What is the general purpose behind this proposal? I think the protocol is in a very fragile state and until new solutions are implemented and there is a sizable backstop for ILP I don’t see the benefit for individual depositors for doing this, Some points:
The warning alone will a) deter some people from ever putting funds in or b) people who ape in without reading will be in a situation they don’t fully know or understand.
Anyone who puts in TKN will immediately have it sold as arbitrage, thus will immediately have ILP+rebalancing deficit. The protocol will become a pariah in DeFi and a blackhole for user funds.
In addition to losing funds immediately, 95-100% of fees will go protocol so revenue for those new LPs will be very small. Yields are higher elsewhere for newer users.
If there is an increased in liquidity pools in deficit, while the percentage of deficit will be the same, there is a risk that the amount in dollars will balloon. Bancor DAO could be on the hook for even more money to cover for ILP if and when it comes on. It could also delay complete ILP if there is a boost in liquidity. Bancor DAO took on the risk by providing ILP insurance and if an insurer was in this position the last thing they would want to do is take on more risk.
I see protocols or institutional investors bring on tokens. Most institutional investors worth a dime wont take the risk. Protocols whose primary liquidity on bancor (e.g. ShibGF) could boost their token, but opening all deposits is IMO not the way to do it if only protocols provide liquidity.
TLDR: from an individual user perspective, this proposal will deter informed LPs and trap foolish ones for the sake of a slight increase in liquidity.
Re-enabling DAOs with majority of their liquidity on Bancor makes sense, there is less chance for IL, since arb activity would be more difficult, in addition if the DAO itself is the major bnTKN holder and is fine with having more liquidity but with potential for IL.
Yeah but that is not how the proposal is written. DAO liquidity and individual approval from Bancor DAO makes more sense instead of this free for all model.
I was replying to your comment, this is a venue to give feedback so that the proposal creator can reflect and make changes, or get rid of it all together. So, yes…that is not how the proposal is written at the moment, but that can change tomorrow.
the app should definitely need to change to reflect the status of the pools etc. - I imagine that’s not an insane amount of dev time
we could potentially define some constraints - like only allow deposits if the deficit % is lower than X - this will prevent (on the contract level) depositing into pools with large deficits
some pools are currently in surplus and some projects still want to create new pools and it will allow that
At very least open the deposits for BNT. It would possibly reduce the total supply and push down vBNT price against BNT => more effective vortex. This is just a speculation, the market will decide what happens.
I have previously voiced ethical concerns about allowing the protocol to accept additional liquidity while the product is under stress. However, it should be said that there are those who are still motivated to provide liquidity on Bancor for certain pairs.
If an argument can be made for appropriate warnings, especially via the app, that the ILP mechanism is currently disabled, and that participants understand how the directional risk affects their position - then I am happy to rescind my objection.
You also need to state clearly in large print, “YOU WILL BE TAKING AN UNREALIZED LOSS OF X% IMMEDIATELY UPON DEPOSIT” for each TKN pool that is in deficit.
And which pools are people still motivated to provide liquidity on Bancor? And what is the reason for such motivation? Do they just believe that BNT will outperform their token? Or do they just want to provide their own token single-sided and don’t mind taking the risk that BNT tanks against their token?
Many token projects want liquidity for their token and are even interested in providing their own external ILP.
Single token staking is still a very interesting option for many.
Also, there are a bunch of pools in surplus, maybe it should be limited to pool in surplus.