[Draft] Create an 80% BANK / 20% WETH Liquidity Pool on Balancer to improve $BANK Liquidity

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This proposal aims to get support from BalancerDAO to coordinate the creation and launch of an 80% BANK / 20% WETH Pool on Balancer V2 to improve BANK’s liquidity.

Read the pre-proposal discussion: Improving $BANK Liquidity and Utility by creating a 80% BANK / 20% WETH Pool on Balancer Protocol

Proposal in Gdoc (feel free to comment):

BACKGROUND
The liquidity and utility of a token go hand in hand. Before AMMs, it was tough to create sufficient liquidity (markets) for tokens. Now, any project (or DAO) can create its own liquidity by setting up a liquidity pool. When tokens are liquid, they can be traded with less friction, improving the experience for traders/investors (as they can buy more tokens without raising the price too much) and contributors (as they can sell tokens without lowering the price too much).

Currently, the BANK token is illiquid - the main market is a Uniswap V2 pool with a 2% depth of about $1000. This is extremely low and limits the utility of the token. One single Airdrop recipient selling his/her airdrop can already lead to the token price going down nearly 5%. If we want BanklessDAO to flourish, we need to ensure that the BANK token is functional and liquid.

The liquidity issue has been mitigated by launching the BANK/ETH pool on Sushi’s Onsen. However, liquidity providers are boxed out of voting and access to the Discord when staking their SLP tokens as there’s no way for Collab Land to track tokens. This is where Balancer comes in.

MOTIVATION
Balancer protocol is one of the largest and most secure Decentralized Exchanges, with over $2B in assets managed on the platform. Balancer is also an official sponsor of Bankless and has supported the community early on. One of the Balancer Protocol’s key advantages is that Pools on Balancer are flexible, allowing the pool creator to specify the number of assets, asset weights, and transaction fees.

This allows pool creators to design pools that have certain characteristics and better represent the conviction of a community. 80% / 20% pools are used by many projects to create a strong liquidity foundation, including AAVE for their Staked BPT, Gitcoin, and Balancer themselves.

Balancer is also running a reimbursement campaign that rewards each trade on Balancer with BAL tokens of about 70% of the txs’ GAS costs.

Another benefit of Balancer is the potential to qualify the BANK/WETH pool for the BAL liquidity mining program. Balancer has recently shifted from Balancer V1 to Balancer V2, and now liquidity rewards are allocated primarily to value-aligned pools. Next week, a proposal will likely be submitted to add Tier 4 rewards (1000 BAL per week) 6 - with sufficient community engagement, BanklessDAO will likely qualify for the Tier 4 slot. I (Luuk) can help steward and champion this application as I’m a Balancer Contributor (Baller) myself.

If accepted - BANK holders would be able to provide liquidity to the 80% BANK / 20% WETH pool to earn BAL tokens and trading fees.

SPECIFICATION

Proposed Pool parameters

The number of assets: The pool will include 2 assets, BANK and WETH. The decision to have WETH as the counter asset is straightforward as the values of BANK and ETH are highly intertwined and because ETH shares liquidity with nearly all other DeFi Assets.

Asset Weights: The pool will consist of 80% BANK and 20% WETH. There are several benefits to having an 80%/20% asset allocation over a 50%/50% pool. Mainly, it means that liquidity providers only need to match 20% of the value with the counter asset and mitigate impermanent loss due to the pool having a majority weight in BANK.

Transaction Fees: The most straightforward transaction fees are 0.15% or 1% - below, I’ll break down the difference and would appreciate some discussion around which amount is preferred by the BanklessDAO.

  • 0.15% Low transaction fees (half of Uniswap standard) make it cheaper to trade - likely leading to more trades (and speculation).

  • 1% High transaction fees (about triple of Uniswap standard) make it more expensive to trade - likely leading to fewer trades (and speculation), but improving the returns for liquidity providers.

Whether the pool will have a transaction fee of 0.15% or 1% will be decided by the BanklessDAO through this proposal.

Timeline: Within 1 week of this proposal passing, the Pool will be created, and the application to become a Tier 4 Pool will be submitted by the proposer.

NEXT STEPS

  1. Create the Pool on Balancer V2.0
  2. Apply for the Tier 4 Pool
  3. Coordinate a post and campaign around the pool

CONCLUSION

Liquidity is crucial for any token to succeed. This proposal aims to improve the liquidity and utility of $BANK by creating an 80% BANK / 20% WETH on Balancer V2.0. If approved by the Baller Committee, this pool will also be eligible for BAL rewards.

Proposed Snapshot POLL

  • For (0.15%) Trading Fee
    Create the 80% BANK / 20% WETH pool with 0.15% trading fees, benefiting traders and incentivizing speculation.

  • For (1%) Trading Fee
    Create the 80% BANK / 20% WETH pool with 1% trading fees, benefiting liquidity providers as they earn more fees on each trade.

  • Against, don’t create the Pool
    Do not create an 80% BANK / 20% WETH pool.

With this forum post, we aim to gather final feedback before submitting this proposal to BanklessDAO.

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The Balancer community has requested to move this to Snapshot in order to solidify which pool should be created (1% or 0.15%) as well as a formal gauge on the interest from the Bankless Community on the creation of the Balancer Pool (the more voter participation in favor, the more likely we are to get on the LM program).

Given the lengthy discussion on the previous thread, this will move to Snapshot later today with the goal of having the pool launched on Balancer v2 next week.

In terms of the actual proposal: I’m a big fan of this as there’s a few key benefits for the Bankless DAO. (1) The 80/20 pool mitigates impermanent loss significantly as the majority of the pool is weighted in BANK while providing a moderate boost to token econ. (2) We can use the BPT tokens as voting power and access to the Discord.

The second point is really why I’m in favor. Getting BANK LPs proper rights is currently an issue with Sushiswap (all SLP tokens are staked into one master contract so we can’t verify LPs via Collab Land) and Uniswap V3 (Minimal infrastructure around V3 NFTs). With Balancer V2, LPs receive standard ERC20 BPT tokens that represent your position in the pool–this plays nicely with Collab Land and Snapshot.

Lastly, I’m in favor of the 1% trading fee as we want to minimize speculation. The 1% does this as it deters speculators from trading frequently while rewarding LPs if they do.

All in all, very stoked for this proposal to go live and hopefully the launch of the 80/20 pool in the near future!

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It was pointed out in the prior discussion that an 80/20 liquidity pool on Balancer has already been created:

Unless there are serious drawbacks to Gauntlet’s dynamic fee-setting, I don’t see any advantage to recreating an 80/20 pool instead of formalizing the pool already created and moving into step 2 (Apply for the Tier 4 pool).

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I completely missed this - we may be able to avoid the Snapshot vote on pool creation then and move directly to the LM proposal. Will report back asap.

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I support using the existing pool managed by gauntlet

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Unless there are differences that necessitate a change, going with the existing pool makes sense.

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After putting more thoughts into this and looking at the Sushiswap pool, I’m in support of getting LM on the Balancer pool, high fees option!

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Hey team!

There are some limits to the existing pool, mainly not deciding the starting token price, Pool token icon, and Pool token Name - but these are all minor. I believe the Gauntlet managed pool would be a good starting point if we don’t need these smaller details now.

For now, I will skip right to Step 2 - and will aim to get that pool incentivized. Will coordinate with Discord admins to make sure Pool holders will be able to access the Discord accordingly :slight_smile:

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All Balancer seed pools use this mechanism; it’s been in operation for a while.

Just to be completely transparent about the fee options:

  1. The fee will stay fixed until Gauntlet adds it to their list of actively managed pools. We’d have to ask them to do so. There would likely need to be some liquidity and volume though (see the criteria in the article). Just saying that if having Gauntlet-managed vs fixed fees is material, we might want to investigate what they need to add it to their list.

We should also recognize that this is using the engagement between Gauntlet and Balancer, which allocated a fixed number of slots for pools to be managed. (Presumably, this can be increased to allow more pools to be managed; not sure of the process there, or how many slots are currently available.)

  1. Only Gauntlet can change the fee now; if the Bankless community didn’t want Gauntlet to manage the fee anymore, we could presumably ask them to remove it from their managed list. (Another thing to ask about.)

  2. Balancer governance could also decide to switch providers, or discontinue fee management altogether. It’s not hard-coded to Gauntlet specifically; just delegated to governance, which currently designates Gauntlet.

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Moving to archive in lieu of activity on Improving $BANK Liquidity and Utility by creating a 80% BANK / 20% WETH Pool on Balancer Protocol

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