I 100% agree with you @BigBen. We want the teams working on the project to be correctly incentivised and aligned with investors interested.
I think @benny_options proposal makes sense and I support it.
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hi,
I get the feeling that somebody sold a lot of BALN in anticipation of this going through, as we had a temporary decline.
I would rather have people engage more with the platform rather than the minimum of waiting for their Baln rewards to come in with their 0% interest loan → incentivized already
Also, the DAO will need more of the allocation as it is the foundation of this platform. Let’s give it some room to breath. I am in support of the Vote.
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Sorry for not being more specific with what my issues were, in the future I will engage more in these conversations
I think we will see how the BALN staking rewards from BIP work and if needed, we can look at something like this next. Great input
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I just wanted to say that while I agree increasing the DAO fund is great, I find it discouraging that this vote is targeting one group of people (collateral providers). Why was there no % taken from other allocations? This vote seems like its just liquidity providers vs collateral providers. Might be the reason why the vote is so close.
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I can see how it might feel this way. Hopefully I can share my point of view with you in a helpful way.
As DAO members we all have a right to our opinion on how best to move forward. So first, I’m not necessarily saying “this is the only way to think about this” ~ I’m just sharing my thought process, and if I come off like a jerk, I’m sorry, I don’t mean to.
Alright, first: My feeling is this is about “Growing the DAO fund vs over incentivizing LP/Borrowers.”
Why grow the DAO fund?
For me, I am specifically thinking about how we will reward/incentivize collateral providers in the future, especially people who are bringing in capital from other chains. Eventually we will be trying to attract users from other chains and platforms. How will we get them to bring dot/eth or whatever to Balanced? Incentives!
Why grow the DAO fund now?
To capture the high rate of BALN being minted/rewarded now, so that we, the DAO, can use those funds/rewards in the future to help grow Balanced. It is not permanent change, the next vote could change the allocations again (not saying that it will).
The sooner we make this change, the more beneficial it is for our DAO fund. From a post earlier in the thread:
Let’s say in a few years, when we get to 2% inflation, BTP connects ICON to a new chain/network. We want to add their token as a collateral option, and get users to deposit that token as collateral and mint bnUSD. Instead of changing our reward allocations from daily minted BALN, we could reward from the DAO. With just half of the rewards from 1 day now (from that extra 10%), we would be able to provide a month of 10% rewards — without having to disrupt our existing rewards.
Note: I’m not going to address the ICX/sICX LP rewards.
Are borrowing rewards over incentivized?
I believe, at this time, borrower rewards are over incentivized.
I updated this quote from above with today’s numbers. It shows how this change will effect users.
On the surface, I don’t see this change being that impactful on user numbers or activity. If you hold your loan for 13 days, you have paid off your fees on an interest free loan — that is pretty amazing to me.
Now, if the borrower puts the borrowed bnUSD into a LP, let’s say the iUSDC/bnUSD pair, then they will be getting fees and if BIP5 passes BALN rewards as well. All with very low risk.
I think it is pretty great even after reducing the rewards.
Will it stay that way?
I don’t know. I could definitely see a scenario in where we decide to boost rewards to borrowers (as daily BALN minted drops). Similarly, if the price of BALN climbs up and hovers around the $10 mark, I could see the community voting to reduce rewards for specific pools or borrowers.
Those are my thoughts.
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On point one, agreed, growing the DAO fund is a good decision. There are no arguments there. My only problem is with almost the entire allocation coming from the collateral userbase. There was no % coming from liquidity suppliers at all. In my opinion, collateral users are just as important to the network. There is a real risk of liquidation, along with any inherent risks involved. The collateral users are also rebalanced very regularly, almost to the point as where I have the same amount of ICX that I deposited few months back. It just seems that collateral users are getting the short end of the stick on this one. For context, I have not sold a single ICX or BALN yet.
I guess I totally ignored this part of your question - I clearly failed in reading comprehension. Sorry.
My best guess may be the necessity of having the LP. The APY on the pools is high, but that is because more capital isn’t in the pools. One of the reasons more capital isn’t in the pools is because of the very present risk of impermanent loss, compounded by having a stable (bnUSD) being one side of both high reward pools.
I can’t say that I am the best to answer this, but I imagine that more capital in the pools would be better (for big price swings being effected by trades).
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To keep going from my previous point.
I don’t think higher rewards are needed to bring more capital to the LP. But I do fear lowering the rewards might get people to pull out capital from those pools, which I think might have unintended consequences.
Does rebalancing happen when the peg is off based on the bnUSD/sICX LP?
Having less capital in that pool may lead to greater price swings, leading to more rebalancing. Again, I’m not the best to talk about this area.
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Yeah, I agree that providing LP is important as well. This vote just seems rushed in my opinion. With OMM released, what happens if everyone withdraws their collateral to there instead? Will the remaining users be hit with even more rebalancing? I hardly think it’s been enough time to reduce incentives that drastically. Just my thoughts.
Rebalancing, frustrating. I believe there are things in the works to try to mitigate the problems associated.
Simple and extreme example below highlights why it is so upsetting (for others, not familiar):
Edit: I do not believe the numbers in this example are accurate
Joe uses Balanced, He:
Deposits 5000 ICX collateral
Borrows 1000 bnUSD
Owes 1011 bnUSD
His net is 5000 ICX - 11 bnUSD
A month goes by, rebalancing has happened:
100 ICX sold
144 bnUSD paid off
Joe loves his ICX, and every time he got rebalanced he bought ICX with his borrowed bnUSD. But Joe paid 10% more:
100 ICX bought
159 bnUSD paid
After a month
5000 ICX
841 bnUSD
9 BALN if BIP5 passes (18 BALN otherwise)
Owes 856 bnUSD
His net is 5000 ICX, 9 BALN, -15 bnUSD
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Hmm, I have no idea if it would increase the instances of rebalancing.
For comparison, here’s OMM’s tokenomics (with BIP5 as comparable):
DAO fund (40%) (BALN 10% BIP5 20%)
Omm Worker Tokens (30%) (BALN 20%)
Liquidity pools (15%) (BALN 50% BIP5 47.5%)
OMM / sICX (5%)
OMM / IUSDC (5%)
OMM / USDS (5%)
Markets (10%) (BALN 20% BIP5 10%)
4% to ICX/sICX (3.6% for supplying/0.4% for borrowing)
3% to IUSDC (1.5% for supplying/1.5% for borrowing)
3% to USDS (1.5% for supplying/1.5% for borrowing)
OMM staking (5%) (BALN 0%)
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They are different platforms, and are rewarding different things.
On Balanced, you are rewarded for minting BALN, and even after BIP5, you are rewarded with 10% of rewards.
A similar action on OMM would be to supply ICX, but you are rewarded with market rate interest and 3.6% of rewards.
We will see how it goes - however, if the worst happens, we can vote to change things. Including voting for a one time payout from DAO to borrowers if rebalancing goes sideways (I really hope that doesn’t happen).
Nice job on the Math AwaxJago, but there’s a slight fact i believe you have overlooked.
Rebalancing only happens when bnUSD is worth 0,95 usd. So basicly when it happens, you sell your ICX 5% above market value. So being rebalanced is a feature to be welcomed, instead of something to be prevented.
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Thank for sharing the comparison. And I guess with BALN, the 0% from staking is offset by network fees. Are we 100% sure this is correct though? I had to check, but I have 2x more deposited into Balanced, then OMM, but currently am getting more OMM than BALN daily.
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Once the bBALN staking gets implemented things will change. Right now LP BALN acts like staked BALN (someone please correct me if I’m wrong), so afterwards, network fees should increase for stakers.
The rebalancing is an accounting nightmare. It is definitely not something I am too fond of, but I realize it as a necessity. I am definitely looking forward to the new updates to the system.
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I need to go make pizza. To sum up, I believe BIP5 is going to be really good for the long term growth of Balanced.
There are definitely growing pains, bumps, and bruises (I am down like 12% vs just staking my ICX -— Impermanent loss is not kind). That said I am excited for Balanced and the direction it is headed!
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There are entirely too many changes for one single proposal. I absolutely love the idea of funding the DAO more, but why so drastic all of a sudden?
We went from fairly straight forward yes/no votes… to something that has a lot of moving parts. Why cant we have a more gradual increase? I just see to much being proposed for everyone to agree on.
Would love to see a 7.5-10% change to the DAO fund, and for the IUSDC/bnUSD to be incentivized more. Keep the verbiage and changes more simple. I am sure such a big proposal is a shock to many as well.