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
- Create an 80% BANK / 20% WETH Pool on Balancer V2
- 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!
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