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):
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.
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.
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.
- Create the Pool on Balancer V2.0
- Apply for the Tier 4 Pool
- Coordinate a post and campaign around the pool
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.