Drastically increase BALN-sICX rewards

Proposal Discussion WIP: BIP
#16

First, I see no evidence that this change would increase TVL. Where are you getting a 2m TVL increase from? Also, why would more TVL in sICX/BALN pool be beneficial to Balanced?

Second, by prioritizing the sICX/BALN pool, we would be diminishing the attractiveness of our core service/product, minting bnUSD.

Having huge TVL in the sICX/BALN pool is horrible for balanced. We should want that sICX locked as collateral.

The bnUSD pools encourage locking collateral and minting bnUSD.

The sICX/BALN pool encourages people to withdraw (or not deposit) collateral.

#17

At risk of repeating myself, the ‘reward rate’ of a pair, the APR, is independant of the ‘reward allocation’ of the pair.
The ‘price of liquidity’ is directly represented by the reward rate, the APR of a pool. The market decides the price, by supplying liquidity. We decide, ‘how much liquidity should we buy’ via the total allocation.

At the time of writing, the market has indicated, directly TOLD us, that the price of liquidity in BALN/sICX is half that of BALN/bnUSD, and also a bit cheaper than the price of liquidity in sICX/bnUSD.
Not only is it displayed on our own platform, as the data I gathered before has shown, there can be HUGE vast differences in the price of liquidty, as shown on the stats from ALL the DEXs in the top 11 DEFI platforms.

Stable/stables have the least reward rates, and lo and behold, if you calculated the liquidity(TVL) per reward you would realise, they are the cheapest, followed by major pairs, followed by speculative token pairs.

The price of liquidity is NOT set by the purchaser(Balanced). It is set by liquidity suppliers, the AMOUNT of liquidity purchased, that is decided by the purchaser(Balanced) and is represented by the reward allocation.

The liquidity market is not a supermarket

#18

Did that make sense? Don’t get me wrong, I love the sICX/BALN pool. Increasing the rewards in that pool would make my position that much sweeter.

Right now I have about:
30% collateral
52.5% sICX/BALN
25% BnUSD/BALN (about 7.5% is loan)

If the changes here happen, I would probably rebalance to:
12% collateral
90% sICX/BALN (about 2% from loan)

#19

You are one participant in the market, and you have your goals/investment thesis/bullishness or bearishness on BALN/sICX/and indeed bnUSD.

The total supplied liquidty per reward, is a reflection of the agregate willingness of the entire market to supply liquidity at that price. There WILL be variations, but the market decides the price. This price can of course change, with a change in the sentiment of the market. But long term trends in the pools in both Balanced, and other platforms are clear, lower IL pools get more liquidty per reward.

This isn’t as obvious in a closed ecosystem like ICX, but on chains where the fight for liquidity is fierce, liquidity shoppers are very discerning, and vaults allow them to have almost no exposure to the underlying reward token (for pairs not including that token)

EDIT: We as individual investors tend to view an increase in total reward as a increase in reward rate, as we are fully invested. But the reality is there exist vast amounts of liquidity not yet present, and yes part of my initial argument also contained the facet where if we believe the market prices liquidity in BALN/sICX at a cheaper price, if we increase the rewards on that pool, for lack of BALN (if there is a lack) it will cause the price of BALN to increase instead. And then find an equilibirum that roughly matches todays ratios. Or it can slowly absorb a larger share of inflation, reducing the price impact of inflation. Whatever the equalising mechanisms are, the markets price on liquidity of that pair, is both clearly known, and has been stable for a long time

#20

I am not fluent in finance, my apologies. Is this statement sort of the point:

Increasing rewards to sICX/BALN will be the most efficient way to gain higher TVL (more TVL for less rewards paid).

My point is, I don’t think doubling the reward will bring substantial new capital to Balanced or ICON. I believe this change will just move the current capital around.

Further, I believe this change prioritizes a secondary product at the expense of our primary product.

#21

I am very happy to debate the merits of the change at what the change represents.
I just want to clear up, and make sure we are on the same page.

It is perfectly acceptable to say, BALN/bnUSD is more expensive, but we still prefer it because of X,Y or Z.

Thusly the remainder of my arguments are towards WHY buying more of that cheaper portion is better. I have them scattered throughout, but will try and list them again here:

  1. It is not proven by ANY numbers, that the exact split we have now is ideal. It is surely clear to anyone that cutting BALN/bnUSD by 25%, will make TVL fall by 25%, and increasing BALN/sICX by the same amount, lets say it just moves it, the TVL increases by that exact same nominal value, that that is a worse scenario.
  2. I have given data above, for very extremely successful DEXs, tend to favour very skewed pools, and this part is critical as well, ALL heavily do not favour platform token/stable. That one trend is very obvious. They also favour ultilising hops, even for pools with (a small amount) of direct incentivication.
  3. Multiple hops can make the trading experience slightly worse, but can reduce Price Impact, mitigating the negatives to the trader, while increasing fees. Balanced makes fees from more hops, Balanced makes ZERO fees from the trader suffering more Price Impact.
  4. Higher TVL in BALN/sICX for the same trading experiance, locks up more BALN.
  5. It is easier to attract liquidity when one side has a much large supply, thats almost always the native token, ETH, ICX, etc.
  6. Higher TVL is a known marketing metric for DEFI platforms, without any improvement in trader experience, or in fact with a negative trader experience, this, plus point 3 about hop fees, can make it a superior choice.
  7. Opinion Other DEXs support Platform/Native the most because on a chain the richest people, the whales, are rich in the native token. There are people with WAY more ICX than anything else on the chain, making sure they choose to use OUR platform means the deepest pools should be X/sICX. This is why on other platforms, since they face real competition, all of them favour X/native to be very very much deeper.

Closing
We are buying Quadruple the amount of the liquidity that is double in price to a perfectly valid pair. We can buy a little less, of the expensive one, and more of the cheap one.

Reducing BALN Allocation to BALN/bnUSD Pool
#22

So, my point is that ideally we should want that native token as collateral, sICX/ICX liquidity, and bnUSD/sICX liquidity. These activities all support our primary product.

Competing with ourselves to get that sICX into a sICX/BALN pair hinders our primary product.

#23

The problem for ICX/sICX is unlike the other pools, increasing TVL doesn’t increase the trading experience, and is a non competative edge.

Theres nothing wrong with the sICX/bnUSd pool atm, I can see it going lower, but only to be replaced by sICX/other stable, should we desire. That pool also generates fees worthy of its reward, whereas in the same way as the rewards are, we are paying 4x for BALN/bnUSD, that only generates 2x of the fees of BALN/sICX.

Additionally we need a BALN LP of some kind. I am not opposed to REALLY reducing BALN/bnUSD, following (broken record here) the ratios of platforms with HUNDREDS of BILLIONS of TVL.

Please refer to Bancor and Sushi above, where Bancor has ONLY very small pools with BNT/stable, and zero other stable pairs. And the opposite of Sushi, with ZERO SUSHI/stable farms.
Observe the size of the reward pool for CAKE/BNB which is 40x, and a combined BNB/stable (like sICX/stable) which is FAR smaller

#24

We are paying 4x for BALN/bnUSD pool not only for the liquidity, but to also validate the use case for our stable coin.

#25

Yes, we don’t have to follow their ratios exactly, here is a possible optimisation.

Increase sICX/bnUSD - it is also cheaper than BALN/bnUSD
Increase BALN/sICX
Introduce bnUSD/stable (already happening) which traditionally stable/stables have damn good deals, on liquidity, as you can see for yourself on any DEX, or from my data above.

If I could be so bold, we are spending the MOST (more than on sICX/bnUSD) on the poorest returning liquidity, with not a single shred of evidence it makes more fees/improves trading experience/ increases TVL, or ANYTHING really, other than ‘we started this way’.
If you want to propose to shift BALN/bnUSD rewards into, BALN/sICX + bnUSD/stables, I’d say heck yeah?

#26

Story time, long ago I taught English in Japan. The company I worked for worked hard to create their branded English conversation schools for children. At first I thought that was their business. It wasn’t. They were the largest door to door salesman driven book publisher in the country. The schools were a secondary product, used to help sell their primary product. The two salesmen who thought of the idea got promoted and were heavily praised for their insight. Over time, the capital built up in their schools was huge, but their earnings was still from selling books - it’s much easier to sell books that unlock access to the schools.

My thoughts is that Balanced works in the same way. The DEX is there to help the functioning of our primary product, minting bnUSD. Over time that may change. But right now the DEX is there to help sell the notion of staking ICX to mint bnUSD. I could, of course, be completely off.

#27

There are bnUSD containing pairs that give a hugely superior liquidity return. This includes sICX/bnUSD.

Additionally origination may make fees, but we don’t make much money from people holding bnUSD, the real money is made from people spending it, ie. ultilising the leverage). A flat origination fee is a ‘sugar hit’, increasing the total size of the economy greatly helps the DEX is true, but not by having it locked in LPs, by people spending it, spending it, and spending it again.

Also feel free to compare the Market cap of DEXs versus governance token of collatoralised stable coins (like MAKER). The collatoralised stable coins have one stiff competition, centralised stables.

#28

Basically I’m saying, incentivizing sICX on anything that isn’t related to our primary product is a mistake at this point. Increasing the sICX/BALN TLV means less possible sICX locked as collateral.

#29

The dark cloud that hangs over crypto, threatening to send us back to pre 2017 market cap levels if not completely wipe out the market for years @.@

That’s a little gloom and doom, just for fun’s sake :partying_face:

#30

To look at bnUSD, the BALN/bnUSD LP doesn’t help it at all.

People minting just to stick it into an LP, again, we can lock MORE bnUSD in another pair.
And real sustained demand for bnUSD CANNOT be incentivised pools, because paying others a CONSTANT rate, for a 1 time fee, thats not the play.

#31

Without checking, I’m guessing DEX tokens are higher?

One of the great things that happened with Balanced is that the user experience of the DEX is great. Maybe minting BnUSD isn’t the only primary product. But until there are more pairs I don’t know if trying to get all the liquidity in 1 pair is needed.

Thank you for all your work explaining to me.

I don’t disagree with your reasoning, I am just unsure. There may be a time to make a change like this, but I don’t think it is now.

#32

Early days. I’m saying right now, that’s the play. As the icon’s DeFi space grows then that will change.

#33

I like your work in drafting up numbers, if you could indulge me,

What do you think the net TVL would be plus total locked BALN, and total locked bnUSD be,
if the BALN/sICX reward was zeroed, and 1/4 went to sICX/bnUSD, 1/2 went to BALN/sICX and 1/4 went to bnUSD/stable. You can use the highest findable rate for stable/stable, but its about 10-15% APR generally.

And all that, the ‘terrible’ effect on trading that pair, is a single hop, which grants more fees, and isnt even particularly negative. Buy and hold users only pay once, it reduces speculative trading on the platform token. And thats not what I am suggesting at all, but if you crunched that, I think we can see why DEXs with 100x our mcap, choose that.

I also enjoyed this conversation, it has made me realise BALN/bnUSd is worse than I thought. all the more reason to change it asap. This misallocation of capital is worse than initially assumed once we can add stable/stables to the mix.

#34

I’m actually about to go offline for a few days. So I am sorry that I cannot indulge you.*

But I’ll ask for an indulgence of my own.

Out of the DEXs you’ve pulled data from, what was their ecosystem like when they started?

(Users/activity, available tokens in use on chain, available tokens that are also available on centralized exchanges, and market cap for those chains/tokens are all probably relevant)

Which ones had similar origin environments to Balanced?

I feel like you are pulling data and assuming that our situations are the same. Once we get more pairs listed, and when those pairs have utility elsewhere, then I will start to see the similarities. Because, other than ICX, all of our pools are new assets, and currently, the only legitimate use case for these assets is our platform. I’m not saying this is the goal, but it is the current situation.

Is the way you are looking at it like “how much TVL do we get for X rewards? Is that good value?”

In opposition, I feel those rewards are currently doing more than that. First, they compound the incentives for minting BnUSD. Second, they add legitimacy to BnUSD and BALN. Third, they heavily reward early adopters to the platform.

I am really excited about ICON and Balanced, but for many in the crypto and DeFi spaces, we are not on the radar yet. I have no numbers to back this up, but my guess is that we have an extremely high ratio of “new to DeFi” users.

*there was a highway accident, and we missed our morning ferry (that’s why I’ve been able to ramble at you :flushed:)

1 Like
#35

Really love this topic. Huge supporter of an increase, or rebalancing.

There were no BALN airdrops in the beginning, collateral BALN rewards have been decreased, and you can only stake your BALN for network fees…no rewards. We need to show more love to BALN users in my opinion.

sICX/ICX pool total daily rewards = 4,687.53 BALN
BALN/sICX pool total daily rewards = 3,348.23 BALN

Are we actually operating where a pool with no IL is receiving more rewards than a pool with IL?? I really think some kind of rebalancing should occur within these pairs adding more reward share to the BALN/sICX pool. Just looking at this from a very simple point of view. If I am way off in my observation please let me know!!!

Would love more discussion around this… not saying a huge rebalance, but definitely something that is more risk adjusted as to what is currently there.