BIP13: BALN Allocation Adjustment (comment)

I was just seeing BIP13 has been closed after 1min without any discussion.

I am highly confused about this process.

As the single biggest liquidity provider on Balanced, and also the biggest liquidity provider in the IUSDT/bnUSD pool, we have voted against this proposal.

The only reason, we have provided liquidity to the IUSDT/bnUSD pool in the first place was to improve price stability for bnUSD, while we could have easily made better and safer yield on other networks.

Looks like the vote is going through, which is democratic and fair, but I want to put expectations straight here.

We have no intentions to re-allocate our LP share to the USDS/bnUSD and IUSDC/bnUSD as for our size we have no option to do this on the ICON network and will end up going multiple times through Orbit Bridge (which currently doesn’t even support single-sig hardware wallets on Ethereum side…) and charging a 0.1% fee on both sides.

So effectively, this will lead to a reduction in stablecoin liquidity on Balanced, as we will just allocate our USDT on another network.

As we are also one of the biggest BALN token holders, I would consider this a (-1,-1) for everyone.

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Hey Markus - let me address your points below, appreciate you taking the time to comment:

Posts in the BIP category are immediately closed as it’s just meant to be a place to simply track the history of BIPs, that will then have a link to the discussion thread. Discussion tends to take place under the Proposal Discussion category, where we are now, but there was no discussion in this example.

The current rules to propose an on-chain vote are to have 0.1% of the staked BALN plus a 100 bnUSD fee. Anybody that meets those criteria can submit an on-chain vote that lasts for 5 days. Perhaps 5 days is not long enough, and extending the voting period could be discussed. I’m also always interested in hearing any suggestions on how to improve the governance process itself, which is the main goal of the Meta-Governance category.

Outside of the voting rules, this boils down to an issue with the rigid voting system rather than a more “fluid” system like P-Rep voting and how CRV pool-boosting works. It’s been mentioned here and there in our roadmap updates as “live voting”. We’ve been exploring how to implement this from a high level, but bBALN implementation needs to come first anyway.

The result of the current system is more frequent on-chain votes, as it’s unlikely that any individual BALN allocation is perfect. It will continue to need fine tuning, which is why live voting is something we are exploring in the first place. It will remove the necessity for so many votes to adjust these allocations.

Hey @Markus_Agnostic,

From reading your comment i assume you speak for some kind of professional investment group. An audience i feel is all but missing from balanced ecosystem at them moment, and for sure this is the first post i have seen on the governance forum from anyone claiming to be able to throw some serious weight around :slight_smile:

While i think Scott has explained the governance process (if not, please let us know). I would like to ask you for a favor. Could i bother you to spend some time explaining the wants and needs of the “power investor” to the DAO? Maybe you would even be willing to suggest an improvement?

I think one of the most important factors of succes for any DAO is to make sure as much as possible different voices are heard. And personally i feel BIP13 being passed without you being able to give your perspective in advance was a failure in DAO governance.

Look forward to hearing from you.

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Hi @Uglyrage,

Maybe a quick intro.

Agnostic Fund is a 4-year rolling fund with close to $500 million AUM.

We have a position in ICX, and a smaller one (accumulated farming rewards) in BALN.
We do not hold BALW.

My personal background is 3-years at MouseBelt, who has worked on the spec for Balanced, thus why I am aware of Balanced in the first place.

I basically manage all DeFi activities at Agnostic, and to be honest, the $2.5 million we have put in the bnUSD/IUSDT pool was rather aimed to help the platform and specifically the bnUSD peg, than for us generating yield.

I actually didn’t realize there was a discussion on Discord going on. I usually work with notification bots for other protocols when proposals are being discussed. An “announcement channel” for governace proposals on Discord would help.

Regardless, as for BIP13, I literally don’t even understand the benefit of it still.

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Hey Markus - thanks for sharing more info and I’m sure I speak for the Balanced community when I say that I appreciate your support on both Balanced and ICX as an ecosystem.

I want to take a few minutes to elaborate on two main topics.

1.) Governance process

Unfortunately, our current voting system is discrete votes; Yes/No on a rigid allocation of inflation. In the future (hopefully middle of next year) we’ll have what we’re calling “live voting”. This is how Curve pools work. People fight for veCRV voting power for their pool to maximize the CRV allocated to their pool.

If Balanced worked like CRV with live voting, you would simply be using your bBALN to vote to allocate more inflation to the USDT/bnUSD pool since you are a heavy LP there.

The reason I pointed out that the current system leads to more frequent on-chain votes was to point out that you can submit a vote in the same fashion as BIP13 to allocate a bit more inflation to the USDT pool since you have an incentive to do so. You could start a discussion or just submit the vote like what was done in BIP13.

2.) Logic behind BIP13

From a game theory perspective, of course BIP13 doesn’t make sense for you as an LP of the USDT/bnUSD pool, I would never argue against that, but I figured I’d point out the benefits BIP13 attempts to achieve anyway. Also, to be clear, I didn’t propose BIP13, so this is based on some of the Discord discussion i saw and my own speculation of what could be the reasons.

The benefit is that BIP13 should lead to more volume on the DEX. USDT had the most TVL by far, but was generating as low as double digits of volume on a daily basis when I would check. It has generated very little income for Balanced DAO and BALN stakers relative to the other pairs. It unfortunately appears that very little full-circle arb trading is profitable, or at least not profitable enough to warrant the hassle. I hoped that adding the USDT pair would help stabilize bnUSD, but I can admit that my theory was flawed. Curve-style pools and enhancements to rebalancing are the main answer long term imo.

USDC and USDS, on the other hand, are doing a few hundred k in volume on significantly lower liquidity. I believe this is people swing trading interest rate changes on Omm, swing trading OMM/USDC, OMM/USDS, USDS/bnUSD and USDC/bnUSD, and taking advantage of low borrow rates to supply liquidity on Balanced (borrow USDS on Omm for 10% then LP on Balanced for 30%).

The existence of these assets on Omm creates reason to borrow and trade them as opposed to USDT. If USDT were added to Omm and/or paired to other assets on Balanced, I would think trading volume would be higher on it. Perhaps a way to increase volume on USDT/bnUSD would be to add an sICX/USDT pool, as an example.

Now, since people have reason to trade between USDC and USDS, having a deeper liquidity pool on Balanced for USDS and USDC will allow for more volume to occur before the aforementioned trades stop being profitable. Just as a quick example, deeper liquidity on USDS/bnUSD allows people to borrow more USDS from Omm, sell more USDS on Balanced, and LP more USDS/bnUSD before the trade becomes non-profitable. More volume leads to more fees and a better staking yield for BALN.

That’s my general understanding of the logic of BIP13, just my analysis of it, would certainly be open to other takes. And as I mentioned earlier, I expect to see plenty more BALN Allocation votes in the future.