Proposal: (Focused Discussion on) Burning BNT collected by the Bancor Vortex in the v3 vault when it reaches 1m

This proposal is expected to appear on Snapshot on Sep 25th 2022, 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

  • Burn the BNT collected by the Bancor Vortex in the v3 vault when it reaches 1m

Intent and prior discussion

This proposal seeks to trigger a burn of 1m BNT once collected in the Bancor v3 vault. At the time of writing, there is approximately ~868k BNT that has been collected so far. Given the current accumulation rate, 1m BNT can be expected to be hit within the next 30 days.
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 community sentiment that the protocol should burn BNT as a trial to see if it will have a positive impact on BNT. DAO members have cited the fact that “burns” have a psychological effect on market participants and the same can happen if such an experiment is allowed to be carried out. For this reason, this proposal is seeking a one time burn of 1m BNT when this amount has accumulated in the Bancor v3 vault. If the community determines that this has a positive impact on the BNT token then future proposals can be expected specifying new BNT burn amounts

Voting Instructions

For: Perform a one time burn of 1m BNT collected in the v3 vault
Against: Do not burn BNT collected in the v3 vault

9 Likes

@foxsteven @ashachaf @ZenoBNT @Jindo @TheOneJM
I’d like to get some final, focused discussion on the discrete topic of burning 1m BNT as a marketing tactic. This would be a one-time event, with no required follow up burns, but does not preclude any further attempts no matter the (IMO subjective) determination of “success or failure”.

2 Likes

I’d like to see ideas on HOW we market the burn and let non-community members know that the event is taking place in order to best create interest. Time is short before the 1m is reached and I don’t want to see it wasted.

2 Likes

Adding link to YT about the vBNT vs BNT discussion which happened recently:

also, linking another relevant forum topic:

1 Like

i am in favor of this but as @glenn pointed out, there is an ongoing conversation on this matter.

once we vote if we should burn vBNT or BNT, we can move to the gamification/implementation details to boost exposure of this action.

2 Likes

There are now 888k BNT in Pending Network Fee. I guess the burn could hold off if the value tops 1M and just burn the 1M and leave remaining excess in the vault?

2 Likes

I guess the protocol can always burn the 1m BNT at some planned date in the future if this proposal is something that the DAO votes for. It doesn’t have to be exactly when it hits 1m BNT, collected (we all know that this will happen) but a date can be picked that lines up with some important event (e.g. can get creative and line this up with halloween etc…).

1 Like

I would like to join the discussion, share my thoughts and viewpoints:

  1. Burn BNT

    • Economic value?
      • Directly reduces BNT supply;
      • increases the percentage of staked BNT in the protocol from 48.3% to ~48.9%;
      • Marketing? Hype? Good PR?
    • Public perception?
      • Locked in the LPs by removing the IL protection (now IL 60%+) and pumping their own coin from the fees taken from LPs.
  2. Burn vBNT

    • Economic value?
      • Locking in more BNT at discounted price [(vBNT+slippage)<BNT];
      • diminishing the future earnings of the protocol [not relevant when network fee is high, or TKN liquidity is increasing];
      • creating deficit for vBNT LPs that needs to be compensated in the future.
    • Public perception?
      • Same as burning BNT, maybe a little worse because public doesn’t understand.
  3. Selling it for other coins to compensate the IL of LPs

    • Pushes the BNT price down and increases the IL = economic suicide → Big NO-NO
  4. Do nothing. Leave it as a reserve.

    • It is out of the circulation
    • IL works both ways → if the price of BNT suddenly pumps against TKNs IL increases → good opportunity to buy TKNs, fill up the IL protection reserves and push down the BNT against TKNs [Not very probable in the current market conditions]
      • Gives the DAO a tool to control the BNT price and manage the IL → acts as a crypto price index (assuming TKNs in the IL protection reserve), closely follows the price movement of these tokens to reduce IL → Here is a paradox. Most of the user owned BNT should be burnt or locked for the BNT to be able to follow the TKNs price naturally
    • Buy vBNT while still at discount and hold for future protection compensation (Testing of the new TKN reserve system)
    • Stake it in the protocol [smart thing to do]
      • decreases the protocol owned BNT (protocol fee generation unaffected, because the BNT is owned by the DAO)
      • it will act virtually as burning, decreasing the Total supply
    • Builds up ground for future DAO owned liquidity [Vision: there is liquidity and fee generation even if all the LPs leave, no need for marketing, just good mechanics, the protocol is destined to grow in the long term]
    • Reminder: The DAO can’t mint BNT at its own volition

The governance sentiment is leaning towards the BNT burn. I think it’s a marketing stunt that can be successful or not. I would suggest to burn only a 1/2 (500K BNT); see how the market reacts and then decide the next step.

The best decision IMO is to prepare for the new TKN reserve system and keep ammunition for accumulating TKNs to reduce the deficit when BNT pumps. If we burn the reserves and there is no positive PA on BNT, we start from zero and the protocol remains in stress (Reserve = breathing space, it provides the option of bail out if reserve/deficit is >1).

I’d suggest to stop the automatic vBNT burn and build up a 0.3M vBNT reserve ASAP. There is ~3.156M vBNT in the v3 vault with a current deficit of 8.06%, that makes ~0.276M vBNT and the vBNT:BNT ratio doesn’t seem to go under 0.8 in the near future. The best thing to do is to prepare for a scenario where the vBNT:BNT will be permanently above 1. If the ratio dips we can always burn the vBNT reserve and buy back more.

6 Likes

@glenn @tfns
Request elevating for Level 2 in prep for Vote on 25 Sep. 3 days have elapsed and I think we’ve linked all discussion in this thread.

3 Likes

https://vote.bancor.network/#/proposal/0xf0502de1e9b84548ea954d8f1e93fc3a603eac28cf6389dabaec5e1a2bfa72bf
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