The below proposals will be split into different proposals on Snapshot, with the first part being a blocker for the second. The second part will be a different vote per pool.
As we all know B3 is becoming legacy Software and thus active development has been stopped and Development efforts have been moved to Carbon.
Only the current problem we face is the enormous deficit we currently hold towards the LPs on B3 and constant growth of said deficit. Looking at below Dune Chart we can see that deficit has grown by almost 13% ~ from April 9th to today 3th of August, from 35.4% to 48.1%.
The vortex clearly isn’t doing enough to mitigate the rising deficit and Carbon isn’t ready yet to take on such a huge burden with their current 1.12 million ~ TVL and four figure fees. The current giant liquidity of BNT of course isn’t matching current demand so every action to buy BNT of the market gets immediately arbed with the sheer amount available.
We have a 4 – 5 million surplus that’s currently getting exchanged for ETH, which we can use to boost Carbon TVL via a simple rETH/wstETH strategy for example, and maybe allocate a part of it to buy BNT.
Above however isn’t enough to stop the leaking of value. Thus we propose a more drastic, but far better option for tackling the deficit.
The proposal is built on two parts:
First part is limiting TQ Drastically, so not limiting it to a small amount but essentially freezing the current pool state and moving almost all TKN off-curve essentially leaving only a small amount that’s exposed to IL.
For example, looking at the ETH pool, we can see that it’s currently 66.4% in deficit, freezing it right now would mean transferring most of the remaining 33.6% off curve and only leaving for example just 100k $ in eth remaining in the pool. Besides that most of that BNT trading liquidity will thus be burned with this move.
Currently, there Is 66,656,004 in BNT trading liquidity, an action like the above on all pools would amount to a burn with a minimum amount of 60 million + BNT that’s taken out of the supply.
With current supply numbers that would instantly reduce supply from 150 million to 90 million, making BNT a lot more scarce, and thus making the vortex burnings far more impactful.
A drawback of taking liquidity off curve is that deficit isn’t going to decrease with a BNT price appreciation. However judging from the current state of Carbon we aren’t ready for such price appreciation anyway (See the Dune stats I posted, can also look at it for yourself and judge).
Second part is basically a follow-up on the above and that is what to do with all that liquidity we have taken off-curve.
We have an entirely new fancy platform that doesn’t have the drawbacks of B3 with regard to bleeding value. Thus we will approach the LPs with a strategy they can individually vote for in regard to do with their funds. The ETH lps could for example choose the same strategy which we plan to pursue with the surplus, the funds and fees we make off this will be entirely reserved for either buying BNT or filling the TKN chests to reimburse lps.
Everyone who doesn’t want their funds deployed on Carbon either has to vote NO or not vote at all on the proposals. We want to emphasize that we will never use funds of the lps without consent.
The above will of course be a giant boost to Carbon’s TVL and fee production, thus allowing for more vortex burns and acceleration of partnerships and integrations like 1inch for example.
TL;DR of the timeline and above proposal:
- Have the surplus convert to ETH - In Progress
- Decide what strategy to chase with Surplus ETH (for example, 25% towards buying BNT with a carbon strategy, 75% in an rETH / wstETH Carbon strategy)
- Have a snapshot vote to limit all the pools to 100k $ max TQ
- Have a snapshot vote*** for first the ETH pool to decide if we deploy their funds we took off-curve in a similar carbon strategy like at point 2.
- YES vote is moved to carbon
- NO vote is to keep it in SFL and off-curve
- NO-SHOW is the same as point 4b
- Follow on with the other pools for similar strategies on Carbon like at point 4.
What are the benefits of the above:
- Surplus will be around 4 – 5 million $ give or take, 75% is around 3 million – 4 million, roughly a 269% ~ increase in TVL
- More fees to buy back BNT
- More incentive for aggregators and the like to integrate us
- Bigger numbers mean more attention for Carbon and people to start noticing us
- 25% of the surplus to buy back BNT, Increases Carbon TVL, and fees, does the same as the vortex, and takes a whole bunch of BNT off the market, BNT will get burned after like the vortex
- Limiting the pools, will cause a lot of BNT to be taken off the markets, reducing liquidity and making BNT far more scarce, with the numbers we’re aiming for this should account for roughly 60 million + BNT that gets burned.
- Vortex buys will have more impact with less BNT around
- Deficit won’t increase anymore with BNT underperforming the rest of the market, cause the pool states essentially get frozen.
- Redirecting the funds that were in B3 to Carbon enormously increases TVL (granting the same benefits as discussed in the first point) and solves the problem of value leakage which the pools currently are suffering from. Strategy yield proceeds will go to solving the deficit, either in buying BNT of the open market, or keeping the TKN to add to the treasury and reimburse LP holders with
Please contribute and share what you think of the proposal below in the comments. Excuse the spelling or strange grammatical decisions, English isn’t my language.
***Snapshot vote for the allocation towards Carbon doesn’t require a supermajority, but will be done on an individual basis, so if someone with 10 eth for example votes for YES, we’ll use exactly his share for the Carbon strategy.