At the initiative of @Brianna. We have posted a proposal on the Bancor governance forums to facilitate a listing of TRIBE on that exchange.
BANCOR is a blockchain protocol that allows users to convert different virtual currency tokens directly and instantly instead of exchanging them on an exchange. It considers itself to be the first decentralized trading protocol.
In practice Bancor utilizes its own native token BNT as the counterparty to every AMM pair, which exchange assets algorithmically using on-chain reserves. They turn pooled market-maker liquidity into an asset class (“liquidity positions”), allowing for broader, more competitive involvement in market-making.
The advantages to listing TRIBE on more exchanges has been discussed ad nauseum on this forum, and of course a further listing on Bancor would also facilitate better price discovery and additional sources of liquidity for TRIBE. What of additional interest to TRIBE holders though, would be Bancor v2.1’s Impermanent Loss Protection programme.
IL is a common plight for liquidity providers, Bancor’s feature would allow depositors of TRIBE to accrue overtime full entitlement to IL protection. To quote Bancor’s own materials: “Using an elastic BNT supply, the protocol is able to co-invest in pools alongside liquidity providers and pay for the cost of impermanent loss with swap fees earned from its co-investments. When a user makes a new deposit, the cover offered by the protocol increases at a rate of 1% each day the stake remains live, and matures to full protection after 100 days.”
Apart from providing another secure source of yield for TRIBE holders, the Bancor listing may facilitate greater FEI utility when Bancor v3 launches with support for more stablecoin pairs by building a robust relationship between the two communities.
I support this initiative. Getting tribe listed on addl. exchanges will help with everything you have outlined. And will be a great step forward for Fei as a whole.
While Bancor listing TRIBE is obviously fine, I am against the PCV making any capital investments in BNT because Bancor v2.1. is the AMM version of Iron/Titan.
Suppose I am the only LP, I single-stake 100 TRIBE, and TRIBE goes up x4. Then Bancor AMM has only 50 TRIBE left. If I withdraw, I receive 50 TRIBE and 200 BNT, which is equal in value to what I would have had if I hodled, assuming I can sell BNT at the market price. But this is a very bad assumption.
During a market rally, all non-stable assets on Bancor will go up together. LPs will rush to withdraw their stakes and sell the minted BNT, crashing BNT and causing even more selling until BNT is priced at 0. This is precisely what happened to Iron/Titan. Bancor is trying to provide insurance by printing their governance tokens, and it’s not going to work.
In fact, I couldn’t find in the docs what happens if TRIBE goes down and there is extra TRIBE in the pool. This is a bit weird, but it does not really matter how this is handled, because it cannot change the fact that the AMM as a whole incurs IL and prints BNT to cover it… for those who pull liquidity first.
Hi @cozeno, this is a sound proposal with a proposed co-investment of 200k BNT. What would be the proposed investment amount from the Fei side, and also, why the decision for TRIBE and not also FEI? Also, would this be subject to the increased BNT 12-week LM program? How would you manage/incentivize continual liquidity maintenance and long term holding of TRIBE without short term dumping?
Thank you for your response, you do bring up a good point, and upon further consultation, it is possible to avoid any BNT exposure altogether in the long run. As outlined by Bancor staff, any pool will need to initially be seeded with around 1,000 BNT. Though after TRIBE is deposited, and Bancor’s co-investment kicks in, the pool will grow to a large and healthy size, at which point it is possible to eventually sell all BNT positions.
Hello, The proposed investment from FEI side would be around 1M TRIBE,
The reason to list TRIBE is Bancor v2.1 currently does not support more stable-coin pairs, though that will change with Bancor v3.
It is unlikely that our pool will garner enough volume/fees to be approved for single-sided BNT LM incentives.
Honestly I feel with an investment size that is quite small relative to both TRIBE and Bancor, it is unlikely to have a large effect on the liquidity of the wider FEI protocol.
Thanks, I actually mistook co-investment for purchasing BNT, and now realize it’s a parameter on Bancor’s side.
But do you mean that the FEI DAO would deposit 1M TRIBE, either from the treasury or by market-buying with PCV? If that is the case, I would still consider that an investment into BNT because if BNT falls, we will hold more BNT and less TRIBE. Well, the IL insurance is supposed to protect this, but I don’t think this will work well as I wrote above.
In fact, I thought a bit more about the death spiral and I now think it doesn’t even require a market-wide movement. Since all tokens trade against BNT, a loss of confidence in BNT alone would make the pools be composed of more BNT and less of other tokens. This would lead to withdrawals, more sells, and further drop in BNT until it goes to 0. This is almost identical to the Iron/Titan fall, with BNT corresponding to Titan and LP withdrawals for TRIBE + (whatever amount of BNT to make up for IL) corresponds to Iron redemption for USDC + (whatever amount of Titan to get to $1).
My understanding is it would come from the DAO Treasury. The sizing of ~.33% of the Treasury feels appropriate to the risks you mention above. Elastic supply tokens do have issues of potential bank runs, so we should be prepared for that and willing to accept that risk. A key difference between BNT and TITAN is that BNT is being minted/burned based on the volatility in the assets held in the AMM which is different from being minted/burned by demand for a stablecoin. My understanding is this diversifies the risk of any similar failure modes in BNT.
Overall I think this proposal would increase the visibility and utility of TRIBE for a comparatively small investment.
My name is Mark - I am the lead researcher for Bancor.
It is clear that you have thought deeply about the IL protection strategy employed by our protocol. However, some of the points you have raised are derived from misapprehensions about the system and the implicit consequences.
I wonder if we could organize a call? I would be very glad to discuss these concerns with you. Feel free to reach me on Telegram (@MB_Richardson), or you can email me (mark@bancor.network).
I will be watching the DAO vote for the TRIBE token with interest
Good luck everyone!
I am a Bancor community member and just wanted to chime in as well with some of the questions that have been raised here.
The co-investment (200K) from the Bancor TRIBE proposal is what determines the amount of single sided TRIBE space that will be available to TRIBE LPs. With BNT prices at around ~$3 this means that there will be roughly ~$600K worth of TRIBE space available on the TKN side (anything that is not BNT in our DEX, we consider a TKN A.K.A Token)
All pools require an initial seed amount for single sided staking to become available. The initial seed amount is 1K BNT plus the equivalent in TKN. After the initial seed happens and single sided staking is available then you can remove your dual sided deposit after the pool has grown to a healthy depth. E.g. If you add 1K BNT + TKN then at current prices that will be equivalent to pool that’s roughly $6K in depth. Once the depth of the pool reaches about ~3x (~$18K) due to single sided staking on the TKN side then it is safe to remove your initial investment.
This essentially roughly the following:
1K BNT + equivalent in TKN → Your initial investment
2K BNT (Co-invested by the protocol as single sided staking happens) + equivalent in TKN
Removing your initial seed at this point leaves ~2K BNT + equivalent in TKN behind and that should be a good amount to maintain the protected (Impermanent loss protection plus single sided staking) status of the pool. You can either sell your tokens or deposit them into the pool single sided at this point in time.
The Co-investment for the pool will always be there for TRIBE LPs and token holders. If you don’t use it then you are not going to lose it. We find that most community do use their co-investment fully and even setup reminders for when space opens up because it is very competitive (e.g. our LINK and WOO pools are very popular and usually space runs out instantly when TKN side staking opens up). Other examples include the Barnbridge community which put a portion of their treasury funds in the pool:
and also the Harvest community which seeded the pool with ~$500K worth of FARM:
With the release of Bancor V3, we will be able to support liquidity mining (LM) for projects that want to incentivize their pools. At the moment, we only support LM via BNT and the split is typically 70% for the BNT side and 30% for the TKN side. TRIBE could potentially do something similar where you can incentivize 70% for the TKN side and 30% to the BNT side. The BNT incentives is so that you can have BNT LPs staking on the BNT side so that more space opens up for the TKN side as they deposit BNT into your pool. We can also do dual sided rewards where the Bancor community can incentivize the BNT and TKN side with BNT and FEI community can incentivize with TRIBE both sides as well. I think the Bancor community in general would gladly support such an initiative for a few rounds (could be 4/8/12 weeks etc…) since it is a good way for our communities to cooperate together.
Sorry, I had to split this into another append since I was limited to posting only two links.
Lastly, the Bancor DEX has some complexities due the crucial role that our token (BNT) plays. A good guide that does a good job at explaining is the following:
additionally, I also recommend the MakerDAO collateral onboarding presentation from a few months ago that goes into detail about how it functions:
A key difference between BNT and TITAN is that BNT is being minted/burned based on the volatility in the assets held in the AMM which is different from being minted/burned by demand for a stablecoin. My understanding is this diversifies the risk of any similar failure modes in BNT.
Minting BNT does depend on all assets in the AMM, but aside from the risk of correlated market movements, BNT is also minted when the value of BNT falls because all assets on the AMM trade against BNT. In other words, BNT is minted when there is less demand for the Bancor AMM. I think this is a single point of failure similar to the one TITAN had because TITAN was minted when there was less demand for their stablecoin.
But if the DAO is aware of the risk and decides the benefits are worth the risk, I respect that.
I had a very productive discussion with @mark.bancor. I still think the risk of LPing in Bancor is higher than LPing in a standard AMM, but it is now clear to me that the team actively manages the risk and has plans to further reduce it. Below are some of the points we discussed.
Risk of IL from market crash/rally: Bancor AMM has a low percentage of stablecoins, and intends to keep it this way. USDC+USDT+DAI consists roughly 5% of total TVL, as opposed to more than 30% in Uniswap. This limits the IL from a market-wide movement, as long as all non-stable assets move together (in particular, as long as BNT moves with the rest of the market).
Risk of IL from BNT crash: If Bancor AMM becomes very unpopular for some reason, it is possible for some fully insured liquidity providers to not only suffer IL, but make additional losses. However, the team has a concrete plan to remove this risk.
One of the biggest problems of Iron/Titan was that the team was not aware of the risk they faced. This certainly does not seem to be the case for Bancor.
I don’t think that’s true or maybe I am misunderstanding? There should only be three scenarios when BNT is minted:
As part of Co-investments to match single sided TKN deposits on whitelisted pools.
As part of liquidity mining campaigns when LPs restake their rewards or withdraw them.
As part of IL insurance when an LP withdraws their single sided stake and there isn’t enough fees that has been earned by the protocol. BNT gets minted at withdrawal to cover the difference in this scenario.
Korpi (@korpi87 on twitter) recently wrote a great article:
on some of the scenarios that you have highlighted. E.g.:
What happens when BNT outperforms TKN (BNT price increase)
What happens when TKN outperforms BNT (BNT price decrease)
Sorry, I was a bit unclear there. I meant that if there is less demand for Bancor AMM and BNT falls, this is likely to involve LPs withdrawing their TKNs and being reimbursed in minted BNT. Most of this BNT would then be swapped for TKN.
Minimum requirements are 35% quorum and 66.7% supermajority. It will probably take a day for the TRIBE-BNT pool to be set up and added to the protection contract.
Just to add here, the pool is whitelisted but hasn’t been enabled for single side staking with IL protection yet because it needs to be seeded. Seeing will require 1K BNT plus the equivalent in TRIBE tokens. I recommend that you seed the pool with an amount that’s a little more than 1K (e.g. 1100 BNT) because some small trading could happen and the BNT amount could drop below 1K. The seed amount is only needed until there is enough single sided deposits on the TRIBE side that the protocol has matched with an amount greater than 1K BNT. At that point, you can remove your dual sided liquidity and stake single sided into the pool to have IL protection
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