I’d like to voice my concern about the order of operations of removing Vortex burning of vBNT BEFORE we have a system in place to cleanly and quickly phase vBNT out of the ecosystem.
It seems the intent is to simplify the Staking/LP process by removing v2.1/v3 and the complexities of bnBNT as well as vBNT itself. I have a few ideas on how we can quickly and easily complete this process.
Summary:
Shutdown Staking of BNT into v2.1 and v3 protocols which will implicitly stop the minting of vBNT and any secondary method of extracting value from the vBNT/BNT pool >
Pause Swapping on the vBNT/BNT v3 Vortex (and v2.1 if it still exists). See above to remove possible gaming of ratio
Develop and implement a Burn/Redemption Contract that will take 1vBNT and return (1/bnBNT ratio) BNT to the user. This secondarily forfeits your bnBNT and underlying BNT stake on v2.1 and v3 protocols essentially turning all staked BNT into Protocol Owned Liquidity (PoL). This would then allow the Protocol/DAO/Community to control the entire BNT side of v2.1/v3 protocols and ease the Surplus/Deficit shut-down process as a result.
Remove vBNT LP pools and mint/burning from all v2.1/v3 contracts so that in the future if an Omni-Pool DEX/LP offering becomes viable we have a much simplified Conventional/Constant Product AMM (CP-AMM) offering in place for IDO/ICO/IGO launching of new Tokens.
This process will offer an incentive for leveraged vBNT speculators (loose vBNT), v2.1/v3 LP’ers (bnBNT+vBNT) holders, Governance Invested ([no/some/all] LP’ers + additional vBNT) who purchased vBNT at variable rates to be able to unwind with zero reason to hold on and draw out a complete phase out in as short a time as possible.
This will allow for all Vortex operations to entirely focus on BNT burn as vBNT will be entirely out of the picture.
This will ensure all vBNT holders are satisfied with a proper ratio of redemption without being able to game a “vBNT run” on the Vortex pool or simply dump vBNT to a very poor ratio as vBNT will be seen as “worthless”.
Analysis:
As 22.24% (6.18M of Entire 27.79M) vBNT supply has been burnt at this point, I believe a 1.3 BNT to 1vBNT ratio would be more in line with proper redemption ratio, but in order to ensure a simple and efficient phase out propose (1/bnBNT:BNT ratio) {~ .990156 at time of writing making 1/bnBNT ~1.01}
6.00M out of 27.79M vBNT are staked for Governance indicating little interest in using for Governance. Moving to either simply staked BNT into a Voting contract or using Snapshot to take a Balance at block # for voting seems like it should be minimal effort and drive higher engagement.
Higher gas fees on L1 are a disincentive as well. Would propose moving to an L2 rollup using L1<>L2 messaging for on-chain voting as well but out of scope for this proposal.
vBNT LPs are currently at a 0.08% Surplus but were as high as 5% as recent as April 1st. This would allow any LPs to exit cleanly and close down the trading pool with minimal negative sentiment.
Conclusion:
This proposal is rushed (I know) but I would like feedback to start and will modify/edit as required. This will be an excellent way for Bancor and Carbon to simplify and start focusing the deficit efforts toward BNT directly which will solve all pools deficit in a single, simplified manner.
The order in which we phase out complexities matters and we have the chance to phase out vBNT quickly and with minimal negative sentiment if we plan out and execute.
Completely agree with everything you stated above.
VBNT is becoming more and more of a burden than a benefit on the protocol.
IMO, this is a top priority to push through and finally have some closure on the topic.
I did have a question though on your point 3:
I get that everyone who staked their BNT in the protocol and has their bnBNT and vBNT should be able to withdraw as normal (right?). But the burn redemption function for vBNT holders (those without bnBNT) still is a bit unclear. Will they all get a 1:1 ratio? So one vBNT will pay out 1 BNT? And if that’s the case, would the protocol pay for this by using the excess BNT it holds or does it need to mint it?
Also wouldn’t bad actors be able to front-run such an exchange before we can completely close off the pools?
Also, the vBNT play has always been speculative in nature, so a 1:1 Ratio doesn’t seem completely fair imo, but maybe that’s just me.
Most important thing is that BNT stakers should get their BNT back without a problem in every scenario.
To add also to the snapshot feature you mentioned (so snapshotting BNT held in at current block), I think it would help governance a lot. The current process is such a roundabout terrible way of incentivizing people to participate in the DAO (Stake BNT, then stake the VBNT in the governance contract) It all happening on the L1 layer is terribly inefficient on top of that, especially in an environment where gass fees are getting higher.
Correct and they will receive their proportional share of BNT returned which should be the bnBNT ratio of 1.01. Ideally they would simply burn vBNT leaving the bnBNT as PoL for the DAO/Protocol to manage.
It will be 1/{bnBNT ratio} so 1.01 as above. Due to 22.2% of vBNT supply being already burnt the “fair market price” should be closer to 1.25 and meeting the vBNT current ratio (0.76) puts a middle price of around 1.01. The 1.01 ratio also prevents a vBNT/bnBNT exploit like you mention further down.
It would still be speculative to attempt to game the ratio before the vote passes and with such low liquidity I dont see it being a huge risk overall. Would be good to run numbers on it.
Edit: Sorry, it would not be an exchange, it’s a simple 1 : (1/bnBNT ratio) burn/mint. Ideally disable trading on the Vortex trading pools and halt BNT staking so vBNT can’t be gamed before allowing the burn/redeem. Everyone should be sufficiently incentivized to simply burn vBNT and get their BNT while turning over bnBNT as PoL.
“Fair” is relative as originally bnBNT was designed to continually provide upward pressure which was immediately changed after the v3 release. The Vortex was also designed to provide the method to allow the ratio to be “un-pegged” and float. Removing the Vortex “method” removes all pressure on vBNT putting us back to v2.1 essentially (we saw how that went).
As stated above IMO “fair” market value is more like 1.3 BNT : 1 vBNT due to burned supply and such low liquidity. I see the 1.01 ratio as a compromise in the interest of allowing the quickest, most “fair” price for all involved parties (LP’ers, Governooooors, vBNT vortex speculators, etc.) while also providing the DAO with all of the current bnBNT as PoL.
I envision using the nearly 2M BNT in the Network Fee holding to lower pure “minting” pressure, however, yes, it would be essentially minted in exchange for turning over bnBNT (and the underlying BNT) as PoL. The PoL could lower Trading Limits and “unstake” to lower the excess minted supply or simply burn a large amount of BNT and make the overall net supply lower than initial state. I’m open to further proposals once the DAO controls that PoL.
Agreed and I’ve tried to think of every holder/staker and don’t want to miss anyone, while allowing the quickest possible shutdown of vBNT from the ecosystem.
110% agree and have had to time stake/unstaked tx already this year to try to save on gas fees from staking for Governance. I’d like to see Snapshot take either wallet balance or have a simplified staking contract that just takes BNT itself. There are L1<>L2 messaging protocols on zk-rollups available for future true, on-chain voting that I’d like to see entertained as well.
It’s a valid concern. I am finalizing the Carbon proposal(s) today, and I am convinced that the Vortex standardization component should probably be split out into its own process. This means that:
We can prioritize the decisions relating exclusively to the Carbon deployment.
The vBNT discussion has some room to breathe. BNT burning via a Carbon-specific Vortex contract is something we can handle in isolation.
Carbon has taken something quite complex and made it Ded SIMPLE. Cheers to MBR and devs on the Voodoo Math and coding and a big hat tip to Sruly who’s making her truly beautiful. This will mean love at first sight for many when Carbon walks into the room. The problem is at the moment she has three legs … vBNT could be confusing and distracting causing new money and institutions to pause or walk away. It is much cleaner to take care of it now.
Minimal negative sentiment keeps us from having a turd in the punch bowl at our coming out party.
Thx for replying @sylentz .
So basically we’ll just let people exchange their vBNT for bnBNT, which they then can use to unlock BNT.
Seems like it would require some work, as the whole unstaking system should be changed (as you wouldn’t need both vBNT and bnBNT anymore to do so).
I think it’s good to have the devs chime in with this to decide what’s the easiest course of action to lighten the load and increase the incentive to deploy it asap.
I’m in favor of putting all effort right now on Carbon, and once the system is deployed and is operating for a few weeks, come back to this discussion and evaluate the best way forward.
In other words, although I think this is a very important topic, I don’t see this as an urgent issue.
The only ugency would be the ability to greatly simplify BNT itself for any newcomers that would be entering the ecosystem for the first time. This is something that I’ve wanted to discuss for a while now and I’ll leave the Discussion up as long as it takes. I’m pretty content with the 4 major points I’ve setup and making the process as simple as possible and with as little Dev work as possible. Hence just using a bnBNT (poolTokenToUnderlying) ratio and using existing “disable trading”, “disable BNT deposit”, “Set Trading Level” on v3 pool entities that should already exist and take simple Gov votes to execute. The timing is important to ensure a quick and “fair” exit so that might take some coordination. From what I can tell the only dev work required would be the new “Burn/Redeem” contract and with a set/locked bnBNT ratio once we disable trading on the Vortex and deposit of BNT on v3 it should be fairly simple and secure.
To clarify: vBNT sent to Burn Contract > BNT (loose) returned to user. This would forfeit any bnBNT and allow it to remain PoL with the DAO free to manage the entire BNT side of Omni-pool.
This would increase the supply of BNT initially but with Carbon fees and a 100% focused burn on BNT directly I don’t see this as net inflationary for long.
Trading Limits could/would be dropped as well which would indirectly burn BNT as well. We can work the math on that as well and time concurrent Gov Votes to drop say “Surplus v3 Pools” to 9,000 BNT trading limit, burning large amounts of BNT and effectively halting the pool in surplus allowing LPers to exit without a haircut.
Personally I think it’s the worst possible time to do any of that - right when Carbon is about to launch. Would be better anytime during the past year and any time few weeks post launch.
And there’s no dev that could actually do that right now anyway, it would just risk Carbon launch.
I want to share some of my thoughts here, with a view to establishing at least a minimal structure to this conversation, so that we have a scaffold for addressing the main talking points and eventually composing everything into a proposal, or series of proposals. For better or for worse, this requires some historical context, as vBNT has a complex past.
The Background on vBNT
At present, vBNT is the de facto governance token of Bancor. This token was introduced with the original v2.1 proposal:
The vBNT token was initially conceived as a means to ensure that decision makers are necessarily part of the system being governed. This served as a critical aspect to maintaining good-faith governance, as the mechanisms (whitelisting, rewards, etc.) available to the BancorDAO during v2.1 and v3 were implicitly abusable. Forcing DAO participants to “have skin in the game” was a considered precaution against deliberate subversion of DAO processes and other malicious attempts to poison the protocol.
Importantly, vBNT was issued as a receipt of BNT contribution to these legacy protocols. In essence, it was always the case that BNT was the parent token from which all governance authority was derived; vBNT was only a convenient wrapper for staked BNT that could be separated from other contract processes.
It became immediately clear that vBNT would become a liquid token in its own right, although this was never part of its intended use case. A vBNT/BNT liquidity pool was quickly established, liquidity was added, and the pair was actively traded long before the advent of the Vortex, or whitelisting status of vBNT. I was personally engaged in conversations with an individual known only as XaH4uK, who identified themselves as the sole liquidity provider to this pool.
The existence of a vBNT/BNT trading pair was potentially but not necessarily problematic. At the time it was worth giving some serious attention, as it added a somewhat random element to the system that would exist entirely outside of the DAO’s purview; trading pairs with vBNT can exist in any composition, and on any protocol that supports it. For a fledgling DAO, this concerned me. New liquidity products were arriving every other day in 2020 and 2021, most of which were nefarious Uniswap V2 clones offering incentive mechanisms to provide tokens of any type. The attack vector was clear:
Create a malicious Uniswap V2 clone.
Offer 123456789% “APY” for vBNT and other governance tokens.
Transfer all tokens to the admin wallet.
Become a dictator on essentially every DAO for which you now hold voting majority.
Take a minute to appreciate the existential nature of such a threat in the context of a DAO that is still getting acquainted with its role and responsibilities. The culture at the time was also to find literally any excuse to put tokens somewhere and receive other tokens. You may think my impressions of the state of affairs back then to be overly cynical - and you may be right. However, the idiom that it is not paranoia if someone is out to get you should ring with a profound credibility in light of the plethora of governance attacks we have witnessed in the years since.
These deliberations were coincident with another topic of discussion at the time: how to better monetize the system. A BNT buy-and-burn mechanism was among the more popular talking points, and therein lay a potential synergy that eventually grew into the Bancor Vortex.
It is important to note that using vBNT here hit multiple targets. In early 2021, discovering ways to bring more BNT into the protocol was a desperate priority. It also front-ran the perceived threat of a nefarious 3rd party utility for voting power. Moreover, it brought vBNT resources in-house, where the DAO could monitor and govern it, while also affording a new and interesting use case for the token.
The reasons for vBNT to exist have slowly eroded over the development of the project:
Since V3, liquidity levels inside the protocol have been controllable by a DAO vote, and TKN capacity is unlimited by virtue of the separation between on- and off-curve token balances. Therefore, finding BNT reservoirs to open space has not been an issue since the release of the V3 update. By extension, creating a BNT sink while preserving liquidity levels is largely an irrelevant consideration.
Therefore, the safeguards and precautions surrounding the requirements for staked BNT (aka “skin in the game”) can be relaxed without exposing governance procedures to the threats it once faced. Of course, there will always be a need for short lock-up periods to participate in governance - for reasons I choose not to elaborate on here. The good news is that the existing process will service this need equally well with BNT as the governance token.
The burning of BNT directly, rather than indirectly via vBNT, is not just tenable - but in many ways simpler to implement, document, and communicate. The deprecated draft of the Carbon proposal sought to make burning BNT standard across all three protocols - and was one of the instigating influences behind the creation of the present thread.
"If we dont 100% require any token besides BNT, [then maybe we shouldn’t have any tokens besides BNT]. " (private correspondence).
This represents my view, precisely.
Rather than continue to dominate this message board, I choose to end my posts here temporarily. There are, of course, some challenges ahead - retiring a token like vBNT is a difficult task. But before we get lost in the specifics, I think the points I have raised here, and those raised by @sylentz, @yudi, @AnimaDunk and @Hodlchamp, should be given the necessary time to invite dissenting opinion. We have the rare luxury of being afforded as much time as we want to arrive at a reasonable, and well-informed proposal (or proposals). There is no need to rush this - and we have much larger fish to fry in the meantime.
Thank you for this context and appreciate all the input in this thread. I hadn’t fully thought of vBNT as that v2.1 Liquid Staking Derivative (LSD) but it’s a good concept to use to make the argument that since v3 (and especially with Carbon coming now) we no longer “need” a BNT LSD in the form of vBNT. IMO bnBNT serves that purpose and could be used in a much simpler fashion as it is essentially “up only”. We never saw vBNT or bnBNT being used a collateral on external platforms so the usefulness has been hard to quantify.
Let’s not forget there was a vote that was overturned and was an attempt at Gov manipulation…
Agreed and am welcome to further opinions in support and dissent.
I have not stated a Time for Snapshot as I knew this would be longer term discussion but believe the simple points made at the start are sufficient to be the talking points for this topic. Before moving to Level 2 I fully anticipate multiple Gov votes being required and certain order of requirements and would like to capture that here.
Carbon launch is top priority. I’d like to have the structure well defined and ready to go as soon as Carbon is on its feet. I will be continuing to refine and take input before moving to Level 2.
A sigh of relief to hear the word Simplify by making locked BNT governance rights rather than staked BNT to stake vBNT. However, I’m now scratching my question mark asking where is bnBNT? I don’t recall acquiring or receiving any when I staked BNT (v2.1) and received vBNT. Now my BNT is in v3. Should community members like me have bnBNT somewhere and require it for redemptions?
EDIT: OK I do have bnBNT & bnTKN tokens. I must have received them when I transferred liquidity from v2.1 to v3 but hadn’t noticed at the time.
So what happens to Holders who just simply own vBNT and no bnBNT?
Like users who bought vBNT before the v3 bnBNT token was added?
Edit: seems like this is mentioned above that bnBnt is not needed for the redemption.
… vBNT could be confusing and distracting causing new money and institutions to pause or walk away. It is much cleaner to take care of it now.
