As discussed in the bBALN proposal, network fee earnings and voting weight will move only to bBALN. You’ll no longer receive network fees or voting weight for being an LP.
As we build continuous rewards and other features, I have noticed considerable work on the smart contract side to maintain network fees and voting weight for LPs.
Given that this feature will be removed anyway, and already has been agreed upon via an on-chain vote to be removed, I’d like to remove it now to speed up current feature development and simplify the smart contract code while also increasing the rewards for BALN stakers. bBALN is expected to be live on main net end of November/early December, so doing this now will offer many benefits for Balanced development while only removing this feature ~1 month earlier than expected.
Pros:
Better rewards for BALN stakers sooner than expected
Less complexity in the smart contract code
Less dependencies in the smart contract code
Faster development of continuous rewards
Cons
Removing network fees for LPs ~1 month earlier than expected
Removing voting weight for LPs ~1 month earlier than expected
As usual, open to feedback/thoughts. I would like to handle this with social consensus rather than forcing another on-chain vote if possible.
Continuous rewards is in development. Continuous rewards changes the data source of where the data of who owns BALN tokens in the liquidity pools are held. Right now the DEX has all the info, but with continuous rewards and the requirement to stake LP tokens, the LP token staking contract will hold all the liquidity, then that LP token staking contract manages who has the rights to withdraw (unstake) LP tokens from it.
So if we want to stick with LPs having governance and voting rights, we’ll need to do a lot more work on the LP-token staking contract to be able to report who owns how much BALN, total BALN in the LP staking contract, etc. to the Network Fee Distribution contract and the Governance contract. There are also other questions, like do non-staked LP tokens get these rights too? This work will be entirely wasted, as it will be removed when we switch to bBALN.
There’s also composability issues. Like when Optimus launches, the Network Fee contract and Governance contract would again need to reference another data source if people deposit LP tokens into Optimus.
Overall it’s not a very scalable architecture and it’s quite cumbersome to manage from a codebase and implementation standpoint. The longer Balanced has it, the more exceptions we’ll find that need to be accounted for as well as potential bugs. We may even find more issues as we develop other features.
Pretty much looking to nip it in the bud right here as we’re first seeing the issues associated with it rather than wasting the development resource on it. I’d say we’d save at least 2 weeks of work by not forcing this feature, and as a bonus, BALN stakers will get more rewards sooner than expected and maybe we’ll see more people stake it.
One factor is how much bnUSD the BALN/bnUSD pool soaks up. We are dealing with a over supply of it right now. Just over 20% (closer to 21%) of all bnUSD loaned is in the BALN/bnUSD pool.
If we remove voting, what will happen to it? Maybe people will repay, maybe it will go to the already pretty heavily used sICX/bnUSD pool, maybe to some other incentivized pool.
That said, the development work for tracking this would be a huge pain when staking LP tokens. It would make the feature much more complex to ship. I think it can be taken out, I just want to consider/discuss what will happen to the market if so.
The ideal scenario would be people taking their BALN out of LP and staking it, then using the other half of the LPed asset (either bnUSD or sICX) to purchase more BALN to stake, increase voting weight and network fees.
If the bnUSD is used to purchase BALN, then that will cause more rebalancing temporarily. But hopefully BIP12, lowering LTV, along with integration to Omm will help ease that rebalancing.
If the sICX is used to purchase BALN, then this also lowers some pressure on bnUSD as more sICX is available within the DEX to be arbed against the sICX/bnUSD and BALN/bnUSD pools.
Another option is LPs decide to say f*** it and just keep their BALN/bnUSD and BALN/sICX in the pool anyway. This would depend on the yield earned by staking vs LPing.
Regardless of the above, this is coming anyway with bBALN. So the question is to do it now to save development resources or wait until bBALN and do some unnecessary work now
One thing might be that if BALN moves out of the BALN/bnUSD and BALN/sICX pools at great volumes, then the rewards for those pools will increase. Potentially attracting new users and increasing demand on BALN.
Does this mean we don’t need to have a vote, and wait the time, as it is part of the agreed upon bBALN change?
Will there be an announcement of when the change will take effect?
When bBALN gets implemented fees and voting gets switched anyway. So the change would be only about a month away ~ though in-line with speculated implementation.
Though, what I think benefits liquidity providers the most is that this part of the change happens before the boosted pool rewards, giving you some time to adjust.
If this change waits for bBALN, then along with removing network fees and voting weight liquidity providers, Pool rewards drop to .4 unless boosted by bBALN. Which could feel really shocking.
Also, we may see BALN price and LP rewards rise as people stake their BALN, helping liquidity providers make up some of that IL.
I always think as using the BALN/bnUSD LP is a DCA way to hold BALN. I also Ape in more LP when i drop harder. Without bBALN, there seems to be no reason for us me to withdraw the current LP, fee is lower then the APY in LP.
