Analysis of Bancor and the ETH Merge
The Ethereum Merge is coming and set to arrive around the 15th of September.
Following the analysis on Discourse informing the Bancor community of the anticipated changes in the Ethereum transition to proof-of-stake and their effect on Bancor (minimal to none), two proposals have made their way to Governance.
The first is a proposal to determine which action to take in the event of a PoW fork.The second proposal is whether the protocol should be paused 15 minutes prior to the merge to account for any unknowns that might occur as part of the transition.
BNT Burn Proposal
vBNT burning has accelerated in the last few months due to the majority of network fees being used to buy BNT, swap BNT for vBNT, and burn vBNT. However we have yet to explore the effects of directly burning BNT and there has been significant discussion on this topic, most recently here.
A proposal to evaluate the effect of directly burning BNT by burning the current BNT balance (at the time of writing, >~657k BNT) in the V3 fee wallet is now up on Discourse for discussion and is expected to go on Snapshot this coming Sunday.
This proposal is seeking to observe the effects of burning BNT directly and whether it will have a positive effect on market sentiment and protocol recovery.
Set LPL Pool Fee Value to 5% Proposal
An experiment was performed on the Bancor LPL pool over the course of a month to find which fee value was the most profitable for the protocol. The fee value on the LPL pool originally started at 1% and was changed over the course of some weeks to 3%, then 5%, back down to 3%, and to its original starting value of 1%.
The results found that a 5% fee on this pool yielded the highest amount of average daily fees for 10 days in which the pool was set to 5%.
As a result, a proposal to set the LPL pool fee to 5% permanently on v2.1 and v3 is now up on Discourse. If the proposal passes, additional data can be gathered over a longer period of time to confirm that a 5% fee outperforms 1% in terms of fee generation.
The vBNT burn continues with close to 15k of vBNT being burnt daily on average in August. Cumulatively, this amounted to over 450k vBNT burnt for August and over 2.5M vBNT for all of 2022. It is important to note that the protocol has bought ~664k worth of BNT in v3 that has not yet been swapped for vBNT to be burnt.
To help rebalance token reserves on the protocol, the Bancor DAO previously increased the rate at which fees are used to buy $BNT and burn $vBNT. 90% of fees on Bancor v3 are being used to buy $BNT (as of July 20th), while 100% of fees on Bancor v2.1 are being used to buy $BNT and burn $vBNT.
The chart below shows the amount of vBNT burnt per month from network fees collected in Bancor v2.1. Network fees collected in the destination token as part of a swap are used to buy BNT, swap BNT for vBNT, and burn vBNT. The figure below does not include the Bancor v3 vortex which is currently only collecting network fees and buying BNT (happens atomically as part of a trade on v3).
The cumulative amount of vBNT burnt year to date from network fees collected in Bancor v2.1:
The chart below shows the BNT that has been bought from network fees collected in Bancor v3. Since the Bancor v3 vortex is not yet implemented, this BNT has yet to be utilized for swapping to vBNT and then burning the acquired vBNT.
Protocol Analytics — Simulator Explainer
If you want to learn how to participate, run your own simulations, and become a productive contributor to protocol-level decision making, you are encouraged to join the Bancor Discord and post your questions in the simulator channel.
- Fix data event on trades
- Enable deposits on the frontend to match onchain flow and better inform users of risks
- Update pool liquidity data collection to be on-chain
Posted on Bancor DAO Discourse
Level 1 Proposals Under Review:
Listen to the recording of the community call from 8/21. The next community call will be rescheduled to September 11th at 3PM UTC due to the Labor Day weekend, be sure to join the call on Telegram Voice.