Modified Bancor Vortex Contract:
As outlined in the preceding sections, protocol fees can accumulate in any token comprising an active trading pair, as well as the gas token of the blockchain (or acyclic graph) Carbon is deployed on. Bancor’s legacy protocols (V2.1 and V3) have many existing pairs with BNT, and an existing smart contract implementation (the Bancor Vortex) is superbly suited to utilizing the network’s capabilities to recover and destroy BNT. The following illustration is provided to supplant the prior descriptions of the Bancor Vortex.
Assume that after a period of time, the protocol has accumulated 1,234.56 USDC, 65,43.21 USDT, 10,987.65 DAI, 1.23 wBTC and 4.32 ETH in fees. A caller may choose any set of these tokens to swap into BNT via its own liquidity pools, and the Vortex contract offers a small incentive in return. The incentive is equal to 2% of the total recovered BNT, up to a maximum of 100 BNT, which is returned to the caller.
In this hypothetical, the caller has selected USDC, USDT and DAI for the Vortex to use. Each of these token balances are routed through the liquidity pools on Bancor V2.1 and V3. For the sake of demonstration, the simulated USDC, USDT and DAI pools contain precise liquidity amounts of $2M, $4M, and $8M, and their fee settings are 0.2%, 0.2%, and 0.3%, respectively. The simulated BNT price is $0.50. This Vortex call results in the recovery of 37,328.16 BNT.
Since 2% of the recovered BNT amount is > 100 BNT, the burn reward defaults to 100 BNT. The remaining 37,328.16 BNT are destroyed.
It is important to note that the prior vote specified that 100% of the accumulated protocol fees be used to destroy BNT. However, without a caller incentive to interact with the Vortex contract, it is not clear how to maintain a consistent turnover rate. Therefore, this proposal asks the BancorDAO to approve the policy and implementation described above for any token pairs that exist on V2.1 and V3, with the express understanding that a minimum of 98% of protocol fees are used for this purpose (rather than 100%). It is noteworthy that 98% is the worst-case scenario. With reference to the figure above, it is trivial to demonstrate that effective burn efficiencies more than 99% of the protocol fees value are unremarkable.