Proposal to onboard PDI with 100k BNT trading limit

Proposal to onboard PDI with 100k BNT trading limit

For this proposal to pass, it requires a 35% quorum and 66.7% supermajority.

This proposal is expected to appear on Snapshot for voting on 2022-05-07T23:00:00Z. Make sure to stake your vBNT for voting before this date and time to participate in the DAO decision.

TL;DR

  • Proposal to whitelist PDI (Phuture DeFi Index) before it launches on Ethereum mainnet
  • PDI offers exposure to the top crypto assets by market capitalisation in the decentralised finance sector, known as DeFi.
  • The proposed initial trading liquidity limit is 100k BNT
  • $25k in external IL protection in the form of PDI
  • There are no apparent security concerns that would prohibit whitelist status
  • Up to the equivalent of 50k BNT in PDI to be contributed for liquidity incentives with the equivalent value being matched by the Bancor joint rewards programme

Rationale

The PDI token

PDI marks the first index created by Phuture and begins our journey of working closely with Bancor to have all our products supported by the exchange. Our protocol has been audited by Certik, Solidified and C4 and the reports for these audits will be available soon. In addition, the Bancor team have reviewed the token contract that is being used for all our index products and have confirmed it is fit for purpose. This is no surprise as the token contract is based on the standard erc-20 implementation. No issues have been found in our token contract across all our audits.

The token:

The token is not yet live but our intentions are to be whitelisted on Bancor ahead of the launch so that we can build liquidity on Bancor from day one. Getting this proposal ratified prior to launch means we don’t need to create a pool on another exchange whilst we wait for the proposal to get reviewed by the DAO.

External IL

We are committed to providing $25k worth of PDI for external impermanent loss protection to help cover IL generated from PDI. Whilst we are happy to provide this amount of protection we believe that PDI will not suffer from huge IL costs. The reason being, that PDI is made up of the most mature and liquid tokens within DeFi and as a result is not subject to the initial price discovery that new tokens typically go through. Excess supply or demand on the index token itself will be corrected through the arbitrage loop that exists between the Bancor exchange and the Phuture platform. In fact, this arbitrage loop creates additional fees for LPs and acts as a consistent source of volume.

According to Binance here is the impermanent loss suffered for a given percentage return:

  • 1.25x price change = 0.6% loss
  • 1.50x price change = 2.0% loss
  • 1.75x price change = 3.8% loss
  • 2x price change = 5.7% loss
  • 3x price change = 13.4% loss
  • 4x price change = 20.0% loss
  • 5x price change = 25.5% loss

If we look at the case where PDI doubles, that is the sum of the value of the DeFi tokens in the index in aggregate double, then a 5.7% IL would be suffered. Based on our external IL provision we could support a pool of approximately $440k. A pool of that size could potentially be supported if the entire trading limit we are asking for is taken up. This leads us to believe that this external IL fund should be sufficient in significantly reducing the burden of PDI on the Bancor protocol.

Liquidity rewards

Phuture intends to join Bancor’s incentive matching programme by supplying up to the equivalent of 50k BNT in PDI for liquidity rewards on the PDI pool, with the commensurate value being matched by Bancor. Given that Bancor is distributing the BNT rewards across a 2 year period, we intend to match this with our own rewards distribution. This will showcase Bancor’s auto compounding rewards allowing our investors to provide liquidity and receive additional rewards through one transaction.

FOR

Onboard PDI with 100k BNT trading limit, $25k external IL protection and the incentive matching programme

AGAINST

Don’t onboard PDI with 100k BNT trading limit, $25k external IL and up to the equivalent of $50k BNT in PDI rewards

4 Likes

You had me at dual LM and external IL protection.

2 Likes

Thanks for bringing up this proposal to our DAO. I too love to see that external IL and LM will be used for the PDI pool in Bancor. If you don’t mind me asking, can you share the tokens that will make up the PDI index? Additionally, do you think it makes sense to start this pool with a higher trade fee percentage (e.g. 1%)?

3 Likes

Tentatively the assets will include:

  • UNI
  • AAVE
  • MKR
  • CRV
  • YFI
  • XSUSHI
  • COMP
  • PERP

I think that a 0.3% fee for this pool is appropriate because the tokens which dictate the price of the index are mature and highly liquid. As such, I expect volatility of the pool to be lower and therefore a fee of 0.3% should compensate for this vol whilst remaining competitive for traders and arbs.

2 Likes

I would suggest you drop XSUSHI and add BNT

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BNT is 110 on CMC vs 150 for SUSHI

XSUSHI is a derivative of a token smaller than BNT

Curious - do you rebalance this index on chain at all?

1 Like

BNT does not have enough liquidity on our currently supported dex list, which is Uniswap/Sushiswap, however in a future update we will support other dexes, such as Bancor :slight_smile:

Yes rebalancing will occur on-chain for the index.

2 Likes

Where is the rebalancing on-chain currently done?

The two exchanges we currently support are Sushiswap and Uniswap v2. More exchanges will be added. The most liquid pool is chosen for each rebalancing trade.

Any idea when Bancor will be added?

I’m a fan of you guys, but doesn’t look great when you only support UNI and SUSHI as both your measure of liquidity and for rebalancing.

Can you confirm you will Bancor in the next 8 weeks for example?

Hard to give concrete deadlines as we are launching our Avalanche product straight after. Two months after release seems like a palatable time frame. Rest assured we fully intend on supporting Bancor and our commitment is clear through the fact we are making it the home of liquidity for our products.

Whilst I can understand you’d like us to support Bancor I don’t think the decision to whitelist or not should be predicated on the current internals of our protocol. Ultimately, this is a net positive for Bancor and as this and our other products grow, they will drive continued volume to the exchange.

2 Likes

If I’m being honest, I will vote yes based on your word ( plus I think its a great project +dual LM+ external IL)

1 Like

@eldude We really appreciate your support on this.

1 Like

Just to chime in, would love to see some Bancor integration in the future. Also, dropping our developer docs here for reference: