This proposal is expected to appear on Snapshot for voting on 2022-07-24T05:00:00Z. Make sure to stake your vBNT for voting before this date and time to participate in the DAO decision.
To pass, this needs 35% Quorum and 66.7% FOR
TLDR:
Deposits on all pools was paused as part of the emergency action so that issues could be addressed and new depositors, particularly those working directly with the contract, wouldn’t make deposits unaware of the current situation and lack of BNT distribution.
The protocol is now a month into the scenario, adjustments have been made to redirect majority of fees to deficit reduction, and news of the current Bancor state is very public and known.
It is now time to open deposits back up for those interested in placing liquidity with Bancor.
Opening all pools across the protocol enables Bancor to continue the moving forward process, accept more liquidity, generate more fees, etc. while working on other initiatives.
This proposal seeks to open deposits on all V3 pools with a disclaimer on the UI that clearly states BNT distribution is off, and that attempts to withdrawal while any pool is in deficit state will require less tokens being returned than deposited, or wait till pool is in surplus to withdrawal.
Risks if passed:
Deposits may not come and present additional FUD opportunity against Bancor.
Depositors could provide liquidity and still have deficit increase.
Benefits if passed:
Much needed liquidity flows into Bancor
Protocol shows it is moving forward and let’s the market decide whether they want to provide liquidity.
Risks if NOT passed:
Protocol continues without any means of bringing on new liquidity
FOR - Open deposits for all V3 pools.
AGAINST - Take no action
May be good to implement after a direction is chosen (on the three recovery options, all of which are great) as well as some additional fee/revenue generation ideas to also openly show the potential benefits to depositing along with the risks. Overall though, I’m generally for this, giving the market an option with all risks/benefits presented. Also, this might have already been implied in your proposal, so apologies if I misread anything.
The FUD/hate aspect is ever present, I think to a certain degree there’s little room to the downside, as the loud and vocal group is going to create an opportunity to complain in any scenario. That’s the hidden risk to constantly hating on anything; if your anger is already at a 10/10, then it frees everyone up to try things if that makes sense. If we’re already getting all the heat, might as well keep going.
Certain things would obviously need to change. This verbiage would be a liability.
I think you’d have to disclose that you wouldn’t be earning fees and rewards and you wouldn’t be maintaining 100% upside exposure, given that all the fees will go towards the vBNT burn and you’d be subject to less than 100% upside if your token were to increase more than BNT.
That’s why I agree with @PaperStreetCapital that it may be good to implement after a direction is chosen, so that it’s not all downside risk by depositing. The only upside would be if BNT rises against your token…So it’s purely dependent on the impermanent gain aspect of LP-ing for the time being. The APRs would literally have to be 0% on all those pools.
Will not work. Nobody has money to put under a meaningless risk. Unless the existing users are made whole and the contract is changed, the new people don’t come. 2+2=4
I agree a direction for handling fees is necessary. However, with BNT minting off and vortex cranked up, there is a solutions in place at the moment that validates opening up deposits IMO. I agree, it should be up to the market now to decide if they want to provide liquidity. As the protocol heals, deficits are reduced, etc. I believe you will see more deposits come back and to prevent that from happening is bad optics IMO. FUD will always exist, but some are more sensitive to it than others. I personally am not concerned about additional FUD, but felt it was important to outline.
All important considerations. I believe the more the protocol shows it is moving forward, the more confidence will come into the market regarding Bancor and the BNT token could outperform TKN in many situations, which would reduce deficits quicker than most any other solution that could be put in place. As situation improves, more yield could be directed towards TKN which lifts APR and increases benefit for providing liquidity.
Yeah I agree, all it comes down to is its opening a door, and everyone is free to come in if they wish. At a certain point too, there will inevitably come a time when deposits need to be opened back up, so why not start at least planning for it. Hardly any downside.
Not a matter of being easy to say and the comment still applies to TKN as well. More deposits of TKN would also reduce the deficit within TKN positions. This is true. However, to your point, we can’t control whether people would see such deposits as attractive or non-risky…which means some, even most, may not entertain providing liquidity till the environment looks more favorable. Either way, opening deposits doesn’t hurt the TKN scenario and only offers potential upside. If you disagree, please help me understand.
I’d consider waiting until more solutions are developed. Not that this would hurt anything much. The only risk is inexperienced user depositing without properly reading/understanding the notice (which would just cause more FUD)
UPDATE
Had some time to consider this subject further and have come to the conclusion that it would be irresponsible to reopen deposits on pools with existing deficits under the current conditions.
There is still no watertight data on how potential recovery measures will actually work out. Reopening deposits now runs the risk of increasing deficits in $value if BNT continues to underperform, brings more users into potential loss, and and if these two events occur, further damages the protocol’s reputation.
After doing some more thinking on this, I think this is a really bad idea that would do more harm than good.
First, you’ll almost inevitably have an unsuspecting ape depositing LINK into the pool not realizing that he’d be taking a 45% unrealized loss upon deposit. And once he withdraws and discovers he suffered a huge loss, he’ll FUD Bancor to no end.
Secondly, in the absence of evidence that the new features will even work, you risk increasing the deficit amount by more than the status quo and prolong the time that Bancor will be in deficit. Imagine you get more deposits come in and the new features are not even implemented or they are implemented but fail to realize their intended benefits. Then BNT continues to fall in price relative to ETH/LINK/WBTC, and you will then be in even more deficit than had you not accepted those deposits.
For these two reasons, I am opposed to opening up deposits on Bancor in the current state.
A lot of good momentum on productive solutions, and I think we have plenty to work on in the meantime. I like how we all thought through things and just let the idea breathe. Thanks @Linksemper for throwing it out there and getting a ball rolling.
With BNT minting off we should ensure all new deposits go into SFL and not the trading curve.
This would essentially be a donation to help pay down the deficit and need to be communicated well before allowing the Depositor to proceed.
I’m against operating with the Trading Limits currently set, and against increasing Trading Limits anywhere without data and analysis on Fees vs IL exposure. Proper Trading Limits need to be defined and a model developed so we don’t take on more IL exposure risk than is necessary.
At the minimum, need to enable deposits for BNT, since at the moment the big reason of getting BNT to then deposit to receive vBNT is no longer valid (or if we want, we can use this time to transition to a non user BNT liquidity model, so that vBNT is only available through trading) . After that, if enable all pools make sure a disclosure on the Website of the deficit and as stated before that all deposited going into idle vault for now (although these deposits will not help with the deficit because they generate additional bnTKNs), Also, instead of all pools, we could do pools with IL under a certain threshold, or with little external markets, etc.
