V3 Progress (8:43)
- We have selected an auditor for V3 code and will release new information on the audit soon.
- Coding is ongoing and we can’t release an exact timeline for deployment.
- We’ve put up a private github repo for V3 which isn’t public for competitive reasons.
- Since this repo is private, it’s not clear to the community just how much code there is and how active we are. We are hard at work and things are progressing fast. We have all hands on deck.
- Leading up to the launch of V3, Nate was at the Miami Bitcoin conference.
- One major realization for Nate was how few people in the crypto world are familiar with DeFi, staking and the advantages of Bancor specifically.
- “I believe that staking is the ‘killer app’ for crypto. If you’re holding tokens, you should be earning yield on them.”
- “I had many conversations where people were vaguely aware of us but not of the features we offer.”
- We’ve done some soul-searching and sparked us to have conversations with both newbies and DeFi natives. Despite our compelling features, we know we have an awareness problem. In the lead up to V3, we need to double-down on messaging and awareness.
- Consider that most AMMs put token projects in a difficult position. They are effectively asking their most committed holders to provide liquidity in their pool and if the token moons, the LPs risk getting rekt, since they’re not protected from IL. So the project has to pay liquidity mining rewards to make it worth it, and often the rewards don’t make up for the IL.
- Some AMMs like Uni V3 have basically conceded that since it’s often a losing proposition for long-term hodlers (most of whom are passive LPs and aren’t equipped to employ active strategies to avoid IL), they’ve designed a system for professional market makers, who can take on the risk of IL and continuously update price ranges to avoid losses.
- The thing this, professional market-makers aren’t core community members. They specialize in active market-making and don’t take long positions on individual tokens.
- So this begs the question: As a project, do you want your trading fee yields & liquidity mining rewards going to market-making firms, or to your most committed hodlers? As a trader, when you perform a trade, do you want the community members earning the fee, or a market-making firm?
- This is why Bancor’s single-sided IL protection is so powerful. Projects don’t need to ask their holders to choose between staying long and providing liquidity; holders get yield while maintaining full upside exposure; and users can trade against a pool that generates yield for the community, not a professional market-making firm.
- So we need help from our community.
- We want to communicate our advantages through influencers and YoutTubers.
- If you know of any crypto or financial influencers that you rely on and trust, send them to me on Twitter or Telegram (@NateHindman on both).
- Send any names you have. We are doing an aggressive outreach.
- We have grants available for anyone to communicate and educate on Bancor.
- Every tweet you make helps. Every good idea you have to spread our message and the impact of our great features can help.
- We’ve been leaning more into paid advertisers. You may have seen our ads on Etherscan and CoinGecko for instance.
- We’re making efforts to reduce the friction of whitelisting so we can support more assets and make Bancor the place to list first.
- We want to be a “liquidity-first resort.”
Q: Can you tell us about how liquidity will migrate from V2.1 to V3?
- Nate: “We can’t comment too much on that but it will be a failure for us if migration is complex or expensive for LPs. We want the migration of liquidity to be as smooth as possible.”
Q: In V3, will gas costs be optimized?
- Mark: “Giving hard numbers on the gas is premature. One of the motivations behind V3 was to make things simple enough to improve gas for swappers and LPs. The biggest gas savings will be for LPs due to how the current contracts are set up. Contracts for staking and unstaking will be hugely reduced compared to how they are today. We are also working to reduce the gas on swaps as well.”
- Mark: “There’s no way that V3 will be more gas intensive than V2.1. You will be pleasantly surprised at gas costs.”
Q: When will V3 get shipped?
- Nate: “We’ll be sharing more info on the specific features once we get closer to the launch.”
- Mark: “Share a launch date for V3 is premature. We are still coding and we’ve just decided on an auditor. The audit process itself can take as long or as short as it needs to take depending on changes we need to make. Once we are in the audit process we can talk more about time frames.”
Chichi from Degen.Farms (26:00)
- We have launched a game called Degen’s Farm where we want to connect NFTs and DeFi.
- We have twenty types of “animals” attached to each protocol, for example the Mouse for Bancor.
- We are making a farming competition between different protocols.
- If you hold BNT token, your chance to farm the “next level” of that related creature are improved.
Discussing stablecoin yields with Mark (32:44)
- The big question: Are we overpaying for our stablecoin liquidity?
- Is it worth having a 30–50% APY on these pools?
- Currently they are between 37 and 50 million in liquidity for each of the pools and they don’t need to be much bigger.
- If pools are very large we pay much more for impermanent loss insurance. This is what shadow pools solves for — limitless stablecoin pools that incur very low IL cost on the protocol.
- If you look at any stablecoin options on DeFi, our stables are the most profitable by a wide margin. We want to be the best but we don’t need to be the best by 200%.
- Reducing emissions on this pool is difficult but possible since we have done it before.
Q: What do BNT holders gain from this change?
- Mark: “Stablecoin pools were consuming roughly $2m in monthly BNT emissions and anchoring down the BNT price. We don’t want them to shrink too much either.”
- Mark: “Our swap APYs are comparable to other platforms even without rewards. Also if you put your stables in another platform, you can lose tokens due to impermanent loss. Even if your yields appear higher, they may end up being lower.“
- Community member: “It’s great that you guys are looking at these numbers. If we can educate the community more about IL protection it would be a big win.”
Q: Rather than reduce total emissions, maybe we increase the ratio towards BNT stakers in those pools? If we incentivize the BNT size more, it can increase the size of the pools as well.
- Yudi: “This is probably the same as reducing emissions but I have to check if this is possible. Frankly, I think that given the size of the pools, it might be better off reducing the emissions to match the same as other tokens which is around 20% of what they are today. It’s a big drop off. The size of the pools don’t justify such huge rewards.”
- Mark: “If the stable coins increase in size, it can cause a lag in BNT price due to arbitrage. The current depth of the pools is almost ideal. The question is, what is the correct reward rate that will keep the liquidity here. We can easily half the rewards we give and still be the best place to provide stablecoin liquidity in DeFi.”
- Community member: “Stablecoin capital is very mercenary. We don’t get the hard-the-quantify extra benefits of token communities with stablecoins. Unlike with LINK for example, there is no community coming out to support us, there are no stablecoin influencers who can shill us.”
- Mark: “I agree. We need stablecoins but we aren’t building a community with stablecoins.”
- Community member: “The people who would be more in favor of stablecoin yields are probably not on this call because they aren’t as involved in our community and the health of the protocol.”
Vote Delegation (55:02)
- There is a new channel on the governance forum where users can post their delegation nomination.
- If you find that voting is too stressful to keep up with, you don’t know which way to vote, or you find the process to be boring, we have people advertising their commitment to DAO operations.
- These delegates explain how and how often they will vote.
- If you find that you are not participating in governance, we ask that you either participate, unstake, or delegate to someone. Being staked and inactive only hurts the DAO.
Q and A (1:00:25)
Q: Why do you think we are losing market share to other DEXs?
- Nate: “There’s a couple of things we’re looking at. One is whether the recent change to the ETH/BNT pool fee is affecting volume. In this case, LPs are seeing higher APR, but possibly less volume.”
- “We are also on the cusp of launching a new version, but we know we have an awareness problem. Even before V3, our LP product is stellar but we need to convert LPs to traders and we have some programs to help us with that. We’re in a somewhat awkward lead-up phase to when Bancor V3 goes live. Several features in V3 are specifically targeted on dramatically increasing volume. There is also a significant amount of trading now occurring on L2s like Polygon, and we are yet to go there.”
- “Volume is also a somewhat flawed metric for measuring market share. In some cases, there may be large volume on a pool, but also a ton of IL, so LP APR is low or negative. So we should consider how sustainable the volume is in other places, for example Uni V3. We see lots of LP churn there, where they generate 10X the fees but also 10X the impermanent loss. These LPs lose money to professionals who are arb’ing the pools. How long will everyday LPs put up with that?”
Q: Are our volumes heavily dependent on aggregators? If so, do they optimize for gas and fees?
- Nate: “We have some numbers about aggregators. We are more dependent on aggregators than our competitors, which can be seen as a positive as an area we can grow.”
- Steven: “Getting aggregator traffic is not an exact science between fees, slippage, etc. Over the past month, we have seen a ton of new whitelistings which expands our community, with around half of them coming from community driven action. Our best way to increase volume is through community lead initiatives like this.”
- Nate: “Something interesting about aggregators is that they often route trades to private pools that are favorable to them even when it’s not the optimal price for the user. We used to think that having the best liquidity and prices meant that traffic would just come from aggregators. We have learned that the volume comes with organic, real users who will trade directly on bancor and return.”
- Nate: “Our strategy is now to distinguish ourselves with our other features and have users come for the LP yield and stay as traders, as well as improving the tools for our traders with new features.”
- Mark: “I haven’t been able to dig into volume analytics but when I looked I saw that swap volume in dollars is going down on all bluechip coins across DeFi. The volume that isn’t moving is stablecoin volume. Most of our volume is in volatile assets while platforms like CRV and Uni V3 transact largely in stablecoin volume. I’m not defending this position since I don’t have enough data yet, but it looks to me like when the market is going down, our relative volume goes down.”
- Nate: “Bancor’s current sweetspot is mid-caps, with tokens like WOO or something like MATIC which we captured before it blew up. We are looking at why midcap volume may be getting adversely affected in this climate.”
- Mark: “Midcaps are not reliable enough to be a long term hold yet, and they’re not risky enough to be a degen play. So in this bearish market, it makes sense why mid-cap volume could be suffering.”
Q: Compared to Uniswap for example, we need an interface that is easy to use, very responsive, and we need to get our messaging out about impermanent loss. We need explainer videos that someone like me, not an influencer, can share.
- Nate: “I agree. It took us time to make a product-market fit. We’ve been in product development mode for so long. We are shifting now into leveraging that fit and reinvesting in a lot of initiatives to reach the right people. We are looking to creating something like a Bancor University that can guide users through the process we have.”
- “It’s a matter of getting that awareness out. This is even before blowing people’s socks off with V3.”
Q: We need to get Mark Cuban on this call one day.
- “It’s funny that you say that. He was considering coming on but this call is at a tough time for him.”
- “We want to experiment with hosting this call on another day. We are going to host the next call on a Monday instead of a Sunday. Not this but next Monday we will do that.”
- “Mark Cuban has said that he is interested in joining the call and helping us with our awareness. He owns BNT and posts on governance and thinks we are a great solution.”
Q: Do we know why Cuban was drawn to Bancor?
- Nate: “We reached out to him and said ‘If you like Sushi, check out our single-sided pools.’”
- “We got on a two hour call with him just last week and he was immediately interested because he’s been hurt by IL and was drawn to single-sided liquidity provision.”
- “We are working with him on a plan to help us with awareness.”
- Please ping us with any influencers or YouTubers you know that can be helpful.
- Every tweet you post makes a difference.
- We have content grants active at all times. Any users that want to create videos or guides, please reach out to Nate Hindman.
- 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!
- As always, we have rolling developer grants for those who want to build and innovate on Bancor’s infrastructure.
- As always, token projects that are interested in whitelisting on Bancor, or any other integration, can email [email protected] or Telegram at @FoxSteven.
Join Bancor’s public community calls every Sunday at 1pm UTC on Telegram voice chat to speak directly with core contributors.