The Bancorian | A Weekly Summary-December 5th, 2021

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💻Development

The tentative go-live date for the launch of Bancor 3 Phase I Dawn is in Q1 of 2022. To prepare for the launch, we have a new Bancor 3 landing page that details the features of Phase I (A.K.A Dawn) as well as a roadmap. Dawn will include dual rewards, composable pool tokens, liquidity direction, third-party IL protection, and revised tokenomics. Dawn will be followed by Bancor 3 Phase II (Sunrise) and Phase III (Daylight).

We have launched a new UI for the Bancor web application which is powered by our new APIs. Expect the new UI to be modern, faster, and better than the previous version. The application will continue to evolve as Bancor 3 rolls out and new screens, as well as user flows, will be made available in the future. We welcome any feedback from the community as well as any bug reports.

New UI screens are now live on the redesigned interface. This includes:

🌐Ecosystem

🌀Bancor Vortex🔥

November 2021 ended with a total of ~319K $vBNT burned. It has been the highest burning month to date since the inception of the vortex.

On 11/4, we saw the largest amount of $vBNT burned for the month and roughly ~24.7K $vBNT were locked away forever.

This month is an outlier as compared to the previous 7 months in which we have burned between 200K-300K $vBNT monthly. For the first time in the history of the vortex, we have burned over 300K $vBNT 🌀🔥

+----------------+--------------+
| time | burnedamount |
+----------------+--------------+
| 5/1/2021 0:00 | 234190.261 |
| 9/1/2021 0:00 | 214951.2059 |
| 7/1/2021 0:00 | 212623.0538 |
| 4/1/2021 0:00 | 66613.12837 |
| 6/1/2021 0:00 | 240030.686 |
| 8/1/2021 0:00 | 281869.4172 |
| 10/1/2021 0:00 | 218338.8625 |
| 11/1/2021 0:00 | 318706.3137 |
+----------------+--------------+

For this week, we saw roughly ~73K in $vBNT that was burned by the vortex. At current $BNT prices (~$3.25) this equates to ~$237K worth of $BNT locked forever.🔒

+-----------------+--------------+
| time | burnedamount |
+-----------------+--------------+
| 11/28/2021 0:00 | 24029.0012 |
| 11/29/2021 0:00 | 7969.467713 |
| 11/30/2021 0:00 | 7861.164179 |
| 12/1/2021 0:00 | 8869.220831 |
| 12/2/2021 0:00 | 6349.885621 |
| 12/3/2021 0:00 | 5545.444667 |
| 12/4/2021 0:00 | 12244.97997 |
| Sum | 72869.16418 |
+-----------------+--------------+

The cumulative burned amount increased from ~1.747m on 11/27 to ~1.82m on 12/04.

📊Key Metrics

7-day total cumulative fee revenue: ~1.34m

30-day total cumulative fee revenue: ~$5.34m

Source: token terminal

📈 The average daily revenue for different time periods:

  1. 7 days ~$191K
  2. 30 days ~$178K

The 30-day annualized daily revenue equates to ~$65m in annual trading fees paid to LPs. For the past 30 days, trading fee revenue is up (~$300k) as compared to the previous 30 days.

💰 In terms of protocol revenue, Bancor earned around ~$2.67m in monthly revenue for $BNT holders.

🔌Integrations and Updates

  • Bancor presented at DCentral in Miami and unveiled Bancor 3 Phase I (Dawn). This followed the Bancor3: A First Look with core contributors which featured ChainLinkGod, DeFi Dad, and Arthur from DeFiance. We also presented the Uniswap V3 IL study at DCentral Miami on the second day of the conference.
  • The conference was a resounding success and we had a dozen or more Bancorians (members of the Bancor community) that showed up for the Bancor 3 announcement in addition to full-time contributors. We connected with the broader crypto community and many of the tokens teams we have been working closely with. The Bancor 3 reception has been huge and people seem super excited about it.
Mark Richardson unveiling Bancor 3 Phase I Dawn
Bancor booth at DCentral Miami
Bancor event at Palapa Miami

💪Social Channels

🌅A New Day for DeFi

It was an event-packed week with many announcements around Bancor 3 Phase I (Dawn). The list of features announced as part of Dawn is staggering:

Instant IL protection
Omnipool
Infinity Pools
Auto-compounding
Dual Rewards
Third Party IL Protection
Composable Pool Tokens
Tokenomics Redesign
New front-end
Multichain

…🤩 and blew me away as I was watching the live stream. Not only did it catch the attention of the Bancor community (it essentially fixes everything that’s wrong with v2.1) but also the wider crypto crowd is getting increasingly excited for the rollout. The coverage that it received via multiple Twitter threads, articles, Discord, Telegram, and other social media channels has been well received and positive overall.

Leading up to the announcement of Dawn, Bancor appears to have been working overtime on multiple fronts. We saw the release of il.wtf and the subsequent campaign around that. This was followed by the Uniswap V3 research paper which sparked multiple discussions. The marketing side was also busy and we finally have an official Bancorian song thanks to Lil Bubble (pool & chill). There was also the DCentral conference in Miami with two presentations on the DeFi stage covering Bancor 3 and the Uniswap V3 IL study. Lastly, we saw coverage on Nasdaq, Yahoo Finance, Defiant, and many more outlets on all of the above.

The official announcement of Bancor 3 was introduced by a masterpiece of a trailer. The visuals in combination with an outstanding composition gets you excited and builds up tension for what’s to come (hint: Phase 2 and Phase 3 are even better 😲). We can see the new Bancor color scheme make its way into the animations which capture the essence of the new features being introduced. The trailer has a futuristic outer space vibe and overall it is beautiful and unlike anything seen in the DeFi ecosystem. Congratulations to the team for a successful introduction and here is to 🥂 a successful launch in Q1 of 2022.

🎲Random Musings

The buzz of the week was Bancor 3 and countless articles and threads were written 📝

If you missed it, Mark recently appeared on the Radix “The DeFi Download” podcast. Catch it below 👇

🎩Bancorians in the Wild

A collection of weekly tweets from some of the greatest Bancorians🧠💪

☑Governance

👈Previous Proposals

This past week (11/28/21), we saw the following proposal on Snapshot that was able to meet quorum and supermajority requirements:

The following proposal failed to meet quorum and supermajority requirements:

👉Current Proposals

For this week (12/5/21), we have several proposals on snapshot for voting:

Head over to snapshot to cast your votes.

❗If you aren’t voting regularly make sure you unstake your vBNT from governance and delegate instead. Self-nominated delegates maintain a page on Discourse to inform other community members of their intended voting behavior. If you disagree with the way your delegate votes, you can always vote manually to override their decision on your behalf.❗

☎Bancor Weekly Call

In this week’s Community Call recording, Bancor shared the development updates above.

Q&A

When do we expect Bancor 3 to be out?
We don’t give specific hard dates until we’re completely sure of them, but our estimate is early Q1 next year. Bancor 3 will be a phased launch; it will roll out in 3 distinct phases — Dawn, Sunrise, and Daylight. All the features discussed in Miami will go live in the Dawn phase.

Will there be documentation accompanying the Bancor 3 release?
Yes. We can only propose Bancor 3 if it’s what the DAO wants, so they will be consulted on it via explanatory documentation. We also need to know that the average DAO member can understand what they’re voting for, so it won’t be overly technical. There’ll also be a new whitepaper and new technical documents.

How was the Omnipool conceived and how does it achieve one-hop trades?
Parts of V2.1 will be emulated in Bancor 3; we still need BNT to act as a universal numeraire. When you perform a trade, you’re still exchanging a balance of BNT for the balance of the other token, but the balance is virtual as the pools aren’t separated into discrete parts with different tokens. We now have a single pool with everything in it. When you are performing a trade, there’s one token transferred into the vault, and one transferred out, hence it’s a one-hop trade whilst routing through BNT abstractly.

We will also prevent additional approvals needed for transfers, adding to the gas savings.

Do we know whether unclaimed BNT rewards will be part of the one-click migration to Bancor 3?
Yes, they’ll be moved with all your pooled positions in one click. Gas fees will also be significantly lower than they are currently when contracts are simplified.

How are the LP tokens going to differ from vBNT and what are the implications of that on the protocol?
These pool tokens will be the first of their kind in that they only know about their own balance, and not the balance of any other token. So if you have BNT, you’ll get a pool token for it that only measures BNT, the same for ETH, etc. It’s a single-sided design.

Let’s imagine you’re the first person to provide LINK to the omnipool: the protocol will issue the LP token at a 1:1 rate. After some time when you’ve managed to double your stack of LINK from fees and everything else, each pool token will now be worth 2 LINK. You don’t need to acquire more pool tokens to withdraw your initial stack + earnings.

The same is true for BNT, except you’ll get issued both the pool token and a vBNT token. The number of vBNT tokens is equal to the number of pool tokens you get; it means that over time, you need more and more BNT staked in order to receive the same amount of vBNT from the protocol. This means that the arbitrage price of vBNT is whatever the price of the pool token is. If you’re the first BNT LP in the omnipool and you provide 100 BNT, the protocol will again issue both the pool tokens and the vBNT at a 1:1 rate with the number of BNT you’ve staked, and again the pool tokens and vBNT will be worth more BNT as time goes on. However, it also means that someone alongside you who deposits 200 BNT, will receive pool tokens with the same value as yours, so their 100 pool tokens and 100 vBNT have cost them more. The value of the pool tokens can never go down — it’s an “up only” system.

Is the price for the pool tokens going to be universal for the entire pool?
The BNT omnipool has one pool token associated with it, so you can’t choose which specific pool your BNT is in. All of the pool tokens are equivalent to a 100% fungible, composable system. The vBNT is the same. The vBNT pool will be transformed into an infinity pool, meaning it can accept all your vBNT.

Do the changes to vBNT’s tokenomics change governance at all?
No. The only major change is that the price of vBNT is arbitrageable at a different point to v2.1, and it can be provided as liquidity much more easily than in v2.1.

How will the omnipool work across multiple chains?
You can think of it as a liquidity protocol on each chain. If we go to something like Arbitrum where there’s a delay between the layers, there’ll likely be arbitrage opportunities for a substantial length of time. The two different chains we’re on will have occasional, small price discrepancies. Every deployment can be its own marketplace. Having said that, governance may live on Ethereum L1 forever, so the only way to get vBNT is to stake BNT on Ethereum, but details TBC.

Will infinity pools have an inflationary impact on BNT?
The infinity pools will accept any amount of liquidity, and the TVL can be used for multiple things simultaneously, including native staking of TKN on other protocols. There’s no rule to say that the protocol has to make markets with 100% of the liquidity it holds, as this strategy has proven to be extremely risky, generally resulting in loss of funds. You may think that’ll hurt APY, but on the contrary, if you do a risk-adjusted returns analysis, returns go up overall, and the protocol can cover IL with minimal cost.

If the liquidity on Bancor goes up a lot, what will be the impact on yield?
Volume on Ethereum has been trending flat to sideways since May 2021, and that’ll trend back upwards again. It’s about making sure we’re best-placed to attract the liquidity from the user base we’re targeting. With regards to yields, LMR will be auto-compounding from now on, and there’ll be a highly attractive staking rewards schedule with the launch of Bancor 3. On the TKN side, we’re engaging with other projects to support them providing their own token as rewards in those pools.

Will DeFi help to slow down price volatility in the long term?
It’s quite possible that decentralized liquidity is already tapering volatility. This is because physical market makers were reluctant participants, and would extract more value than they needed to, whilst trying to limit exposure to the tokens they were asked to make markets with. Bancor invented liquidity pools to make those obsolete because retail’s interests don’t always align with those of physical market makers. That’s been one of the sources of volatility in cryptocurrency up until now — the person deciding the price has a lot of insecurity.

How was the 7-day cooldown period in Bancor 3 decided upon? Can it be shortened?
It’s to replace the 100-day vesting period. In Bancor 3 we want everything to be composable and fungible. The best way to do this is to ensure insurance vesting with a time component like in V2.1. There’s an apparent exploit in the math of IL protection, which allows someone to provide and remove quickly over and over again, siphoning value off the protocol. So, instead, we used a Monte Carlo simulation to re-assess the 100-day vesting period. We found that vesting is not needed beyond a certain period of time, allowing us to shorten the length and replace V2.1’s system with a 7-day cooldown period like on AAVE and Terra. After 4 days, the window of opportunity for the exploit is virtually eliminated — the extra 3 days of cooldown is just a buffer. We can adjust the cooldown period when we learn more about Bancor 3’s behavior once live.

If you’d already vested for 100 days on V2.1 before migrating to Bancor 3, the 7-day cooldown period will still be required of you simply to ensure that fungibility on Bancor 3 works in the same way for everyone — all pool tokens need to be treated the same.

If you’re worried about needing to withdraw immediately in order to acquire funds to avoid being liquidated on another protocol, we addressed this by allowing you to borrow against your pool token on Bancor 3 without liquidating your Bancor position. If you provide ETH, create an ETH pool token on Bancor, the pool token’s value will always be honored and appreciate over time.

What exactly happens during the 7-day cooldown? Are you accruing fees? What happens if you don’t proceed with the withdrawal of liquidity once the cooldown ends?
When you decide to initiate the cooldown, you agree to liquidate your pool tokens at the price they were at when you announced your withdrawal. However, you’re not committed to continuing with the withdrawal if you don’t want to after 7 days. If you change your mind about withdrawing during the cooldown period (because the pool’s trading volume drastically increases all of a sudden, for instance), you can cancel your withdrawal and have the fees accrued in the pool (since your announcement) added to your position retroactively.

Any updates on the licensing of Bancor 3? Will it be a DAO decision?
The license for Bancor V2.1 is such that the protocol can’t be forked without BNT; this will be the same in Bancor 3. If you want to fork the code you can, but BNT has to be the token that’s used.

If you have unclaimed BNT, will it be included in the one-click migration?
Everything across different pools in V2.1, as well as unclaimed rewards, will be bundled and migrated into Bancor 3 pools all at once. On Bancor 3, rewards on your liquidity will then be autocompounded.

Do you envisage Bancor becoming a more comprehensive DeFi hub, on top of being the AMM it is today?
Liquidity mining rewards in general is a sign of the times — it works because DeFi is bootstrapping right now. It won’t be the primary source of revenue in the future, although it serves an important purpose today. We’ll also look to generate fee revenue from sources besides trading volume. One of these sources is flash loan support on Bancor 3 — we will offer liquidity inside the pools as loans for people who want to do flash loans. Fees earned from flash loans can be enormous, and BD is in touch with big players who are very excited to use Bancor for this purpose. We should not have to settle for significantly lower APYs when DeFi matures and LMR subsides — it will simply require continued innovation.

Can Bancor use Moonbeam to migrate to Polkadot?
We already have a bridge on Moonbeam. We’re aware of the potential that Polkadot offers, but we are prioritizing building the product before migrations. Polkadot is super impressive, but the ecosystem is still underdeveloped. Until there’s a clear need for a liquidity protocol, we are in no desperate rush to migrate. We have over 100 ERC-20s whitelisted on Ethereum L1, but there aren’t necessarily very many tokens we want to whitelist elsewhere yet.

If a token team wants to incentivize a large pool in Bancor 3, how would the liquidity direction work if all BNT is deposited in one pool? I.e. How do we direct liquidity in that direction?
The pools can be grown and shrunk as needed. There’ll be no significant re-direction required. All we have to do is say what the depth of each pool should be in BNT, because that determines how big the pool can grow. We’re working on a dashboard to show where BNT is within the protocol at any given moment.

Any incentives paid to voters have to be blind to the way they voted so that we don’t corrupt our DAO like other protocols.

Where else do you see pool tokens being used when they are issued on Bancor 3? Are we speaking to anyone about that?
This is the focus of our next call, but in short, we’ll be able to use them in many places.

🤝Connect Projects with Steven, Bancor Business Development Lead:

  • Are there tokens you’re holding that we should whitelist on Bancor? DM @FoxSteven about it or connect us with any community leaders/core contributors on the project. Steven leads all our BD efforts and will connect with the team and work with them to get whitelisted or build a deeper pool.

📔Bancor Grants:

  • We have content grants active at all times. Any users that want to create videos or guides, please reach out to Nate Hindman (@NateHindman on Twitter or telegram).
  • We have analytics grants. If you want to work on Bancor data projects or if you are good with working on blockchain data and APIs, we can always use your help!
  • As always, we have rolling developer grants for those who want to build and innovate on Bancor’s infrastructure.

📓Bancor Resources:


The Bancorian | A Weekly Summary-December 5th, 2021 was originally published in Bancor on Medium, where people are continuing the conversation by highlighting and responding to this story.

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