Proposal: Move v2.1 liquidity to v3

As this is a highly sensitive topic, I think the community should take more time to assess the different implications and consider all the different options and how they affect different LPs.
I don’t know if there’s a “fair” option at this point though, seems like any option is going to negatively affect some LPs.
Maybe it should also be handled in a per LP basis regardless of technical complexity.

4 Likes

The problem is that v2.1 people are highly privileged, if they are allowed to withdraw from v2.1. They basically have 2 pools then and if their v2.1 pool has a bigger deficit than the v3 one, they simply migrate.

2 Likes

I’m not sure it’s as easy as this.

When looking at the July 20 Surplus Google sheet, it shows a larger deficit for WBTC for v2.1 for example. But when you look at v3 deficit, it’s been going down as v2.1 WBTC whales have been moving over to v3 over the past few days.

Shows how complicated the situation is on a pool basis. All I know is that overall, as more tokens have been transferred from v2.1 → v3, the v3 deficit seems to be going down.

The notion that a decision can negatively impact 1 group of people over the other brings into question;

the problem that bancor recently went through - mass exodus, ILP minting BNT, BNT being sold onto the market

** is this a v2.1 or a v3 problem ? or is this a problem for the entire protocol?**
** was the BNT being sold onto the market only being sold on v3 pools? or were the trades also being sourced through v2.1 pools? **
** the portfolio page for v2 still shows users balances as 100% whole and that they still are entitled to ILP to make them whole… is this the case ?? **

If this was further discussed by the big brains of the project during the community call, then this could have given more clarity to all the users… however this has not been covered by the developers… and I cannot understand why

To answer my above questions , the recent events … mass exodus, ILP minting of BNT and selling of BNT is not a v3 problem, but a Bancor problem and this affects all users and all pools regardless of which version. The portfolio page for v2 users should get updated to reflect their specific positions. ILP was not just a guarantee for v2 but also for v3… until it was no longer.

I will continue to state my experience in the wbtc pool, as people migrate from v2 to v3, my IL has continued to reduce from 65% down to now less than 50% …

These positive effects of users migrating to v3 cause an immediate positive response to the wbtc pool, therefor its likely this will do the same for all other pools.

Users are currently divided on this topic, and justly so, because we have not been given clarity from the people in charge. I as well as many others are trying to shed light on this matter, however, this topic once again is not being openly discussed from the public figureheads // people who can actually sway opinions on this matter.

the mass migration is a quick fix, with immediate positive effects, will shed more light and clarity on bancors current situation.

Yudi…Mark… I implore you to dig deeper into this… and prioritize this as the 1st change that the protocol implements.

Who may I ask gets negatively impacted??.. when in fact… this problem was not a version problem… but a core feature of bancor problem which stretched across the different versions. We the users are all affected, however there are half of us who simply think are unaffected which is causing division and strife between community members. During this period of time, it would be beneficial for bancor and its community as a whole to get onto the same page and move forward together. Let’s make this happen and please move a little faster.

The decision makers… or people who have the power to sway public opinion… need to act a little faster… I respectfully would like to remind you that although it is prudent to take our time… this is also a battle against the clock… and if the market resumes its uptrend… and the deficits balloon before we minimize the damage and actually implement changes… this manageable problem can and will grow into something that is significantly harder to come back from. I’m not trying to light a, fire under your ass, but whether you like it or not… the flame has already ignited.

2 Likes

The problem is that there’s no “correct” way to do it - this is highly subjective.
I’m not sure the community even agrees on who owns the surplus in v2.1 yet - protocol or LPs?
If the surplus in v2.1 is owned by the protocol, it makes sense that the surplus itself should move to v3 (as a matter of fact, there’s a function that does that already, since it was part of the plan, eventually - but of course things are different when BNT distribution is off).
So maybe the community should evaluate that as first step before making a wider and much more complicated decision.

I have done as you mentioned and created a poll. with these results, I am hoping this will help provide clarity and give us the push needed to take action.

I also want to comment that it is right to discuss the surplus, but I also want your comment on LPs positions that are still currently in v2.1

  1. were they affected by the current events?

  2. are their positions still whole and are they entitled to ILP?

  3. was the problem at hand a bancor protocol problem or was it specific to only v3?

Don’t mean to target you Yudi, so perhaps you and Mark could shed light on these questions. thank you

Well these are actually easier to answer -

  1. Of course they were affected - BNT distribution completely stopped, it affects everything. Also remember that v3 deficit was mostly a result from v2.1 migrations.
  2. The DAO voted on stopping BNT distribution across the board, so relevant to both.
  3. Definitely a protocol wide problem.

But the hard questions are still relevant, even given the above.

Really appreciate your feedback on this matter Yudi !

1 Like

How is the community even allowed to have the surplus up for debate? It is verifiable and proven that the surplus is protocol-owned revenue per the smart contract design and the Consensys Audit for v2.1. The TKN LPs in a surplus pool have no claim to the surplus created from their participation in the pool.

Leaving this to subjectivity is further proving my points from telegram that due to the information asymmetry and non-technical expertise of many DAO participants, that it is egregious for TKN LPs to be at the wimb of governance outcomes after 6/19/2022, as there can be no confidence in the decision makers (DAO voters) having the necessary information to make informed decisions.

2 Likes

You’re describing a general issue with DAOs but it’s still the DAO’s decision.
Small correction: Consensys audited v2 - not v2.1.
But I think there’s generally an understanding that the protocol owns the surplus in v2.1, definitely according to the original design, but the protocol did use its tokens to compensate LPs for deficits in v2.1 as well.

Yes it is the DAO’s decision on how to handle the surplus protocol revenue, but the fact that a subjective vote for what the surplus even is, shows a blatant lack of understanding from the DAO participants to the protocol design they are making decisions on. This is concerning in my eyes.

https://gov.bancor.network/t/who-owns-the-surplus-within-all-bancor-pools/3926

1 Like

It’s not surprising though - most DAO members don’t have a deep understanding of the protocol design, most users don’t bother.

v2.1 people are not highly privileged. They simply trusted v2.1 design more and wanted to avoid potential il problems in v3 with changed stake parameters.

Even before IL protection getting lifted, they had the privilege to stay in v2.1 while newcomers wouldn’t be able to. That’s not due to privilege that was bestowed upon them. That’s because they staked early into v2.1 and did not move.

This is like saying very early BNT buyers are privileged because they were early so let’s seize their assets.

2 Likes

judging from the vote, most people seem to have a grasp of the surplus and a general understanding.

I dont see why you would feel this way, when just moments earlier Yudi said ^^^ above

“The problem is that there’s no “correct” way to do it - this is highly subjective.
I’m not sure the community even agrees on who owns the surplus in v2.1 yet - protocol or LPs?
If the surplus in v2.1 is owned by the protocol, it makes sense that the surplus itself should move to v3 (as a matter of fact, there’s a function that does that already, since it was part of the plan, eventually - but of course things are different when BNT distribution is off).
So maybe the community should evaluate that as first step before making a wider and much more complicated decision.”

the vote is simply a poll for a general consensus. with everyone on the same page then we should write a proposal to do this… or include in within another future proposal…

at the moment and time… the DAO cannot seem to agree on any changes at the moment… and what we need now is for everyone to come to agreement on various changes and begin implementing them rather than bickering back and forth and getting no where

1 Like

The team should note that there are obviously many more people affected by IL in v3 pools than v2. So asking the crowd if they should loot the v2 pools is no different than voting to seize assets that belong to the foundation.

Just like how the foundation is a different entitiy, so are the people who have funds in v2.1.

But it seems that when the discussion is lifted to foundation, the team says they have no control over those funds and that they are a different entity.

But when it comes to moving and forcibly haircutting v.2.1 users funds’ the team suddenly opens it up to discussion, although it’s clear that victimized v3 users would definitely seize the opportunity to illegally seize v2.1 funds.

Why does not the Bancor team respect the rights of Bancor v2.1 users but outright denies any possibility of a foundation bailout?

Why does the team not want to touch the foundation, but see no problem in unethically forcing v2.1 users funds a haircut without their consent?

2 Likes

you dont understand the problem. this was not a v3 problem and v2 is not the solution.

the problem was ILP which stretched across ALL bancor regardless of versions

A mass amount of BNT was minted and sold while there was an exodus.

Users of v2.1 ALSO suffered major IL however the developers did not update the portfolio pages of v2 users yet to reflect their current holdings.

A force migration is not robbing users of funds… your funds were already taken away… its just not being displayed

1 Like

For avoidance of doubt, I am an existing V2.1 LP in the surplus Chainlink pool and been very vocal in my non-consent for migrating to V3. I have a deep understanding of the v2.1 design, which I felt comfortable participating in, and chose to opt-out of any potential upside that may have arisen from v3, staying in a pool that is not prioritized in the liquidity router due to the upgrade.

I exercise my right to opt-out of any future protocol upgrades from v2.1 and directly withdraw from v2.1 with no impermanent loss protection. This right to opt-out is clearly defined in the terms of the V2.1 smart contract. Please see the Upgradeability Clause and link to github below:

V2.1 Smart Contracts

This is a massive breach of the protocols obligations if forced migrations from v2.1 are voted through. This not only presents potential massive damages to v2.1 LPs (the DAO members could potentially be liable as limited partners of the DAO), but has massive implications to the future of Bancor attracting new liquidity.

This would be the first breach of the obligations from the protocol. The turning off of ILP was not a breach, as it was voted on as multi-sig right in BIP21. Breaking these terms would be a massive breach of trust to existing and future stakeholders of the protocol.

It’s imperative the community honors the Upgradeability Term of v2.1. There is clearly non-consent from many 2.1 LPs, hence why their positions stay in 2.1. This is especially present in 2.1 surplus pools. One thing to consider in regards to deficit pools is that there is currently no UI information on the health of an LPs position. If these figures were provided in the UI, I would think 2.1 users in deficit would likely opt-in to migration to v3, given their right per the Upgradeability Term.

7 Likes

In regards to the surplus, it is clearly defined that surplus is protocol-owned revenue, and I believe the DAO should be able to move this as they see fit to best help the v3 pools.

It is important to note when considering migrating the surplus, that direct deposit of the surplus in v3 could drastically reduce its effectiveness given the instant haircut it will receive based on the current v3 deficit. There is 2 routes I think that can be taken to “lock in” the surplus and not have it subject to the deficits:

  1. Migrate surpluses to a holding contract
  2. Migrate surpluses off-curve on v3 (Yudi’s suggestion)

Both of these options serve the same purpose - to protect the surplus value and give the DAO the most ammo to attack the current problems and fix v3. This gives time for the community adapt and strategize how best to use the protocol-owned surplus.

Option 2 also is unique as it can kill 2 birds with one stone - protecting the surplus and honoring the v2.1 LPs right to opt-out of version upgrades. If forced migrations are passed, both the surplus and 2.1 LPs positions should be moved off curve to honor the Upgradeability Term, giving them time to opt-out of the upgrade (direct withdrawal from off-curve position on v3) or consent to the upgrade and have their positions moved on-curve. This significantly alleviates any technical debt that may arise from having to change the BNT Minter in v2.1 to allow direct withdrawals w/ no ILP.

2 Likes

There is not “team” - we are all community members, and no service provider actually suggested to make this move, it comes from unpaid community members.