Proposal: Move v2.1 liquidity to v3

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.

Holistic Solution That Factors All Stakeholders

After careful consideration of the state of both protocols and stakeholders’ interest, I believe the below solution takes into account everyone’s situation and is a positive interim step to moving the community towards a sole focus of revenue generating mechanisms. This potential solution solves for the following issues:

  • Minimizes technical debt for protocol developers
  • Honors the protocol’s obligation to fulfill the Upgradeability Term that exists for v2.1 LPs.
  • Compensates every former/existing 2.1 LP who helped create the surplus w/ the swap fees they earned.
  • Protects the $10M aggregate v2.1 surplus from price divergence and maximizes its capability to alleviate the problems of v3.

High Level Plan

  1. Alter the v2.1 BNT Minter to force a return value of 0 for ILP calculation.
  2. Reopen direct withdrawals for v2.1 pools w/ no ILP.
  3. Move the $10M surplus to a holding contract vault to protect its value and not be subject to v3 deficit.

Step 1: Alter v2.1 BNT Minter to Force Return Value of 0
One of the main reasons forced migration to v3 was implemented on 6/19/2022, was due to the v2.1 withdraw function incorporating the ILP calculation and minting BNT to LPs withdrawing. A simple solution to fixing this is changing the BNT Minter function in v2.1 to send a return value of 0. This would equate to no ILP and allow withdrawals to open with minimal technical resources required to implement.

Step 2: Open Direct Withdrawal for V2.1 LPs
After altering the BNT Minter to force return values of 0, allow V2.1 LPs to directly withdraw from their respective pools with no impermanent loss protection. Opening direct withdrawals is imperative to honor the Upgradeability terms of v2.1 LPs and give ample time for them to make a determination whether they want to withdraw w/ no ILP or migrate to v3 and participate in any future upside of future v3 revenue generation.

Step 3: Move $10M Surplus to a Dedicated Vault
Upon completion of reopening v2.1 pools for withdrawal, we begin migration of the $10M aggregate surplus into a holding contract (“vault”). The $10M figure is based on @yudi’s spreadsheet. This is significant capital to either alleviate the current deficits of v3, or as a capital injection into either the proposed DAI or Protection Fund models.

By moving the surplus to a vault we protect the capital from taking the deficit hit, and begin one step of the process for either the DAI or Protection Fund solutions, as both require a dedicated vault to exist. This effectively has no technical debt, as the vault would be created under either proposed solution upon passing in the DAO.

My own personal opinion, is that the $10M surplus combined with the Protection model is a very attractive solution. We are effectively re-implementing a sustainable form of ILP for all v3 participants. $10M of direct injection into the Protection Fund would start $50k daily distribution (0.5% a day), plus $10k in fees fees being added to the fund daily, at current volume, would provide the protocol almost a year to work on additional revenue generating features. This would be a significant boost to the morale of the community, and a significant step in the right direction to making v3, sustainable and profitable for all participants.

In summary, we can honor v2.1 LPs right to upgradeability term by reopening withdrawals w/ no ILP and create a $10M vault from the aggregate surplus to begin focus on deep diving either the DAI or Protection model, with the only technical debt being a minor change to the v2.1 BNT minter. Thank you for everyone’s consideration on this and I look forward to hearing feedback from the community.

cc: @yudi, @mbr, @lesigh, @ILRekt, @alphavalion, @Jindo, @ordinator

13 Likes

Well stated and well reasoned. The Ugradeability Clause isn’t something that should be up to debate. I feel like this shouldn’t be something that is even subject to a DAO vote because the DAO technically already voted in the “Upgradeability” clause.

By mandating a forced migration, token owners are no longer left with the choice to move into the new system or stay in the old one. The elimination of that choice is a material breach of the Ugradeability Clause.

Currently, forcing all v2.1 LPs to not exit unless going thru B3 is also a huge concern. You’re effectively trapping them in and depriving them of that choice upon exit.

The worst thing you can do is force migrate the v2.1 LPs into B3. Although that is a tempting solution for all vBNT holders, be warned of the legal implications of such actions. It’s direct contradiction to the Ugradeability Clause and would likely be a material breach of contract. Even in the absence of a lawsuit, there would be FUD to no end.

tl;dr - I think option to exit via v2.1 should happen even WITHOUT a vote because the Upgradeability Clause is crystal clear on its face, and these terms were already voted in by the DAO.

6 Likes

This point is moot as anybody currently in V2.1 that would benefit from moving to V3 can already do so.

It’s in no way an argument against enabling direct withdraw from V2.1.

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.

You keep repeating this although you’ve now been explained on several occasions that this is not true.

There are pools in surplus in V2.1, which are rightfully in surplus as those funds were earned during the duration of V2.1, and users never consented to using V3, thereby foregoing any benefit OR disadvantage V3 offered. So no claim to higher yields, and also no exposure to the surplus/deficit these new pools found themselves in.

No matter how times you claim “this is a Bancor propblem”, that doesn’t make it true. There is clear definition between the versions, as defined in this clause:

Trying to now simply adapt previously set terms because is it serves your personal needs better is highly immoral and would be absolutely destructive to the image of the platform and DAO. These terms exist for these exact circumstances: To protect individual users in case of grave issues.

2 Likes

“It is for the better of the protocol”.

This should never be the sole reason to act if it directly contradicts previously agreed upon terms. Neither from a PR, or moral standpoint. It’s basically admitting theft from a minority, to better the position of the majority, and the fact that the DAO will simply ignore any previous promises or statements made to better itself.

You have also been explained to several times that your opinion is incorrect.

How do you think a surplus even exists in v2.1… could the people who migrated over to v3 previously have aided & contributed towards the existing surplus in v2 from their previous LP positions ? Yes all the funds within the pool did. The surplus belongs to the protocol as a whole. NOT just the v2 users who stayed back.

In addition to this the bancor developers themselves do not see things the way you do. They already wrote up the code to port all the surplus from v2 to v3… hmm I wonder why? Also in case you didnt read Yudis previous message

"

Jindo

yudi

22h

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

Reply

yudi

22h

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.

"

You are trying to do what is best for YOUR personal needs vs the overall health of the protocol.

Also with this upgradeability clause you and friends keep referring to. The DAO can vote to change such clauses in events like what we are facing today. So the DAO can decide on this matter.

It is in everyones best interest to see Bancor recover and move forward. It is in YOUR best interest to try and hold onto whatever surplus you think you are entitled to.

You dont control the surplus and the surplus should go where it is needed to get us out of this situation.

Remain in v2.1 until you’re ready to withdraw. From the way you speak, I am sure that you do not plan to stay with Bancor. You’ll ditch at the first chance you get. So I nor ANY other long term user here will vote for something that will benefit someone who is packed and ready to go.

You got hit with IL just like everyone else, and I CANT WAIT for the developers to update the v2 portfolio pages. When that time comes, I hope you can spend more time on thinking how to fix this mess as a whole rather than simply try to protect your own personal lp position.

2 Likes