Proposal: Commit 57k/200k OPIUM for the Dual Liquidity Mining Program on Bancor 3
Summary
This proposals seeks to launch a liquidity mining campaign for the OPIUM liquidity pool on Bancor 3.
Rationale
A first discussion regarding launching a Bancor Liquidity Mining program was proposed in June by @alirun and a second discussion was proposed in September by @tsudmi. As Bancor 3 will include native Dual Liquidity Mining, this proposal seeks to deploy 75k/200k OPIUM for Liquidity Mining Rewards with matching 18.75k/50k BNT rewards, all going to OPIUM single-sided LPs.
Bancor 3’s distinguishable features from other Decentralized Exchanges include:
Infinite Single-sided staking.
Instant Impermanent Loss (IL) Protection - Instant protection from the moment you stake. There is a 7 day cooldown period and 0.25% withdrawal fee. At the end of the cooldown period, if an LP chooses to leave the pool, they forfeit the fees and rewards accrued during the cooldown period back to the pool. The withdrawal fee is used by the protocol only to assist with paying out Impermanent Loss Protection.
LP tokens - bnOPIUM LP tokens that represent single-sided OPIUM with no IL downside, making them great collateral and very useful for governance or native staking strategies.
Dual LM rewards - No need for external contracts; the OPIUM rewards auto-compound for all LPs gaslessly and immediately become available liquidity in the pool. The BNT rewards can be claimed or staked in a separate rewards contract that accepts bnOPIUM.
Any OPIUM committed to the Bancor 3 LM campaign in the OPIUM pool will be matched 1:1 in dollar value with 50,000 BNT in rewards, all going to OPIUM LPs.
As mentioned above, the BNT LM rewards will be provided in a separate rewards contract that accepts bnOPIUM and can be claimed or staked in the BNT pool.
The BNT rewards will be emitted over 24 months on a flat emission schedule. The OPIUM rewards don’t need to follow the same schedule - the Opium DAO can choose the rate of the OPIUM distribution per block, total amount and model (flat or exponential decay emission models).
As per previous discussions, I suggest the following:
As already proposed, allocate 75k OPIUM and get 18,750 BNT rewards, at 25k OPIUM per month for 3 months.
Allocate 200k OPIUM to max out the amount of 50,000 BNT rewards provided per pool before the cut-off date at 25k OPIUM per month. The campaign would go for 8 months, and can be paused, restarted and continued by the OpiumDAO.
TODO
Reward LPs in the OPIUM liquidity pool on Bancor 3 with 75k/200k OPIUM tokens via DR.OPIUM mechanism.
I have known the Bankor for a long time, I have always appreciated this project. I think the idea of Impermanent Loss (IL) Protection sounds and works fine and fruitfull. So I can’t wait for all this to come true. Prepare your opium’s, gentlemen!
fantastic! single-sided staking and IL protection are definitely a great value proposition. Out of curiosity, in the hypothetical scenario where the impermanent loss is greater than the LP’s accrued fees/rewards, is the IL protection partially subsidized by Bancor itself via BNT? Also, will Bancor provide liquidity mining on L2/arbitrum?
All pools are paired with BNT on Bancor. So you have ETH/BNT, OPIUM/BNT, LINK/BNT, etc. When a token holder stakes their tokens single-sided, the protocol mints BNT up to the trading liquidity limit. This BNT is Protocol-Owned and the protocol accrues fees with it - the same way as any Liquidity Provider. These fees are one of the mechanisms we have to pay out for Impermanent Loss. The protocol-owned BNT is kept high enough that any IL that needs to be paid can be covered by the protocol.
You can think of Bancor as an insurance provider that covers IL. Not all pools suffer significant IL and essentially if the fees that the protocol earns from its trading liquidity are greater than the IL that it needs to cover for LPs then it is profitable. We can offset risk by controlling how much trading liquidity we provide to a token with more mature tokens having higher trading liquidity than riskier tokens that are brand new.
We also have ways of applying deflationary measures to the $BNT token via what we call the vortex burner that takes 15% of swap fee revenue to burn $vBNT ($vBNT represents $BNT that is locked into the protocol and supports trading liquidity). This 15% can be considered an insurance premium for the protection that we provide to LPs.
Our version 2.1 of the protocol was deliberately handicapped with regards to how much deposits we could take from LPs while we tested some of the assumptions about our IL protection. We have proven that our model works and in Bancor 3 we are essentially removing the limitations that we set in place.
Hope this answers your question, but happy to elaborate further and answer any other you might have!
