This proposal is expected to appear on Snapshot on June 5th. If you want to participate in this decision, make certain that your vBNT is staked for voting prior to the commencement of the voting period.

TL;DR

• The BancorDAO recently approved a diminishing emissions schedule for USDT, USDC, DAI, LINK, ETH and wBTC (colloquially referred to as the “primordial pools”).
• This proposal seeks to repeal these decisions, and effectively cancel the inflationary rewards schedule for these tokens.
• Instead, the same emissions budget is proposed to be redistributed exclusively to BNT stakers - a total of 980,000 BNT over a six-month period.

Clarification

• The other established programs remain unaffected:
  • The once only, 50,000 BNT “dual rewards” program, which creates an incentive for other projects to use the Bancor 3 autocompounding feature is unaffected. This program has been previously established, and maintained by governance with the evolving Bancor 3 deployment schedule. The most recent addendum, approved via Snapshot voting, imposes a deadline of August 31st for projects seeking to use the program.
  • The BIP18: Proposed Bancor 3 Liquidity Mining Program established the BNT autocompounding schedule, and the overall BNT emissions budget into the future.

Motivation

• The motivation for this effective repeal is that the standard rewards contracts were not designed to support this type of incentives system. The “dual rewards” program was envisioned as being the main, perhaps the only use case.
• The misuse of the standard rewards contracts has the following issues:
  • The liquidity providers in these pools seldom keep their BNT. It is the opinion of the author of this proposal that the stress on the BNT token caused by the rewards programs on these pools is unnecessary, and ultimately harmful.
  • The user experience is already compromised. Due to the short duration, and number of standard rewards contracts required to facilitate the schedule outlined in the proposals being repealed here, users are required to perform multiple tasks, including recurring stake/unstake actions.
• User confusion and frustration, and degradation of the BNT token, culminates in a situation that is decidedly worse than simply having no emissions at all.

Refocus on Sustainability

• It is the opinion of the author of this proposal that liquidity mining emissions have run their course.
  • Inflationary rewards programs are valuable in their ability to drive engagement, and further distribute the token.
  • Rewards programs are not true yield.
  • The longer we rely on BNT inflation to appease liquidity providers, the more we are contributing to the systemic misunderstanding of the value proposition of DeFi.
• The version 2.1 rewards schedule could be viewed as the early adopter advantage - something which is only valuable if the early adoption period is ultimately concluded.
• Bancor 3 is highly competitive, regardless of inflation rates. It has become part of the Bancor community culture to assume that inflationary tactics are necessary (they aren’t) and that liquidity will flee from the system en masse immediately (it won’t).
• The longer the community continues to lean into the inflation paradigm, the more our project is conflated with low-brow yield farming and “ponzi” tokenomics, which erodes the reputation of the project and its community.

Bancor 3 BNT Stakers Advantage

• The economic impact of distributing BNT back to those already participating in the network with their own BNT is muted compared to those participating with TKN (non-BNT).
• Since the BancorDAO has already approved the emissions for 980,000 BNT back to network participants, this proposal seeks to reallocate that same amount with a standard rewards contract for bnBNT instead of bnTKN.
• Further, this proposal seeks to establish the following points, which may be referred to in future governance conversations, but aren’t a binding aspect of this proposal:
  • The standard rewards contracts used to incentivise BNT stakers is a temporary measure only.
  • The autocompounding mechanics are superior in every regard; after the relevant contracts are deployed, and the network is stable enough to commence their operation, there is no reason to ever use the standard rewards contracts to incentivise the BNT community itself ever again.
  • The standard rewards contracts are a bootstrapping tool; to consider BNT inflation as a means to maintain participation on the protocol - BNT and TKN liquidity providers alike - is a cheap and dangerous paradigm, and has no place in an informed conversation about the utility or value proposition of Bancor 3.
  • All BNT emissions to anyone, including BNT stakers, is paid for by BNT stakers eventually. There is no free lunch - if you give away tokens for free, you can’t act surprised when others value it accordingly.
• Therefore, the creation of a six-month staking contract is in-line with the community expectation.

BNT Standard Rewards Contract: Conditions

• The proposed 980,000 BNT emissions distributed via a standard rewards contract to BNT stakers will commence after the whitelisting process has completed.
• Therefore:
  • The emissions rates towards the aforementioned tokens ceases immediately.
  • Emissions towards BNT stakers via the proposed standard rewards contract will not commence immediately, and has no fixed commencement date as of this proposal.
  • Rather, the commencement of the standard rewards contract for BNT stakers is defined as being the period of time following the on-boarding of the whitelist from v2.1, with the following guidelines:
    • The protocol holdings of bnBNT are sufficient to on-board no less than 90% of the remaining BNT from v2.1.
    • The entire token whitelist is supported on Bancor 3, with at least 50 pools having completed the bootstrapping procedure, and available for trading.
    • This is critical both from a protocol health perspective, and also from a user experience perspective, as the rush to participate in Bancor 3 to collect these inflationary tokens may outpace the underlying utility of the network while the protocol is still in its establishing phase.

Voting Instructions

Vote FOR to repeal the prior decisions on USDT, USDC, DAI, ETH, wBTC and LINK, effectively nullifying BNT emissions on these tokens indefinitely, and reallocating the recently approved 980,000 BNT incentives budget exclusively towards BNT stakers over a six-month period.

Vote AGAINST to uphold the prior DAO decision to use a total of 36 separate rewards contracts to support a diminishing emissions rate on USDT, USDC, DAI, ETH, wBTC and LINK over a 6 month period, with no changes to the incentives model for BNT.