Yep! And work is ongoing. It is a demographic that is difficult to generalize; ‘traders’ is a group of people that breaks down further into other discrete groups. The front-end team and the marketing team have a growing reservoir of market research, on which the new UX is being founded.
2 Likes
I wrote an easily digestible piece on IL for use as a marketing tool of some sort.
I can’t think of a better place to post this, so I am putting it here.
If anyone finds this useful, feel free to edit this at will to suit your needs and purposes.
George wants to provide liquidity to a trading pool on an exchange and generate profit from the crypto that he owns. Let’s run through an example and see what happens. In this example, there are no extra incentives in this trading pool, a normal occurrence. He will simply garner profits from swap fees that accumulate in the pool due to trading activity in the pool.
George has ETH and BTC. At this time ETH is worth $2,000 and BTC is worth $30,000. He has to provide equal dollar amounts (commonly known as dual-sided liquidity provision), so he puts 15 ETH and 1 BTC ($30,000 each) into the ETH-BTC pool on an exchange. In return, the pool provides liquidity tokens that represent his share of the pool
George now has $60,000 invested in the pool. If we say that the pool has a total of $600,000 in it consisting of 150 ETH and 10 BTC, George owns 10% of the pool.
A month passes. Traders trade. The contents of the pool change because ETH has become very popular, so the pool gradually depletes in ETH and accumulates BTC. The quantities of ETH and BTC have changed from trading and accumulation of swap fees to 135 ETH and 11 BTC, AND the values of ETH and BTC in the markets have changed to $2500 and $25,000, respectively.
George’s share of the pool does not change; it is still 10%.
George now wants to withdraw his share of the pool and see how much money he has made. He withdraws his 10% of the pool and receives 13.5 ETH and 1.1 BTC. The ETH is worth $33,750 and the BTC is worth 27,500.
This gives a total withdrawal value of $61,250. George is overjoyed! He has made $1,250 on his investment in only a month.
Now, let’s see what his investment amounts would have been if he had done NOTHING for the month. He would still have 15 ETH and 1 BTC. After the one month, George’s 15 ETH and 1 BTC would be worth $37,500 and $25,000, respectively, for a total of $62,500. If George had done nothing with his coins, he would have made $2,500. George is flabbergasted! He LOST money by providing liquidity with his coins.
This is the moment of truth that has been experienced by almost every liquidity provider.
George has suffered what is called “Impermanent Loss.” This will almost ALWAYS occur in liquidity pools, unless the two coins don’t change in value (stablecoins, for instance, that will be worth $1 today and $1 a month from now), or George manages to withdraw his funds when the coins have exactly the same relative value as they did a month ago (a near impossibility even if the coins’ values are highly correlated in the market). As far as the coins in the pool go, this loss should more accurately be termed “Guaranteed Loss.”
Why does this happen? It is a little technical, but basically you are gaining more coins of lower value and losing coins of higher value. You basically lose out on the appreciation of value that you would have received on the coins that went up.
So, why would anyone EVER provide liquidity if they are always going to lose money? The answer is that they either don’t understand that impermanent loss exists, or they hope to overcome the loss with profits from swap fees or incentives.
Swap fees are rarely large enough to overcome impermanent loss because they are often in the range of .1 or .2%. If there is huge trading volume, fees will add up, but this huge volume usually also means that the ratio of the coins values and the amounts in the pool will also distort to a greater extent. Generally, swap fees do not make up for impermanent loss.
This leaves incentives as the only way to counter impermanent loss. Incentives CAN be huge and profitable, but are often offered on a temporary basis, or diminish over time. In addition, they are only available for select coins. Generally, crypto enthusiasts buy a coin they believe in and then look for a way to gain yield by staking, liquidity provision, or lending. Good liquidity incentives for an enthusiast’s coin may not exist anywhere.
Fortunately, there is an answer: BANCOR. Bancor insures you against impermanent loss and leaves your initial investment intact! If you are a passive HODLer and want to ‘set and forget,’ then Bancor is for you! In addition, you do not have to have two coins in equal dollar amounts to provide liquidity. Bancor allows single-sided liquidity provision, so there is no need to go out and buy a second coin just so you can invest the coin you already own. On top of a guarantee of no impermanent loss, Bancor is currently offering additional lucrative incentives that sweeten the deal even more on select coins.
Consider looking at Bancor before you experience your own “moment of truth.”
3 Likes
Excellent. Customer segmentation is good.
1 Like
Thanks for putting that together @gdhurst 
.It is probably a good idea to create a new topic with this information in the “community chatroom” category so that it doesn’t get lost amidst the discussion here (maybe call it “Impermanent loss explainer”). I am sure we can reference it in the future for others that might need an easy explainer.
2 Likes
Sorry! I am behind and will be— doing my best to be concise and transparent. A kind reminder for all: from my original perspective— this is an awareness and volume campaign— not just trader incentives.
Perhaps I should rename the title as such.
Thank you for your advise and notes! I won’t reply to all your comments— quite honestly most of them would be semantics. My goal remains unchanged— we need traders and awareness, now. despite wording. despite a perfect interface. despite excuse n^n.
As the SME, your feedback is much appreciated and noted.
I’ll try to contribute by picking up where you left off (for now— obviously many thoughts have been developed here).:
- Decide on the mechanics of an interim trading incentive program, of which I support an “account opening bonus” for any trader (wallet) that completes X trades (or generates Y volume) within Z amount of time.
-
What would you suggest, in defining these parameters (X,Y,Z)? PreV3.
-
I love the simplicity in approach— but am definitely going to ask for grittier details, especially given your acumen
-
If in theory, this approach comes from tradfi, what metrics would you use now to make sure it is worth it? We have so much data.
-
Also, noting this approach currently doesn’t capture the retail demographic I refer to.
-
Unless we make it tiered to begin with, even in interim— they won’t be making 30 HIGH volume trades a day. Maybe 3— but their shares still compound and propagate too.
Do you think there is a win-win there? Very eager to learn and hear your thoughts on the proposed tradfi mechanics.
- Create the reports to track trading activity
- A delta of the same metrics (volume, fees, etc) that were used to determine XYZ.
- Set the program’s budget cap
- Personally, have no idea but I think a (relatively) large one (IN BNT OR BNTEE OR BOTH?!)— what do we have to lose if we offer something great and simple? Open to hearing risks.
- 100,000 BNT (???) + A SHIRT ? Dare to be different?
- Line up promotional efforts through social media, podcast interviews, jumping on the community calls of all WL’d TKNs, etc.
- Easy enough, I think we can all handle as a community and team. Once we have the actual plan… this is def phase III of rollout LOL.
- Light this candle: LFG!
- YES.
1 Like
I’ll reply to everything over the weekend, but I wanted to bump an item that could be part of the short-term solution you’re looking for – rabbithole.gg. It was mentioned in two separate threads on our governance forum, but got little more than lip service from the community (myself included):
However, in the Trader Incentive Discussion @tenzent, @tfns and @glenn all did voice their support for a rabbithole quest. They’re smart cookies!
Recently, I noticed that AAVE approved a grant to create a quest. I read through the post, replies and explored rabiithole, and I agree with my esteemed colleagues that this could be a great, low-cost and minimal dev-resource experiment. @issabobissa, please take a look and let us know what you think.
FWIW, I would wholeheartedly support a grant similar to AAVE as a short-term solution to find new users. If we went with USD $50,000 we should be able to track various KPIs such as cost per new customer acquisition, etc.
EDIT: Thinking more about this, the use of rabbithole should also allow us to do some customer segmentation through the use of specific quests. which I provide a very rough draft for below.
Liqudity Providers:
- add TKN liquidity from a CEX
- add BNT liquidity from a CEX
- add BNT liquidity from a wallet such as MM
Traders generally for my being too lazy to segment them atm though I’m going to default to lowest common denominator of CEX clients we want to lure away from CEXes:
- Add TKN from a CEX
- Swap TKN for another asset (perhaps BNT? wBTC to show people educate how to earn interest on BTC not just buy BTC to hodl)
- Place a limit order
- Sell vBNT for leverage, etc.
Governance:
- Participate on Bancor governance forum
- Stake vBNT to vote
- Vote vBNT
New User
- Deposit via fiat gateway
3 Likes
I agree with the sentiment that efforts should be saved until v3 is out. until the trading ux is fixed there’s much less payoff in investing time/energy into trading incentives.
But i’m firmly of the belief that a significant airdrop should utilized to announce V3. The uniswap airdrop created so much publicity and hype if we could recreate that it would be amazing. I remember the news of the uniswap airdrop even made it to some of my friends who aren’t even into crypto. It has the potential for huge viral effect. Imagine the airdrop is like a giant cannon annoucing V3 and kicking off all the other festivities and marketing and trading incentives we implement. (“you missed the airdrop? thats okay because we are giving 10 free trades to new wallets trading on bancor!”). Airdrop will create a magnifying effect for all of those other efforts.
Arguments for an airdrop:
- Generate significant news hype and viral spread
- Boost decentralization by spreading the token distribution
- Many of the tokens will likely be staked back into the protocol
- Reward long term and early supports of bancor
But to do this correctly it does need to be a significant airdrop. A 5 BNT airdrop will not create the hype we are going for. UNI dropped 400 tokens, we could do something similar (especially because we have much fewer unique traders). Does anyone have the number for total unique traders on bancor across all time? Let’s just estimate it at 15,000. A 100 bnt airdrop would only print 1.5 mil. 400 bnt would print 6 mil.
Of course any plans or indications that we are actually going to do an airdrop must be kept under wraps to prevent exploitation. So not expecting much positive feedback from the team on this even if they were heavily considering it.
Honestly-- rabbithole.gg has been mentioned multiple times, I need to take a look there and also at the AAVE grant, thanks for noting this.
and also thanks a ton for your thoughtful input- it’s helpful, I will try to reply in more detail sometime over the weekend.
So far though this particular outline/template seems to be coming together great for the interim, I agree with the parameters and metrics mentioned!