Add BALN incentives to CFT/sICX

Hello BALN community, I am writing this post as a member of the core contributor team of the NFT Craft marketplace and as a member of the Craft DAO ( $CFT ).

We’re looking for feedback for a proposal we have in mind for Balanced DAO.

Our goal is to increase liquidity on the Balanced CFT pair. The volume of the $CFT token on balanced.network is quite high compared to the liquidity and has been one of the best fees generators for BALN holders lately.

This low liquidity increases the very high volatility of CFT. Our proposal is therefore to ask the BALN community to enable the distribution of BALN rewards for the CFT/sICX liquidity providers.

Why would it be beneficial for the Balanced ecosystem and how is Craft involved with Balanced?

  • As mentioned above, CFT/sICX pair has proven to bring high volume and high fees to the DAO. We have been aware that during volume spikes, users willing to buy/sell $CFT from/to bnUSD were routing through the sICX pair and was sometimes destabilizing the peg. We are considering to bring a bnUSD pair but at the moment our liquidity is too tight to consider splitting it. Bringing higher liquidity to the pair will reduce this effect. We’ll then be able to safely split our incentives to 2 pools in order to incentivize bnUSD minting on Balanced.

  • On Craft, we are planning to bring multi-currency payment. Our focus will be to integrate bnUSD, we believe that bnUSD transactions will be popular and this will bring an additional use case to bnUSD, thus helping to stabilize the peg.

  • We also dedicated 10% of our token supply to incentivize CFT/sICX liquidity providers, this is currently entirely allocated to Balanced LPs.

Here are our proposal for BALN inflation changes:

USDC/bnUSD 2% (-0.5%)
USDS/bnUSD 1.5% (-0.5%)
BALN/sICX 13% (-1%)
iUSDT/bnUSD 0% (-0.5%)
BALN/bnUSD 10.5% (-2.5%)
CFT/sICX 5% (+5%)

We’re asking for your feedback about this proposal, especially about the BALN inflation changes. We pick this configuration based on the volume and fees generated by the pairs and we’d be glad to proceed with any changes if necessary.

Thanks all and have a good day.

9 Likes

Half a percent max on all pools to give cft lp 2.5% total baln daily

3 Likes

If you guys add bnusd on the craft network it will be amazing ,one notice I have is reducing by 2.5% the baln/bnusd inflation allocation it will hard baln so I think something like 1% is more fair allocation :+1:

2 Likes

I agree that sufficient liquidity is important to support larger trades and to increase price stability. However, I am not certain if this will result in higher liquidity for balanced in its entirety as it might just shift liquidity from other pools to the cft/sICX pool. So I don’t really know if balanced should incentivize liquidity to flow to a pool that is not tied to bnUSD or BALN. If incentivizing a CFT pool I would prefer it to be tied to bnUSD or BALN. I think we should be careful to ‘distinguish’ between tokens traded on the platform. Incentivizing pools not tied to bnUSD/BALN can open a path for more projects requesting incentives.

Additionally, the BALN inflation curve is becoming more stagnant so spreading the decreasing rewards to more pools might not be a good idea until we have (enough) protocol owned liquidity to ensure sufficient liquidity for the pools most crucial for balanced. So all in all I do have some concerns.

I am excited about the further intergration between CFT and bnUSD though and the multi-currency payment sounds great.

4 Likes

as you can see here Statistics | Balanced, the fees for the stablecoin pairs are a lot higher than for the CFT pair. So I don’t see why BALN rewards should be higher for the CFT pair than for the stablecoins.

I suggest you team up with the upcoming Karma platform to get more liquidity for your traiding pair.

2 Likes

Broad points

What I don’t see here is why we are removing a not-inconsequential sum from a ton of pools, all of which:

  1. Contain a Balanced product in one if not both sides of the pool
  2. Need deep liquidity for large trades
  3. Play a part in stabilising bnUSD peg

Realistically trading volume on that pair(CFT/sICX) is not as much driven/affected by the depth of liquidity, and trading volumes are unlikely to be encouraged by deeper liquidity.

Go and try and trade bnUSD/USDC/USDT/USDS and look at the slippage, if anything we need MORE on stable pools not less. There is a ton of potential volume, and the stablecoins still don’t line up precisely because of high slippage due to shallow liquidity.

The proposal allocations

Lets more closely examine the pools being proposed get cut:

  1. USDC/bnUSD 2% (-0.5%)
    Excuse me, are we removing 20% of the incentive for bnUSD/USDC, an important cornerstone of Balanced products with the most popular DEFI stablecoin. This alone makes me seriously question the good faith of the proposer.

  2. USDS/bnUSD 1.5% (-0.5%)
    This is less harmful than the above, but only slightly less harmful, are you saying we should cut bnUSD pair with the only direct USD fiat onramp/offramp by 25%. Now that I write this out, this is even worse than I thought.

  3. BALN/sICX 13% (-1%)
    Compared to pretty much every DEFI in existence, including extremely successful ones, the Balanced incentive for its platform token(BALN) with the chain token (ICX) is pretty much the lowest in terms of allocation ratio, again this pretty much harms Balanced, this category should be increased, not lowered. Also I assume its a typo as the current allocation is 15%.

  4. iUSDT/bnUSD 0% (-0.5%)
    I am assuming this is a typo but its asking to remove 100% of the incentives of this pair. Can’t tell if serious honestly. The pair is not performing well volume-wise but if its to be removed it should certianly go to other stables. Also lets just not conveniently forget, that bad press aside its still the largest and most CEX supported stablecoin.

  5. BALN/bnUSD 10.5% (-2.5%)
    This pool is not an ideally allocated pool, but cutting it by 20% is flat out preposterous without being able to show the benefit to the platform. Lets see some volume projections. Additionally the listed proposal numbers are wrong, the current allocation is 12%, so this seeks to lower it to 9.5% not 10.5%.

  6. CFT/sICX 5% (+5%)
    Lets do a fun thought experiment, the LP currently holds about 9% of the supply of CFT. Across both BALN pools, both LPs hold ~23% of the BALN supply and receives 27% of the allocations across both pools.
    After the proposal this BALN supply will supported by 23.5% of the allocations. This means, on a percentage of supply basis, Balanced will be supporting CFT half as much as BALN, and even less if you count Balanced should absolutely support bnUSD as well.
    Even not scaling it to supply ratio, thats over 1/5th the support for a arbitrary token versus the platforms very own token. And gets worse if you include the need to support bnUSD again.

Personally there can be only one conclusion about this proposal, that is not made in good faith, seeking to do 1 of 2 things, worst case outright siphoning BALN holders holdings, or engaging in some sort of price anchoring, suggesting something outragous to then scale it back ‘a lot’ and still end up with way more than logical.

This critism is not suggesting Balanced should not ever support other fellow ecosystem tokens, but the scale of the proposal to me tells me it cannot have been made in good faith at all.

Suggested benefits as per proposal

Proposal point 1

The proposal suggests it is a very profitable pool for balanced, however collectively all OMM pools have both higher TVL and higher trading volume.
Also as proposed, trade volume will need to increase an extreme amount.
Lets all be realistic, CFT/sICX is much more volatile that 2 stablecoins. The increase in TVL for CFT/sICX will be magnitudes lower than increases in TVL for stablecoin pairs, as people are more willing to provide liquidity at a lower return. Remember Balanced voters, high APR for pools is Balanced paying more for a particular amount of liquidity.

Point 2

This looks to be an appeal to some sort quid pro quo, or a suggestion that bnUSD may not be used if Balanced does not comply? I am not sure.

Point 3

From this point we can see, if Craft is incentivising the LP, we can easily see how much the current return on the pool is, and by how much we can expect the LP TVL to increase by allocating an additional 5% of BALN emmissions to it. However I was unable to find the current CFT rate for LPs to model the likely increase in TVL for that pair.

That said, ‘we incentivise the pair’ is not really an argument for a benefit to Balanced. That platform should do what is best for itself, like support liquidity in its token. Framing it as some sort of benefit to Balanced seems very strange to me. I am not discounting the trading fees Balanced collects, but those are fees for services rendered, if the platform(Craft) is not feeling it is receiving the proper services for the fees rendered that is a different matter. It should be a mutually beneficial relationship, not a sacrifice from either side.

EDIT Bonus fun stats

Proposal seeks to lower support for stable/stable pairs containing Balanced own product by 30%. Pairs that help greatly with bnUSD pegging.
Proposal seeks to lower support for Balanced own token by 13%, and additionally some amount I can’t easily parse in bnUSD support.

TLDR

5% is crazy yo. this is not in good faith.

7 Likes

Just to jump in here, I’m sure the proposal was not made maliciously (maybe I’m misinterpreting “good faith”) but perhaps he didn’t consider a few key points.

But hey - Lucas is from outside the Balanced project/community and seeking our feedback, so I understand where he’s coming from so let’s all do just that - provide feedback. I appreciate all those comments that have already come in.

Having said all that, I do agree with most of the points made. If anything, it should target CFT/bnUSD, not sICX, and I also agree that the allocations from the other pools is quite a lot and should be a more reasonable amount if anything.

@Chiel you raise a good point that this doesn’t necessarily increase TVL for Balanced and @arch I also agree with your point that it won’t directly translate to more volume. Slippage strongly effects stablecoin volume, as people will literally just not trade if it’s too high, but I’d agree the effect is not as large for assets like BALN, OMM, CFT, etc.

@arch - I personally don’t mind getting rid of the incentives for the USDT pool. The APY is extremely small and only supported by 3 wallets I think? Whoever is there is not there for the APY, and perhaps they forgot about their tokens or perhaps they are just supporting Balanced. I had hoped IUSDT would be more helpful but definitely misunderstood the impact it would have.

Side note - stableswap invariant trading will help the stability and trading volume of stablecoins a lot, I would think.

2 Likes

I also want to briefly point out that this entire conversation is a bit of a consequence of our governance system, which I do hope to migrate to something a bit more fluid. It’s tough for the DAO to make such rigid decisions on inflation allocations. The goal would be to allow bBALN holders to fluidly dictate which pools receive how much inflation, just as is done with veCRV.

It then gives an incentive for other projects to accumulate bBALN in order to incentivize liquidity on their own pairs. We could allow this only for bnUSD pairs, for example

6 Likes

I agree, getting rid of USDT pair incentives is reasonable, just not in this way IMO, or as a seperate discussion. I think a possibly worthwhile seperate discussion is which pools are the best to pull incentives from, and have that available for parties making proposals. Since IMO, most of the time a proposal regarding incentivising pools will know what they want to incentivise but not what to de-incentivise. A general community guildline for which pools are more core/less core and also something that the community can discuss properly might be beneficial, both for Balanced itself and any other parties seeking to make these kinds of proposals(before we get to dynamic incentives).

Apologises for being a bit harsh, proposal still feels very surreal to me, but I can see that its unlikely to be malicious so would like to apologise to the proposer for any implications of malice. I still stand by my points though.

If the proposer or anyone else could let us know about the rate of current incentives towards the pair, we could crudely model the TVL increase from this proposal.

3 Likes

Craft team could also marlet buy a million baln, stake them now to help their propsoal kinda the same thing :man_shrugging:

3 Likes

Hello everyone, thanks for the feedback so far, and apologies for the late response! Totally agreed with @benny_options about bBALN and rigidity in BALN incentives allocation.

In order to support the statistics I mentioned in my first message, I printed the 30 day rolling fees generated ($ adjusted) by pairs including BALN, sICX, bnUSD, GBET, USDS, IUSDT, CFT

  1. baln/sicx: 9823
  2. baln/bnusd: 7651
  3. sicx/craft: 6993
  4. sicx/bnusd: 65350.
  5. bnusd/usds: 3365
  6. gbet/bnusd: 2330
  7. bnusd/iusdt: 1185
  8. craft/bnusd: 23.
  9. gbet/sicx: 11.
  10. iusdt/sicx: 0.5612840899903905
  11. usds/gbet: 0.00349742225216629
  12. usds/sicx: 0.002523503531848434

Check out the source, fees are expressed in the source currency for each trade so you’ll need to multiply the values by the token price.

This is mainly what motivated the repartition, I wanted to match the current Balanced fees generation and by no means implying that CFT need to have permanently 5% of the CFT inflation allocated. I didn’t take bnUSD needs (incentives to mint and keep the peg) into account in my reasoning and I apologize for this.

From your feedbacks, it seems that it would be fairer to limit the impact on bnUSD pairs and to reduce the overall allocation to CFT/sICX. Would the following repartition be more suitable for you?

USDC/bnUSD 2.25% (-0.25%)
USDS/bnUSD 1.75% (-0.25%)
BALN/sICX 14.5% (-0.5%)
iUSDT/bnUSD 0% (-0.5%)
BALN/bnUSD 11.5% (-0.5%)
CFT/sICX 2% (+2%)

Once again, this is not a proposal yet, my goal is to gather some feedbacks and initiate the discussion so we can create interactions between Craft and Balanced! :slightly_smiling_face: Thanks again for your feedbacks and have a good day.

2 Likes

2% is a lot more realistic but everyone needs to keep in mind that icon bridge will bring in new lps to possibly incentivize as well

1 Like

Just to give my oppinion in the shortest way possible -
BALN is here to incentivise the use of the BALANCED platform. I don’t understand why you would assume, that balanced (or rather its users) would donate ~850$ in BALN to CFT every day. thats almost a 10x the amount of fees CFT trading generated for the Balanced platform - from a business perspective it just does not make any sense to me.

Since this is a DAO you can go forward with your request anyway but i doubt that it will go through…

Best Regards

4 Likes

Doesn’t it make more sense that if we as a dao support support this project that we just buy it and provide our own liquidity? Should we just propose an OTC purchase to provide our own liquidity and start building our own liquidity ?

2 Likes

This is an interesting proposition actually. Objectively speaking, Protocol Owned Liquidity (what you are mentioning) will end up securing less liquidity than “renting” liquidity, which is the typical model.

For example, if we go the POL route, with let’s say, 200k bnUSD, then the maximum amount we could get in POL is ~400k. With “renting” liquidity, that $850 per day could rent us, maybe ~750k - 1M of liquidity? Depends on a lot of factors of course, but the main point is that renting liquidity usually gets you more liquidity but it’s not permanent