This proposal is expected to appear on Snapshot on June 5th. If you want to participate in this decision, make certain that your vBNT is staked for voting prior to the commencement of the voting period.
TL;DR
The BancorDAO recently approved a diminishing emissions schedule for USDT, USDC, DAI, LINK, ETH and wBTC (colloquially referred to as the “primordial pools”).
This proposal seeks to repeal these decisions, and effectively cancel the inflationary rewards schedule for these tokens.
Instead, the same emissions budget is proposed to be redistributed exclusively to BNT stakers - a total of 980,000 BNT over a six-month period.
Clarification
The other established programs remain unaffected:
The once only, 50,000 BNT “dual rewards” program, which creates an incentive for other projects to use the Bancor 3 autocompounding feature is unaffected. This program has been previously established, and maintained by governance with the evolving Bancor 3 deployment schedule. The most recent addendum, approved via Snapshot voting, imposes a deadline of August 31st for projects seeking to use the program.
The motivation for this effective repeal is that the standard rewards contracts were not designed to support this type of incentives system. The “dual rewards” program was envisioned as being the main, perhaps the only use case.
The misuse of the standard rewards contracts has the following issues:
The liquidity providers in these pools seldom keep their BNT. It is the opinion of the author of this proposal that the stress on the BNT token caused by the rewards programs on these pools is unnecessary, and ultimately harmful.
The user experience is already compromised. Due to the short duration, and number of standard rewards contracts required to facilitate the schedule outlined in the proposals being repealed here, users are required to perform multiple tasks, including recurring stake/unstake actions.
User confusion and frustration, and degradation of the BNT token, culminates in a situation that is decidedly worse than simply having no emissions at all.
Refocus on Sustainability
It is the opinion of the author of this proposal that liquidity mining emissions have run their course.
Inflationary rewards programs are valuable in their ability to drive engagement, and further distribute the token.
Rewards programs are not true yield.
The longer we rely on BNT inflation to appease liquidity providers, the more we are contributing to the systemic misunderstanding of the value proposition of DeFi.
The version 2.1 rewards schedule could be viewed as the early adopter advantage - something which is only valuable if the early adoption period is ultimately concluded.
Bancor 3 is highly competitive, regardless of inflation rates. It has become part of the Bancor community culture to assume that inflationary tactics are necessary (they aren’t) and that liquidity will flee from the system en masse immediately (it won’t).
The longer the community continues to lean into the inflation paradigm, the more our project is conflated with low-brow yield farming and “ponzi” tokenomics, which erodes the reputation of the project and its community.
Bancor 3 BNT Stakers Advantage
The economic impact of distributing BNT back to those already participating in the network with their own BNT is muted compared to those participating with TKN (non-BNT).
Since the BancorDAO has already approved the emissions for 980,000 BNT back to network participants, this proposal seeks to reallocate that same amount with a standard rewards contract for bnBNT instead of bnTKN.
Further, this proposal seeks to establish the following points, which may be referred to in future governance conversations, but aren’t a binding aspect of this proposal:
The standard rewards contracts used to incentivise BNT stakers is a temporary measure only.
The autocompounding mechanics are superior in every regard; after the relevant contracts are deployed, and the network is stable enough to commence their operation, there is no reason to ever use the standard rewards contracts to incentivise the BNT community itself ever again.
The standard rewards contracts are a bootstrapping tool; to consider BNT inflation as a means to maintain participation on the protocol - BNT and TKN liquidity providers alike - is a cheap and dangerous paradigm, and has no place in an informed conversation about the utility or value proposition of Bancor 3.
All BNT emissions to anyone, including BNT stakers, is paid for by BNT stakers eventually. There is no free lunch - if you give away tokens for free, you can’t act surprised when others value it accordingly.
Therefore, the creation of a six-month staking contract is in-line with the community expectation.
BNT Standard Rewards Contract: Conditions
The proposed 980,000 BNT emissions distributed via a standard rewards contract to BNT stakers will commence after the whitelisting process has completed.
Therefore:
The emissions rates towards the aforementioned tokens ceases immediately.
Emissions towards BNT stakers via the proposed standard rewards contract will not commence immediately, and has no fixed commencement date as of this proposal.
Rather, the commencement of the standard rewards contract for BNT stakers is defined as being the period of time following the on-boarding of the whitelist from v2.1, with the following guidelines:
The protocol holdings of bnBNT are sufficient to on-board no less than 90% of the remaining BNT from v2.1.
The entire token whitelist is supported on Bancor 3, with at least 50 pools having completed the bootstrapping procedure, and available for trading.
This is critical both from a protocol health perspective, and also from a user experience perspective, as the rush to participate in Bancor 3 to collect these inflationary tokens may outpace the underlying utility of the network while the protocol is still in its establishing phase.
Voting Instructions
Vote FOR to repeal the prior decisions on USDT, USDC, DAI, ETH, wBTC and LINK, effectively nullifying BNT emissions on these tokens indefinitely, and reallocating the recently approved 980,000 BNT incentives budget exclusively towards BNT stakers over a six-month period.
Vote AGAINST to uphold the prior DAO decision to use a total of 36 separate rewards contracts to support a diminishing emissions rate on USDT, USDC, DAI, ETH, wBTC and LINK over a 6 month period, with no changes to the incentives model for BNT.
If we allow ourselves to make the assumption that the “rewards claimed” (rather than restaked) is a litmus test for how much is being sold, versus held by recipients, then a compelling interpretation for what the fate of BNT is in the current paradigm is as follows.
The rewards distribution on v2.1 is 70% to the BNT side, and 30% to the TKN side. The restaking versus claiming quotient is very nearly identical, at 68.6% and 31.2%. Without scraping each user position and determining precisely how the rewards are being accumulated versus dumped on the market, the strong correlation between the gross amount of rewards given to TKN stakers, and the amount being dumped, speaks for itself.
Mark - you suggested that the existence of LM rewards is akin to the Bancor house being “on fire” in the Bancor Liquidity Providers’ Telegram group. Though that comment may have been directed more firmly at the receipt of BNT LM rewards by TKN LPers, is there any great need to reallocate these BNT emissions to BNT LPers? Has any thought been given to rescinding them altogether?
I suppose one benefit of the reallocation is to provide an incentive to BNT LPers to vote in favour of this proposal. These BNT LM rewards sitting in the hands of BNT LPers (rather than TKN LPers) is presumably the lesser of two evils…
Just adding some info about how much $BNT these tokens will be receiving over the course of the 6 months if the DAO does not do anything:
Token
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Total
ETH
100000
80000
60000
50000
40000
30000
360000
WBTC
35000
25000
20000
18000
16000
10000
124000
LINK
35000
25000
20000
18000
16000
10000
124000
USDC
35000
25000
20000
18000
16000
10000
124000
USDT
35000
25000
20000
18000
16000
10000
124000
DAI
35000
25000
20000
18000
16000
10000
124000
980000
Essentially these are meant to taper off slowly until rewards run out 6 months from now.
Note that the current standard rewards program for $BNT LPs called for 35K to be distributed for 1 month. The program started since B3 went live (5/11) and it will end on ~6/11. If this proposal does not pass then a separate proposal will be needed as a stop gap for BNT LPs until AC rewards go live.
Looks like this already went to Snapshot but I’d like to respond for future reference.
Like @TooOrangey said, I’d MUCH prefer the rewards just be cancelled entirely. I am at this time 100% against any more Standard Rewards on the BNT side and only partially in favor of Dual-LM for Token side.
Ideal: Remove these 980k BNT entirely and put them back in the budget for future use or just burn them entirely. If they MUST be used add them to auto-comp’ing bnBNT rewards. I’m not interested in burning ETH L1 gas for claiming and staking at all. Use the Auto-compounding and STOP Standard rewards entirely.
Compromise: Shorten the 6 month timeframe to 3 months to make the APR more attractive to TKN LPers to migrate and then dump on the market.
Aggressive: Mint the BNT, but convert (using the Vortex ideally) to bnTKN and burn on the TKN Pools. This could even be allocated to Token Gauges that vBNT vote for weekly/monthly and start vBNT Wars.
I’m 100% sure that TKN side are not aware that each month they’ll need to claim from Reward Contract 1/6, 2/6, etc. and manually manage each LMR position 6 times. This was not communicated and will lead to immediate dumping.
The rewards would be in bnBNT or raw BNT that must be Claimed > Staked || Sold ?
This will be a single contract with a single end date?
Agree with this analysis 100% put would much prefer to see actual data of # of Positions Claimed AND DUMPED vs just claimed. I can say anecdotally that I claimed 4/5 of my rewards yet sold 0 BNT. However the 70/30 split is just too perfect over an entire year to assume that this workflow is a high percentage
When a standard rewards program expires, the UI will show you that you are staked in an inactive program that requires you to unstake and restake:
What this means for LPs is that they will have to unstake at the end of each month and restake in order to continue receiving rewards. They don’t have to manage 6 different reward programs at the same time, only the current active one. They can claim their BNT rewards from all programs at any point in the future since what they have earned does not expire.
There is the additional side-effect that the longer BNT is claimable from STD Rewards contracts the long vBNT ratio will take to recover. Very non-ideal to continue raw BNT printing for 6 more months
If at all possible I would like to see a Ranked Choice Vote here. My personal opinion is that if we’re going to get rid off the TKN rewards then there is no need to shift them over to BNT Stakers since it’s ultimately still harmful (Although less so). I know the proposal is already live but in hein-sight I think voters should have been able to choose between;
Shift Rewards to BNT Stakers.
Cancel Rewards Altogether.
Lower the budget to a more reasonable amount and keep it on TKN.
Lower the budget and split it between TKN/BNT Stakers.
Do Nothing.
Using the numbers @glenn provided it looks to me these inflationary rewards will bring in about a 12% APY on BNT for the first month which I think is okay but I’d like for there to be an addendum to have these rewards turned off when the autocompounder gets turned on since we project a similar APY anyway when on. My 2 cents.
On board with the ideal scenario. Any opportunity we have to curb inflation of BNT I’m in favor of. As there is no current timeline in the proposal for the re-distribution of the 980k BNT, if possible, another proposal to remove the 980kBNT completely should be drafted.
