Hi all, understood that Bancor has a lot happening right now but wanted to propose an idea and generate some discussion about it.
TLDR - Adopt a time locked staking model similar to CRV. This will further align incentives between BNT holders and the protocol by rewarding more voting rights / protocol fees to people who lock their BNT for longer. The increased stickiness in staked BNT should reduce overall volatility and reduce IL across the platform
Understood that this will require some changes to the way the protocol is currently structured. I will try to explain how this will work below:
Current model:
BNT holders choose which pool to stake in / provide liquidity for.
Proposed model:
- All staked BNT goes into a single ‘master’ pool. (i.e. BNT holders no longer choose what pool to stake their BNT in).
When TKN holders provide single sided liquidity, BNT is first taken from the master staked pool to act as a pair for that TKN deposit. If the master staked BNT pool is empty, the protocol will mint new BNT to match the TKN deposit the same way that it does today.
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IL experienced by the master pool will be protected via minting of new BNT. In this way the protocol is very similar to how it works today, in that staked BNT essentially receives IL protection from non-staked BNT.
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Staking in the master pool requires a time lock. Users can choose to stake their BNT for 1 week, 1 month, 1 year, 4 years… etc.
Similar to CRV, staking 1 BNT for 4 years will give the staker 1 vBNT. The amount of vBNT the user receives for staking will be proportional to the amount of time that the user has their BNT locked up. e.g. if someone locks 1 BNT for 2 years, they receive .5 vBNT, if 1 BNT is locked for 1 year, they receive .25 vBNT, etc.
- All trading fees generated from the BNT side of pools will be distributed proportionally to vBNT holders.
For TKN/BNT pools where the BNT is provided by the master pool, this is very similar to what happens today (stakers receive their proportion of fees) the only difference is that all BNT holders will share fees across the entire platform as opposed to having exposure to a single TKN/BNT pool. Stakers will also be rewarded more based on how long they’ve committed to staking their BNT (since they will have more vBNT). Under this model, fees generated by newly minted protocol BNT will be split amongst vBNT holders as well, instead of being burned as they are today. This further incentivizes
and rewards vBNT holders.
The Vortex can stay the same, in fact the vBNT buyback may provide an even more powerful effect on the overall protocol under this BNT staking model
Would leave to hear feedback and thoughts from the community thank you for reading!
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Hi defiderp69,
Thanks for posting. I don’t really agree with your proposal to be honest. Many BNT hodlers choose where and when to provide their liquidity; some for specific pools. There are pools I’m providing to for a number of reasons. I wouldn’t agree with my BNT being allocated to a specific pool based on someone providing X TKN being staked at a certain timepoint. The pools arent equal in terms of i) trading volume/ swap fees ii) liquidity iii) token preference/ project quality.
The 100-day IL already acts as a pseudo lockup; people can withdraw early if they wish and suffer IL. I don’t see the point in a timelock, as people need to be able to do with their tokens as they wish whenever they wish e.g If someone needs to pull out early with IL to cover a leveraged position, they should be free to do so.
The burning is necessary is necessary to prevent inflation. At this current rate, the tokencomics are heading towards delfationary/ stable. Removing the burning mechanism turns it into a hyperinflationary tokenm, which will massively increase volatility down the line. You describe a socialised rewards distribution (very unfair to the providers to an earning pool) with increased minting to cover IL (?) and stopping burning (?) and a timelock. The burning is necessary to ensure token value. Its a hyperinflationary scenario with unlimited minting and nothing to counteract it, where people won’t have access to their tokens. It would be a case of get out early with the reward and dump to avoid the inevitable mass dump.
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Hi Larrythelinket, thank your for your reply - I hear some of the points that you are raising but don’t fully agree with all of them
In my mind BNT should be dedicated toward supporting the exchange as a whole, people can still support individual pools/projects by supplying liquidity on the TKN side.
In my opinion BNT supplying is a commodity, recently lots of people have been making posts about being able to move their BNT across pools - likely because they would like to move their BNT to pools that are currently earning more than their current pool. However, trading fees and APRs will always vary day by day, and this constant pool switching to chase the highest yield is inefficient and costly from a gas perspective. A master BNT pool which consolidates all the trading fees across the platform would solve this
In terms of inflation - I disagree that this proposal would have a massive effect on the inflation of the token. The minting / burning mechanisms under the proposal are identical to the mechanisms that Bancor has in place today with one exception - Fees generated by protocol BNT are distributed to vBNT holders instead of being burned. (the protocol BNT that is minted to act as a pair to TKN deposits are still burned, only the fees generated from trading are distributed). The motivation for this change is to further reward vBNT holders by distributing fees to them directly, burning these fees rewards all BNT holders regardless of whether they are staking or not.
I hear you that the timelock feels restrictive (I love having instant liquidity on my coins as much as anyone else) but i do think that having a large amount of locked BNT will strengthen the protocol and stakers will be rewarded handsomely with all the fees that are being generated. Also, the Vortex will always provide liquidity for people that have locked their BNT if they desperately need it
Thank you for reading