seed doubt in previous votes that the DAO has cast and were totally legitimate. What we are seeing here is the Bancor team, and or the writer of this proposal attempting to rewrite history and change the rules of the DAO in real time.

Three proposals were drafted as fast as possible. The changes in language aren’t on purpose, just slipped.

I’ve replied to your points in Proposal: Extend LM Rewards on DAI/USDC/USDT Pool For X Weeks (Attempt #2) - #3 by tfns

2 Likes

I absolutely support this second attempt to pass LM Rewards.

We shouldn’t be shackled to a blindside vote orchestrated by a few whales.

Let’s see what the DAO really thinks about this proposal when the vote goes up.

3 Likes

The proposal is up for discussion. This means that the current proposal can suffer changes that arise from debate.

It’s clear to me that continuing rewards for this pool is important for protocol stability and growth as we head into V3.

2 Likes

A rebuttal that changed parameters would be welcome. A repeat proposal unchanged will do nothing more than trap new voters into the governance contract for 7 days and for that I applaud the author. We will build strong hands together.

The network creates $20m~ of BNT (at current prices - much higher two months ago) every month to pay for Eth, Link, and wBTC pools.

The network also $9m~ of BNT (at current prices - much higher two months ago) every month to pay for the stablecoin pool rewards

These pools combined bring in less than $3m in monthly fees to $BNT holders. (~half of the total fees)

Why is BNT crabbing? This is why.

Furs, could you please give input on why you see this as a good spend?

The rewards program for this pool was designed at $.50c BNT and $500,000 TVL.

Current TVL exceeds $1,500,000,000 and $BNT price is $5~. It’s time to rework.

Lower LM, higher BURN >> healthy and sustainable BNT model.

We all know that rewards need to be cut. Better now than in 6 months, same result of angry people, except for that fact that if we wait a further 6 months there will be 100s millions $USD of strengthened crabbing power.

The time has come to face our fears.

I support this proposal. I don’t think it is wise for us to curtail any liquidity at the moment with V3 around the corner. From what the team has hinted, V3 will have great advancements in capital efficiency. If we decide to curtail rewards in the future, then V3 would be the perfect time to do it giving that we might not need enough liquidity in some of our pools to be competitive.

The team has already hinted that the rewards model is being reworked and I think we should give them the opportunity to complete that work before making any drastic changes and that could have negative consequences.

3 Likes

this strengthens the argument that “LM rewards are NOT NEEDED.”

Why don’t we just not do anything destructive to our TVL and wait for V3? Cutting off LM drastically on our biggest pools is a massive risk with little reward.

image

2 Likes

They might not be needed when V3 comes out but why upset the balance until that happens? I don’t disagree with some of your arguments but I don’t think it is wise for us to remove rewards at the moment and potentially have LPs leave the platform. This will lead to a loss in liquidity in the large pools which will not be able to sustain large trades without incurring a high price impact and negatively affect our DEX.

2 Likes

vBNT are not wallets or people.

They are distinct. vBNT exist. It doesn’t matter who owns them or how many. Every vBNT can be obtained in an equal way whether owned by person A, B, or C.

It requires 66% of the active vBNT to decide the path forward.

35% of the active vBNT can call bullshit.

This is how voting with a quorum and a threshold works. A small group of users tried to pass a disgusting and aggressive extension to rewards without regard for the health of BNT. They did not have 66% majority and they were sanity-checked by the small minority.

This is HOW DAO’s are SUPPOSED TO WORK.

The minority here won. They sent it back to the table for a re-work. They didn’t abuse anything or force anything through that others didn’t want. They simply prevented a power coup.

The ego to just propose the same thing again is mind blowing.

My last thoughts. I will continue to monitor the thread before vote comes to see if any sensible changes are made.

If no adjustments to emissions are made and a sensible plan for going forward, my vote remains STRONGLY AGAINST.

FYI, your position about tying LM rewards to how profitable (at least I think that’s what you are trying to convey) pools are is reasonable for renewals on existing pools that already had an LM campaign (and potentially the new LM program might take that into account? Too soon to say, we don’t know.).

I don’t think that should be a factor for new LM campaign to attract new communities. A perfect example of this are the NDX, MPH, and most recently WOO communities. We are essentially subsidizing some of these pools (I don’t think their volume is great yet) with LM to bring awareness to our platform and onboard new users. These users might not be aware about single sided staking or IL protection and might stick around and LP in other pools. I don’t necessarily see this as a bad thing and consider it the cost of user acquisition.

On the other end of the spectrum, the community has actually voted down renewals on pools that haven’t perform great. Some of these have been OCEAN, UNI, GRT, REN, etc… I don’t think the community is here to infinitely print money and they understand when rewards should be cut as well as extended.

4 Likes

This has been my understanding since before I owned any BNT (I came here to stake my ETH), but it seems that @BurnVictim fails to acknowledge regarding the purpose of LM rewards and how the community has decided to initiate, renew and end them as the DAO has deemed appropriate.

3 Likes

Not extending the LM rewards especially for WBTC and LINK would be a big mistake. There is no reason why tokens most people never heard of should be getting LM rewards while the important pools are not getting renewed. If you are so strongly against inflation, LM should be stopped for the whole platform, not just for the biggest pools. But yet the same wallets voting against LM in essential pools voted just a few days ago to activate LM for WOO. If it was really all about inflation concerns, they would have voted against all recent LM extensions/activations.

I am strongly in favor of this proposal and encourage all to vote for it.
If these proposals don’t pass, BNT holders who put their BNT in the biggest pools will get their BNT diluted compared to the smaller pools with active LM. People who trusted in our biggest pools will be forced to pay fees to move their BNT stacks in smaller pools with active LM, which leads to the liquidity of the most important pools getting drained.

There is no reason for such a risky and unnecessary step. It would hurt smaller holders who have only recently (re)staked their assets in the biggest pools, thinking these are the most likely to get renewed. We saw healthy growth in the last months and especially now with v3 we will have big changes anyway going forward.

3 Likes

I don’t really wish to argue the economics of it, rewards will have to end at some point. But it seems like a rash decision to upset the current state of the protocol without all the information available to us re V3.

There will be plenty of time to make a more informed decision in the future once the impact of V3 can be taken into account.

3 Likes

The extension to the existing pools have not changed since the previous renewals for these pools (which passed successfully) were put up to the DAO. In fact, wBTC/ETH/LINK have had previous extensions at the current rate since the LM campaign for these pools started. I think you have been a BNT holder for a while (from looking at your twitter threads) and it would have been great had you express your thoughts/opinions around these renewals previously (changing the emission rate) when they were put up to the DAO. A reduction in rewards in the past could have been possible but with current dev efforts focus on V3 at the moment, this seems not feasible.

The stable coin pools had a drastic 50% reduction in rewards which required significant dev time to make happen. This happened roughly 2-3 months ago and had you raise your concerns for the other Large cap pools at that time, I am sure that an amicable solution could have been worked out.

4 Likes

Sharp rise in vBNT staked for governance:

Changes to proposal being debated by the community (happy to gather more, please suggest below):

  • Is it really not possible to lower LM rewards emission for some pools?
  • For how long should the LM rewards run for?
  • What about changing the LM rewards split? I’ve read comments from 80% for BNT side to 100%.
  • Stablecoin pools bring additional risk to health of protocol because of IL. Is it reasonable to remove LM rewards from these pools? Especially on the TKN side?