Gradually increase the trading liquidity limit in the wNXM pool from 2M BNT to 10M BNT in 1M BNT increments

TL;DR

• This proposal seeks to increase the trading liquidity limit (TLL) in the wNXM pool from 2M BNT to 10M BNT with 1M increments happening each time the pool space is filled.
• The pool has space for 13,663 wNXM ($492,885) to be staked single-sided. The proposed TLL increase would allow an additional 68,232 wNXM ($2,440,000) to be staked, with BNT at $2.44 and wNXM at $35.76.
• This proposal is conditional on a Nexus Mutual treasury funds deployment proposal passing through their governance.

Rationale

DEX liquidity on Ethereum

The wNXM pools with deepest liquidity in Ethereum DEXes are:

• The wNXM 1% pool on Bancor with $12,254,226 liquidity, and an extrapolated APY from the fees accrued in the past 24 hours of 8.53% [1].

• The wNXM/ETH 1% pool on Uniswap v3 with $4.30m liquidity, and an extrapolated APY from the fees accrued in the past 24 hours of 4.53% [2].

• The wNXM/ETH 0.3% pool on Uniswap v2 with $475,624 liquidity, and an extrapolated APY from the fees accrued in the past 24 hours of 12.15% [3].

The pool has space for 13,663 wNXM ($492,885) to be staked single-sided. The proposed initial TLL increase of 1M would allow an additional 68,232 wNXM ($2,440,000) to be staked, with BNT at $2.44 and wNXM at $35.76.

If the pool is filled with the initial trading liquidity limit increase and already available space, it should hold a total liquidity of at least $18,119,996, 4.21x the liquidity of the second deepest wNXM pool.

Further increments would work according to the following logic:

1. If the pool’s trading liquidity limit is 10M BNT, stop the increments.
2. If the space in the pool is full within 1 month from the previous increment, increase trading liquidity limit by 1M BNT.
3. Return to step 1.

A pseudo-code for the above logic is:

while (trading_liquidity < 10,000,000) % BNT

if (space < 300,000 AND current_time < last_time_incremented + 1 month)

trading_liquidity += 1,000,000 % BNT

last_time_incremented = current_time

end

Volume and fee performance

wNXM pool weekly Volume and Fees are presented in Figures 1 and 2, respectively.

The pool would benefit from a larger trading liquidity limit to reduce swap price impact, increase volume/fees and thus improve APY.

The Liquidity Share of wNXM dipped in November but has been steadily recovering. The volume share of wNXM on Bancor at the time of writing is 87.7%.

Impact of a deep wNXM pool on Bancor

If the trading liquidity limit in the wNXM pool is raised to 10m BNT, the pool would have a liquidity of at least $50m (with BNT at $2.51), making it one of the deepest pools on Bancor. Therefore, the wNXM token would become a significant part of the BNT index and thus have an increased influence in the BNT price.

The Bancor community has had a very positive relationship with the Nexus Mutual community. The Nexus Mutual team is openly receptive to pool revenue optimization, and this commitment shouldn’t be taken lightly - the most recent success case of pool revenue optimization is the TRAC pool fee experiment - which has had an incredible relative performance w.r.t. fees accrued for all LPs.

FOR

Increase trading liquidity gradually in the wNXM pool from 2M BNT to 10M BNT, with 1M BNT increase at a time.

AGAINST

Keep the trading liquidity in the wNXM pool at 2M BNT.

[1] https://etherscan.io/address/0x5A29f970788F3494f6350207fc91DaD0d6e8C184

[2] https://v2.info.uniswap.org/pair/0x23bff8ca20aac06efdf23cee3b8ae296a30dfd27

[3] https://info.uniswap.org/#/tokens/0x0d438f3b5175bebc262bf23753c1e53d03432bde