Proposing Carbon - DRAFT (DEPRECATED)

I wish there was an easy way. Not to worry - that 10% number is arbitrary. I would support a lower incentive, and happy to edit the proposal. What number would you think reasonable, keeping in mind that the caller must foot the gas cost. Maybe 5%?

I would much prefer to write that no less than 95% and up to 100% of the fees result in burning BNT. We could go lower. Even a 2% incentive is tenable, it just means the burns will be less frequent. I don’t think that is too big a concern, though.

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It is true that the Vortex contracts use global values - they do not have a per-token setting. However, nothing proposed here affects that limitation. Its not clear (to me) how the burning of BNT directly (instead of vBNT) impacts the liklihood of a future beneficial ratio proposal. Having said that, I would prefer that users do withdraw when their liquidity pools are back in surplus. My only ambition for the past year (feels like a lifetime now) is to recover the state of V2.1 and V3, with the target being that every LP can withdraw everything in entirety. I am not afraid of everyone pulling their liquidity when it is back in surplus. On the contrary - that is the goal.

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I am going to be AFK for about 9-10 hours. I will be back to respond to any comments/questions that may have accumulated during that time ASAP.

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I believe the impact on likelihood of a future beneficial ratio proposal there is that people invested in the success of Carbon (and thereby adjustments to its parameters) will only care about BNT buying/burning mechanisms, since they’ll never have existed in a context of earning fees from the protocol. The higher that is, the better for them. Their primary source of benefit is either meant to be use of Carbon for automated trading, or speculation on BNT appreciation due to Carbon’s pro-BNT buy/burn mechanics.

Meanwhile, v2/v3 LPs were supposed to benefit from protocol use through fees accrued in TKN. So if the vortex is universal, it seems that the goals of the two groups will not be aligned if we get to a point where deficit is reduced; Carbon natives will want to preserve system that maximises return for BNT, whilst Bancor TKN LPs would like to finally earn some actual TKN fees again. But if we acknowledge (as you and other contributors seem to have done) that v2 and v3 are essentially abandonware and LPs are actively encouraged to leave Bancor as soon as their deficit is tenable, then I suppose the thought of them earning fees for LPing (and thus adjusting the ratio in a universal vortex) doesn’t really matter.

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Understood.

I think a good approach would be to write a proposal, that explicitly addresses what should happen as the protocol returns to surplus. I would be very happy to work on it with you.

For example, we could start with V3 on a per-token basis. Once a token is back to surplus, we can propose that the trading liquidity be reduced, and the off-curve liquidity increased to be precisely the number required to cover all deposits.

Unfortunately we dont have that kind of flexibility on V2.1, but we can work on something.

Then, we can mandate that once every single token on V2.1 and V3 is back to surplus (these can be done separately), that the Vortex contract is retired completely on these legacy protocols.

If you like, I could draft something? I would prefer we work together on it, but I can at least get the process started.

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Imo, Mark’s reply below is a good concession. But I think in reality the DAO would almost always vote to keep the vortex burning.
There is a lot of Protocol Owned liquidity that can earn fees and burn more BNT for us, while users withdrawing their LP will just burn more BNT.
We have seen that more TVL doesn’t correlate with the same increase in fees, even more, so more TVL can actually be more damaging as the IL can rack up more.

I think we should incentivize users to go to Carbon as much as possible and just let Bancor be an arbitrage protocol.
Carbon will just be that much more efficient at managing liquidity and with the dev manpower being as stretched as it is, deploying too many hours on a semi-death (no offense) protocol seems like a waste.

TLDR:

  • DAO will probably always vote to keep the vortex burning as there will be cases of POL outweighing lps anyway
  • We don’t necessarily need more TVL, probably need to actually disable trading liquidity in a lot of pools cause of IL
  • Focus should be as much as possible to incentivize users to go to Carbon as it’s much more efficient
  • Limited manpower makes our resources stretched thin thus we need to make hard choices in what to support and whatnot.

To also add, will probably be voting yes on all proposals, but we should maybe take a look at the vortex payment fee. We shouldn’t fall into the same trap as what we had at the beginning when we were paying vortex initiators way too much money. So much money that even with the reduction we implemented it still was more than profitable enough.

Tagging Mark also.
@mbr

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Yep, agreed.

Let’s roll it back to something like 2%? I can edit the proposal later today.

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would this mean that all these BIPs will go live on snapshot together at the same time and votes would have to vote on each one separately?

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Yes, a 2% drop versus a 10% drop on the protocol fees is definitely a much more palatable shift; if Carbon drives trading volume, then callers should still be able to make profit off that.

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Yep, 2% seems good. We can always adjust it afterward if it’s still too much or not enough.

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Correct.

This document is designed to have all the relevent information in one place. However, each decision is specifically itemized.

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Done. I have changed all of the “90%” to “98%” and all “10%” to “2%”. Let me know if you find any parts where I missed one of these numbers.

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i would say that bip 25 is NOT well designed and should be left out of scope of the vote.

BIP 25 - Maker Fee Implementation and Initial Settings:
This decision relates to the tentative maker fee implementation, where fees are collected in the gas token of the chain Carbon is deployed on, and targets an approximate $1 value (0.0005 ETH) at the time of writing, with its initial deployment on Ethereum.

  1. adding fee on the onboarding flow can cause friction in initial adoption and as such should be avoided.
  2. adding makerFee to all strategy related actions will create multiple fees on every interactions
  3. having 1 variable for all maker fees is problematic as you would NEED to have the flexibility to control different fees and set them at different levels.
    for example, the dao might want to:
  • encourage strategy creation and decide to set the fee to 0
  • while withdrawals might be a “positive” happy flow for users where they might not mind paying the extra fee to claim their “buy low, sell high” proceeds.
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With no upward pressure on bnBNT like was originally designed (due to 90%+ vortex rates from v2.1/v3 catastrophy) this kills vBNT without actually giving a way to close out vBNT positions. I’d recommend holding off on changes to vBNT bb&b until we can fully discuss how to remove vBNT from the environment. I have a proposal in the works and will be posting to Discussion for comments this week.

From the timing of your post it looks like you might have started when the ratio was back to 0.9-1.0 again but since then it has dumped to .67 and only recovered to .75 now. I believe this is due to Vortex bb&b creating real (or perceived) upward pressure. Until vBNT can be cleanly removed would not support removing the only mechanism in place to prevent a v2.1 vBNT spiral like we saw for its entirety

Edit: Topic created for discussion on BIP-29 process: System to begin phase out of vBNT

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I agree with Sylent. If the purpose of BIP29 is to render vBNT purposeless, then it makes sense to tie up the vBNT loose end neatly and with a degree of permanence. I’ll be interested to see Sylent’s proposal once it is made available.

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This should tie into my recent proposal as well. The sooner we can get vBNT removed from the ecosystem and focusing entirely on BNT directly the better.
Ideally we should do an analysis of PoL to see if each pool has sufficient to keep the pool open or if we should shutdown entirely. If you have a framework just tag me or reach out and I can get that Prop started.

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I have added to the proposal the five categories of maker fee. However, I have kept the proposed settings at 0.0005 ETH in all cases. I refer to the prior DAO meetings where the topic of setting a zero fee during on-boarding, then switching it to a non-zero value later was considered, and met with mostly negative criticism.

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This proposal has been reviewed and edited since its initial publication:

  • The proposed Vortex mechanic has been discussed, and its caller incentive has been reduced from 10% to 2%.
  • The maker fee sections have been expanded to include descriptions of five different actions, wherein each may have its own discrete setting.
  • The deprecation of some sections have resulted in BIP 29 being dropped from the decisions being put to a Snapshot vote.

To maintain a clean presentation, I have decided to remake the proposal on Level 2 with these changes applied, and to move the original (this document) to the deprecated proposals section to maintain provenance.

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thank you for the clarification and adding the breakdown.
i still believe that the protocol launch should have 0 fees to encourage onboarding and adoption

tbh, if trading is massive, we might be fine with 0 fees on makers as trader fee is basically net profit to the protocol (to use as discussed) which is very different from all other AMM fees that are used to try and make LPing profitable (unsuccessfully) and are NOT actually profits to any of these protocols.

also, worth clarification, as you have pointed out, the maker fee is discussed and voted upon yet there is a chance it will not be included in the initial version (well the vote is if the DAO approve releasing without the maker fee code or not).

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