Launch BANK Liquidity Mining on the 80% BANK / 20% WETH Balancer Pool

This post is a revision to a proposal made by LuukDAO last month.

Authors: LuukDAO, gav, Above Average Joe, Davoice321, Kouros, 0xLucas.

Summary

This proposal looks to establish a BANK liquidity mining program on the 80% BANK/20% WETH Balancer V2 liquidity pool. This action both incentivises liquidity for the $BANK token and brings long-term project supporters off the sidelines to participate in market making while maintaining significant skin in the game.

Using Balancer’s 80%/20% pool, Bankless DAO holders can earn yield on their BANK through incentives and trading fees while also maintaining access to the Bankless DAO Discord. This activity will increase liquidity for $BANK and increase its utility in many respects, helping the overall long-term goals of the project.

This proposal requests 500,000 BANK to be allocated over a 60 day period (250,000 per month) as an initial trial for liquidity mining rewards. We expect this to provide a 10-15% APY for $1M liquidity in the $BANK/WETH pool.

Background

This proposal aims to create an 80% $BANK / 20% WETH Pool on Balancer V2 as a fundamental liquidity source for the $BANK token.

Currently, the $BANK token is quite illiquid - the main market is a Sushiswap pool with a 2% depth of about $2500. This is fairly low and limits the ability for new entrants to join and leave the DAO without causing a significant amount of slippage. Finally, having $BANK on multiple pools helps diversify protocol risk if anything were to happen to any of the DEXs our token trades on. If we want Bankless DAO to flourish, we need to ensure that the $BANK token is functional and liquid.

Specification

  1. Create an 80% BANK / 20% WETH Pool on Balancer V2
  2. Optional Bonus: Apply for a Balancer liquidity reward slot

Creation of the 80% BANK / 20% WETH pool on Balancer V2.0

Balancer protocol is one of the largest and most secure liquidity protocols, 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 up to about 70% of the transaction gas costs.

Pool Parameters

The pool has been created in anticipation of this proposal getting passed. Specific details on the pool can be seen at the following link: Balancer

The number of assets: The pool includes 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 the pool set up in this way instead of a 50%/50% pool. Mainly it means that liquidity providers only need to match 20% of the value with the counter asset, driving a demand for BANK. It also reduces impermanent loss risk for those providing liquidity.

Trading Fees

For Balancer V2, Gauntlet is an option to dynamically change trading fees to optimise pool returns. Rather than going with a fixed trading fee, we have opted to go for Gauntlet as they use data to optimise trading fees for those providing liquidity.

More can be read on Gauntlet here: Balancer Partners with Gauntlet To Make Dynamic-Fee Pools A Reality | by Fernando Martinelli | Balancer Protocol | Medium

Funding Request

  • 250,000 $BANK/month for 2 months to be funded from the grants committee, which will last for the remainder of Season 1.
  • This is 10% of the grants committee’s project allocation in return for bootstrapping liquidity and increasing token utility
  • This will provide 10-15% APY targeted yield on $BANK token

Bonus: BAL liquidity mining

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. We believe we can qualify under these terms and have been approach by LuukDAO who can help steward and champion this application as a Balancer Core Contributor (i.e. BALLER.)

Note: The continuation of incentivising this pool will fall under the responsibility of the Treasury Guild and the funding from the Grants Committee.

Success Metrics or KPIs

  • Reach $1M in liquidity on Balancer
  • Increased 2% depth more than Sushi pool of ~$2,500 (Target $10K at 2% slippage)

Next Steps

Step 1 - Apply for Grants Committee Funding

Step 2 - Build squad to lead development & implementation

Step 3 - Apply for Tier 4 Rewards from Balancer - if passes, move to step 4.

Step 4 - To maintain the Tier 4 BAL Rewards - think of potential value adds for Balancer

As examples, BanklessDAO can provide Balancer Protocol with $BANK tokens for co-liquidity mining, providing a sponsor discount on Bankless HQ content, or contributing to Balancer through evangelism and communications support.

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.

Let’s have a prosperous $BANK economy and help the world go Bankless!

  • For
  • Against

0 voters

4 Likes

Awesome proposal! Thank you for all the work putting it together!
The only issue I had is there isn’t a Hell Yes button so I could only vote FOR!

1 Like

Wouldn’t this also require the DAO to front the 20% in WETH as part of the budget ask, not just the 500K in BANK?

No. The 500K $BANK will be rewards given to LPs as an additional incentive for providing liquidity on top of trading fees.

It is important to note that this proposal does not suggest that the DAO will be providing any liquidity to the pool itself as of now. The 500k $BANK is purely incentivising liquidity providers. However, it may be worth discussion on this topic in the future for the DAO to eventually own its own some of its liquidity.

Does this answer your question?

1 Like

Sorry about this Steve, I thought a 'Hell Yes’ option might dilute the votes… To be included in future proposals.

1 Like

Thanks @GavWan, I understand now.

A few questions here

  • Do you have a spreadsheet that models this? 500K is a lot, so I just want to understand how the reward breakdown would work.
  • This assumes 1M USD in liquidity? I don’t know of this is achievable worh currently supply. Sushiswap only has 300K USD and that’s a 50:50 pool.

Sounds like a lot of $BANKs being thrown around.

I’m just curious about a small thing, say if I throw all my $BANKs into this liquidity mining program. Would I lose my level 1 status?

AFAIK, yes. We don’t have a solution in place for this yet.

1 Like

@0x_Lucas has done the modelling on this and has provided us with the estimations for the proposal. Perhaps that can be shared below?

@AboveAverageJoe has mentioned that this is partly the reason for going with Balancer as their LP tokens will be recognised in the Discord for status.

2 Likes

No I don’t believe so - Collab Land would be able to track staked BPT.

The issue with Sushiswap is that all SLP tokens are in that contract (whereas this would only hold BANK BPT tokens).

Question dump:

  • Can someone explain or show the funding cost breakdown?
  • Are the 250k in tokens going into the Balancer Pool to start it off?
  • Is the Treasury going to kickstart the pool or are you anticipating members to do that? If it is the latter, that would most likely drain liquidity from the existing LP pools.
  • Is there a reason why BANK incentives aren’t being given to the Sushiswap pool (50/50)?

Thank you for researching this. Liquidity is an important issue.

When this rolls out, please make very simple step-by-step instructions. This is very attractive but balancer isn’t the easiest platform.

1 Like

80/20 Pool has been great for me so far on Balancer IMO. Only 24K of total balance though to date, could use some incentivization :slight_smile:

So guys one question, as i know we should hold 35k BANK to be on discord. So if we invest that 35k and get the BPT token for that 35k BANK which will be 80%BANK/20%WETH can we get access still or we have to maintain 35k BANK as 80%/something as 20% WETH ? so with current price it will be $1800 weight of the LP ?

I am a fan of this proposal!!! When can we get this pool started?

yup we’ll be able to set the parameters for Collab Land to give access to BPT tokens

Yes. Will ensure this happens.

  • Lucas has done the research on this. It was the information used to simulate numbers.
  • Kind of… There will be 500k $BANK allocated to the pool over 60 days to be given to LPs for incentivisation.
  • We anticipate members to do this. It could very well affect the liquidity in the other pools.
  • I am not sure on this. The incentives are being allocated to this pool as it suits our needs better as a DAO at this moment in time.

I hope these answers help.

@0x_Lucas

Want to follow up on my questions here.