[Discussion] Initial MTA Liquidity Seeding on Bancor

Happy Friday Metanauts!

A proposal has started over at the Bancor forum for increasing the BNT limit on the MTA/BNT pair to $1m, and I would like to start a mirrored discussion here to gather feedback and sentiment around the idea of using $1m worth of MTA tokens from our treasury to initially seed the pool if the outcome over at Bancor’s side comes out positive.

Summary:

  • If motioned, this proposal would seek to bootstrap the MTA/BNT pair on Bancor with $1m worth of MTA tokens that would be under impermanent loss protection that we would be fully covered by after 100 days of providing said MTA to the pool

  • This will enable MTA to be even more liquid across several AMMs, and mStable users & liquidity providers will have a bigger choice on where to buy or deploy their tokens, based on their risk profile and current market conditions

  • A positive outcome on this proposal will enable further collaborations with Bancor down the line

Abstract :

  • A MTA/BNT liquidity pool has already been whitelisted on Bancor offering single-sided liquidity and impermanent loss protection. It currently has a liquidity depth of $62k

  • We’re focused on making our MTA token as liquid as possible, and in an effort to more efficiently deploy our capital in our smart contracts as well as our treasury, this proposal would set the staging ground to do so

  • Bancor’s phenomenal growth and launch of single-sided liquidity pools with impermanent loss protection will offer the DAO and community a superior value proposition through a HODL + LP strategy while simultaneously offering impermanent loss protection on the deployed MTA tokens

  • The mStableDAO would seed the required $1m worth of MTA tokens to match the $1m worth of BNT from Bancor to create a solid starting ground & playing field, as well as set a fantastic first opportunity for cross-collaboration between these two DAOs

Motivation:

  • Currently, Uniswap is the primary DEX for facilitating MTA trades, with liquidity routing through the MTA/WETH and the newly added DAI/MTA liquidity pair we recently bootstrapped

  • We believe there is a significant upside to attract MTA liquidity to Bancor given Bancor’s unique impermanent loss protection which offers MTA holders the ability to offer single-sided liquidity, as well as further spread liquidity across the ecosystem and help in price discovery of MTA and offer more opportunities to arbitrageurs and aggregators alike

  • Further down the line, this would also open up an opportunity to divert some MTA currently located in our staking contracts (~US$33m) into this liquidity pool, protecting our stakers from impermanent loss, while at the same time putting the underlying MTA to work in a meaningful way

We hope to receive plenty of input from our Meta Governors concerning this next step forward for the protocol, and if you’re in favor of this step on our end, then please also do consider voicing your opinion on Bancor’s side if you’re actively participating in the community or governance over there.

Should there be a positive sentiment around this Discussion on both sides, we’ll put this motion forward into a formal vote in the near future.

7 Likes

Thanks @mZeroNine ! Completely for this and very excited to increase MTA’s liqudiity on bancor.

Note that we need to get support for this - a 40% quorum to get this though so need support from metanauts with BNT bags!

2 Likes

This is a pretty easy choice for me. I support this proposal for the following reasons:

  • The mStableDAO is dedicated to growing mStable in a way that accrues long term value back to the protocol and MTA holders. It does this by responsible custodianship and deployment of its public treasury. A large part of its current mandate in this part of mStable’s growth (as I see it) is to help bolster liquidity for MTA or mAssets across DeFi. This proposal is squarely in that domain.

  • Bancor’s 100 day insurance against impermanent loss protects the MTA that the DAO will provide in the long run. Assuming this insurance works, the MTA being being deployed is almost closer to a loan, that the DAO can take back at any time after 100 days as it will hold the LP tokens. You can read more about the IL insurance here: https://blog.bancor.network/beginners-guide-to-getting-rekt-by-impermanent-loss-7c9510cb2f22

  • BancorV2 has been met with success and a positive reception from the market, with volumes increasing in a way that’s worth paying attention to.

Its great to feel mStable picking up momentum. Looking forward to seeing this happen should it be approved!

1 Like

This makes a lot of sense - great option for a big group of potential liquidity providers that dont want to risk losing some of their MTA upside and further diversifies/derisks dependence on one trading venue

2 Likes

I am not in favor of this proposal. We should be focusing our incentives on fewer AMM’s, not more and should do so with the market leaders. The liquidity at Bancor pales in comparison to Uniswap or Sushiswap. They seem to have a good idea around impermanent loss but the fees involved to take advantage of that are very high, which sort of cancels out the benefits of this feature. Maybe this will be more relevant when Ethereum operates at scale but, as someone who has tried to make Bancor work, and with significant funds, the juice isn’t worth the squeeze, IMHO.

Thanks for the feedback and great input everyone, and this has now been moved to a formal vote on Snapshot.

I think there’s a demand for single sided MTA liquidity e.g. treasury funds. Agree too much fragmentation of MTA liquidity isn’t ideal but Uniswap MTA liquidity hasn’t been really great either

I agree strongly. It might not be the best fit for individuals, but for institutional or DAO investment strategies, Bancor is clearly the OG right now in my humble opinion, especially for volatile asset classes.