Use of pendingNetworkFees for a 3:1 BNT Supply Reduction

This proposal is expected to appear on Snapshot on Aug 20th 2023, after the required 4 day discussion phase has completed. If you want to participate in this decision, make certain that your vBNT is staked for voting prior to the commencement of the voting period.


  • Action: Move all TKN in 13 TKN pools to SFL and shutdown trading. Buy back TKN using BNT fees to backfill deficit on shutdown pools. Allow LPs to withdraw at will at no deficit.
    Result: 700k BNT sold for TKN directly. 989k BNT effectively burnt through shutdown of 13/28 remaining v3 pools


This proposal seeks to close out the deficit entirely on 13 out of the remaining 28 tradingEnabled Bancor v3 pools using {739k ?TBD?} BNT collected in pendingNetworkFeeAmount Bancor Network v3 . At the time of writing, there is approximately 1.016M BNT that has been collected.

**Removing vBNT and CROWN pool as they are in surplus or have not had a vote to allow TKN to move to SFL.

Sorting by pools with the Lowest deficit while having the Highest Trading Limit (and therefore most BNT) we get:

11/13 having a BurnRatio higher than 1.0 with an average value of 2.909.
UNI/MKR being the outliers at: 0.76 and 0.81 BurnRatio respectively

All 13 pools have a DefUSD amount of: “400,918” USD (739,837.6084 BNT)
with a TL of: “536023” USD (989154.8256 BNT)
for an effective burn ratio of: 1.337


This proposal represents the desire to make efficient use of BNT acquired through Bancor v3 fees while simultaneously buying back direct TKN deficit which will be directly visible to LPs and external users. This has the added effect of using ~739k BNT to backfill TKN directly while accomplishing a 898k BNT reduction in supply (1.337:1 effective Burn Ratio) :fire: :fire: :fire:

~~# Voting Instructions

For: Perform a one time buy back of sub $100,000 USD deficit pools using {xxx} BNT ($378k)
Against: Do nothing~~

1 Like

TL;DR: Uncertain what to think about this. Favouring specific pools for direct remediation should be good for those LPs specifically, but not sure about impact on protocol as a whole vs pure BNT burn. It also sets a precedent, and one which I would argue makes any notions of bootstrapping Carbon with POL untenable.

While I appreciate the creative thinking here, I’m not 100% sure yet what my stance is on it morally, because it seems to be taking around 67% of all the fees collected to pay off pools that–given their relative deficit amounts and liquidity–were likely generating only a fraction of the fees versus the larger pools. So it seems a bit like using the bigger pools’ outsized contributions towards fee generation to specifically pay off smaller pools generating lower fees, at the expense of pure BNT reduction which should have the same deficit-reduction effect on all pools.

I say I’m not 100% sure what my stance is not as a diplomatic way of saying I disagree, but literally because I’m not certain. Does removing specific favoured pools–whilst selling off BNT to benefit them–have as much overall benefit as the universal BNT supply reduction option? We also now live in an age of BNT shorts available on Binance, so any action by the DAO which involves selling BNT should be considered extra-carefully. Uncertainty on likely impact here is not helped by the fact that current deficit percentages from the app look significantly out of step with that graphic in both directions (e.g. UOS 36.5% deficit vs 44.5%, MKR 71.9% vs 65.3, RLC 15.8% vs 28.3%, CHZ 25.3% vs 46.9% just to take the first 4 picked at random). It’s possible those fluctuations all occurred in the day since you posted this, but if so it illustrates the volatility inherent in proposals favouring specific tokens.

Another thing to ponder; given the overall deficit value of those pools, how many LPs are actually in them (i.e. what kind of average deficit value per capita are we looking at in the pools)? How many people would this action directly benefit? If they’ve got a lower personal deficit value on average, then how certain can we be this will lead to universal withdrawals (and resultant BNT burn)? Of course, everyone’s financial circumstance is different, and amount X can have a different impact on person A then person B, but given for example that the MANA pool has less than $5,000 deficit spread across $53,000 of deposits, how sure can we be that the LPs haven’t just abandoned it?

Also, according to the latest Dune data, MKR seems to be back above the cited $100,000 deficit value limit at -$106,000, so how would such fluctuations impact the execution of and calculations inherent in this proposal? If one of the listed tokens is above $100,000 value at the time the proposal goes up, it gets removed from the list and the BNT sell amount gets adjusted?

For my money, if we do this and effectively say “Its okay to a) fill the deficit by buying up TKN to backfill pools, rather than buying and burning BNT and b) specifically favour certain TKNs over others”, then there’s no justifiable way to argue against using the $4m-$6m (or $3m-$5m, or whatever the current swing is) of POL from the surplus’d pools for backfilling some of the larger pools.

The “bootstrapping Carbon with POL is the best use of those funds” argument seems predicated on increased Carbon fees and visibility helping all pools equally, but it’s definitely a much slower process than direct remediation like this. If I as an LP have seen other pools benefit from a direct TKN injection, you can bet that I’m going to want that POL used in the same way, especially if I see favouritism after more than a year of being told “BNT outperformance vs TKN is the only way to fix things, we’re all in this together”.


I would like to add that the BNT you want to use to buy TKN is already off the market,and the BNT that would be burned is already protocol owned so this is also off the market, so after all this you would only GROW the supply on the market,only to favor some specific pools.

Overall,I think this will be bad for the protocol and for the users(other than those from the 13 pools).

TL;DR : I am totally against it because it’s bad for the protocol and it grows the amount of BNT out there on the market.

1 Like

Thanks for responses from @ImshermanentLoss and @mh89spd above. This started off with the title assuming 3:1 burn ration but removing vBNT and CROWN that were in surplus revealed those to be the major reason for TL getting burned.
I do find it interesting that there exists a TL burn ratio that is higher than 1.0 though and is something I’d like to look into more.

are you referring to the pendingNetworkFees BNT or the TradingLiquidity BNT on v3? If second, TL is 100% exposed to IL and “on the market”. This proposal still accomplishes a 1.337x burn ratio when excluding vBNT and CROWN pools (however i feel vBNT needs to be closed out in the near future)

Edit1: The only preference given is an arbitrary cut off of 100k DefUSD but could be switched to bottom 13 (or 14) pools to make it easy. We have over 1M BNT in pendingFees now so shouldn’t get over that value before a vote would be sent. This was just a data point I wanted to look at and then my computer had an issue so I saved in a not 100% ready state to begin with.

The key point is that “backfilling” (preferred pools) deficit in these pools would be to entirely close them out and release TL and arb weight preventing BNT price and deficit from moving easily. The large pools will have to dig themselves out either way so I’m not sure how using those fees in a > 100% efficiency would be a huge issue for them. It will free up 1M+ BNT they dont need to fight against as they try to dig away at their own deficit.

I’m against using Surplus or Fees to backfill a pool that continues to remain exposed to IL but closing out 50% of v3 in one fee burn seems like a cool way to get LPs fired up and Community ready for the FINAL 10% of v3 Pools to get closed down in surplus.

@PaperStreetCapital @lesigh interested to see your thoughts on this data

1 Like

Interesting concept - but not sure what is achieved here.

As when you convert BNT to TKN, you are increasing the deficit on all other pools. So what is good for the pools you listed, does damage to the rest.

I also agree with @ImshermanentLoss that this does created “favored” pools which is obviously a problem - While this might be appealing for the LPs in those pools, it is certainly not to the other pools (who would be in a worse position if this passes).

My initial thought was this is really creative, and honestly makes me glad we have heavy hitters like you involved. It gives me confidence that we’ll not only resolve the deficit issues but also thrive in the near future. It sounds like this is an extension of what we experienced this past week, which was the benefits of the flywheel of pools coming into surplus and that additional burning that magnifies positive momentum across all the other pools.

To that end, I think @foxsteven may have a point here in that the deficit resolution in some of the pools may come at the cost of others, while introducing the potential future fight of the remaining pools arguing for special treatment. Its likely a small risk, but I think you can see some users will willingly overlook the positive effects of a net BNT burn, like your proposal can accomplish, and just focus on any POL getting applied directly to them. I’m sure it feels like if we don’t try to better use the PendingNetworkFeeAmount that it seems like a missed opportunity, but I think this past week was a reminder of how things can really shift in our favor and simply having a continually decreasing BNT supply (and vBNT in that case) is positive all around.

So to give you a clearer answer, I think the slippage and potential negative implications of closing certain pools may counterbalance the positive effects of the increased BNT burn overall. That said, I genuinely like the creative thinking and the focus on making everyone involved better off, so greatly appreciate the effort here.

1 Like

Any BNT used to reduce the deficit in one pool increases the deficit in the other pool. We’ll use AAVE and wBTC as an example.

The way this would work is that you sell BNT into the wBTC pool in order to take the wBTC to another exchange and swap it for AAVE which is sent to the pool on Bancor. I can’t justify increasing the deficit on one pool in order to lower the deficit on other pools. This kind of unfair treatment doesn’t feel ethical and I would vote no to such a proposal.

1 Like