Draft Proposal: Deposit TBD FOX from the treasury fund on Bancor 3

Hey everyone, here to talk to you about the upcoming Bancor 3 release as a solution to utilise idle ShapeShift treasury funds! I’ve already had a debate on Discord in the past week about this but wanted to formalise the proposal and add all the information here. Thank you for being so welcoming, feel free to ask any questions!

This proposal is a draft and will be changed, the amount to stake is TBD for now as I’m trying to understand if there is an interest in using Bancor 3 to provide liquidity. All the upcoming features and pros of using Bancor 3 are presented below.

Summary

  • FOX is whitelisted on Bancor, with low liquidity, at $7,384.
  • As the liquidity is low, it doesn’t attract any volume.
  • Bancor v2.1 already offers Impermanent Loss Protection and single-sided staking, making it a very risk-averse option for liquidity provisioning.
  • Bancor 3 will be the biggest protocol upgrade yet and will bring more interesting features for treasuries.
  • This proposal is a draft and the goal is to debate with the ShapeShift community on a treasury stake for the FOX pool.

Motivation

  • To increase FOX liquidity with a more risk-averse option.
  • Utilise idle Shapeshift funds and accrue yield on them.

Specification

Overview

This proposal seeks to deposit TBD FOX on Bancor.

Rationale

Bancor v2.1’s two main distinguishable features are single-sided staking and impermanent loss protection. These are ideal for treasury stakes as ShapeShift wouldn’t have to deposit any pairing assets in the pool. Furthermore, impermanent loss protection means that the treasury wouldn’t lose value with its stake due to IL - which can be significant as we’ve observed in a recent study Bancor did in collaboration with TopazeBlue [1] [2].

Technical Specification

The ShapeShift DAO would stake TBD FOX on Bancor 3. Bancor 3 Phase 1 of 3 (Dawn) will be release at the end of this quarter.

Bancor 3 Phase 1 of 3 (Dawn) relevant features

  • LP tokens: Bancor 3 will bring LP tokens that represent a single-sided stake with no potential IL downside. This means that they represent an increasing value over time of the liquidity+fees+rewards in the FOX pool, when expressed in the token numéraire. These properties make the LP tokens ideal collateral, and can also be used for other strategies such as native staking and governance.
  • Instant impermanent loss protection - instead of ramping up to 30% after 30 days and 1% a day until 100 days at which you’re at 100%, Bancor 3 will be offering impermanent loss insurance from day 1. However, a 7-day cooldown period has been added to safeguard the system. After the 7-day cooldown period, an LP may choose to leave the pool and the fees and rewards accrued during the cooldown period are sent back to the pool. If the LP does not leave, then it is as if they had never attempted to unstaked. There will also be a 0.25% withdrawal fee.
  • Infinity pools - There will be infinite single-sided staking space in the pools. Some of the liquidity in the pools will be on-curve, i.e., used for swapping, while the rest of the liquidity can be used for internal and external strategies. The next Bancor 3 phases will explore some of these internal strategies.
  • Lower gas fees - On the staking side as the contracts have been greatly simplified, and on the swap side as the swaps moved from being two-hop swaps to one-hop (BNT is used to price the assets instead).
  • Multichain - Contracts are being written with multichain portability in mind, and will be much easier to deploy to new chains compared to the v2.1 contracts. The DAO will vote on which chain/s Bancor will be deployed on.

And many more features such as revamped tokenomics for vBNT, BNT Omnipool (one place to stake BNT), third-party Impermanent Loss Protection, new frontend and auto-compounding fees and rewards.

More info on Bancor 3:
Blog post: Introducing Bancor 3. Bancor 3 marks a New Day for DeFi — one… | by Bancor | Bancor
Mark’s presentation on V3: Bancor 3: Dawn Phase 1 Keynote @ DCentral Miami - YouTube
Landing page: try.bancor.network
Governance forum Bancor 3 spec (detailed): BIP15: Proposing Bancor 3 - LEVEL 1 (DRAFTING) - Bancor Governance Forum

Dual LM rewards campaign

There will be a migration process from Bancor v2.1 to Bancor 3, which will go live in the next couple of weeks. To incentivise migration, we’re running a dual LM campaign which might be of interest to the ShapeShift DAO. It would perhaps work best as a separate proposal, but I’m adding the info here:

  • Any tokens committed for rewards will be matched in dollar value up to 50,000 BNT (roughly $100k).
  • The FOX rewards will be auto-compounded in the pool, and can be used for trading up to the trading liquidity limit (which can be increased via DAO vote).
  • The BNT rewards will be emitted over 24 months to FOX LP token holders that stake their LP tokens in the rewards contract.
  • The FOX rewards can be set according to any parameters that the DAO chooses - emission period, emission amount and model (decay or linear), all done from the UI, no need for extra contracts.
  • The LM rewards will increase the APR in the pool and attract more FOX holders to stake their tokens on Bancor 3.

Governance forum Dual LM campaign proposal: Proposal Addendum: Incentivize users to migrate to V3 by matching token side LM rewards with up to 50,000 BNT per pool - DAO Archive (SUBMITTED) - Bancor Governance Forum
Snapshot voting passed for the Dual LM campaign: Snapshot

References

[1] Half of Uniswap v3 liquidity providers are losing money: New research
[2] https://arxiv.org/ftp/arxiv/papers/2111/2111.09192.pdf

5 Likes

Just heard the community call recording from the 24th - happy to answer any questions you may have about staking FOX on Bancor.

A good suggestion to start the pool with would be around 1.5m FOX to deploy initially which seems sensible based on the liquidity depth of FOX on Uniswap v2. Again, Bancor 3 will offer:

  • Instant Impermanent Loss Protection
  • Single-sided staking
  • AMM tokens with no IL downside - great collateral
  • Auto-compounding fees and rewards

We can setup an AMA on Twitter Spaces if someone from the ShapeShift treasury DAO would like to join!

3 Likes

Hey @tfns would you and some of the Bancor folks be willing to do an AMA in our discord? We try to set up AMAs on our stage to get more community participation and involvement.

Please feel free to DM myself, @willy or @hunt in the discord and we can get a call scheduled.

1 Like

Yeah would love to! I’ll DM you on discord!

2 Likes