Proposal : Targeted LM Campaign for FARM to capture Buyback Mechanism

[tenzent]

Targeted LM Campaign for FARM to capture Buyback Mechanism

This proposal is expected to appear on Snapshot for voting on Monday 19 July 2021 at 12:00 pm UTC

TLDR;

• Enable LM with a smaller than typical 5,000 BNT Per Week for 8 Weeks.
• 50/50 Split Rewards on BNT/FARM.
• Will be Put up for 8 Weeks rather than the usual 12 in order for the DAO to not overcommit.
• Goal is to grow the FARM Pool to a depth higher than UNI.
• After Becoming the Biggest Pool the Harvest Team has stated in their previous proposal they would move their buyback mechanism to bancor, giving us a guaranteed amount of upside volume.

A Great Reason to Activate This Campaign Over Others.

The Harvest Team has shown great commitment, seeding the pool with an initial 500,000 USD worth of FARM. Furthermore this LM Campaign has a clear goal that is drawn from the harvest team’s original whitelisting proposal.

@redmption

Once the liquidity depth at Bancor exceeds the depth at Uniswap, the platforms profit share mechanism can be pointed at Bancor instead

As such this campaign would be considered successful if the pool’s depth grew larger than that of Uniswap, which has 2,800,000 USD Worth of FARM in it. At the current depth of our pool (656,000 USD Worth of FARM) this would mean we would need to add 2,144,000 USD worth of FARM to our pool, which translates to 35,275 FARM.

How does it compare to other LM Campaigns?

Where most LM on bancor before has historically seen a flat 12 week long program and 10,000-20,000 BNT minted per week (2x Multiplier after 4 Weeks), this proposal gives the DAO a lot more flexibility to cut off inflation while at the same time lowering the emissions to as low as a sixth of that of the previous minimum. This means that compared to a typical campaign where, at the very least, we are minting 240,000 BNT this LM Event only emits 40,000 - 80,000 BNT at it’s highest.

What does 5,000 BNT / 8 Week Period do ?

This has been discussed extensively here and is in some ways our first test should the DAO Vote to Pass it. (Link)

5,000 BNT per week annualized on our target liquidity of 2,800,000 USD at current prices of 3.5$ per BNT translates to 34%~ APY divided between BNT and FARM (so 17% For Each Side). This APY was targeted specifically because it mirrors the incentives on Harvest’s ETH/FARM Uniswap Pair. Assuming we are successful in siphoning both the liquidity of this pair and the volume from the Buy-Back mechanism there should be no reason why the incentives should not be instead moved into Bancor.

Benefits to FARM-ers

Farmers in the ETH/FARM Pool will no longer suffer from impermanent loss, on top of this their yield will be further diversified into BNT which can be compounded back into the pool or others to earn great yields. All ETH/FARM LPs will also no longer be forced to cut their position in half with ETH and will be free to use the other half of their position in other things or simply have a larger share of FARM all while earning trading fees and LM Incentives (and perhaps harvest’s own incentives ?).

Goals

This campaign should be considered successful if :

• The pool’s depth grew larger than that of Uniswap, which has 2,800,000 USD Worth of FARM in it (35K Farm at current Prices).
• The FARM Buyback Mechanism is moved over to Bancor.
• Optional : Would be nice to see Harvest move their FARM incentives over to the Bancor Pool from Uniswap, or some other form of reciprocity.

Voting Options

1. FOR - 8 Weeks / 5,000 BNT per Week.
2. AGAINST - No LM Rewards

[Hodlchamp]

In case others dont want to read the full extensive discussion heres a link to the particular post i found most useful. I think this proposal helps us give proper weight to different protocols and partnerships and does it in a more sustainable way for the future.

[glenn]

@tenzent

50/50 Split Rewards on BNT/FARM.

Just skimming the proposal, we should verify if this is doable.

[tenzent]

@MichalHerzyk or @mbr can clear this up, if it cant be moved from 70/30 to something different I’ll recalculate the numbers a bit.

[flymaster29]

It would be interesting if the developers did not make the ratio adjustable. [Versatility is a great feature to have]

[tenzent]

Hey guys, since we’ve been talking alot about using ranked choice voting for LM Rewards why don’t we instead use this as a Pilot for it. The options could be as follows :

1. FOR - 4 Weeks / 5,000 BNT per Week.
2. FOR - 8 Weeks / 5,000 BNT per Week.
3. AGAINST - No LM Rewards

I am thinking now coming back to it 8 Weeks might be a better option in order to not have LPs feel as thought they’ve been trapped in for the 100 Days but still have a buffer zone of time where LPs are seeing their stake grow natively instead. Might also make it more worth it for Smaller LPs of which Harvest has a lot of to enter. I adjusted the proposal with this in mind, lmk if you guys agree or not.

[glenn]

@tenzent

At the current depth of our pool (656,000 USD Worth of FARM) this would mean we would need to add 2,144,000 USD worth of FARM to our pool, which translates to 35,275 FARM.

Nice, we do have quite a few number of tokens to go in order to catch up:

@tenzent

This means that compared to a typical campaign where, at the very least, we are minting 120,000 BNT this LM Event only emits 20,000 - 40,000 BNT at it’s highest.

It’s actually higher, at 5K per week the range is 20K-40K at 4 weeks and 40K-80K at 8 weeks. That’s because if you everyone stays for the full campaign then they will get 2x rewards at the end.

Some thoughts from my end based on the volume of the pool:

Assuming a .2% pool fee with a daily average volume of $245K, this is roughly $490 in fees daily. If we go with a 4 week campaign and a max of 40K BNT emitted then we would roughly recoup this is ~286 days (could be a few days shorter or longer). Half of these fees go to FARM LPs and we should only take into account the fees that go towards BNT LPs and I would considered that we have recouped our investment when that side makes back the 140K (40K * $3.5) which is twice the 286 day estimate.

Out side of the above, my concern is that the following would happen should we have an LM campaign. We incentivize the pool and have FARM LPs move their liquidity here which will stick around for the duration of the campaign. When the campaign expires, we might have a larger pool but FARM is still incentivizing the UNI pool which means that as we peel liquidity from UNI then the reward rate on UNI will also increase due to there being a lower amount of LPs. There would be nothing to stop the migration from occurring in the opposite direction once our rewards expire and at which point we might be back at square one (our pool would no longer have a higher depth). Essentially, we might have given away an LM campaign and not achieved much in return.

The only way I see this working is if we incentivize the pool and also get FARM to agree to stop incentivizing the UNI pool (hopefully get them to move incentives to us). Unfortunately, even if they did do that and agree to incentivize our pool instead, we can’t support TKN side LM until this is in place when V3 launches.

[tenzent]

@glenn

It’s actually higher, at 5K per week the range is 20K-40K at 4 weeks and 40K-80K at 8 weeks. That’s because if you everyone stays for the full campaign then they will get 2x rewards at the end.

Fixed the Emmisions above, but i didn’t factor it in for both so propostionally it’s still the same % lower emmisions.

@glenn

Assuming a .2% pool fee with a daily average volume of $245K, this is roughly $490 in fees daily. If we go with a 4 week campaign and a max of 40K BNT emitted then we would roughly recoup this is ~286 days (could be a few days shorter or longer). Half of these fees go to FARM LPs and we should only take into account the fees that go towards BNT LPs and I would considered that we have recouped our investment when that side makes back the 140K (40K * $3.5) which is twice the 286 day estimate.

These numbers would change as well if the buyback mechanism swapped over to Bancor. It would be good to know how much volume exactly the buyback mechanism produces.

@glenn

The only way I see this working is if we incentivize the pool and also get FARM to agree to stop incentivizing the UNI pool (hopefully get them to move incentives to us). Unfortunately, even if they did do that and agree to incentivize our pool instead, we can’t support TKN side LM until this is in place when V3 launches.

Would your mind be changed if perhaps the Harvest team agreed to re-stake the BNT earned on their deposited treasury funds into their pool ? Would be cool if we could get the Harvest Team in here to talk about it.

As Far as the ability to incentivize the pools, FARM is a yield aggregator so they should actually be able to implement LM Rewards on their side through a vault (They already have a single stake FARM Vault that earns purely inflationary yield at a good 45%~, which is higher than the UNI Incentives). I think so long as they offer incentives equal to that of the UNI pool we would be golden.

[glenn]

@tenzent

These numbers would change as well if the buyback mechanism swapped over to Bancor. It would be good to know how much volume exactly the buyback mechanism produces.

Yeah, those numbers are from vision for the UNI-ETH pool which is what they are using at the moment for their buybacks (I don’t have access to the 60 or 90 day numbers which might be more indicative of what we will see in terms of volume)

@tenzent

Would your mind be changed if perhaps the Harvest team agreed to re-stake the BNT earned on their deposited treasury funds into their pool ? Would be cool if we could get the Harvest Team in here to talk about it.

Yes, but not so much as I care more about them actually moving their buyback mechanism over to us (we will recoup our cost in the long run). I am not sure if those LPs that migrate here will stick around after our campaign is over since they can go back to the UNI pool that has harvest incentives. When that happens, we will lose the depth in our pool and not have the buyback mechanism targeted here.

I think having the conversation with them is worth it since from their end having single sided staking, IL protection, with the ability to incentivize FARM LPs in the BNT-FARM pool is more than what they get from UNI. If that’s something that they can get behind when V3 launches and we do a round of LM to bootstrap from our end then I could see that working out better.

@tenzent

As Far as the ability to incentivize the pools, FARM is a yield aggregator so they should actually be able to implement LM Rewards on their side through a vault (They already have a single stake FARM Vault that earns purely inflationary yield at a good 45%~, which is higher than the UNI Incentives). I think so long as they offer incentives equal to that of the UNI pool we would be golden.

Yeah, if we can get similar incentives on our pool then I think at that point it is a no brainer for FARM LPs to prefer us.

Just for clarity, iFARM is their stake FARM solution?:

and this is their UNI incentivized pool?:

[mbr]

@glenn

Out side of the above, my concern is that the following would happen should we have an LM campaign. We incentivize the pool and have FARM LPs move their liquidity here which will stick around for the duration of the campaign. When the campaign expires, we might have a larger pool but FARM is still incentivizing the UNI pool which means that as we peel liquidity from UNI then the reward rate on UNI will also increase due there being a lower amount of LPs. There would be nothing to stop the migration from occurring in the opposite direction once our rewards expire and at which point we might be back at square one (our pool would no longer have a higher depth). Essentially, we might have given away an LM campaign and not achieved much in return.

My concern too.

It’s no secret that 3rd party incentives is an important part of Bancor V3. Assume that we are ready to migrate to the new system before the expiry of the LM program. We could liaise with the FARM team to ascertain their level of interest in providing their own external incentives to FARM LPs. It never hurts to have these kinds of conversations, and the FARM team and community have demonstrated a sincere interest in what we are doing.

[mbr]

@glenn

Just skimming the proposal, we should verify if this is doable.

Confirmed. We support custom splits in the contracts.

[tenzent]

Moved this proposals date to next week.

[glenn]

@mbr

Confirmed. We support custom splits in the contracts.

Thanks, Mark.

@tenzent, from the community call, It looks like the offline discussions between Bancor and Harvest are progressing fruitfully and there is potential that they would move their LM program here. I think we can wait until next week for the vote?

[tenzent]

exactly my thoughts.

[redmption]

Hi everyone! Red from Harvest

We are still working on this request internally, sorry for the delay. We have been launching amazing new things all week as we release our v2 which includes a new UX, new products and multiple collaborations. We might even have a new blockchain to farm on very soon

Rest assured we love the enthusiasm we have seen from the Bancor community and we are excited about the opportunity here! Back soon with more feedback.

[tenzent]

Excited to see what new things are in the works in Harvest ! Take your time.

[tenzent]

Going up for a vote this Monday. I changed the vote to be a simple for/against since we don’t really have a way to decide supermajority for these cases yet. Sincerely hope people will vote FOR, the harvest team is really trying to involve itself further with us, we can start to grow a fruitful relationship and get that juicy buyback.