UPDATED: BIP 13 Rules for extension of LM rewards + LINK, WBTC, ETH extension

OLD GOV (LEGACY)
1

Rules for extension of LM rewards + LINK, WBTC, ETH extension

TL;DR

  1. After an initial 12-week LM period, each pool can have its LM program renewed for an additional 4 weeks, a maximum of 9 times.
  2. The LM program has been immensely successful, and the DAO sentiment is highly congruent with a sustained continuation of the LM program.
  3. The Bancor Vortex will allow for an additional deflationary mechanism to be implemented that can offset nearly the entirety of the LM emissions, and bring the token supply within reasonable inflation levels EOY, assuming trade volume targets are met.

Extension of Liquidity Mining on Current Pools

TheBancor Liquidity Mining Plan has had a substantial impact on network growth and adoption. Moreover, the DAO sentiment is that the LM rewards are critical to maintaining the current market momentum. However, LM has an economic cost and must be wielded with care and skill. Therefore, the following proposal has been created that allows for the continuation of the LM program on all major pools, with a view to tapering the emissions and moving towards a sustainable supply management strategy in the immediate future.

  1. Follow an initial 12-week LM period, liquidity mining program can continue on any pool, so long as the community votes to extend it:
  • The voting for the pool/pools to extend LM rewards will take place every 4 weeks.
  • The voting will start at least 1 week before cessation of the LM rewards on any pool or pools.
  • Community members will vote to extend the LM for a further 4 weeks.
  • The Extension Proposal will indicate the pools for which the LM rewards are being considered for extension.
  • Each Extension Proposal may include single, or multiple pools.
  • Any pool on the network cannot be extended more than 9 times (overall, LM cannot be longer than 1 year per pool).
  1. The proposal also includes 4 weeks extension of the liquidity mining rewards on:
  • Big caps pools:
    • LINK
    • ETH
    • WBTC

Discussion

  1. Around 78% of tokens have been restaked back into the pools; therefore, the LM rewards have increased the space for single-sided TKN deposits, resulting in growth of the network, rather than creating a sell pressure.

  1. LM brought a significant increase in the TVL bringing Bancor ecosystem size to above $1B, immediately prior to a market-wide correction.

  1. The current momentum, fuelled in part by a successful LM program, has bolstered capital growth. As we can see on the graph below, daily liquidity deposits in all pools are continuously growing.

image

  1. The synergy of LM restaking behavior exhibited by our community members has also established Bancor as the single largest source of LINK liquidity, taking not just a significant share of trading volume from Uniswap and Sushiswap - but took the majority of all LINK trades from the market aggregator, 1inch.

Until protocol achieves a similar penetration on pools such as ETH and WBTC and others, LM rewards should be considered to stay to maintain the momentum and protocol growth.

  1. Cumulative fees on all of the pools are growing exponentially, therefore the potential short term inflation in the long term will be offset by the fees collected by the network, and Bancor Vortex (following the fee burner release).

708×524 72.5 KB

  1. Bacor Vortex fees upgrade is behind the corner, but to achieve significant burn on the vortex fees, the volume of the protocol also has to be increased further.
  2. If Protocol achieves 1B in daily volume, we can anticipate around 18% of annual deflation caused by the Bancor Vortex.
  3. Aiming towards around 4% annual inflation, in the long term, the protocol can afford minting around 10,000,000 BNT after the growth stage (benchmarking to initial 70M supply, excluding token co-invested by the protocol)

Thanks to the Bancor Vortex burning mechanism, the Bancor Network can afford a more aggressive approach to LM.

Summary

  1. Current protocol growth stage requires LM to maintain the momentum and stay competitive in the space (the DAO seems all too aware of this).
  2. After achieving the position of market leader in both TVL and volume, LM extension will no longer be necessary, and the voting for LM extensions will be concluded.
  3. A commanding majority of the LM rewards are restaked, increasing the TVL and space of TKNs single asset exposure. If this trend continues, the LM program is more of an asset than a liability, and can be managed more assertively.
  4. In the long term, Bancor is aiming towards sustainable annual inflation of 4%, in order to achieve that, Bancor requires significant volume.
5 Likes
2

Fully support the extension of these 3 pools.
They are the very core of our protocol momentarily. Extension of LM rewards on these pools will help us capture more traffic via aggregators and direct visitors.

2 Likes
3

Great update, I fully support this proposal.

2 Likes
4

Question on the math. LP rewards can last for at most 40 weeks (12 week initial period, plus 7 x 4 week renewals), yet elsewhere in the proposal it states that LM cannot be longer than 1 year per pool. 40 weeks is roughly 75% of one year, so I’m just wondering what the actual constraint will be.

EDIT And per the initial LM proposal I thought LM rewards were supposed to last for 72 weeks subject to DAO approvals. I would like more clarity on the long term plan because I feel that’s been overlooked. Otherwise though I’m in favor of extending LM rewards for these pools for 4 weeks.

1 Like
5

Thanks for updating it based on community feedback. Speaks highly of the team and of course I support this BIP.

2 Likes
6

fair point, fixed, thanks

2 Likes
7

Please don’t leave the renBTC and Ocean poools in the dust.

1 Like
8

@MrLong These 2 pools could be voted on separately. No need for them to be included in this particular proposal.

1 Like
9

Couldn’t agree more, Extend them.

1 Like
10

Voting FOR on this, let’s keep the TVL train rolling!!!

1 Like
11

Really excited for keep this rolling. Just started to yield farm and Bancor is the first AMM I have become an LP for.

2 Likes
12

Is there a place to see the specific required amount of volume to completely offset the inflation from LM program?