Protocol owned liquidity. BALN sICX and bnUSD

Proposal Discussion WIP: BIP
#1

It’s time we invest some of our daofund into platform owned liquidity.

I know many are eager to get liquidity for BTC and ETH but this is not what is discussed in this proposal. That will have to go through some other service for the daofund to buy BTC and ETH (ex Karma).

We have 3 relevant pairs that we can supply to:
BALN/sICX
BALN/bnUSD
sICX/bnUSD

The balanced we have to work with are:
sICX: 500K + 1.4M in the reserve fund
BALN: 3.2M + 700K in reserve fund
bnUSD: 880K

Event though this proposal wont be for ETH and BTC we still should keep a budget in mind for that purchase and LP.

I do not have a good idea really how much we want to invest but will give my thoughts on the pools and give some arbitrary initial values. From thoose we can discuss if they are to high or to low and why.

BALN/sICX: This pool is a good pool to be an LP in since they are more correlated. However the fees are quite low. Another thing to keep in mind is that sICX always increases in value. And so the pool automatically increases the price of BALN. More liquidity here would make it “harder and more expensive” to arbitrage down. Thus earning us fees (or increasing BALN Value).

BALN/bnUSD: Not sure exactly if this pool is used for arbitrage somehow to stabilize bnUSD, it might be. Otherwise this pool does not earn a incredible amount and is subject to impermanent loss. Looking at the initial result of live voting BALN/bnUSD got very few votes. So If want some good liquidity in that pool the dao might need to add it.

sICX/bnUSD: Currently this Pool plays the biggest role in keeping the bnUSD peg as well as key tool for retiring bad debt. It is subject to impermanent loss but is a key pool in the balanced eco system.

Some Random values to kick of the discussion:
(values are not exactly at correct price)

BALN/sICX:
500K BALN ~ 300K sICX
BALN/bnUSD
300K BALN ~ 37K bnUSD
sICX/bnUSD
700K sICX ~ 140K bnUSD

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#2

can suggest to make POL on ETH and BTC pair instead for better user experience. this Baln and SICX pair already available. No point to have POL on this.

#3

I personally like this as it should help the dao earn more AND help with slippage. Less slippage more trades will occur. More trades more fees :astonished:

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#4

Does not have to be one or the other i am going to push for both.

#5

I don’t have a strong opinion on BALN/sICX or BALN/bnUSD. I definitely support adding liquidity to sICX/bnUSD. The more liquid that pool is, the more interested arbitrage traders (me included) will be. In volatile times, thanks to arbitrageurs, sICX/bnUSD is a big moneymaker for BALN bonders via trading fees.

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#6

I’d say I’m most aligned with @bwhli on this topic. First pool we should bolster is the one that generates the most revenue, this way we earn more money to then later bolster more pools.

Just to get things started with specific numbers, I’ll suggest 1.5M sICX paired against corresponding bnUSD as the first vote for POL. Of course, we’d need to first vote to move a chunk of the sICX reserve into the DAO Fund as well.

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#7

I agree on focusing on the sICX/bnUSD pool, but we do have a lot of BALN tokens laying around. Would be nice to use some of them in LP but i do see that the benefit is quite small compared to bnUSD pairs against collaterals.

However we should consider the danger of live voting killing the BALN/bnUSD pool. Since that pool is a last resort of the reserve in case we run out of a collateral.

Also was planning on including moves from reserve in this vote. Can be done in the same.

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#8

That’s a fair point and I’ll be sure to allocate some votes to that pool

#9

I think it would be smart to provide a minimum foundation for BALN/sICX and BALN/bnUSD using POL just to ensure there is never a situation where they are left with no liquidity.

After that, I agree with the others that we should focus most of the funds on POL for sICX/bnUSD. It would be good for the functioning of the platform, good for bBALN stakers, and good for users.

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#10

Taking a look at our current liquidity pool depths:
BALN / sICX:
~ $630k

BALN / bnUSD:
~ $630K

sICX / bnUSD:
~ $1M

I guess at the current time it gonna be hard to have a impact on multiple pools, especially if we want to save some money to buy BTC and ETH.

So 1.5M sICX is reasonable to have a impact on sICX/bnUSD
which adds about $600k worth of liquidity.

So if we break down a scenario for this.
We add: 1.5M sICX and 300K bnUSD.
Then lets assume we want to save 400K for ETH and BTC. Two pools with 200K liquidity.
And we keep at least 200K sICX in the reserve.

We are then left with 200K sICX and 180K bnUSD. If we invest the whole daofund we can bolster the BALN/sICX by 12% and BALN/bnUSD by 55%.

So BALN/sICX POL would be very insignificant. We could have a impact on BALN/bnUSD but might want some bnUSD left or invest more in ETH and BTC liquidity since BALN/bnUSD will not earn us a lot of money at this time.

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#11

Hey everyone, Robi from Karma team here!

I think it is up to the Balanced community to decide on the specifics of the POL. I am here to help and provide my feedback on POL for strategic assets Balanced do not yet possess.

Overall I think Balanced should consider diversifying treasury (BALN) to more stable assets either by pairing in to LP tokens or acquiring LP tokens directly.

By diversifying treasury Balanced will make a big step towards more stable solvency and potential to grow securely.

Native inflationary tokens are a great way to bootstrap the ecosystem but become a constant sell pressure coming from rented liquidity bill. When speculation and yield ROI starts declining, negative loops start to hurt true believers and holders of Baln token.

What is the end goal how it can be achieve?

End goal:

  • Treasury consisting of Protocol owned liquidity (LP), stable coins and strategic assets (BTC, ETH, .) in majority and Baln token in minority
  • Rented liquidity being incentivised only from the real yield (fees)
  • Reduced inflation of the Baln token
  • Baln token value being grown by real yield (fees), belief and speculation

How can this be achieved?

Pairing of existing treasury assets can be done from Balanced side, but comes with a risk of leaving treasury only with Baln tokens in hard market conditions, becoming insolvent.

All of the end goal steps can be made through Karma Bond. When community will be aligned, Karma team can prepare incremental long-term plan.

Very positive results on Karma Bond can be observat at OIP 11 report: First iteration of 3 OMM bonds

I am looking forward to productive discussion!

4 Likes
#12

@Andell WE should not use DAO Baln as POL or it will increase the inflation or reduce the push factor for BALN to move up the price. instead only use BnUSD and SICX as POL. or use Bnusd to buy ETH or BTC.

#13

DAO BALN should only keep there forever or untouch . or burn in future.

#14

Disagree to use Baln from Treasury.

#15

I’d like to see the DAO treasury add liquidity towards BTC and ETH pairings.

1 Like
#16

correct. Use Baln from treasury is indirectly screw up baln holder. Diluting the effort of accumulate BALN.

#17

Hi y’all, first of all I’m trying to figure out what pools to vote on for lp%. My main objective is use of our platform and BALN increase.

Also, why would we put more BALN into circulation when we have plenty in our current liquidity pools.

That BALN should be use for a future Kraken listing or something like that. Adding extra BALN to our DAO will reduce BALN price, or am I missing something.

We are the number one Defi of ICON, we aren’t that far behind some chains that have their top DEFI and other coins as well listed.

I don’t understand the benefit of touching BALN at this point? Maybe burn it one day but we should think about future exchange listings.

Again, any advice on how to vote for LPs? I want our LPs to know we appreciate you all!

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#18

Yes, Baln in treasury should be burn at all in future. Don’t put more in circulation to dilute the price.

#19

@Balnmax and @BALNSupporter yes I do think you’re missing something here. The conversation might be better in discord because we can more easily have a back and forth but happy to share another perspective here for now.

1.) BALN in the DAO fund used for POL does not impact price. Price is determined by the ratio in the pool, supplying liquidity has no impact on the ratio. I don’t know what you mean by “save for a kraken listing”, because exchanges obviously don’t take payment in BALN. Governance tokens used in exchange listings are given away for free to traders as incentives or lent to market makers to help make the orderbook, objectively worse for Balanced than being an LP on our own exchange where we earn the revenue.

2.) It’s objectively bad to have low liquidity for your governance token. Would you want to log onto CMC and see that ICX volume is 100k and liquidity on exchanges is no more than 50k? Low liquidity leads to low volume. That would be a really bad sign. In order for people to want to buy your token, there needs to be assurance it will actually be possible to sell it in the future. High liquidity (POL especially), ensures that.

3.) The pioneers of POL and the original purpose of POL was specifically around gathering deep liquidity for your own governance token. Karma is based on Olympus DAO, who pioneered POL for the entire industry. If you are not familiar with them, some high-level research would be instrumental for your understanding of industry standards and how this all came about. Look at most of Olympus Pro’s historical POL initiatives (you need to connect wallet to see them), almost all are focused on governanceToken/otherAsset liquidity. Main point is that historically, the biggest POL holding of DAOs on Ethereum and other ecosystems is the governance token pair, typically referred to as “pool 2”. Here’s an example from one of Olympus Pro’s early launch partners.

We’re not reinventing the wheel here. These ideas are put in practice and used by many of the large and small projects in other ecosystems. I’d definitely encourage more research into Olympus Pro as a next step, hope this helped!

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#20

I don’t want to get too off topic on this thread, but I think this an important teachable moment for the entire community and other future readers.

From a high level, you need to realize that your BALN literally OWNS the DAOFund and is indeed backed by it. Let’s go through a very basic example. Let’s compare the absolute floor marketcap (meaning how low could price actually go) of BALN in two scenarios:

1.) We use DAO Funds (i.e. bnUSD, sICX, etc.) to purchase BALN. Your traditional crypto community member bag holder would jump at this idea. “pump my bags!” They’d say. But let’s examine the objective, undeniable, intrinsic value of BALN here. With 0 funds to back it, BALN could in practice fall in marketcap close to 0. BALN would be backed up with more BALN, which doesn’t provide real value. If the market price of BALN drops, then the entire value backing it drops linearly with it.

Floor marketcap = ~0

2.) We sell some DAO Fund BALN for BTC/bnUSD LP. The DAO Fund now holds Bitcoin and stablecoins. Let’s say Bitcoin moons to 70k, but the development and trading has been dead for months (of course just hypothetical!). Despite being a dead project, BALN still has genuine intrinsic value that could be distributed to holders. BALN gains tangible, undeniable, objective value through the tokens backing it in the DAO Fund. Let’s say the BTC/bnUSD LP tokens are worth ~10M USD value. BALN marketcap could never drop below that. If it did, a trader could purchase enough BALN for governance control, then vote to distribute all the 10M USDC to themselves. This is an illustration of intrinsic value by keeping the DAO Fund large and diversified away from BALN.

Floor marketcap = ~10M USD value. Generally, it’s the value of all non-BALN holdings

I hope this example helps show you that acquiring hard, non-BALN assets to the DAO Fund adds intrinsic value to BALN and is imperative for our long term value as part-owners of the DAO Fund. The DAO Fund is somewhat like a low-risk hedge fund owned by token holders. It should be used to invest in revenue generating opportunities, hard-value for the DAO, development efforts, anything that brings lasting value to us all as holders. I know it can be counterintuitive, but the DAO Fund trading BALN for harder, non-correlated assets is objectively safer and more valuable for BALN holders. Timing is of course important, but HODL till die mentality for the DAO Fund is not beneficial to BALN holders. If BALN moons to $10, I’d want the DAO Fund to sell a considerable amount and lock in funding / intrinsic value for BALN for years to come!

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