Bancor Community Call Summary, June 6 2021

This post was originally published on Bancor

Bancor hosts weekly community calls with core contributors every Sunday 1pm UTC in Bancor’s Telegram voice chat.

This week, Mark hosted a call for the Bancor community while Nate is at the Bitcoin Conference in Miami. Here is a summary of the ecosystem and development updates from that call.

  • This was an interesting week due to the massive mobilization from the Bancor community who wanted to preserve the Liquidity Mining Rewards for ETH/LINK/wBTC/stablecoins. These were overwhelmingly reinstated after most of them failed to pass their votes last week.
  • This is a welcome reminder for community members to stay involved in the DAO. If you find yourself becoming apathetic, there will be some actors out there who might try to take advantage of that fact.
  • Many whitelisted tokens were added last week including: SUSHI, 1INCH, LPL, CREAM, OPIUM, SMARTCREDIT, QUICK
  • It’s helpful when we have Bancor community members active in these other communities to keep an eye out for questions about providing liquidity, impermanent loss and to answer questions about Bancor’s core features or even to point out to that community that their token has been whitelisted.
  • These guerilla marketing efforts through Discord and Telegram are highly impactful, not just in bringing new members to Bancor but to expand the partnerships that Bancor can develop.
  • One brightspot of our increased governance activity was seeing Mark Cuban, the billionaire entrepreneur, identify himself as a new BNT holder and as a participant in our DAO.
  • The DAO has made excellent decisions recently, including the whitelisting of WOO which has been one of Bancor’s most performant pools, bringing a lot of revenue.
  • 10% Vortex burner rate was passed by governance, while 20% burner was voted down.
  • This is an increase from the existing rate of 5%.
  • In short, 10% of swap fees generated from all trades are placed into the burner wallet. These fees are then used to purchase vBNT which are then burned.
  • Remember that vBNT is only created when BNT is staked in the platform and it is created at a 1:1 rate with the staked BNT.
  • Therefore, each vBNT that is burned means that one BNT staked in the protocol can never be unstaked.
  • This is a permanent deflationary event.
  • Burning vBNT literally reduces the available BNT supply but also retains that same BNT in the protocol, allowing it to continue to act as liquidity and earn fees.
  • When vBNT price is low, the burner event purchases it at a discount and therefore burns it at a faster rate, allowing us to lock more BNT in the protocol more efficiently.
  • Unlike many token burning schemes in crypto, burning vBNT has a direct effect on BNT scarcity and price.
  • The Snapshot UI has been updated and allows vote delegation natively.
  • There is a new page on Bancor’s discourse to allow users to nominate themselves to receive vote delegation.
  • Bancor V3 progress is going very well!
  • No additional details are available right now but we believe that V3 will be as transformative as V1 was when Bancor introduced the concept of liquidity pools to crypto.

I’ve heard it said that Bancor arbitrages its own token. How does that work?

  • The protocol doesn’t actively arbitrage itself but our design naturally attracts arbitrageurs who swap against our pools in order to balance their prices.
  • You may be referring to the fact that the protocol owns non-BNT tokens (which we will refer to as TKN, the generic example, which could be anything such as LINK, WBTC or ETH).
  • Every Bancor pool contains BNT tokens and many of these BNT tokens are owned by the protocol due to Bancor offering single-sided liquidity provision.
  • If BNT moons compared to TKN in its pool, that pool will become imbalanced, and arbitrageurs make money by purchasing BNT tokens out of the pool to balance it.
  • This leaves behind a surplus of that pool’s TKN, beyond the TKN that LPs deposited into the pool originally.
  • Basically, this surplus TKN, beyond what LPs have provided and are entitled to if they withdrew their liquidity, is actually owned by the protocol.
  • These TKN balances, even when you account for paying impermanent loss insurance as we do, are far beyond what LPs own and this amount of TKN can’t actually be removed from the protocol.
  • Due to a huge parabolic increase in BNT price early on, this caused the protocol to own huge reserves of tokens like ETH, WBTC, LINK, etc.
  • If the price of TKN increases relative to BNT, the protocol automatically uses its huge TKN surpluses to buy BNT, which reduces downward pressure on the BNT token any time its price is dropping.
  • This effectively makes the Bancor protocol the largest BNT swing trader in existence. This may be the arbitrage effect that you are referring to.

These TKN reserves that are owned by the protocol, are they going to be redistributed in some way or are they going to stay passive?

  • We’ve been researching ways that the protocol can more actively manage these protocol owned reserves to be more productive.
  • Unfortunately all of these strategies effectively turn Bancor into a type of hedge fund, and someone needs to enact these strategies.
  • Our current passive strategy is highly risk averse but we may look at momentum trading algorithms, for example, in the future.

Can you discuss the recent work on an UMA integration?

  • We mentioned last week that we’ve been collaborating with UMA.
  • They want to offer Bancor call options on their platform.
  • We asked if they can create call options for vBNT which allows users who are leveraged with vBNT to create a stop-loss for themselves using these options.
  • During our conversations, we provided a script to the UMA team to query prices in our platform that effectively created an oracle-type system.
  • UMA wants to use these oracle scripts for their call options where they don’t have other reliable price feeds.
  • This is a new type of utility that is being recognized in DEXs.

We changed from a dynamic vortex fee to a static fee to gas costs. Will we change back to dynamic fees when we switch to L2?

  • The reasoning is not only gas fees. The fees used for the dynamic Vortex were taken unequally from both sides of trades (TKN and BNT) and we no longer think this is a good system.
  • The Vortex seems to be working with a static fee which gives it more predictability for all participants.
  • It’s possible we don’t move back to a dynamic fee at all.

Have we considered dividing vBNT into a leverage token and a governance token?

  • This was part of our initial conversation during design.
  • While we haven’t figured out how we would divide these functions, it is something we have thought about.
  • It may be time to look at this again after V3 launches.

Someone who doesn’t own or stake any BNT can buy vBNT just to influence governance, is that correct?

  • Yes, and this is one reason why the vBNT pool is limited. Through price increases and slippage, large amounts of vBNT can’t be purchased.
  • At some point, it’s more economical to purchase and stake BNT to gain vBNT, which is what we want anyway.
  • UNI for example is purely a governance token. This attack vector is the case all over DeFi where people who don’t LP own the governance token and can control governance for that project.
  • We are actually unique in that it’s harder to take over our DAO because vBNT is a leverage token.

Is there a direct relationship between the BNT price and vBNT price? For example, if BNT price went to $20, would it drag the price of vBNT up with it?

  • The only way to buy vBNT is to purchase it against BNT from a shared pool, so if BNT price increased, vBNT price would increase as well.
  • The pool ratio won’t change if BNT increases in price.
  • Never think about vBNT price in terms of dollars. Always think about the price of vBNT in relation to BNT.
  • We have content grants active at all times. Any users that want to create videos or guides, please reach out to Nate Hindman (@natehindman on Telegram).
  • We have analytics grants. If you want to work on Bancor data projects or if you are good with working on blockchain data and APIs, we can use your help! Please reach out to Nate.
  • As always, we have rolling developer grants for those who want to build and innovate on Bancor’s infrastructure.
  • Token projects that are interested in whitelisting on Bancor, or any other integration, can email [email protected] or @FoxSteven on Telegram.

Follow Bancor on Twitter, join our Telegram /Discord for the latest updates, or read more about us in Bancor’s docs and blog!

Join Bancor’s public community calls every Sunday at 1pm UTC on Telegram voice chat to speak directly with core contributors.

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